American to charge for just one checked bag

[JediAthos]

FORT WORTH, Texas - American Airlines will start charging $15 for the first checked bag, cut domestic flights and lay off workers — probably in the thousands — as the nation's largest carrier grapples with record-high fuel prices.

 

American plans to cut domestic flight capacity by 11 percent to 12 percent in the fourth quarter, after the peak summer season is over. The carrier was previously planning a 4.6 percent cut.

 

Shares of American parent AMR Corp. tumbled 24 percent, down $1.98 to $6.22, as oil prices shot past $130 per barrel for the first time, signaling even more trouble for the nation's airlines.

 

American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.

 

In a further sign of the problems facing the industry, Southwest Airlines Co., the only major U.S. carrier to post a profit in the first quarter, won't earn as much for the rest of 2008 as it did a year earlier, its chief executive warned.

 

American said Wednesday that the fee for the first checked bag starts June 15, and it will raise other fees for services ranging from reservation help to oversized bags. Those fees could cost between $5 to $50.

 

United Airlines, the nation's No. 2 carrier, is "seriously studying" imposing its own fee on first bags, spokeswoman Robin Urbanski said. Delta Air Lines, the third-largest, has no current plans for a fee but is considering all options, spokeswoman Betsy Talton said. AirTran Airways and Northwest Airlines said they were weighing their response.

 

Last month, American joined other carriers in charging $25 for a second bag checked by passengers. The major airlines have also raised fares about a dozen times in recent months.

 

The first-bag fee will be charged to everyone except people who belong to elite levels of its frequent flyer program, those who bought full-fare tickets, and those traveling overseas.

 

Chairman and Chief Executive Gerard J. Arpey said he expects the fees will raise "several hundred million dollars" for American.

 

Arpey said American was reducing flights and charging more fees to adapt to "the current reality of slow economic growth and high oil prices." He said the fees would also get customers to pay for services they want.

 

Arpey didn't put a figure on the layoffs, but when asked whether he expected them to be in the thousands, he replied, "I would think so."

 

International flights are more profitable, even with costly fuel, so they are largely untouched by Wednesday's announcement. Overall, American will cut global capacity by 7 to 8 percent.

 

Arpey said he wanted to cut overhead and costs by the same 7 to 8 percent, but he declined to comment whether layoffs would equal a similar percentage of the work force. American has 82,000 employees, while regional affiliate American Eagle has 13,000. Both are owned by AMR Corp.

 

American expects to retire 45 to 50 planes, most of them gas-guzzling MD-80 aircraft. Those were the planes grounded for faulty wiring last month. American Eagle will also retire 30 to 35 jets, he said.

 

Even before news of the new fees and layoffs, Lehman Brothers lowered its earnings outlook for nearly all major U.S. carriers, and Soleil Securities cut its rating on AMR stock to "sell." Soleil also downgraded Continental Airlines Inc. to "hold" and United parent UAL Corp. to "sell."

 

American announced its changes as AMR shareholders attended their annual meeting. During the meeting and outside on the street, hundreds of uniformed pilots and flight attendants protested against stock bonuses for management.

 

Southwest shareholders met a few miles away, and the mood was festive despite the somber backdrop of industry problems. Shareholders gave a celebratory farewell to co-founder Herb Kelleher, who was presiding over his last meeting as chairman.

 

CEO Gary C. Kelly, who added the title of chairman on Wednesday, said he expects Southwest to remain profitable, as it has in every quarter since early 1991, but not as profitable as it was in the second, third and fourth quarters of last year.

 

"I would love for Southwest to grow modestly next year and in 2010, but at this point we're not making any announcements," he added.

 

Southwest shares fell 57 cents, or 4.4 percent, to $12.43 on Wednesday.

 

Does anyone else think that charging to check a bag is ridiculous?

 

I see it as a good reason to take my business to another airline.

[Rev7]

Does anyone else think that charging to check a bag is ridiculous?

 

I see it as a good reason to take my business to another airline.

I most certainly do think that it is ridiculous to have to pay for even just one bag. It is all because of the cost of fuel! It is just getting worse...unfortunatly this is the only way that the airlines can make up the money that they are using/having to spend on jet fuel.

