American Airlines to Charge for All Checked Bags

By Russell Grantham, The Atlanta Journal-Constitution

May 22–In another sign of growing strains on the industry, American Airlines announced deeper capacity cuts and said it will begin charging $15 on the first bag customers check to help offset fuel bills.

American said at its annual shareholders meeting Wednesday that it will cut domestic capacity by up to 12 percent and ground at least 75 jets. The retrenchment — more than double its goals announced a month ago — will result in unspecified “work force reductions” and possible “facility closures.”

“The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak U.S. economy,” said Gerard Arpey, chief executive of American Airlines’ parent, AMR Corp. “Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve,” he said in a news release.

The moves by the nation’s largest airline mirror similar reductions Delta Air Lines announced in December and March to shrink domestic capacity by 10 percent this year and shed 2,000 jobs and dozens of jets.

A Delta spokesman indicated that the carrier has already reacted to deteriorating conditions and doesn’t have immediate plans for deeper reductions. “That’s all we’ve announced at this point,” said Kent Landers. “We’ve been an aggressive first mover in adjusting our business plans.”

In a message to employees this week, Delta CEO Richard Anderson said more than 3,000 employees signed up for voluntary retirement and separation programs. “As a result, there will be no frontline involuntary reductions, and the high number of people participating is also helping us to significantly reduce” involuntary job cuts among administrative and management staff, he said Monday in the recorded message.

However, some industry analysts have been skeptical that airlines are slashing operations enough to deal will annual fuel bills that could be billions of dollars higher than expected.

“A war of attrition seems to be under way,” JPMorgan analyst Jamie Baker said in a report. He said airlines need to shrink operations “massively” and that “capacity cuts thus far fall meaningfully short of what we and most executives deem necessary.”

Roger King of securities advisory firm CreditSights said most big airlines have squeezed out much of their costs in earlier bankruptcy restructurings, leaving them little maneuvering room other than cutting capacity and raising fares.

“The race is on to see if airlines can raise fares high enough to cover the fuel bills before they run out of cash,” he said in a report.

In a move aimed at boosting revenues “several hundred million dollars,” said American Airlines, it will boost several fees and begin charging the $15 fee — or $30 a round trip — for checking a first bag starting June 15. American said the fee will not apply to some customers, such as its most frequent fliers and those who buy full-fare, business or most international tickets. Other fee increases ranging from $5 to $50 apply to services such as using a reservation agent to book a trip or checking an oversized bag.

Delta’s Landers said the airline has not adopted a similar fee for checking the first bag. He declined to comment on potential changes in the future.

American’s new fee makes it perhaps the only domestic carrier that currently plans to charge a separate fee for carrying any luggage in the belly of the plane.

Like other airlines, American had already announced plans in recent months to charge $25 when customers check a second piece of luggage. Delta also began charging $25 one-way, or $50 a round trip, for a second checked bag on May 1.

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