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)