[Ravnas]

Oh Crap. This is just fantastic. Wonderful to see our tax dollars at work.

[mimartin]

Does anyone else think that charging to check a bag is ridiculous?

 

I see it as a good reason to take my business to another airline.

I will take my business to whichever airline offers the lowest overall price including the check bag charge and any other hidden fees. If American is the lowest then I will still fly them, if they are not then I will purchase my ticket from their lower price competition. I am not going to disregard American Airlines strictly out of principle.

[Arcesious]

Perhaps it may be undesirable to passengers for such a fee, but things have reached a point where prices must be increased to pay for the expenses of the buisness being run. Those buisnesses that charge low costs don't last long unless if they add in hidden fees after awhile. In this case, the fee isn't hidden, but it is needed to keep the airlines buisnesses expenses paid. Every little bit counts.

 

Gettign all worried about prices and such is really stupid. We Americans often fail to realize just how good we have it in this country. A few high prices are nothing compared to how bad the lives of people in many other countries are.

[Achilles]

Weight of the bag contributes to overall weight of the plane which contribute to the overall fuel requirements of operating the aircraft. I think we should all be thankful for all the years that the airlines opted suck up the cost of transporting our luggage rather than bemoan the fact that they can no longer afford to.

 

Fuel costs are rising. The industry is still recovering from the massive blow it took after September 11th. Airline unions are striking or threatening to strike for higher wages and more benefits. Airline safety is suffering because of the high costs of maintaining the aircraft. Something has to give somewhere. The money isn't going to magically make itself just so that we can continue to afford cheap air travel.

[Corinthian]

Okay, I'm reasonably certain that a new industry has just become viable - ski trips to Hell. Because I actually agree with what Achilles is saying.

 

What do you expect Airlines to do? Would you prefer they laid off 1/3 of their staff? Cut Domestic flights altogether? (That would be interesting.) The previous are hyperbole, in case anyone was confused. They have to make up the costs of fuel somewhere, and somewhere along the line, the customers are going to get bitten by it. At least they're being honest and not playing a shell game.

[KinchyB]

Well, I have mixed emotions on this one.

 

I'm slightly annoyed that they are now going to start charging for checked baggage. Having to pay to have checked baggage seems odd only because it goes against tradition. If we grew up having to pay to check our bags on airlines this obviously wouldn't be a big deal. So, as a couple posters have pointed out, maybe we are somewhat lucky and in the past have "looked a gift horse in the mouth."

 

Second, I'm grateful that instead of just raising ticket prices (which i'm not sure they have done or well do) they actually are doing something else. That's a nice change. I'm also certain that other airlines will say "Hey, we don't charge for checked bags on our airline", but if you actually compare costs they are more than likely going to be close if not the same due to higher ticket prices at other airlines.

 

My final impulse is my business side coming in. The share price dropped significantly on this news...I'm assuming due to some fearing that the charge will alienate customers. Time will tell on that...side note...stock is up 9% (still down about $1 from the printing of the article) so the drop appears to be temporary. Then there is the thought...well, why don't they cut costs internally...? Granted I'm not saying they should lay off people but instead look at inefficiencies in business processes. This seems to be a weakness within most companies and I don't believe companies realize how much money the inefficiencies actually cost them. Also, for the most part companies that do realize they have inefficiencies usually don't do a sufficient job of correcting the issue and as a result don't see the full benefits of that correction. So, maybe they could have done some internal reworkings to help decrease organziational costs and therefore not charge for checked baggage...maybe.

 

Oh well...it's not an ideal world so expecting an ideal solution isn't always realistic.

[Jae Onasi]

Well, they added the baggage charge because they didn't want to raise the prices of the tickets themselves--they were concerned that it would make the price of their tickets listed on online travel appear higher and that they would lose travelers as a result.

 

I'm not sure why they didn't just enact a fuel surcharge. While I agree that they have to pass on the increased costs to those using their services, all this is going to do is encourage people to try to stuff even bigger bags in the already overcrowded overhead bins.

