Delta Air Lines swings to profit, helped by US aid=20 =20 Thursday July 17, 9:25 AM EDT=20 (Recasts first sentence, adds background, byline) By Meredith Grossman Dubner CHICAGO, July 17 (Reuters) - Delta Air Lines Inc. (DAL) on Thursday said cash from a U.S. government aid package helped the carrier achieve its first profit in 2-1/2 years, but it still expects a slow recovery from a historic downturn. Without the $251 million after-tax in federal money, Delta's quarterly loss widened to $237 million, or $1.95 per share. The No. 3 U.S. carrier also benefited from $176 million after-tax from the sale of its stake in reservations firm Worldspan. "Even though we saw some initial post-war traffic recovery, the overall revenue environment remains weak," Chief Executive Leo Mullin said in a statement. "Delta still faces many challenges as we cautiously emerge from the worst business cycle in our company's history." The Atlanta-based airline reported a second-quarter net profit of $184 million, or $1.40 per share. A year earlier, Delta posted a loss of $186 million, or $1.54 a share. Before items, the company reported a loss in last year's second quarter of $162 million, or $1.34 a share. Analysts had expected the carrier to post a loss before items of $2.04 per share, with loss estimates ranging from $1.62 a share to $2.30 a share, according to Reuters Research, a unit of Reuters Group Plc. Although demand for air travel has started to increase slightly since the end of major combat in Iraq, it has not yet returned to pre-war levels. Delta said its systemwide capacity was down 10.7 percent and traffic was off 8.5 percent in the quarter, compared with a year earlier. The carrier also said it ended the quarter with $3 billion in cash, of which $2.8 billion is unrestricted. Delta, like other airlines, is under pressure to reduce costs to remain competitive with other carriers that have restructured -- both in and out of bankruptcy court. The airline said last month it intends to trim $2.5 billion in costs by the end of 2005 through a number of measures that do not include job cuts. It plans to save $80 million by 2005 through its new low-cost subsidiary, Song. Delta also began negotiating with its pilots, the company's only unionized group, two weeks ago on possible concessions. Shares of Delta rose 65 percent in the second quarter as investors gained confidence that the threat of additional airline bankruptcies had faded. The American Stock Exchange's airline index (XAL) jumped 85 percent during the period.=20 =A92003 Reuters Limited.=20