In the past some airlines may have considered "arrested but not charged" to mean "probably guilty but not enough evidence". They don't want to take a chance, or do a lot of research.

The process is geared towards the airline not making a mistake...it is not intended to be fair to the applicants. The best applicant for some airlines is going to be squeeky clean in all things in and out of aviation. Does the guarantee that they will be the best pilots and employees? Of course not. But it guarantees that the people doing the hiring cannot be second-guessed if something happens down the line. Also any "color" in a person's background is ammunition for plaintiff's attornies in the event of an accident.

I think the process has gotten a lot fairer in the last decade or so, but you never know.