[Totenkopf]

Just remember, any increase in costs to a business is ALWAYS passed onto the consumer. This includes everything from inflation to taxation. Let's see how long it takes before the others jump on this bandwagon.

[Achilles]

Well, they added the baggage charge because they didn't want to raise the prices of the tickets themselves--they were concerned that it would make the price of their tickets listed on online travel appear higher and that they would lose travelers as a result.

Agreed. Raising the base cost of the ticket itself is most likely the very last thing they want to do.

 

I'm not sure why they didn't just enact a fuel surcharge. While I agree that they have to pass on the increased costs to those using their services, all this is going to do is encourage people to try to stuff even bigger bags in the already overcrowded overhead bins.

This makes sense. On the the flip-side some people prefer to travel light and always have (*raises hand*). A fuel surcharge would hit them as well.

 

As for the bag sizes and overhead capacity, I can only see this being a problem if the airlines relax their current policies. Perhaps they have, but I haven't heard anything indicating that this has happened or that it will.

[mimartin]

all this is going to do is encourage people to try to stuff even bigger bags in the already overcrowded overhead bins.

I always check my bag except for a small bag that I can stick under the seat in front of me. Use to carry nothing but a magazine or the old Game Boy, but after the airlines lost my luggage a couple of times I now carry a change of clothing too.

 

I really love the 100 lbs young woman that carries on her enter winter and summer wardrobe. She always arrives just before the plane is ready to depart the terminal and after all the over head bins are full. After finally finding a place to cram the overstuffed bags neither her nor the flight attended can lift the bag. When you try to get up to help, the flight attended yells at you to set down the plane is about to leave the terminal.

 

With the security measure in place for what items can and cannot be taken into the cabin, this measure is going to only add to the time getting through security too.

[JediAthos]

After contacting American to "inquire" about the new policy this is the response I received:

 

"Thank you for contacting us. We appreciate hearing your perspective about the change

to our checked baggage policy.

 

First, allow me to clarify that the $15 fee for one checked bag applies to tickets

purchased on or after June 15, 2008. Assessing a fee for checked baggage was a

difficult decision but reflects the reality of our business. We are taking direct

steps to ensure the long-term success of our company in the face of unprecedented fuel

prices and these fees help us to offset the rising costs associated with the

transportation of baggage. We hope to have our customers' understanding.

 

There are some exceptions to the policy. To view the specifics, please go to AA.com

and select "All News" from the Home Page and look for "View Updated Checked Bag

Policies."

[Web Rider]

You know, the simply solution to this for the airlines is to shut down for a week. Yeah, it's hurt 'em, but it'll send the oil companies a message that they need to lower their prices or we'll stop buying. Maybe when the Shell CEO can't get his flight to Aruba every month he'll pay attention.

[Achilles]

Oil companies don't set prices. Really.

 

Shutting down the airlines for a week simply results in unemployed airline workers, stranded travelers, panicked markets, etc. (aka cutting of one's nose to spite their face).

 

In the mean time, the oil company gets the message that...well, they don't get any message because they have very little do with how the prices are set (since that is determined by commodity traders in the market).

[Web Rider]

Oil companies don't set prices. Really.

 

Now, no matter how many times you tell yourself this, it won't be true.

[Achilles]

Feel free to point out how I'm wrong at any time.

 

The people you're after are called "commodity traders" and they work on Wall Street and the like.

[mimartin]

You know, the simply solution to this for the airlines is to shut down for a week. Yeah, it's hurt 'em, but it'll send the oil companies a message that they need to lower their prices or we'll stop buying.

Last time we shut down the airlines for any extend period of time it hurt the oil companies all right, but I believe it hurt the consumer worst. You know the American Taxpayer, when the federal government bailed out the airline industry (yet again). As Totenkopf wrote the cost is passed on to the consumer only with your solution, we do not get a ride.

[Web Rider]

Feel free to point out how I'm wrong at any time.

 

The people you're after are called "commodity traders" and they work on Wall Street and the like.

