Delta Air Lines on Thursday posted a sharply wider fourth-quarter loss as it struggled with high fuel prices and low fares, and analysts warned of an even worse current quarter, sending its shares down more than 10 percent.

"High industry capacity continues to foster a depressed fare environment. Fuel remains volatile... and low-cost carriers, with 180 aircraft on firm order, are growing," Delta Chief Executive Gerald Grinstein told analysts on a conference call.

"Our issues related to debt and liquidity remain challenging."

Grinstein noted that five US airlines accounting for 25 percent of all domestic seats are in bankruptcy, referring to US Airways, United Airlines, ATA Airlines, Hawaiian Airlines and Aloha Airlines.

Delta, the No. 3 US airline, has narrowly avoided bankruptcy in the past few months, but its net loss ballooned to USD$2.2 billion in the fourth quarter from USD$327 million in the year-ago period.

Excluding one-time items, the loss was USD$780 million compared with a loss of USD$207 million a year ago.

"We expect high fuel costs and low fares to continue into the first quarter, which will exaggerate Delta's losses further," Calyon Securities analyst Ray Neidl said in an interview.

The Atlanta-based airline said it ended 2004 with USD$2.1 billion in cash, of which USD$1.8 billion was unrestricted.

"Bankruptcy is not imminent anymore with that amount of cash in hand," Neidl said. "But if fuel prices continue to rise, and fares stay as low as they are, bankruptcy remains a possibility for Delta."

Continental Airlines, suffering from the same pressures, on Thursday posted a loss of USD$206 million compared with a profit of USD$47 million a year earlier.

Delta said it is on track to achieve the remaining USD$2.7 billion in cost savings in its original goal of USD$5 billion through several measures. These include a 10 percent pay cut for all employees, increasing the share cost of health-care coverage, cutting 6,000 to 7,000 jobs by the end of 2005, and eliminating health-care coverage for employees retiring after January 1, 2006.

Delta is remodeling its cost and route structure to compete with low-cost carriers such as Southwest Airlines and JetBlue Airways. More than 51 percent of its network will be restructured by the end of January, it said on Thursday.

Delta expects to boost capacity by 6 to 8 percent in 2005 -- double analysts' estimates. This will result from restructuring rather than any capital investment, Chief Financial Officer Michael Palumbo said on the conference call.

The de-hubbing of Delta's Dallas/Ft. Worth operations, transition to a continuous hub operation in Atlanta, and better aircraft utilization will free up the equivalent of 19 additional planes, Palumbo said.

Delta in January slashed its fares by as much as 50 percent on domestic routes.

"Down the road, it may turn out to be a positive thing because of increased traffic stimulation in business travel, but you can safely look forward to very bleak first and second quarters," Calyon's Neidl said.