The occupation of Tripoli airport for several hours on Monday by an armed militia force has compelled policymakers in Europe and the United States to ask what sort of country they helped create when they joined the campaign last year to force Muammar Gaddafi from office.

Libya, home to Africa's biggest proven oil reserves, is free from Gaddafi's repression, but it is a chaotic country where nearly a year on from the end of the revolt, the state still barely exists.

Garbage piles up uncollected in suburban streets, drivers park their cars in the middle of highways, and, as incidents like the attack on the airport underscore, rag-tag militias who answer only to their own commanders are more powerful than the police and army.

"How can these people ... close the airport like this?" asked Adel Salama, a civil society activist in Zintan, a town whose fighters used to control the airport before handing over to the central government back in April.

"Where is the state?"

On Tuesday, the militiamen who had attacked the airport were gone and staff were at their posts. An Austrian Airlines jet took off for Vienna, the first departure since the attack.

Yet foreign investors, who already knew Libya was a risky place, are now likely to be even more cautious. The incident at the airport happened the same day that Libyan Deputy Prime Minister Mustafa Abushagur was in the United States trying to persuade companies there to come and invest.

"It's a worrying thing for someone who wants to come and do business here," one foreign businessman visiting Tripoli said. "I am just happy my investors were not here themselves when this happened."

SECURITY FAILURES

The attack on the airport was carried out by members of the al-Awfea brigade, a volunteer militia from the town of Tarhouna about 80 km (50 miles) south-east of Tripoli.

They believed their leader had been detained by security forces in the capital and their aim was to take the airport as a way of pressuring his captors into releasing him. They pulled out of the airport late on Monday after negotiations.

Details emerged on Tuesday of how close the incident came to endangering passengers.

One airport official said an Austrian Airlines jet was about to take off when the militia arrived, and was ordered by the control tower to abort. Another official said a bullet had struck and damaged the side of a parked Alitalia aircraft.

Interior Minister Fawzi Abdel A'al told Reuters on Tuesday that the incident had been handled properly by the government.

"Democracy is still new to the Libyan people and a lot of people do not know how to use their freedom in the right way," he said. "They have demands which they believe are legitimate. They believe this (trying to seize strategic sites) is the best way to express their anger."

"The government prefers to use dialogue first, negotiations to resolve problems," the minister said. "What happened yesterday is a lesson (to anyone attempting similar protests). We detained them, put them under investigation, and took their weapons."

However, accounts gathered by Reuters from witnesses and officials point to big holes in the security set-up that was supposed to protect the airport.

There was a series of mistakes, a lack of proper resources and the absence of any security coordination: all problems which have come to typify Libya since the end of Gaddafi's 42-year rule.

Fadel Bin Nusayer, 50, the manager of the airport, said security staff had no choice but to stand back and let the al-Awfea brigade drive their pick-up trucks, with heavy guns mounted on the back, onto the runways.

He said airport security needed more resources to do their job fully, including more walkie-talkies and vehicles.

"They arrived at the metal fences surrounding the ... airfield and cut the fence and entered," he said. "Our defence teams on the ground told their leaders in the watch-towers and were given orders not to shoot because we didn't want to shed blood or escalate matters or make civilian travellers scared."

"We ask the government and the prime minister to give us the extra resources ... so we can avoid a similar situation," Bin Nusayer said. The incident on Monday was, he said: "A wake up call to all of us."

Other people familiar with the airport said the militia should never have been allowed to reach the perimeter fence.

The al-Awfea brigade, in a convoy of about 60 vehicles, drove to the airport from their base in Tarhouna, a journey that would have taken them through dozens of security checkpoints.

These though are usually run by local militias and it is unlikely they would have alerted anyone outside their area about what was happening.

"Why was nothing done before these people reached the airport?" asked Salama, the activist from Zintan. "They were driving from 80 km away."

A spokesman for the Zintan militia which used to run the airport before handing over to the government said the security measures in place were woefully inadequate.

Khaled Karr said airport security did not have the long-range weapons needed to deter attackers before they reach the perimeter, and were not carrying out regular patrols in the surrounding area.

"We told the government over and over: they do not have the resources or the capabilities to secure a huge installation like the airport," he said. "We all know there are issues and problems and the state is not in control."

SETBACK FOR INVESTMENT

At Tripoli's luxury Corinthia hotel on Monday evening, foreign business people milled around in the lobby anxiously trying to find out what was happening at the airport - for most people the main route out of the country.

Several airlines which operate flights into Tripoli cancelled them on Monday and now say they will not be resuming them straight away. These included British Airways (ICAG.L), Emirates EMIRA.UL and Tunisair. Austrian Airlines (LHAG.DE) said it was suspending services from Vienna to Tripoli on Tuesday and Wednesday.

The occupation of the airport will have an impact on the broader business climate too, said David Bachmann, head of the commercial section at the Austrian embassy in Tripoli.

"This is a big setback," he said. "It is especially bad for newcomers. They want to be able to travel to the airport, to their hotel, and hold meetings safely, but when they hear about rockets flying at the airport, they won't come."

"It is difficult for someone like myself to try to convince such companies that this is not a big thing."

Nevertheless, other people who work in Libya were more sanguine. Libya's economy depends on oil and this sector is recovering well. Output is back to pre-revolt levels. Foreign majors, including BP (BP.L) and Eni (ENI.MI), are coming back.

And for all the chaos and security shortcomings, most observers say Libya is making progress.

The disparate groups which hold power show a capacity for resolving their differences through negotiations, as eventually happened with the airport stand-off.

The civil war which Gaddafi's exiled children predicted has not materialised. The country is heading towards its first-ever election, a landmark event which should give the new authorities more legitimacy.

Security too is gradually getting better. The army and police are recruiting more people all the time, some of their recruits are being sent for training abroad, and militias are slowly disbanding.

"The airport incident is likely to scare people at first but businesses are waiting to see what happens after the elections," said a Western diplomatic source. "I don't think it will deter them in the long run."

(Additional reporting by Ali Shuaib in Tripoli, Tarek Amara in Tunis, Regan Doherty in Qatar, Estelle Shirbon in London, Maria Sheahan in Frankfurt and Isabel Coles in Dubai; Writing by Christian Lowe; Editing by Giles Elgood)

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