Forty years after United Airlines first urged travelers to “fly the friendly skies,” the airline is at the center of industry upheaval that could decide which major carriers stay airborne.

Loss-ridden and fighting for its life, United last week won approval from the judge overseeing its bankruptcy case to hand off its underfunded pension plans to a federal agency.

The airline, the main division of UAL Corp., also asked Bankruptcy Court Judge Eugene Wedoff in Chicago for permission to impose more wage cuts on its 26,000 mechanics, ramp workers and other unionized ground employees.

With the employees threatening to strike if Wedoff sided with United, the airline and its mechanics’ union reached a tentative out-of-court agreement on a new five-year contract for the mechanics, who still must ratify the pact.

United continues to negotiate with the International Association of Machinists, which represents the other ground workers, in hopes of reaching a deal before the judge’s ruling and any potential work stoppage.

A United Airlines plane takes off from Chicago's O'Hare International Airport. The carrier has become an example for other struggling airlines. It recently won court approval to hand over its underfunded pension plans to a federal agency. It also continues to work on contract deals with its employees.

The outcome of United’s turmoil will affect the survival prospects of the other old-line carriers – Delta Air Lines Inc., Northwest Airlines Corp., Continental Airlines Inc., US Airways Group Inc. (which last week announced its merger with America West Airlines) and the industry leader, American, a unit of AMR Corp. – all of which are struggling. US Airways, like United, is operating under Chapter 11 bankruptcy protection, and third-ranked Delta earlier this month warned that it too could be a candidate for Chapter 11 in the coming months.

“United is the 900-pound gorilla in this situation,” said Alan Sbarra, a principal of Roach & Sbarra Airline Consulting in San Francisco. “They are the airline everyone’s looking at.”

The implications for travelers are considerable. Although it is unlikely a major carrier will go under this year, financially troubled airlines are hacking away at their route systems, reducing options for fliers. And service, already a complaint with many travelers, might remain a problem as carriers push their employees for more wage-and-benefit concessions.

United, which carried 71 million passengers last year, sent shock waves through the industry when it succeeded in transferring $6.6 billion in pension obligations to the Pension Benefit Guaranty Corp. The move gives United a potential competitive advantage that rivals might be forced to emulate.