Fees ready for takeoff
Continuing trend of passing on costs, American to charge for 1st checked bag
Starting June 15, a ticket for American Airlines Inc. will cover a passenger's seat and a soda, but not a single piece of checked luggage.
The world's largest airline - struggling to stay solvent in an era of record-high fuel prices - revealed at its annual shareholder meeting yesterday that it will start charging many customers traveling in domestic coach class $15 to check in a piece of luggage. This first-bag fee - which has yet to be adopted by any other major US carrier - follows American's action last week to join the new industry trend of charging anyone who is not among the most loyal or lucrative customers $25 to check a second piece of luggage.
American's experiment with the first-bag fee is one of many cost-cutting moves disclosed yesterday. The airline also plans to cut mainline domestic seat capacity 11 percent to 12 percent at the end of the year, up from the previously announced 5 percent, and reduce regional affiliates' seat capacity by 10 percent to 11 percent, up from the previously planned 2 percent.
These cuts will possibly result in facility closures and thousands of layoffs, but the details are still being figured out. Additionally, the carrier will retire 75 to 85 fuel-guzzling, older aircraft and increase fees by $5 to $50 for services pertaining to reservations, pets, and oversized bags.
American expects the new or increased fees to generate "several hundred million dollars" in incremental annual revenue and help the airline avoid filing for bankruptcy.
"The airline 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 US economy," said Gerard Arpey, chief executive of AMR Corp., American's parent company. "The bottom line is that our revenues, which include ticket sales and fees, must keep pace with our increasing costs."
Reaction from passengers who were catching flights on a variety of airlines at Logan International Airport in Boston yesterday ranged from outrage to indifference. Some vacationers said they might as well drive as far as Washington, D.C., rather than pay to fly with several suitcases filled with souvenirs and spare outfits. But some business travelers don't care about the new fees because their employers pick up their travel costs.
Chuck Millet, a Medway engineering manager who frequently flies for business trips, is not happy that checking a bag will now cost $15 more each way if he flies on American.
"The common assumption is if you buy a ticket, you get to check a bag," said Millet as he arrived at Logan yesterday to catch an Air Canada flight to Ottawa. "I would look at what other airlines offer. I collect miles on all of them and look for the best deal."
But competitors may follow American's lead, just as they did after United Airlines said in February that it would start charging many customers to check a second bag.
"The other airlines, I'm sure, are studying it," said Henry H. Harteveldt, principal airline analyst for Forrester Research Inc. "If the other airlines match, then the fee is likely to stick - unless low-cost airlines like Southwest choose not to offer it."
Nicole C. Wong can be reached at nwong@globe.com.
