NEW YORK, June 12 (Reuters) - Delta Air Lines (DAL) expects to report a second-quarter loss of about $170 million excluding special items, much smaller than in the first, but weak revenues industrywide remain a challenge, chief executive Leo Mullin said on Wednesday. The projected loss for Delta, the No. 3 U.S. carrier based in Atlanta, falls roughly in line with current consensus estimates, Mullin said in a presentation that was Web cast. Delta reported a $397 million net loss in the first quarter. "While substantially better than our first-quarter loss, these results clearly reflect the challenges at hand," Mullin said. "Though traffic and revenue are returning, revenue still lags. Domestic loads continue to climb driven primarily by leisure travelers and continued fare sale activity." Cash flow from operations is expected to be positive for the full second quarter and Delta expects to have about $2.7 billion in cash and short term liquidity at the end of the quarter, Mullin said. Delta Air Lines shares were last down $1.04, or 4.24 percent, at $23.47 in Wednesday afternoon trading on the New York Stock Exchange. ©2002 Reuters Limited.