American Cuts US Flights; Airline Stocks Plummet

Jason Decrow / AP American Airlines

American Airlines said it plans to cut jobs, retire old planes and slash domestic capacity by 11 percent to 12 percent in the fourth quarter as fuel prices reach record highs and the weak U.S. economy saps air travel demand.

The world's largest airline, owned by AMR , also said it would charge $15 for 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.

American said it would take at least 75 mainline and regional aircraft out of its aging fleet, the biggest scaling back of the carrier's services since the attacks of Sept. 11, 2001. The carrier also expects to retire its gas-guzzling MD-80 aircraft, which were the planes grounded for faulty wiring last month.

It did not say how many jobs would be cut.

American had previously expected fourth-quarter capacity to fall 4.6 percent from the same period in 2007.

AMR stock was briefly halted before the announcement. When trading resumed, it plunged along with other airline stocks, including United Airlines .

In the last two years, most U.S. carriers have removed capacity from less profitable domestic routes and introduced charges for checking extra bags as they try to keep up with rising fuel costs and fierce competition.

In March, Delta Air Lines said it would cut 2,000 jobs and reduce domestic capacity by 5 percent, on top of a 5 percent cut already planned, for a year-on-year decrease of about 10 percent.

In April, Northwest Airlines -- which has agreed to be bought by Delta -- announced its own plan to take some older planes out of service and cut domestic capacity by about 5 percent.

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