It was one of the most extreme moves yet by the nation’s airlines as the price of oil jumped Wednesday to US$133.17 a barrel, up US$4.19. And on Thursday, New York’s main oil futures contract, light sweet crude for July delivery, briefly rose to a high of US$135.04 a barrel before easing to US$134.59 in Asian afternoon trade, up US$1.42 from its U.S. close Wednesday.

Starting June 15, most American passengers must pay US$15 for checking a single bag. That comes on top of the airline’s decision two weeks ago to charge US$25 for a second bag.

American said it needed to take the series of actions in what it called an “extraordinary” environment.

Other airlines are expected to take additional steps to fight the twin curses of rising oil prices and a weak economy, increasing prospects for higher fares and crowded planes as the summer travel season kicks into gear with the upcoming Memorial Day weekend.

Already, domestic airfares for summer travel are up 20 percent compared to a year ago for flights between June 3 and Aug. 20, according to Farecast.com, an online travel search service. American said rising oil prices have increased its expected annual fuel costs by nearly US$3 billion since the start of the year.

“There is no sugar-coating the fact we are facing an extraordinarily difficult economic environment,” Gerard Arpey, chief executive of American’s parent AMR Corp., said during a conference call with reporters Wednesday. “The industry cannot continue in the current state.”

The fees for checked bags marks the first time that a major airline will charge for a service that has always been included in the airfare. That fee does not apply to “elite” level frequent flier members and those paying full fare.

The airline began charging US$25 for second checked baggage earlier this month, and has imposed even higher charges for additional luggage. The airline said it also plans to raise other fees for services ranging from reservation help to handling of oversized bags.

The series of moves to generate additional revenue came on the heels of another record-breaking day for fuel and raised for the first time prospects that a major airline could end up in bankruptcy if oil prices continued to rise unabated.

On Wall Street, a four-day-old selling wave in airline stocks intensified as crude oil prices reached record levels. AMR, the parent of American Airlines, plunged US$1.98, or 24 percent, to US$6.22, its lowest since 2003.

Also hitting multi-year lows were UAL Corp., parent of United Airlines, which sank US$3.41, or 29.5 percent, to US$8.15, and Continental Airlines, which lost US$2.15, or 13 percent, to US$14.20.

In a dramatic reversal, the U.S. airline industry may post US$7.2 billion in losses this year compared to profits of US$6.6 billion last year, said Jamie Baker, airlines analyst for J.P. Morgan Chase & Co.

In such a climate the airlines appear to be in a “war of attrition,” Baker said, adding that the carriers seem to be engaging in “destructive behavior as they attempt to merely outlast one another.”

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