Traders on Wall Street this morning will encounter a novel commodity – United Airlines stock. The troubled second-largest airline in America has at long last emerged from a 38-month journey through bankruptcy court, although it still faces challenges from high oil prices and low-cost competitors that are as vigorous as ever. In one respect, United’s trials and tribulations and the way that it has overcome them, at least to some extent, are emblematic of afflictions specific to the airline industry. But United also provides a test case for the difficult transition that many “old economy” companies need to make into the twenty-first century, particularly in respect of pensions.

United first marched into a bankruptcy courtroom in Illinois in December 2002. The proximate cause for trouble throughout the airline industry was the downturn in business travel following September 11, but the airline industry was already near collapse. Airlines in general are hard to run. Capital costs, like new planes, are enormous and the workforce must be highly skilled. Airlines prefer to offer relatively generous concessions to unions rather than seeing those planes sit idle during strikes.

As a result, in the boom days of the 1990s, wages rose 43%. That wasn’t much more than inflation, but it was generous considering the other market pressures facing the carriers – fares rose only 6% during the same period. Even in the best of times the market is competitive enough that raising prices is difficult, but it has only gotten worse for the legacy carriers now that they’re competing with low-cost airlines like Southwest and Jet Blue. Overall, even after fares increase by a projected 5% or 6% in the coming year, they will be 19% lower than they were during the boom period around 2000.

And it wasn’t just wages and work rules (thanks to a web of complex regulations, United pilots got paid for 81 hours of work a month but only flew about 50) – like other legacy airlines, United also made very generous pension promises to its employees, often as a way of extracting at least some wage concessions from ornery unions. Some pilots could accrue $140,000 a year after reaching 60, the retirement age mandated by the Federal Aviation Administration.

If this pattern sounds vaguely familiar, it should. Americans have witnessed the same phenomenon play itself out in other corners of the economy recently. Think of General Motors, another old-style giant in a highly competitive market where generous wages and pension benefits and 2.5 retirees per active worker helped rack up $4 billion in losses for the first nine months of 2005 and have left the automaker with junk-rated debt.

United is an especially instructive example, however, for how it has tackled its pension problem. In short, it passed the buck. The airline has unloaded its obligation onto the Pension Benefit Guaranty Corporation, a federal pension insurance agency. And the most generous promises have evaporated. The pilot to whom the airline had promised $140,000 a year risks getting as little as $28,000 from the PBGC, which caps pay-outs irrespective of what the worker would have received under a previous contract.

Many United employees are still smarting from the dramatic reductions in their pension benefits. Which is a point worth marking for those who still cling to old-style defined-benefit plans. Some would argue that the certainty of a defined-benefit plan is far superior to the risk of a defined-contribution pension like a 401(k). United’s story, however, shows that the certainty of defined benefits is illusory. Of the decreasing number of defined-benefit plans, 75% are underfunded, meaning that companies have been delaying the day when they will figure out how to fund those obligations. United’s story is a timely reminder of what can happen if, in bankruptcy court, a company concludes that it can’t meet its obligations.