UPDATE 2-JetBlue profit falls on higher expenses, hurricanes; shares drop

(Adds outlook on expenses, stock price, background)

NEW YORK, Oct 24 (Reuters) - JetBlue Airways Corp's third-quarter net income fell by $20 million from the prior year, hurt by higher operating expenses and flight cancellations during a severe hurricane season, the carrier said on Tuesday.

JetBlue's shares fell 3 percent to $19.30 as the carrier reported a steep increase in year-over-year operating expenses that would continue into the fourth quarter.

JetBlue posted earnings of $179 million, or 55 cents per share, down from $199 million, or 58 cents in the year-ago quarter. The latest result was ahead of Wall Street's average forecast of 53 cents, according to Thomson Reuters I/B/E/S.

"Our third quarter results were impacted by two hurricanes that reduced our (earnings per share) by approximately 6 cents. We are confident that the adjustments we are making to our network will limit any ongoing financial impact in 2018," JetBlue Chief Executive Officer Robin Hayes said in a statement.

Those expenses increased by $125 million, or 9.1 percent, from the previous year on the back of significantly higher fuel and labor costs.

Including fuel, JetBlue's operating expense per available seat mile rose by 5.2 percent in the quarter to 10.50 cents.

The airline has been struggling to keep down costs of its largely New York-based operation, and costlier fuel coupled with industry demands for better wages have made it more difficult to keep a lid on expenses.

Looking ahead to the fourth quarter, JetBlue expects operating expense per available seat mile, excluding fuel, to go up between 5.0 percent and 7.0 percent.

Across the industry, results were damaged by a string of debilitating Atlantic hurricanes.

Two of the storms, Irma and Maria, cost JetBlue about $44 million in lost revenue and will drag fourth-quarter revenue by about $70 million to $90 million. (Reporting by Alana Wise; Editing by Bill Rigby and Jeffrey Benkoe)