(Adds commentary on Gulf competition, changes headline)
By Jeffrey Dastin and Alana Wise
Dec 15 (Reuters) - Delta Air Lines Inc on Thursday said it expected a two-year decline in unit revenue to end in early 2017 as prices for last-minute trips have firmed, and appealed to U.S. President-elect Donald Trump to fight foreign airlines that it says compete unfairly.
Delta said it expects passenger unit revenue, which measures sales relative to flight capacity, to fall 3 percent in the fourth quarter of 2016, versus prior expectations of a drop as large as 5 percent. Bookings picked up after the U.S. election, it said.
The No. 2 U.S. airline by passenger traffic also said unit revenue will be unchanged in the first three months of 2017 from a year earlier.
Despite the rosier outlook, Delta's Chief Executive Ed Bastian said U.S. airlines should be a "poster child" for the Trump administration's fight against countries taking advantage of trade deals with the United States.
Delta shares rose more than 3 percent. Shares in rivals also jumped, as investors viewed the outlook as a sign that unit revenue industry-wide would once again increase.
For months, major U.S. airlines sold discounted tickets so they would not lose customers to rapidly growing budget carriers, pushing down unit revenue. Now that the peak summer travel period has ended, big airlines have slowed their capacity growth with the hope that prices will rise and customer loyalty will remain intact.
"Business travel volumes have picked up significantly post-election," Delta President Glen Hauenstein said in an investor webcast. "It's almost like the country breathed a sigh of relief. There seemed to be a significant amount of pent-up demand."
The airline said it plans to increase flight capacity 2 percent in the United States, where bookings have been strong, while shrinking international service by 1 percent in 2017.
Trans-Atlantic revenues will remain a pain point next year, Delta said, as a glut of flights there continues.
"We are facing Middle Eastern carriers that are violating the law," Bastian said in the webcast, referring to "Open Skies" agreements with Qatar and the United Arab Emirates.
The largest U.S. airlines have alleged that Gulf-state subsidies are allowing Emirates, Etihad Airways and Qatar Airways to expand rapidly and crowd out competition on key routes, accusations those carriers deny.
The Obama administration convened talks on the topic but has not made the progress Delta expected, Bastian said.
"I'm very encouraged by our new president-elect's platform," he said.
Delta also believes that competition from low-cost carriers like Norwegian Air Shuttle ASA, while only somewhat negative for revenues so far, may be tougher to fend off in the long run.
(Reporting by Ankit Ajmera in Bengaluru and by Jeffrey Dastin and Alana Wise in New York; Editing by Saumyadeb Chakrabarty and Meredith Mazzilli)