 

One way is by raising the cost of the lease on station owners. Shell ups the amount it costs to rent their property, or their oil, depending on how much the station owner owns, even when the company is not hurting for money. With the massive profits Big Oil is making, I think we can agree that they aren't suffering on the price it costs the station to use their product.

 

In turn, the station owners have to raise the only source of income they really have, gas. So, there's one way big oil sets the prices. Another, you mention these "commodity traders". And who do you think they work for? Themselves? These guys are hired by oil to speculate on their behalf, oil prices go down, and they have to find a new job.

 

Also, lets look at OPEC, Big Oil has the capital to invest hugely in new sources of energy and completely switch from something like oil, to something else if they REALLY wanted to. Big Oil could easily pressure OPEC(and therefore have a hand in setting the price) into increasing the barrel production.

 

Big Oil sets prices not necessarily by doing something, but, by not pressuring producers, sets prices by inactivity. I think there's a saying in Kotor 2, "apathy is death", by not doing anything to help the consumer, they're killing the consumer.

 

Last time we shut down the airlines for any extend period of time it hurt the oil companies all right, but I believe it hurt the consumer worst. You know the American Taxpayer, when the federal government bailed out the airline industry (yet again). As Totenkopf wrote the cost is passed on to the consumer only with your solution, we do not get a ride.

 

No, but unfortunately that's what it's gonna take, we're gonna have to hurt ourselves a bit if we want to hurt them.

[Achilles]

One way is by raising the cost of the lease on station owners. Shell ups the amount it costs to rent their property, or their oil, depending on how much the station owner owns, even when the company is not hurting for money. With the massive profits Big Oil is making, I think we can agree that they aren't suffering on the price it costs the station to use their product.

Sorry, who owns the station? The oil companies (which "the owners" lease?) or the "owners"? You aren't very clear here.

 

The best I can guess is that you're confused about how the oil companies set the price of gasoline and how the station owners have to ensure that they have enough profit to cover the cost of the next shipment. None of this seems to have anything to do with how commodities traders determine the price of a barrel of oil.

 

In turn, the station owners have to raise the only source of income they really have, gas. So, there's one way big oil sets the prices.

Actually gas station owners will tell you that their margins on gas are very small and probably make up the smallest percentage of their profits. Their markup on donuts, bottled water, windshield wiper fluid, ding dong, you-whos, ping-pows, etc, etc is where they actually make their money. Unfortunately with gas prices going up, not many people are coming in after the fill-up to buy other stuff, so...

 

Regardless, I'm afraid you're incorrect on this point.

 

Another, you mention these "commodity traders". And who do you think they work for? Themselves? These guys are hired by oil to speculate on their behalf, oil prices go down, and they have to find a new job.

Can you back this up with sources or is this speculation on your part? I am pretty sure that the traders are hired by trading houses and that the level of collusion suggested here would be illegal, however I have to admit that I don't know one way or the other. I'll need something more concrete in order to be convinced.

 

Also, lets look at OPEC, Big Oil has the capital to invest hugely in new sources of energy and completely switch from something like oil, to something else if they REALLY wanted to. Big Oil could easily pressure OPEC(and therefore have a hand in setting the price) into increasing the barrel production.

Apparently you haven't been reading the news lately

 

Aside from the fact that OPEC has come right out and said that they can't increase production, let's look at the merits of the comment in general.

 

1) "Big Oil" cannot force OPEC countries to allow them to invest.

2) Even if they could, they would then have a hand in setting oil prices. A hand which they don't have now.

 

Big Oil sets prices not necessarily by doing something, but, by not pressuring producers, sets prices by inactivity. I think there's a saying in Kotor 2, "apathy is death", by not doing anything to help the consumer, they're killing the consumer.

What?

 

I wonder who else we could shove under that umbrella. Everyone? Yeah, I think everyone that isn't an oil producer could fit. Remove "Big Oil" from that sentence and replace it with "Congress" or "Parliament" or "the consumer" (i.e. you and me), etc. I'm afraid that suggestion doesn't make very much sense.

 

Thanks for your response though. Take care.

