American to charge for first checked bag, cut flights

| The Associated Press

5/21/2008 - 5/21/08

FORT WORTH, Texas — American Airlines said Wednesday it plans to charge passengers $15 for the first checked bag, cut domestic flights and eliminate possibly thousands of jobs, as it grapples with record-high fuel prices.

Chairman and Chief Executive Gerard J. Arpey didn't specify how many jobs would be cut, but when asked whether he expected the figure to be in the thousands he said yes. American, a unit of AMR Corp., employs about 95,000 workers.

American, the nation's largest carrier, said Wednesday the fee for the first checked bag starts June 15 and that it would raise other fees for services ranging from reservation help to oversized bags. The other fees will mostly range from $5 to $50 per service, the airline said.

Arpey said he expects the fees will raise several hundred million dollars, but that was the best estimate he would give.

The changes were being made to adapt to "the current reality of slow economic growth and high oil prices," Arpey said. He said the fees are an effort to get customers to pay for services they want.

American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.

AMR shares tumbled $1.99, or 24.3 percent, to $6.21 in afternoon trading after sinking to a 52-week low of $6.15 earlier in the session.

Rival Delta has no current plans to match American's fee for the first checked bag, a spokeswoman said.

Last month American announced it would join other carriers in charging $25 for second bags checked for some passengers, but it wasn't immediately clear how Wednesday's announcement would affect that.

Its proposed fee for a first checked bag would exempt people who belong to elite levels of its frequent flyer programs, those who bought full-fare tickets and those traveling overseas.

Delta Air Lines Inc. spokeswoman Betsy Talton said the Atlanta-based airline is considering all of its options in light of $130-a-barrel oil, but has no plans "at this time" to match the $15 fee American announced.

American plans to cut domestic flight capacity by 11 percent to 12 percent in the fourth quarter. American had previously expected fourth-quarter capacity to fall 4.6 percent from the same period in 2007.

It expects to retire 45 to 50 planes from its fleet, most of them gas-guzzling MD-80 aircraft. Those were the plane grounded for faulty wiring last month.

AMR said the job cuts would be at both American and its American Eagle subsidiary.

The announcement came as its shareholders gathered for their annual meeting.