UPDATE 2-American Airlines 3rd-qtr profit beats Street, shares rise

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Oct 26 (Reuters) - American Airlines Group Inc, the No. 1 U.S. airline, reported a better-than-expected quarterly profit on Thursday on higher demand for business and leisure travel, even as its operations were significantly disrupted by severe hurricanes.

For the current fourth quarter, American said it expects revenue per available seat mile, a closely watched metric that compares sales to flight capacity, to rise between 2.5 percent and 4.5 percent from a year ago.

Shares rose 3.1 percent to $52.60.

American's operating expenses swelled by 5.3 percent to $9.6 billion, primarily from increases in the cost of fuel and labor, which have caused expenses to spike across the industry.

Earlier this year, American, the top U.S. airline in terms of passenger traffic, said it had offered an unexpected mid-contract pay increase to its pilots and flight attendants, which will cost the airline an additional $230 million for 2017 and $350 million for 2018 and 2019.

The pretax margin, excluding special items, is forecast between 4.5 percent and 6.5 percent for the period.

Earlier this month, smaller rival Delta Air Lines Inc reported a better-than-expected profit as disruptions caused by Atlantic hurricanes cost the airline less than investors had feared.

American said it canceled nearly 8,000 flights due to the hurricanes, reducing pretax earnings by about $75 million.

"Despite the significant operational challenges posed by three hurricanes, our team delivered solid financial results," Chief Executive Officer Doug Parker said in a statement.

Net income fell by 15 percent to $624 million, or $1.28 per share, from $737 million, or $1.40 per share, a year earlier.

On an adjusted basis, American earned $1.42 per share.

Operating revenue rose to $10.88 billion from $10.59 billion.

Analysts, on average, expected quarterly profit of $1.40 per share on revenue of $10.88 billion, according to Thomson Reuters I/B/E/S. (Reporting by Ankit Ajmera in Bengaluru and Alana Wise in New York; Editing by Bernard Orr and Jeffrey Benkoe)