American Airlines to Charge for Checked Bags

Crude oil shot up again as the price in New York trading surpassed $131 a barrel. American Airlines responded to soaring oil prices Wednesday by cutting capacity — that's the number of passengers it plans to fly this year — by as much as 12 percent. The company also said it would impose new fees — including a charge for checking a bad — in order to offset increased fuel costs.

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MICHELE NORRIS, host:

From NPR News, this ALL THINGS CONSIDERED. I'm Michele Norris.

Crude oil prices shot up more than $4 today, to a record close of $133.17 a barrel. That big jump came after the Energy Department reported an unexpected drop in crude oil stockpiles. Fuel prices have been creating big troubles for the airline industry. In order to deal with the cost, a lot of airlines has started charging customers when they check a second bag. Today American Airlines said it will begin charging for a first checked bag.

NORRIS: As NPR's Scott Horsley reports, that's just one of several major changes announced by the airline.

SCOTT HORSLEY: American Airlines is suffering the same pain as anyone else who's filled up lately. But with some 960 planes in its fleet, the air carrier has a much bigger fuel tank. American's fuel bill jumped by $665 million in the first three months of the year. That's a 45 percent increase from a year ago, while its revenues grew by only five percent.

David Castelveter is with the Air Transport Association, an industry trade group.

Mr. DAVID CASTELVETER (Air Transport Association): We're facing unparalleled challenges. We have a fuel bill this year, for the aviation industry, of about $60 billion. That's up from $41 billion in 2007 and up from about $16 billion in 2000.

HORSLEY: American's response is to trim its daily schedule by about 240 flights, or 11 percent, starting in October. The company plans to park 75 to 85 jets and reduce its workforce as well. For passengers, the cutbacks mean more crowded planes, less frequent flights, and the prospect of higher fares. Airplanes are already flying about 85 percent full.

Bill Connors, with the National Business Travel Association, says when you take away 240 American flights each day, you're even more likely to wind up sitting in a middle seat.

Mr. BILL CONNORS (National Business Travel Association): And the real issue comes when there's a weather delay or something like that - then you got a major system bottleneck.

HORSLEY: With fewer empty seats, airlines will have more power to raise ticket prices. American says it's posted 15 fare increases in the last month or so. And in contrast to the bloody fare wars of recent years, 14 of those price hikes stuck. American also announced a new $15 surcharge for most passengers first checked bag, beginning with tickets bought on June 15th. Connors says that's likely to mean more competition for a space in the overhead bin.

Mr. CONNORS: It's not as fun to travel as it used to be, and this baggage fee that they've announced, and others have announced on second bags - where you may get more leisure travelers bringing their bags on board - and the logistical nightmare at the airport, and actually on the plane, it's going to get a little worse.

HORSLEY: The airline industry says baggage fees and meal charges are ways to raise revenue without having even higher ticket prices. But as they waited for American flights out of Washington today, passengers Annalid Marcos(ph) and Raymond Pears(ph) said their tired of being nickeled and dimed.

Ms. ANNALID MARCOS: I think it's ridiculous. I think that they're starting to run amok with their restrictions and their regulations and their charges. I mean, somebody needs to start reining them in.

Mr. RAYMOND PEARS: If this is connected in any way to the rising cost of oil, then this country is going to have to take some serious action, very, very simple. If somebody's going to charge you with $15 more to carry my bag, it's crazy.

HORSLEY: American says it expects the new surcharge and other fee increases to bring in several hundred million dollars during the year. But that's only a drop in the barrel for a company that's now paying over $6 billion more for fuel than it was in 2003.

Scott Horsley, NPR News.

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