Update: American Airlines To Charge $15 For First Checked Bag

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Just when you thought airline fees were getting ridiculous, American Airlines decided to move the bar.

In response to record fuel prices and a weak U.S. economy, the Fort Worth, Texas-based carrier said Wednesday that it will charge a $15 fee for the first bag passengers check. The fee will be go into effect for tickets purchased on or after June 15. American (NYSE: AMR) said the move was due to “the increasing costs of transporting checked baggage.”

As Transworld Business has reported, numerous airlines announced fees for a second checked bag in May, but American is the first to begin charging for any checked luggage.

Fees for “certain other services,” like reservation service fees, pet fees and oversized bag fees, will also go up, according to American. The carrier said most of the hikes are in the $5 to $50 range, but they expect the small fees to amount to hundreds of millions of dollars in annual revenue.

“While we understand that these fees affect customers, we also believe that our pricing for the services we provide remains extremely competitive in the industry and continues to offer our customers ample choice and value,” CEO and Chairman Gerard Arpey said in a statement. “The bottom line is that our revenues, which include ticket sales and fees, must keep pace with our increasing costs.”

American also said Wednesday that it will cut mainline domestic capacity by 11 percent to 12 percent during the fourth quarter of 2008, compared to the fourth quarter of 2007. Regional capacity will be cut by 10 percent to 11 percent.

“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,” Arpey’s statement says. “Our company and industry simply cannot afford to sit by hoping for industry and market conditions to improve. We must work to overcome our near-term challenges and to secure our company’s long-term future for the benefit of our shareholders, customers and employees. We must find ways to cover the cost of providing our services so that we can remain viable and have the resources to reinvest in our company for the future.”

Hundreds of Thousands of skiers and snowboarders, as well as numerous industry employees and team members, fly the friendly skies each year to sample the snow of distant resorts, and the ski and snowboard industry has been actively campaigning to get the airline industry to reconsider these charges which may deter riders from traveling to destination resort or change their habits.

One way around incurring these added charges is to simply not bring gear with you. Rick Kahl, editor of Ski Area Management magazine states that “if you’re spending a couple thou on a snowboard vacation, what’s another $50? This new charge may encourage more people to hold onto their old skis or boards and just rent newer gear when they go on vacation. That trend has been underway at destination areas for several years, and this gives folks one more reason to join it. It’s not the cost that has been driving the trend, it’s the hassle. And that, combined with the added cost, will probably fortify the trend.”

“I do not have an exact figure but have been told by multiple sources that 20% of skiers rented skis 6-8 years ago and now it is over 50%,” states Bryn Carey, founder of Ski Butlers, which offers in room ski and snowboard fitting for tourists at 21 resorts in the U.S. and Canada. “Most of the ski companies are worried now b/c retail is down, people simply aren’t buying and with services like ours that makes it so convenient to rent, why buy?”

Ken Gart, President of Specialty Sports, which owns approximately 100 specialty shops offering rentals and demos in California and Colorado, foresees the biggest impact being on their demo boards, which currently make up about one-third of their rental fleet. “The people that generally bring their own skis and boards are usually a bit more hardcore and want better product.” Gart says that his company is taking a wait and see attitude for next season on making their store layouts more rental heavy and significantly upping the percentage of demos.

“I can guarantee you will see some rental shops and local retailers that are going to capitalize on this trend with snowboards as well,” says Rossignol National Sales Manager and North American Product Manager Eric Hutchison, whose company currently controls approximately 30% of the U.S. rental market. I could envision a lot of resort shops, in particular ones that are owned by the resort itself, moving some of their retail buys over to high performance rentals and pairing that with aggressive marketing plans aimed at luring a former retail oriented customers over to a rent while you stay type package bundled in with a lodging/lift ticket program.

According to industry analysts, other major carriers are expected to follow suit if the American policy becomes permanent.

For the full story of expected impacts on the snowboard industry check out the May issue of Transworld Business.