Delta, the nation's third-largest airline, said it expects to post a loss for the period in the range of $85 million to $110 million, or between 70 cents and 90 cents a diluted share. Analysts had been forecasting a profit for the period of 46 cents a share, according to First Call/Thomson Financial. For a year earlier, Delta reported net income of $1.61 a share.

The airline's profit warning signals that the slowdown in the economy is beginning to sap demand for business travel. US Airways Group Inc., which competes heavily with Delta on the East Coast, issued a similar gloomy forecast early this month, blaming softening demand for business travel. The downturn represents a contrast with last year's strong profits in the industry. For Delta, the period will mark the first quarterly loss from operations since the first three months of 1995.

"The airlines are lagging economic indicators, and right now they are on the cusp of feeling the economic slowdown," said Brian Harris, an analyst with Salomon Smith Barney. "Business travelers are looking for ways to stretch their travel dollars and avoid the high fares."

The earnings warning sent Delta shares down $1.64 to $41.46 as of 4 p.m. in New York Stock Exchange composite trading Tuesday. Other airlines stocks also were hit by the news. United Airlines' parent, UAL Corp., fell $1.64 to $36.72; and AMR Corp., parent of American Airlines, slid 51 cents to $34.30, both on the Big Board.

Delta expects revenue in the first quarter will fall short of expectations by between $300 million and $350 million, coming in essentially flat with the year-earlier level of $3.91 billion. The carrier attributed about $100 million of the shortfall to its cutting back capacity by 2.7% in the current quarter as a result of a refusal by many pilots to sign up for overtime flying amid contentious contract negotiations.

Delta attributed the balance of the expected revenue shortfall, between $200 million and $250 million, to the combined impact of the economic slowdown and labor problems. It said the weakening economy has crimped bookings for higher-margin business tickets as business travelers book ahead and scout for cheap fares. Meanwhile, the threat of a possible pilot strike has discouraged some passenger bookings, it said.

Part of the weakness at Delta is also tied to its heavy presence on the East Coast, where US Airways has cut fares amid an ambitious increase in capacity, and low-fare industry leader Southwest Airlines is expanding aggressively.

For the second quarter, Delta said it expects that continued economic weakness, customer skittishness over the pilot problem and the carrier's flight-schedule reduction will pare revenue by between $200 million and $250 million.

Last Friday, President Bush, in creating a Presidential Emergency Board to forestall a strike by mechanics at Northwest Airlines for 60 days, said he would take similar steps to prevent other airline strikes from occurring this year to avoid damage to the faltering U.S. economy.

The Wall Street Journal