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

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Oct 8 (Reuters) - American Airlines said unit revenue, a widely watched measure of pricing power, rose 4 percent in September and would have been higher if not for flight delays and cancellations.

Although the number of passengers boarded fell 3.9 percent on American and its regional carrier affiliates last month, passenger revenue per available seat mile, or unit revenue, rose 4 percent from a year earlier, the airline reported on Monday.

Excluding the impact of halted and delayed flights in the second half of the month, the improvement in unit revenue would have 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 the Allied Pilots Association, but the union says it has called no work action at the carrier.

Three separate incidents recently, in which seats came unbolted from the floor on American flights, have also raised concerns about the airline. American moved to reinforce seat locks 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" over the last week but there is room for more improvement.

"We are not where we would like to be. We are not operating at the same level as we either like to or we have done historically," Vahidi added. "But we have been seeing some improvement in our operations."

Traffic at American Airlines, measured by revenue passenger miles, fell 2.8 percent overall in September. U.S. traffic, hurt by the cancellations, fell 7.1 percent, while international traffic rose 3.2 percent.

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

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

American Airlines said its unit revenue has outperformed other major U.S. airlines for the past six months as it restructures in bankruptcy.

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

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