American Airlines is cutting back on domestic flights, laying off workers and adding new passenger fees as it struggles with record-high fuel prices.

It also outlined plans to retire at least 75 mainline and regional aircraft and unveiled several revenue growth initiatives, as the company responds to record fuel prices, growing concerns about the economy and a difficult competitive environment.

"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," said American Airlines Chairman and CEO Gerard Arpey. "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."

American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year. American will cut its flights in the fourth quarter of 2008 by 11 percent to 12 percent, compared to the fourth quarter of 2007.

As a result of significantly reduced flying, American will likely retire 40 to 45 aircraft from its fleet, the majority of which will consist of MD-80s but will also include some Airbus A300 aircraft. The airline's fleet of MD-80s were grounded for faulty wiring last month.

As a revenue producing plan, American will begin charging a $15 fee for the first checked bag beginning June 15. It will raise other fees for services ranging from reservation services to oversized bags.

Competitor Delta Airlines said it will not match American Airlines' plan.

A spokeswoman for the airline said the company is considering a number of options to deal with record fuel prices, but the $15 check-in fee is not one of those options.