An American Airlines pension plan default in bankruptcy would be the largest in U.S. history as its accounts are underfunded by $10 billion, government pension insurers estimated on Tuesday.

The Pension Benefit Guaranty Corp said that American's four traditional pension plans covering 130,000 workers and retirees collectively report $8.3 billion in assets to cover roughly $18.5 billion in promised benefits over many years.

Employees and retirees of the carrier, which sought court protection from creditors earlier in the day, could lose $1 billion in benefits if those plans are assumed by the agency.

The PBGC also said termination of those plans would weaken the financial condition of the agency, which reported a $26 billion deficit earlier this month.

American is free to use the bankruptcy process to try to terminate plans covering pilots, mechanics, flight attendants and other workers -- an expensive cost overhang that other airlines ditched years ago during their own bankruptcies.

American, a unit of AMR Corp, did not mention in court papers what its plans were for traditional pension plans that pay fixed benefits at regular intervals.

(Reporting by John Crawley)

Investment U.S.