The taxpayer-funded bailout may have actually allowed some airlines to continue in mismanaging their operations.

One of those airlines, US Airways, received $1 billion in loans from the Air Transportation Stabilization Board (ATSB), an entity established by Congress following 9-11 to dole out more than $10 billion approved by lawmakers to salvage the airline industry.

In all, the ATSB paid out $1.5 billion to five airlines who claimed to be "on the verge of extinction" following 9-11, reports Time magazine, in its Dec. 1 issue.

But, the magazine says, US Airways – number six in size among American air carriers and the airline which received the largest aid package – has done little to improve its efficiency since the loan. And, the airline is still so strapped financially it is drawing up plans to apply for another $1.8 billion in taxpayer-guaranteed loans.

Worse, US Airlines – along with America West and others – were operating poorly and inefficiently even before 9-11, Time reported. Yet they still managed to secure ATSB loans, based on the presumption carriers were smarting financially because of the attacks, not because of mismanagement.

America West – once nicknamed "America Worst" – was, at the time of the 9-11 attacks, putting programs in place to improve service, maintenance and efficiency, Time reported. It was given $379.6 million in loan guarantees in return for the government demanding severe limits on labor costs and took 19 million stock warrants giving it the right to buy shares at $3, the magazine said.

America West executives used part of the money to accelerate improvements. The airline now has many more planes available daily for flights, has improved its in-house maintenance, revamped its business model and is generating profits.

Little Improvement

But other airlines, such as US Airways, have seen little or no improvement in operations and finances, though some have cut jobs, services and flights to save money.

"The ATSB knew there was a fundamental question of whether US Airways was even viable, given its high labor costs and weak route structure," a former government official familiar with the board's thinking told Time.

The airline has lost money for two consecutive quarters, shedding $90 million in the third quarter alone. And Southwest airlines is considering going after US Airways' hub in Philadelphia, where 65 percent of US Airways flights originate.

In another example, World Airlines received a conditional guarantee of $27 million from the ATSB in April, based on company officials' stated need for operating capital following the 9-11 attacks. Though the airline reported net income gains in the quarters following the attacks, in the January-March quarter of 2001 the airline reported losing $10.4 million on $74 million in revenue.

United Airlines, the nation's number two carrier and another that received government funds, is presently also considering another application to the ASTB. The airline, which filed for Chapter 11 bankruptcy protection nearly a year ago, also applied in October for funding waivers from the IRS so it could fund its flight attendant pension program from 2003 to 2006.

UAL's exit from bankruptcy could be delayed until next year due to problems with its regional carrier, Fox News reported Friday.

UAL reported an operating profit of $60 million in October, and said it had met all its bankruptcy loan requirements for nine straight months.

Meanwhile, some airlines that have not received federal bailout money have demonstrated robust growth since Sept. 11. These airlines include Southwest Airlines and JetBlue.