UPDATE 1-American Airlines' revenue, adjusted profit beat Wall St view

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July 28 (Reuters) - American Airlines Group Inc on Friday reported quarterly revenue and adjusted profit that beat analyst projections, helped by strong passenger demand and improving average fares.

The No. 1 U.S. airline by passenger traffic said total operating revenues rose to $11.11 billion in the quarter from $10.36 billion, beating analysts' view of $11.07 billion, in the second quarter ended June 30.

However, operating expenses swelled, increasing 11.1 percent to $9.6 billion on the back of higher fuel and labor costs.

The Fort Worth, Texas-based carrier's net income fell to $803 million, or $1.63 per share, in the quarter from $950 million, or $1.68 per share, a year earlier.

On an adjusted basis, American Airlines earned $1.92 per share, topping analysts' consensus forecast of $1.87 per share, according to Thomson Reuters I/B/E/S.

American surprised investors earlier this year by offering an unexpected mid-contract pay increase to its pilots and flight attendants, at an estimated expense of $230 million for 2017.

Under the pay hike, which frustrated Wall Street and at the time sent American's stock spiraling, flight crew received on average 5 percent to 8 percent increases in hourly pay in an adjustment to match rival carriers.

American attributed a 12.5 percent increase in salary and benefits, and a 15.4 percent jump in consolidated fuel expense, for the rise in operating expenses. Total second-quarter cost per available seat mile rose 9.6 percent to 13.34 cents.

Unit revenue - which compares sales to flight capacity - rose 5.7 percent. (Reporting by Alana Wise in New York and Ankit Ajmera in Bengaluru; Editing by Anil D'Silva and Nick Zieminski)