NEW YORK (CNN/Money) - The third quarter was suppose to be the one when airlines started climbing back into profitability. Instead the only thing taking off are the loss estimates.

A year after Sept. 11 the industry is barely any better off than it was a year ago. Demand for air travel and air fares have not rebounded as hoped. Security expenses have increased. Carriers are again turning to Congress seeking additional billions in federal assistance in order to survive, as well as making additional staff and schedule cuts on top of the ones made immediately after the attack.

One major carrier - US Airways Group - already has filed for bankruptcy protection. Another - UAL Corp. (UAL: down $0.01 to $1.72, Research, Estimates), parent of United Airlines, the world's No. 2 carrier, is still struggling to prevent a bankruptcy filing later this year. United CEO Glenn Tilton told employees in a taped message Monday that the company is working with a number of sources that might provide funding and keep the airline out of bankruptcy court.

Additional bankruptcies or appeals for federal loan guarantees are likely if the United States goes to war with Iraq.

When airlines start reporting third quarter results Tuesday all the major carriers except for discount carrier Southwest Airlines (LUV: down $0.19 to $12.81, Research, Estimates) are expected to report a loss, and Southwest is expected to see earnings per share fall by 50 percent to 5 cents from 10 cents a share a year earlier.

As recently as the end of last March, the top five carriers other than United were expected to report a profit in the third quarter.

Since that time oil prices have risen amid talk of possible war with Iraq, driving up the second largest cost component for airlines after labor. Increased security costs have also risen. The Air Transport Association now estimates that security costs imposed since Sept. 11, including increased insurance premiums, are now costing the industry $4 billion annually. It also estimates that the airlines are losing $2.5 billion in revenue due to passengers declining to fly due to the hassle of dealing with tighter security measures.

The biggest problem though is that air travel has not rebounded the way that the industry had hoped. Year-to-date miles flown by paying passengers are off 6.8 percent through September, even with the comparison to September of last year when travel virtually stopped the second half of the month.

The soft demand for travel has translated into weaker fares - year-to-date domestic fares through August are off 11.6 percent, according to ATA statistics.

"I still see the economy as absolute the No. 1 factor, (even with) as many other factors as there are nowadays," said John Heimlich, the director of economic and market research for ATA.

The large so-called hub-and-spoke airlines such as United and American Airlines are responding by restructuring their route system and capacity, trying to move planes through the system on a more even flow. That will allow them to have less staff, gates and planes at their largest hubs, but could mean longer layovers for some passengers. But the carriers say the moves are necessary if they are to compete with the lower-cost carriers such as Southwest and upstart JetBlue (JBLU: up $0.33 to $33.31, Research, Estimates), which have been able to keep growing despite the industry downturn.

The move to less capacity and scheduled flights was led by American, a unit of the world's largest carrier, AMR Corp. (AMR: up $0.04 to $3.74, Research, Estimates) In February analysts had expected AMR to earn 26 cents a share in the current quarter, but the loss per share estimate now stands at $3.06 a share excluding special items. That's almost as bad as the $3.40 a share it lost in the year-earlier period which included the attack and the loss of two of its aircraft.

But Heimlich said that while the cost cutting efforts are more significant than had been foreseen earlier this year, they will not yield immediate results, due to the severance costs of employee furloughs and layoffs, and the cost of getting out of leases and other business arrangements.

"It's kind of like a merger: Costs now, savings later," he said. "It takes a while to flush the costs out of the system."

Heimlich said he now does not expect to see any of the large money-losing carriers return to profitability until the second quarter of next year, at the earliest.

"Then it will maybe be half the carriers making money, but that may be even be generous," he said. "I think for full-year 2003 we're going to lose money as an industry."

Analysts surveyed by earnings tracker First Call agree. None of the five largest carriers are now expected to make money in 2003, which would mark the third consecutive year of losses across the group that handles almost three-quarters of U.S. air travel between them.