[Jae Onasi]

If oil companies drill and sell the oil, how do they not have a part in the pricing? They may not have as much control of the commodity pricing, but it's not much of a stretch for them to figure out high prices are in their best interests and possibly adjust their output accordingly to keep demand high. The Saudis told Bush last week they saw no problem with supply and weren't going to increase output. Of course they saw no problem with it--they're making a ton of money off of this crazy price increase. Their statement that they were not going to increase production naturally made the oil prices jump shortly thereafter.

[Achilles]

If oil companies drill and sell the oil, how do they not have a part in the pricing?

American oil companies could theoretically influence pricing by manipulating oil production in American oil fields, however overall price is still determined on the global market. However, IIRC, we haven't built a new refinery in decades so I don't see how this could be happening, in practice (more than happy to take a look at evidence to the contrary though).

 

They may not have as much control of the commodity pricing, but it's not much of a stretch for them to figure out high prices are in their best interests and possibly adjust their output accordingly to keep demand high.

If we didn't import so much of our oil, I could see how this would make sense.

 

The Saudis told Bush last week they saw no problem with supply and weren't going to increase output. Of course they saw no problem with it--they're making a ton of money off of this crazy price increase. Their statement that they were not going to increase production naturally made the oil prices jump shortly thereafter.

Right. Saudi oil

[Web Rider]

Sorry, who owns the station? The oil companies (which "the owners" lease?) or the "owners"? You aren't very clear here.

It depends on the station. Some stations are owned by the company, and somebody leases the ability to run them. Some stations are owned by the person and are contracted to take some company's fuel. I can't take every situation into account here.

 

The best I can guess is that you're confused about how the oil companies set the price of gasoline and how the station owners have to ensure that they have enough profit to cover the cost of the next shipment. None of this seems to have anything to do with how commodities traders determine the price of a barrel of oil.

which would likly be due to the fact that I wasn't addressing how traders guess on barrel prices in the future.

 

Actually gas station owners will tell you that their margins on gas are very small and probably make up the smallest percentage of their profits. Their markup on donuts, bottled water, windshield wiper fluid, ding dong, you-whos, ping-pows, etc, etc is where they actually make their money. Unfortunately with gas prices going up, not many people are coming in after the fill-up to buy other stuff, so...

I have seen a gas station attempt to survive as a mini-mart. It doesn't happen. People who buy gas, buy the junk inside. You don't sell the junk if you don't sell gas.

 

Regardless, I'm afraid you're incorrect on this point.

reread.

 

Can you back this up with sources or is this speculation on your part? I am pretty sure that the traders are hired by trading houses and that the level of collusion suggested here would be illegal, however I have to admit that I don't know one way or the other. I'll need something more concrete in order to be convinced.

I admit I'm mostly speculating. Though I'd need something more concrete on your behalf to be convinced they don't.

 

Apparently you haven't been reading the news lately

news in my area of anything beyond sports is sketchy, that's why I'm online a lot. If you have an article you'd like to show me...

 

Aside from the fact that OPEC has come right out and said that they can't increase production, let's look at the merits of the comment in general.

Which we know to be false due to knowing they've produced more in the past(# of barrels) and they are not producing more than that right now.

 

1) "Big Oil" cannot force OPEC countries to allow them to invest.

2) Even if they could, they would then have a hand in setting oil prices. A hand which they don't have now.

Any company that sells a product at any point(makers, distributors, sellers, ect..) has a hand in it's price. Even if it's just their "doing business cost". Big Oil could take a nick from that billions upon billions of profit to give us lower gas and they'd STILL make huge profits.

 

What?

 

I wonder who else we could shove under that umbrella. Everyone? Yeah, I think everyone that isn't an oil producer could fit. Remove "Big Oil" from that sentence and replace it with "Congress" or "Parliament" or "the consumer" (i.e. you and me), etc. I'm afraid that suggestion doesn't make very much sense.

 

Yes, you could include Congress or the Consumer or the Canadian Government. But we're talking about big oil's hand in prices here and what they are or are not doing. Not about anyone else.

[mimartin]

The Saudis told Bush last week they saw no problem with supply and weren't going to increase output. Of course they saw no problem with it--they're making a ton of money off of this crazy price increase. Their statement that they were not going to increase production naturally made the oil prices jump shortly thereafter.

