Page last updated at 07:35 GMT, Thursday, 22 May 2008 08:35 UK

Bag charge plan hits US airline

Passengers check in bags with AA at Pittsburgh airport - 21/5/2008
American said it hoped to raise several hundred million dollars in new fees

American Airlines is to become the first major US carrier to charge passengers to check in a first bag.

The new fee of $15 (7.50) comes as US airlines struggle with soaring fuel costs and a slumping economy.

The airline says it will also cut a number of its domestic flights and get rid of older, fuel-guzzling jets.

International travellers will be exempt from the fee. American joined other US carriers last month in charging $25 for a second checked bag.

Shares in AMR, the owner of American Airlines, tumbled by more than 24% to $6.22 on the news.

Aviation industry analyst Terry Trippler said that it was inevitable airlines would look to offset higher costs and boost their profits.

"When people say they are 'nickel and diming', I disagree," said Mr Trippler.

"This is survival. They need to do what they can."

Airline woes

Representatives from several other big US airlines said they were considering charging passengers for the first checked bag as well.

A number of US airlines have gone out of business or filed for bankruptcy this year.

American Airlines said rising fuel prices had increased its costs by nearly $3bn since the start of the year.

On Thursday, the price of crude oil climbed to a new record of more than $135 a barrel.

American Airlines-owner AMR made a net loss of $328m in the first three months of this year, compared with a profit of $81m a year earlier, and said the swing into the red was mostly down to high aviation fuel costs.

American said it hoped to raise "several hundred million dollars" from the luggage fee and other new charges.

Domestic flights are to be cut by 12% and thousands of job cuts are expected, says the BBC's Jonathan Beale in Washington.

At the same time, the company will retire some 75 aircraft from its fleet, focusing on the least efficient planes.


SEE ALSO
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Delta and Northwest deal 'soon'
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Delta to cut jobs as costs surge
18 Mar 08 |  Business
US airline deal talk intensifies
11 Feb 08 |  Business
Delta loss as fuel prices surge
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US airline payout angers workers
07 Dec 07 |  Business
Northwest emerges from bankruptcy
18 May 07 |  Business

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