With oil prices hitting new records almost daily, the nation's largest air carrier, American Airlines, announced drastic steps Wednesday to "remain viable," including charging new fees for all checked baggage, slashing domestic flights and laying off thousands of workers.
It was one of the most extreme moves yet by a U.S. airline, and came as the price of oil jumped Wednesday to $133.17 a barrel, up $4.19.
FOR THE RECORD
Baggage fees: A story in Section A on Thursday reported that American Airlines will charge a fee for all checked baggage. The fees will not be applied to most international travelers. A photo accompanying the article showed a couple headed to Mumbai. Passengers flying the airline to India would not be charged the new fees.
Baggage fees: An article in Section A on Thursday about American Airlines' imposing a bag fee misspelled the last name of travel website publisher Joe Brancatelli as Brocatelle.
Starting June 15 most American passengers must pay $15 for checking a single bag. That comes on top of the airline's decision two weeks ago to charge $25 for a second bag.
American, the largest carrier at Los Angeles International Airport, said it was compelled to take the actions in what it called an "extraordinary" environment.
Other airlines are expected to take additional steps to fight the twin curses of rising oil prices and a weak economy, increasing prospects for higher fares and crowded planes as the busy summer travel season kicks into gear with the upcoming Memorial Day weekend.
Already, domestic airfares for summer travel are up 20% compared with a year ago, according to Farecast.com, an online travel search service. American said rising oil prices had increased its expected annual fuel costs by nearly $3 billion since the start of the year.
"There is no sugar-coating the fact we are facing an extraordinarily difficult economic environment," Gerard Arpey, chief executive of American's parent, AMR Corp., said during a conference call with reporters Wednesday. "The industry cannot continue in the current state."
The fee is the first imposed by a major airline for checking in the first bag, a service that has previously been included in the price of the ticket. The fee does not apply to "elite" level frequent-flier club members, those paying full fare and some others.
The airline began charging $25 for a second checked bag earlier this month, and has imposed even higher charges for additional luggage. The airline said it also would raise fees for services including reservation help and the handling of oversized bags.
The moves to generate new revenue came on the heels of another record-breaking day in the petroleum market and raised the prospect of another round of airline bankruptcies if oil prices continued to rise unabated.
On Wall Street, a four-day selling wave in airline stocks intensified as crude oil prices reached record levels. AMR plunged $1.98, or 24%, to $6.22, its lowest since 2003.
