UPDATE 1-American Airlines to slash capacity up to 12 pct

(Adds details on cuts, bag fee; adds byline and background on other airlines)

By Kyle Peterson

FORT WORTH, Texas, May 21 (Reuters) - American Airlines said on Wednesday 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 Corp (AMR.N), 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. It did not say how many jobs would be cut.

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 Inc (DAL.N) 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 Corp NWA.N -- 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.