Wednesday's decision means the Arizona-based airline will not be allowed to serve liquor on flights to and from New Mexico after 11:59 p.m. Thursday.
"US Airways has done little, if anything, to consider implementing the state's required alcohol server training to identify alcohol-impaired or intoxicated passengers," the department said in denying the extension.
An attorney for US Airways called the state's decision to deny the license extension premature. He said the airline planned to speak with state officials about the liquor license and its efforts to disperse training materials to employees.
US Airways officials hand-delivered a letter to the department Wednesday, saying the airline intended to distribute New Mexico's alcohol-serving training materials to its flight attendants.
The state cited US Airways in January in connection with Dana Papst, who drove head-on into a van carrying a Las Vegas, N.M., family on Interstate 25 in November. After the crash, the state prohibited US Airways from serving liquor on New Mexico flights until it received a state liquor license.
The airline subsequently was granted the temporary license.
US Airways had served alcohol to Papst, even though witnesses said he appeared to be intoxicated. Police have said Papst also bought beer at a Bernalillo convenience store after getting off the flight in Albuquerque.
The state cited US Airways again in May after Ernest Wright, 49, of Albuquerque was arrested less than half an hour after leaving Albuquerque's airport. Wright, whose blood alcohol was twice New Mexico's legal limit for intoxication, told authorities he had been drinking at the Phoenix airport and on his flight to Albuquerque.
Michael Minerva, US Airways vice president, said in a letter to Alcohol and Gaming Division head Gary Tomada that the airline decided to get liquor server materials to its flight attendants after a relative of the Las Vegas family challenged US Airways at a hearing Monday to become industry wide leaders in alcohol-server training.
That "prompted us to think more broadly than we have to this point," Minerva said.
US Airways officials were disappointed with the decision not to extend the temporary license because they believe they've gone above and beyond what the department required, said Andrea Rader, a spokeswoman for the airlines.
"We understand that this is a very serious problem in New Mexico, and we want to do the right thing," she said.
Monday's hearing looked at the status of the airline's application for a permanent liquor license, and department Superintendent Edward Lopez questioned US Airways officials on what they had done to incorporate alcohol-server training.
The hearing officer said the state needed four more documents from the airline and that US Airways needed resolve the pending citation before the department could deal with the permanent license.