FACTBOX: Airlines scramble to survive as fuel costs soar

(Reuters) - American Airlines said on Wednesday 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 September 11 attacks.

As all the major U.S. airline stocks slumped amid a brokerage downgrade for the sector and oil prices soared over a record-setting $133 a barrel, AMR shares lost 24 percent of their value on Wednesday.

American's decision is just the latest by the struggling airline industry to cut costs and generate more revenue at a time when skyrocketing fuel costs have made flying prohibitively expensive.

Some other tactics have included:

* Domestic capacity reduction has been high on the radar of most airlines over the last year and Southwest Airlines Co, American, Delta Air Lines Inc, Continental Airlines Inc have led the pack. Fewer daily flights and nonstop flights are some of the strategies adopted to deal with rising fuel prices.

* Some airlines, such as Southwest, have also decided to fly slower to save fuel.

* A few carriers -- including Eos Airlines, Frontier Airlines Holdings Inc, Skybus Airlines, ATA Airlines, Champion Air, Aloha Airlines, MAXjet Airways Inc -- have either declared bankruptcy or just shut down.

* Airlines such as JetBlue Airways Corp and Continental have also tried to retire old planes and replace them with a more fuel-efficient fleet. The installation of newer technology, such as winglets, has helped improve efficiency at Continental and Delta.

* Others -- such as Frontier, JetBlue and AirTran Holdings Inc -- have sold new planes to help offset high costs.

* Across the industry, fares have been raised and fuel surcharges added to ticket costs. Delta, United Airlines and American recently said they would now charge an additional $20 for a round-trip ticket.

* Many airlines have also resorted to job cuts. In March, Delta said it would slash 2,000 jobs. United parent UAL Corp said in April it would cut 1,100 jobs and American said in May it would cut "thousands" of jobs.

* Some airlines had started charging passengers for a second checked bag rather than the third, as had been the practice earlier. On Wednesday, American Airlines said it would start charging passengers for their first checked bag starting mid-June.

* Fuel hedges have been another cost-saving mechanism to protect airlines from volatile fuel price increases.

* The industry is also experimenting with alternatives to aviation fuel. Continental is planning a biofuels test flight in collaboration with Boeing Co and General Electric Co in 2009.

* Rising fuel costs have also been a driver for consolidation. Airlines hope to get more pricing power out of mergers. The merger deal on April 14 between Delta and Northwest airlines is a case in point. UAL and Continental have also had merger talks.

(Reporting by Bhaswati Mukhopadhyay and Patrick Fitzgibbons; Editing by Andre Grenon)