The real question here is why was it made public? Is every conversation between President Bush and King Abdullah made public? Is Saudi Arabia such an open nation that this news must be made public? Who benefits from this being made public? The oil producing nation and the oil industry. I believe there is manipulation in the markets, but I do not believe the oil companies have the power to manipulate the markets. They would need some help. I still go back to that secret 2001 energy task force meeting that included Exxon Mobil Corp, Conoco, Shell Oil Company and BP America Inc. Great job task force at the time the average price per barrel of oil was around $24.98 and now the price is around $135.00.

[Achilles]

It depends on the station. Some stations are owned by the company, and somebody leases the ability to run them. Some stations are owned by the person and are contracted to take some company's fuel. I can't take every situation into account here.

You certainly seemed to be attempting to with your generalization.

 

which would likly be due to the fact that I wasn't addressing how traders guess on barrel prices in the future.

Then I'm not sure how your response relates to the discussion.

 

I have seen a gas station attempt to survive as a mini-mart. It doesn't happen. People who buy gas, buy the junk inside. You don't sell the junk if you don't sell gas.

The discussion was profit margins, was it not?

 

reread.

Not necessary. I can read it 100 times but that isn't going to make it correct.

 

1) We've established that gas isn't their only source of income.

2) We've established that it's not even their largest source of profit.

3) We know that the oil companies don't set the price at the pump

 

Therefore, your point is still incorrect.

 

I admit I'm mostly speculating. Though I'd need something more concrete on your behalf to be convinced they don't.

1) Burden of proof is not mine.

2) Can't prove a negative.

 

Thank for owning the fact that you're speculating. I appreciate the honesty.

 

news in my area of anything beyond sports is sketchy, that's why I'm online a lot. If you have an article you'd like to show me...

Fair enough

 

Bush asked OPEC to increase oil production. OPEC said "no". So it doesn't appear that anyone is successfully pressuring OPEC into doing anything, let alone "easily".

 

Which we know to be false due to knowing they've produced more in the past(# of barrels) and they are not producing more than that right now.

Gee, if they had more in the past than they do now, that could mean that they are running out (that would mean that we couldn't "know it to be false")

 

Not as though this wasn't predicted by experts 50 years ago.

 

Any company that sells a product at any point(makers, distributors, sellers, ect..) has a hand in it's price.

Indeed, just not in the way (and not to the magnitude) that you're suggesting.

 

Even if it's just their "doing business cost". Big Oil could take a nick from that billions upon billions of profit to give us lower gas and they'd STILL make huge profits.

Well I suppose they could, yes, but why should they have to? I can think of a few very good reasons why they should not (it's their profit and they deserve to have it, they have an ethical obligation to their stakeholders not to, etc, etc).

 

Yes, you could include Congress or the Consumer or the Canadian Government. But we're talking about big oil's hand in prices here and what they are or are not doing. Not about anyone else.

You've yet to establish precisely what that is. Until you do, I'm not sure why I should accept that they are any more culpable than anyone else. My apologies that I don't feel like participating in your witch hunt.

 

The real question here is why was it made public?

Maybe some news organization got a hold of it? *shrugs*

 

Maybe Bush wanted to be able to make a show of doing something. Maybe he needed this to be able to drum up sympathetic ears for another go at ANWR. Maybe this ocean preserve he's fast-tracking is the political trade-off he's going to use to negotiate with the American people for drilling in Alaska.

 

Who benefits from this being made public?

In light of the scenario I suggested above? Bush does.

 

Any chance Haliburton would get any of that? Hmmm...

 

They would need some help. I still go back to that secret 2001 energy task force meeting that included Exxon Mobil Corp, Conoco, Shell Oil Company and BP America Inc. Great job task force at the time the average price per barrel of oil was around $24.98 and now the price is around $135.00.

Considering that it was secret, I guess we won't know. I would venture a guess that it probably had something to do with projecting what would happen after we went into Iraq.

 

But that assumes that the Bush administration would have had plans to go into Iraq well before the attacks of September 11th. And that's just way too out there.