American Airlines to slash jobs, charge for bags

By Kyle Peterson

FORT WORTH, Texas (Reuters) - American Airlines' shares fell 24 percent on Wednesday as it said it will cut thousands of jobs, retire old aircraft and charge passengers to check bags in a move to counter record fuel prices and a weak U.S. economy.

The world's largest airline, owned by AMR Corp, said it would reduce domestic capacity by 11 percent to 12 percent in the fourth quarter, its biggest service cutback since the attacks of September 11, 2001.

"The airline industry 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 U.S. economy," AMR Chief Executive Gerard Arpey said in a statement.

"The industry will not and cannot continue in its current state," Arpey told shareholders at the company's annual meeting in Fort Worth, Texas on Wednesday.

As all the major U.S. airline stocks slumped amid a brokerage downgrade for the sector, AMR shares fell $1.98 to close at $6.22.

U.S. crude oil futures soared to a record above $133 on Wednesday, more than twice the price a year ago.

American Airlines plans to charge $15 for many passengers' first checked bag starting in mid-June, an unprecedented move by a major U.S. airline as it tries to claw back more of its extra fuel costs.

Rivals are considering following suit.  Continued...