Once a profitable airline, US Airways is again struggling for its very survival in bankruptcy court.

How did this happen?

As it turns out, the story of the company's transformation from industry high flier to an inefficient, money-losing enterprise is two decades old. Founded 67 years ago as All-American Aviation, US Airways is a relic of a time when airline prices and routes were set by the federal government.

When the United States deregulated the industry in 1978, it opened the door to unfettered competition and ushered in a new set of problems not only for US Airways, but for all the so-called "legacy" airlines that can trace their origins back to the dawn of aviation.

Beginning as a short-hop air mail carrier financed by a member of the duPont family and taking its first paying passengers on a 1949 flight from Washington, D.C., to Pittsburgh, US Airways was one of the nation's most successful airlines in the years immediately before and after deregulation, when it changed its name from Allegheny Airlines to US Air, dominated short-haul routes on the East Coast and enjoyed a near-monopoly in Pittsburgh, its largest hub.

In the early 1980s, it was also one of the most profitable airlines around, praised on Wall Street for its management strategy. Under Chief Executive Officer Ed Colodny, known to employees as "Uncle Ed," it built large bases in Charlotte and Philadelphia, using a "hub-and-spoke" system to bring passengers from smaller cities into larger ones, connecting them to almost any place in the United States.

But its slow slide began in the latter half of the 80s, when a merger frenzy forced Colodny to spend almost $2 billion acquiring California carrier Pacific Southwest Airlines and North Carolina carrier Piedmont Aviation. The purchases saddled US Airways with high labor costs, debt, an array of fleet types and a clash of cultures. It also made the fateful decision to raise wages at Piedmont and PSA in an attempt to maintain labor peace -- a decision US Airways would later try to undo.

The mergers left turbulence that trailed well into the early 1990s.

In 1991, US Airways abandoned most of PSA's routes in California and the Pacific Northwest it had acquired only three years earlier, not able to match prices offered by Dallas low-fare pioneer Southwest Airlines, which kept its costs down by flying from one point to another, bypassing expensive hub operations.

In 1993, the airline predicted that ultra-efficient Southwest would expand to the East Coast, but then was slow to respond when Southwest launched service that year from Baltimore, a US Airways hub. Airline Chief Executive Officer Seth Schofield said in March 1994, "I don't think anyone anticipated how quickly . . . these low-fare, low-cost operators would intrude in our territory."

Schofield pared routes, created new scheduling systems to help fill planes and speeded the turnaround of jets between flights, but he failed to pry $500 million in concessions he had sought from unions.

The airline made money again in 1995, as the national economy recovered, and the arrival of Stephen Wolf as CEO in 1996 coincided with the best run by the carrier since the 1970s and early 1980s. Wolf eliminated the redundancies from the mergers in the 1980s, replacing many of the aging, costly-to-maintain planes with new European-made Airbus jets, and changed the name, colors and logo. of the airline in an attempt to shed its regional roots and portray it as a national carrier with global cachet.

The airline continued to earn profits through the latter half of the 1990s, but it plunged into the red again in the spring of 2000, as it pushed for a merger with the much-larger United Airlines. The deal collapsed amid antitrust concerns in August 2001, followed a month later by the 9/11 terrorist attacks.

While all airlines suffered from the drop-off in travel after 9/11, US Airways arguably was hit the hardest, with business travel plunging in New York and Washington, D,C., two US Airways strongholds. Eleven months after the attacks, the airline filed for bankruptcy and emerged in March 2003 with $900 million in federal loan guarantees and $2 billion in savings wrested from unions, aircraft lessors and suppliers.

Still, that was not enough to solve US Airways' problems.

Less than a year later, the airline still had the highest costs in the industry and went back to its unions, asking for more.

Many analysts now say that US Airways did not cut enough in its last bankruptcy. But its larger dilemma is one facing all "legacy" airlines -- how to make money competing against a new class of carriers such as Southwest and JetBlue Airways that operate without the costly hub-and-spoke systems that require lots of gates and personnel.

For US Airways, which can no longer afford to cover its high costs with high prices, the answer is to dismantle part of the system it built in the 1980s, cutting flights and service in Pittsburgh this fall by a third, and adding more point-to-point flying in big East Coast cities and the Caribbean.

Pittsburgh, in fact, is suffering most from US Airways' reorganization, having lost its "hub" status and dropping from almost 13,000 airline employees before 9/11 to fewer than 8,000 today. Local officials expect more to lose their jobs in the months ahead.

But will it be enough? Or, is it too late?

"US Airways has spent the past 10 years trying to chip away at costs without fundamentally reorganizing its model," said Tom Petzinger, author of the 1995 book "Hard Landing: The Epic Contest for Power and Profits That Plunged the Airlines into Chaos." In a free market, he added, "even the most potent monopolies don't survive."