Delta said that many of the problems are outside its control

It signed working finance agreements last year to keep itself afloat but warned this might not be enough.

Should it be unable to cut costs, boost sales, restructure debts or sell off assets then it may have to call in the administrators by the end of the year.

Shares in Delta tumbled 11% during morning trading in New York.

Money trap

Delta borrowed $630m from a financing division of General Electric and American Express last year, but said it wants to renegotiate the terms of the agreements.

Written into the loans documents are requirements that Delta's earnings stay above a certain level.

High aircraft fuel prices are masking the progress we are making under our transformation plan Delta Check Delta's share price

Delta is concerned that its poor profit outlook may compromise the terms of the loans and force it to repay the debt immediately - effectively forcing it into bankruptcy.

"We believe we will record a substantial loss... and that our cash flows from operations will not be sufficient to meet all of our liquidity needs," Delta said in a statement.

The company said it had been hit by high fuel costs and increased competition from low-cost carriers, forcing it to cut ticket prices.

Earlier this year, the company announced plans to cut its domestic fares by as much as 50%.

Profit squeeze

Those pressures led to it posting a loss of $1.1bn (�580m) in the three months ending 31 March. During the quarter, fuel expenses increased 54%, Delta said.

However, the company said that its is still on track to hit the cost saving target of $5bn by the end of 2006 laid out in its "transformation plan".

"Historically high aircraft fuel prices are masking the progress we are making under our transformation plan," Delta said.

Other US carriers are also struggling in the current market environment and firms including United have sought bankruptcy protection.