UPDATE 1-Flu virus to cost Delta $250 million in revenue

* Flu virus costs $250 mln in revenue in 2009

* Delta has cut capacity in response

* Shares down 5.6 pct
(Adds background on virus, share price, labor issues)

NEW YORK, June 22 (Reuters) - The H1N1 influenza virus
could cost Delta Air Lines (DAL.N) $250 million in revenue this
year, which the world's largest airline will offset by cutting
capacity, its chief executive said on Monday.

"The steps we are taking have essentially involved capacity
because the flu has decreased demand," said Delta CEO Richard
Anderson at the company's annual shareholders meeting.

Delta shares were down 34 cents or 5.6 percent at $5.73 on
Monday afternoon on the New York Stock Exchange. The Amex
airline index .XAL was down 4.8 percent.

Airlines continue to grapple with fallout from the virus,
formerly known as swine flu. The flu has compounded the
industry's other worries, namely the notable drop-off in
business travel and the surge in oil prices.

During an investor conference earlier this month, Delta
President Edward Bastian said the virus hurt second-quarter
revenue by $125 million to $150 million.

Delta has "significantly" cut capacity in Mexico and Latin
America during the second quarter, Anderson said during the
meeting, but expects to add some back later this year. Weakness
in demand in Asia prompted the Atlanta-based airline to cut
capacity there.

Another issue that emerged at the shareholders' meeting was
labor. A handful of retired pilots addressed Anderson and
Bastian with concerns about their pension plans, which were
affected by Delta's bankruptcy which ended April 2007.
(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn and
Matthew Lewis)