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UPDATE 1-Delta's passenger unit revenue rises, but profit tumbles

(Adds details on quarter)

July 13 (Reuters) - Delta Air Lines Inc on Thursday reported an increase in quarterly passenger unit revenue, a closely watched metric, but higher costs weighed on its bottom line.

Breaking a losing streak that has plagued much of the industry for the last two years, Delta posted a 2.5 percent increase in passenger unit revenue, which measures sales relative to flight capacity, on 0.4 percent higher capacity in the second quarter of 2017.

But the company's net income fell 20.8 percent to $1.22 billion, or $1.68 per share, in the second quarter ended June 30, from $1.55 billion, or $2.03 per share, a year earlier.

On an adjusted basis, the No. 2 U.S. airline by passenger traffic earned $1.64 per share, compared to the analyst consensus forecast of $1.67, according to Thomson Reuters I/B/E/S.

Delta's operating margin, excluding special items, rose slightly to 18.4 percent, compared to 17.4 percent last year.

Total operating revenue rose 3.3 percent to $10.79 billion.

(Reporting by Alana Wise in New York and Arunima Banerjee in Bengaluru; Editing by Bernard Orr; Editing by Saumyadeb Chakrabarty)