CHICAGO (Reuters) - If bankrupt United Airlines scraps its union pension programs to save money it will put new pressure on rivals to address massive shortfalls in their own employee retirement plans, according to industry experts.

United, a unit of UAL Corp and the No. 2 airline, shook the industry recently when it told a bankruptcy court that it would no longer contribute to its four union pension plans during its Chapter 11 reorganization.

United said it needed more flexibility to manage its resources and attract potential investors. Most experts agree any equity investors will not sign on unless pension liabilities are eliminated or dramatically restructured.

According to Fitch Ratings, United plans are underfunded by an industry-leading $6.2 billion. The company has said it must make just over $4 billion in cash contributions to its four employee plans over the next five years.

The airline has not said whether it will terminate the plans and the issue is expected to take months to resolve. But the move to suspend nearly $500 million in contributions this fall after deferring a $72 million payment in July alarmed employees and federal pension insurers that United was maneuvering to do just that.

Ray Neidl, analyst at Blaylock & Partners, said that such a wholesale cost cut would put United rivals at a competitive disadvantage.

"If UAL terminates (pension programs), it will bring further pressure on every other member of the top five," Neidl said of United competitors No. 1 American Airlines, Delta Air Lines, Continental Airlines and Northwest Airlines .

Bill Warlick, senior credit analyst at Fitch Ratings, said he thought United will ultimately terminate the pension plans. "In my mind, this is the single most important issue for potential investors," he said. "I think the company recognizes that now. It's just a question of how you manage that with the unions."

Warlick said United could halve its cash contributions by terminating current plans and switching to new ones.

COMPETITOR CONUNDRUM

Following United on the degree of pension plan underfunding are: Delta at $5.7 billion; Northwest at $3.7 billion, American at $2.7 billion and Continental at $1.1 billion, according to Fitch Ratings. Continental survived two forays into bankruptcy in the early 1990s and emerged with a cost structure better than others.

United's pension strategy is already forcing rivals to seek changes. How that will play out is yet unclear. Either changes have to be negotiated or bankruptcy may result, experts said.

Delta said last week it had proposed unspecified changes to its pilots' plan as part of talks to wring concessions from its only unionized employee group and stay out of bankruptcy.

Pilots are typically the highest paid airline worker and typically the most senior aviators have the most to lose.

Delta recently noted a large pilot exodus as many opted to retire early for a lump sum payment.

US Airways Group terminated its pilot pension plan last year as a condition of securing bankruptcy exit financing. Many active and retired pilots at the carrier lost at least half of their benefits when the airline terminated their plan and switched to a cheaper one that includes a 401 (k) account.

Stan Pace, head of the airline consulting practice at Bain & Co., said as in the cascade of concessions that began when US Air went into bankruptcy, once one major airline makes changes of the magnitude UAL is considering, "it becomes an incredibly tempting target," for others.

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