United is urgently seeking extra cash

The US Pension Benefit Guaranty Corporation (PBGC) has demanded to know what United's plans for its scheme are.

Last week, United it would be deferring its pension payments as it tries to fend off bankruptcy.

If United does scrap its pension PBGC may have to pick up the estimated $5bn (�3bn) tab for the airline's benefits.

Last week the airline, a unit of UAL Corp, said its agreement to secure financing to keep its operations going effectively prohibited any more pension contributions before the company leaves bankruptcy.

Legal warning

On Friday, United told a bankruptcy court judge that it plans to put off a $404m pension contribution in September and a $9m contribution in October.

The announcement came a week after it had deferred a $72m pension payment.

However, PBGC claims any such plans are contrary to US federal law.

The agency has written UAL with the warning and has also demanded to know United will close the funding gap in its pension plans.

"UAL's announcement last Friday that it would no longer make legally required contributions to its employee pension plans while in bankruptcy is of great concern," a letter to the company from the agency said.

PBGC's Executive Director Bradley Belt added: "If UAL intends to terminate any of its defined benefit pension plans, the PBGC and plan participants should be made aware of that fact as soon as possible."

Union anger

A spokeswoman for the number two US carrier said the airline planned to meet with PBGC to discuss the issues.

She added that "no decision had been made" by their airline about terminating any of its pension plans.

"Right now we are in the process of studying all our options, and determining whether United can sustain our pension burden and still attract exit financing," she said.

The pension plan covers around 120,000 active and retired employees who are owed around $4.1bn over the next five years.

Unions have been angered by the proposal as they fear the carrier may scrap its retirement plans altogether to lower costs and attract badly needed investors.

The airline has been in Chapter 11 bankruptcy since December, 2002, but said last week that its cost cutting plans would enable it to organise its funds to exit bankruptcy.

In late June the company tried and failed to win a $1bn handout from the US government.