When Europe's major airlines put their DC10s back in the air last week, rejecting U.S. arguments that the planes should remain on the ground, they were clearly signaling something about what has become of the reputation of the Federal Aviation Administration of the Federal Aviation Administration, America's regulator of aviation safety.

It, too, has crashed.

It has been brought down, on the one hand, by members of Congress and consumer groups who have called into question some of the judgments the FAA made before the crash - judgments about the design of the DC10, about airline maintenance procedures and about the need for closer governmental supervision.

And it has been brought down on the other hand by members of the aviation industry, who believe the agency has shown poor judgment in the days since the May 25 disaster.

Immediately following the crash, the FAA issued several urgent inspection directives before finally grounding all DC10s for an indefinite time 12 days after the accident.Critics at first complained the agency was indecisive.

But when the FAA took the unprecedented step of grounding all DC10s - rather than just the series 10 types, some of which had been found to have cracks in their aft bulkhead wing structures - the airlines charged it with overreacting.

And as the investigation wears on, the agency's reserve of public confidence wears down, particularly abroad.

"There is a general impression that the whole affair was overplayed in the press and that the FAA overreacted rather badly," said one Scandinavian Airlines (SAS) airline official who asked not to be named. "While indications and that the problem may have been in maintenance practices, it appears the FAA threw out the baby with the bath water."

Said another European airline official and former longtime FAA staffer: "There is no question the agency has lost credibility. The European consortium of aviation safety agencies from various countries used to be a rubber stamp. Those days are over."

It should be noted that these remarks come at a time the Europeans are themselves mounting a serious challenge to America's traditional dominance of the world aircraft industry. The "we know better" attitude displayed by the foreign airline safety officials in Zurich last week could well reflect as much a surge in European self-confidence as an erosion of confidence in the FAA.

Also, FAA officials, who say they arent overly concerned by Europe's independent action on the DC10, contend the Europeans considered themselves subject to different political considerations in deciding to fly the planes again. For one thing, the Europeans weren't confronted by a federal court to ground the planes, as the FAA has been.

The court order itself, issued by a federal judge in Washington, hasn't done much to help the FAA's image problem. That a court was seen commanding the agency to take firm action has only added to the perception of the FAA as a confused and reluctant agency.

FAA officials say the court order - the result of a suit brought by the Airline Passenger Association - was not necessary, that the agency would have grounded the planes in any case, and that it served only to complicate an already complex situation. The episode, though, does point out that the agency is having to answer to more aggressive public interest in its actions.

Longtime critics of the FAA, both in Congress and consumer groups, are seizing on the Chicago crash to press for agency reforms. The accident has prompted fresh concerns not just about structural weaknesses in the wide-bodied DC10 but in the FAA as well.

Langhorne Bond, the 42-year-old administrator of the FAA - a licensed pilot himself - recognized in testimony last week that the nation's system of aviation safety is on trial as a result of what happened in Chicago. "Somewhere in there our system did not pick up the gravity of the maintenance procedures being used," Bond declared, referring to the likelihood that the crash was in some way related to damage doen by American Airlines personnel during routine maintenance on the wing structure of Flight 191.

At the core of the U.S. aviation system is a close, cooperative relationship between FAA inspectors in the field and the airlines and aircraft makers they regulate.

FAA staffers work closely with industry members in drafting safety standards. Their policy has been to set general performance standards for aircraft rather than to dictate exact designs, and the standards that are fixed end to to be minimums rather than maximums.

"The reason we do it this way is to eliminate inhibition to innovation, to permit flexibility by the manufacturers," James Vines, acting director of FAA Flight Safety Standards, explained in an interview.

For inspection of operating aircraft, the FAA relies heavily on self-monitoring by the airline companies. With hardly enough inspectors to go around - there are only a handful of FAA inspectors located at each of the large airline maintenance hangers to oversee as many as several thousand airline employees - the FAA has adopted a system of so-called "designated representatives" to do most of the inspections. These representatives are company employees deputized by the FAA.

FAA officials defend this self-monitoring approach as generally proven, safe and secure. No plane is known to have crashed because a designated representative put company interest above that of the public. But the system has been criticized in Congress as vulnerable to conflict of interest.

Moreover, disturbing evidence of gaps and compromises in the FAA's design and maintenance safety review systems have emerged as a result of the investigation into the Chicago crash. Among the more troublesome points:

American and Continental airlines, both of which had some DC10s were found to have aft bulkhead cracks similar to the one in the plane that crashed, were free to make changes in the manufacturer's approved maintenance procedures without telling the FAA. Investigators now believe that improper maintenance procedures could have cuased the cracks.

The FAA receives uncertain and incomplete information on the maintenance and operation of commercial aircraft from the airlines and aircraft manufacturers. For instance, the FAA did not find out until after the crash that Continental Airlines had found cracks in two bulkhead structures a year and a half ago and altered its maintenance procedures as a result. Continental reported the change to McDonnell Douglas but not to the FAA, classifying the case as a ground incident not related to flight safety.

"We're finding the manufacturer knew more about some things taking place than we did," said FAA's Vines.

In the aftermath of Chicago, FAA officials expect to press for a number of changes in the way they do things. They hope to tighten the agency's information-gathering network, allowing airline companies and aircraft manufacturers less discretion in what they report to the FAA's giant data bank in Oklahoma City.

The FAA also may begin to require approval for changes the airline companies wish to make in aircraft maintenance procedures.

A proposal to reorganize The FAA's flight standards service division has already begun to circulate in the agency.

In addition, Bond is likely to pursue a request he made earlier this year for more stringent enforcement provisions. Currently, the fine for violating federal aviation rules is at most $1,000. Bond has asked the fine be raised and that criminal sanctions also be allowed.

In the two years since Bond has served as FAA administrator - he was formerly Illinois' transportation secretary - he has instituted a number of structural management changes directed chiefly at decentralizing the agency. He has fewer directors who report directly to him, leaving more of them responsible and accountable for their own actions.

He also has imposed a hiring freeze on the Washington operation, preferring to push agency employees out into the field. During Bond's term, the agency staff has shrunk by roughly 1,000, to 54,500. Bond says, however, no inspectors' job have been eliminated.

But the essential nature of the relationship of the 21-year-old FAA to those it regulates has not changed and is not expected to as a result of the Chicago crash.

That is because the agency's charter is grounded in potential conflict. The FAA is instructed both to ensure safety and to promote the United States aircraft business. Critics contend this dual mission is diametrical, that safety concerns aren't always compatible with business concerns.

Consumer advocate Ralph Nader charged last week that "the FAA has in the past weighed human safety against corporate profits and come down in favor of the latter." Several General Accounting Office and other congressional investigations of the FAA in recent years have criticized the agency for being unresponsive or slow to respond to a variety of safety issues.

Under such criticism, FAA officials fall back easily on the industry's excellent safety record, denying any conflict exists in their duties. "The best way to promote aviation is to promote safety," said Bond last week.