UPDATE 2-American Air Sept. revenue up despite fewer passengers

* Revenue would have been higher if not for flight troubles

* Operations showing improvement, exec says

* Domestic traffic hit; international traffic higher

(Adds company comment)

Oct 8 (Reuters) - American Airlines said unit revenue, awidely watched measure of pricing power, rose 4 percent inSeptember and would have been higher if not for flight delaysand cancellations.

Although the number of passengers boarded fell 3.9 percenton American and its regional carrier affiliates last month,passenger revenue per available seat mile, or unit revenue, rose4 percent from a year earlier, the airline reported on Monday.

Excluding the impact of halted and delayed flights in thesecond half of the month, the improvement in unit revenue wouldhave been 4.4 percent, according to the unit of AMR Corp, which filed for Chapter 11 protection last November.

In recent weeks, American has canceled hundreds of flights,citing increased pilot maintenance reports and sick leave usage.The airline is currently negotiating a labor contract with theAllied Pilots Association, but the union says it has called nowork action at the carrier.

Three separate incidents recently, in which seats cameunbolted from the floor on American flights, have also raisedconcerns about the airline. American moved to reinforce seatlocks on 48 Boeing 757 jets following those incidents.

Virasb Vahidi, American Airlines chief commercial officer,said the carrier's operations have improved "quite a bit" overthe last week but there is room for more improvement.

"We are not where we would like to be. We are not operatingat the same level as we either like to or we have donehistorically," Vahidi added. "But we have been seeing someimprovement in our operations."

Traffic at American Airlines, measured by revenue passengermiles, fell 2.8 percent overall in September. U.S. traffic, hurtby the cancellations, fell 7.1 percent, while internationaltraffic rose 3.2 percent.

The airline's capacity, as measured by available seat miles,was down 3.4 percent in September. Load factor, or thepercentage of seats filled, rose to 81.1 percent from 80.7percent a year earlier.

Vahidi said September revenue was aided by American's jointbusiness agreement with British Airways and Iberia, whose parentis International Airlines Group , in the Atlantic regionand Japan Airlines in the Pacific. He also said LatinAmerican business, where September traffic rose 6.1 percent,continues to grow.

American Airlines said its unit revenue has outperformedother major U.S. airlines for the past six months as itrestructures in bankruptcy.

For example, Delta Air Lines Inc said its unitrevenue rose 0.5 percent in September, while Southwest AirlinesCo estimated a fall of 2 percent to 3 percent and USAirways Group Inc reported flat unit revenue.

(Reporting by Karen Jacobs; Editing by Gerald E. McCormick andJohn Wallace)