The battle for survival among traditional US airlines intensified on Thursday as the second and seventh biggest carriers took fresh steps to avoid liquidation.

United Airlines and its smaller rival, US Airways, which are both trying to emerge from bankruptcy protection, reached separate agreements to cut costs by jettisoning employee pensions.

Their breakthroughs followed the launch of a fresh price war on Wednesday when Delta, the third largest US carrier, announced sweeping fare changes designed to mimic low-cost airlines.

On many routes, Delta was quickly matched on Thursday by other traditional carriers such as American, Continental and Northwest, according to Bestfares, a website which tracks discount tickets.

But the gradual progress made by United and US Airways in emerging from bankruptcy only exacerbates the strain these price cuts will place on the industry's fragile business model.

Many rivals were hoping that United and US Airways would go under permanently, reducing capacity and strengthening the position of those that remain.

Instead, the two weakest players appear to be successfully navigating through the US bankruptcy system, despite several remaining hurdles.

US Airways led the way on Thursday when a bankruptcy judge allowed it terminate pension plans and scrap existing pay agreements in its bid to save nearly $1bn in costs by mid-January.

It still faces an uphill battle though and needs to persuade the US government's Air Transportation Stabilisation Board to continue allowing it to use their cash as collateral at a crunch meeting on January 14.

Bankruptcy Judge Stephen Mitchell said there were "grave questions" about whether US Airways could successfully emerge from its second trip through Chapter 11 bankruptcy protection in two years.

Meanwhile United Airlines, which is in slightly better shape, received a boost in its efforts to shed pension liabilities when the pilots union voted in favour of an agreement to terminate its scheme.

United's deal with the powerful Air Line Pilots Association (Alpa) should allow it save $180m in annual labour costs and paves the way for similar deals with other unions.

However, it represents an alarming scenario for the Pensions Benefit Guaranty Corporation, a national insurance scheme under financial pressure of its own, which fears the United pilots deal sets a worrying precedent for other airlines.

The growing threat of other airlines following United and US Airways into bankruptcy to jettison legacy costs was spelled out by Continental Airlines which warned it had to slash $500m in operating costs or face liquidity problems.

Continental shares fell a further 6 per cent after it said: "Failure to achieve $500m in annual wage and benefit cost reductions by February 28 could ultimately result in the company having inadequate liquidity to meet its obligations."