American Airlines To Charge for Checked Bags

By DAVID KOENIG, Associated Press
May 21, 2008

FORT WORTH, Texas -- American Airlines will start charging $15 for the first checked bag, cut domestic flights, and lay off possibly thousands of workers as it grapples with record-high fuel prices.

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

American, the nation's largest carrier, said today 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.

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 today'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.

A 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.

The Chairman and Chief Executive Officer, Gerard J. Arpey, said he expects the new or raised 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," Mr. Arpey said. He said the fees are an effort to get customers to pay for services they want.

Mr. Arpey didn't put a figure on the layoffs, but when asked whether he expected the figure to be in the thousands he said yes.

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

Parent AMR Corp. said reduced flying will lead to an undisclosed number of job cuts at both American and its American Eagle subsidiary.

AMR 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.

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 $1.42, or 17.2%, to $6.78 after the announcement which came as its shareholders gathered for their annual meeting. They sank to a 52-week low of $6.72 earlier in the session.