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Benjamin Spillman

Airline industry: Another fee for fliers

22 May 2008

LAS VEGAS, Nevada -- Travelers who want to bring golf clubs or an extra set of clothes to Las Vegas, or anywhere else in the country, will soon get hit with a $15 fee if they are flying American Airlines.

The fee will apply to the first checked bag, making American the first major airline to charge passengers to check just one bag.

The airline coupled the announcement with news that it plans worker layoffs, route cuts and other service charges. It is part of a plan by American's leaders to offset fuel costs that are crippling much of the domestic airline industry.

The baggage charge rankled passengers, and route cuts, depending on where they come from, could bump American from the top five airlines serving Las Vegas in terms of passenger numbers.

American plans to cut domestic-flight capacity by 11 percent to 12 percent in the fourth quarter, after the peak summer season is over. That's more than double American's previous plans to cut flying by 4.6 percent in late 2008.

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.

Last month American announced it would join other carriers in charging $25 for a second checked bag, 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 flier programs, those who bought full-fare tickets and those traveling overseas.

"That is just dumb," said Tim Eaton, 50, who was flying American on Wednesday from Las Vegas to his hometown of St. Louis.

Eaton, a frequent flier, said it wouldn't affect his business travels as a director for a retail food chain, but it would be a burden when it comes to family vacations.

"If I'm going to ski, now it is going to be $15 and $25," he said of the cost to transport skis and a bag for boots. "I'll pack differently, I'll think differently about how I travel."

Eaton also noted a $2 fee to check bags curbside for American flights at McCarran International Airport and said it was wrong to add charges that are likely to erode tip income for skycaps.

"That is taking money out of people's pockets," Eaton said.

The announcement comes as travel to Las Vegas is down, resorts have laid off workers, and state and local governments are struggling to make ends meet because the tourism slump is shrinking tax revenue in Nevada.

Increased costs to travel -- especially charges perceived by customers to be unjustified -- could make people less likely to visit Las Vegas or prompt them to spend less while in town.

"I know they have problems," Mickey Ashmore, 59, of Dallas, said of the airline industry while checking bags at McCarran. "But the fact of the matter is the service has gotten so poor it is just one more thing to make people not want to travel."

Passengers also resented the way American plans to apply its new revenue-raising measures. They questioned whether the fees actually reflect the cost of transporting bags and suggested the airline could do a better job establishing the cost of travel and applying it to passengers in one all-inclusive price.

"Nickel and diming is just annoying," said Andrea Lukens, 40, before boarding a flight from Las Vegas to Dallas.

"If (the baggage charge) is in the fee, it feels like that is what it is," added Karl Lukens, 40. "Just tell me the price."

It is not yet known how many, if any, flights American will take from Las Vegas. But the airline has been losing passengers in recent months. In March it hauled 188,278 passengers to and from Las Vegas. If American were to lose another 8 percent of its passenger traffic, it could be bumped from the fifth spot in Las Vegas by Allegiant, the next carrier in line and one that is adding customers.

Delta Air Lines spokeswoman Betsy Talton said the Atlanta-based airline has no current plans to match American's fee for the first checked bag, but is considering all options with oil at $130 per barrel.

Chairman and Chief Executive Gerard Arpey said he suspects the new or raised fees will raise several hundred million dollars for American, 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.

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.

Arpey said he wants to cut overhead and costs about 7 percent to 8 percent but declined to say whether layoffs would equal a similar percentage of parent AMR Corp.'s work force of about 90,000.

American Airlines expects to retire 45 to 50 planes, most of them gasoline-guzzling MD-80 aircraft. Those were the planes grounded for faulty wiring last month. AMR regional airline American Eagle also plans to retire planes.

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 $1.98, or 24.15 percent, to close at $6.22 on the New York Stock Exchange.