Nov. 21 (Bloomberg) -- Delta Air Lines Inc., the world's largest carrier, said it may need to cut more capacity next year after demand ``slowed over the course'' of this quarter.

Fourth-quarter capacity will decline by 4 percent from a year earlier, with more reductions likely in 2009 on both U.S. and international routes, Atlanta-based Delta said today in a regulatory filing that included an investor update.

Delta, AMR Corp.'s American Airlines and other carriers have already trimmed U.S. capacity by at least 10 percent to shrinking operations as the weak economy and higher fares have curb demand. More reductions are needed, said Hunter Keay, an analyst at Stifel Nicolaus & Co. in Baltimore.

``What I'm pleased to see is that they're talking about cutting more capacity, including on the international side,'' said Keay, who recommends buying Delta shares. ``They'll probably look at trans-Atlantic routes to developed economies, like the U.K. and maybe Germany.''

The biggest U.S. airlines should reduce international flying by about 5 percent next year, Keay said.

Delta today also lowered its forecast for fourth-quarter operating margin to a range of little changed to minus 2 percent. Delta's previous expectation, issued before its combination with Northwest Airlines Corp. was completed, was for an increase of between 1 percent and 3 percent.

The carrier also trimmed its outlook for unit revenue, a measure of fares and how full planes are, to an increase in a range of 2 percent to 4 percent this quarter. Its previous forecast, in October and for Delta operations only, was for a gain of 8 percent to 10 percent.

Delta surpassed American Airlines as the world's largest carrier by traffic with by purchasing Northwest in an all-stock deal in October. The merged company kept Delta's name and has $35 billion in revenue and 75,000 employees.

Delta fell 20 cents to $6.82 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have tumbled 54 percent this year.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: November 21, 2008 16:07 EST