Back in the day, American Airlines thought it was a pretty good idea to sell unlimited first-class travel for a lifetime. For a few hundred thousand dollars, travelers could hop on a jet any time, and for an additional fee, so could a companion of their choice. Turns out that costs American a lot of money, and they’re trying to shut the whole thing down as a result.
The L.A. Times details the very interesting personal stories of a few men who bought tickets that enabled them to go anywhere in the world, basically anytime they wanted to, with the greatest of ease. Some flew for fun, some for business, and some even handed out upgrades to strangers using their companion passes. Each paid more than $350,000 for those privileges.
One man has logged almost 40 million miles, another, 30 million. There are 64 other unlimited AAirpass holders, and all together, they’ve racked up way more miles than American would like. Financial struggles at the company led to it investigating some of its AAirpass holders.
A special” revenue integrity unit” was assigned to see if any pass holders had broken the rules of the program. These customers used to enjoy special treatment due to the AAirpass, and then they were investigated.
“We thought originally it would be something that firms would buy for top employees,” said Bob Crandall, American’s chairman and chief executive from 1985 to 1998. “It soon became apparent that the public was smarter than we were.”
In September 2007, American assigned an employee to root out any AAirpass holders who were violating rules. She calculated that some of those passengers were costing American $1 million a year. After investigating certain AAirpass holders, American revoked their lifetime passes, citing fraudulent behavior. Some fliers were sued by American, and often, they sued back.
American spokeswoman Mary Sanderson said the canceled passes are “very isolated and represent an extremely small percentage of our overall AAirpass accounts.”
“We actively analyze all of our ticketing and program policies for any improper activity,” she said. “If we determine that any activity has violated our policies or is fraudulent in nature, we take the actions we deem appropriate.”
For the entire, somewhat fascinating tale, check out the source link below.
*Thanks to Alex and Thom for the tips!
The frequent fliers who flew too much [L.A. Times]
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But if we let them get away with this, Forever stamps might not last, well, forever.
I know a guy who bought thousands of bucks worth of forever stamps, as he is convinced he will eventually be able to sell them for a good profit.
Eventually, he likely will. Unfortunately, he hasn’t met my friend Mr. Time Value Of Money.
Yeah, inflation will almost certainly eat up any profit he might make on the stamps.
If anything, maybe buying a bunch of forever stamps would be a good way to protect yourself against inflation. But really that’s what those I-bonds are for.
Why? I think I use 5 stamps a year now. And I am sure that I am not alone in this. Everything is online now. I write perhaps 3 checks a year, tops.
Sounds like the insurance industry when they try to find any miniscule thing wrong with the application of a customer who just put in a claim for cancer treatments.
Wow…we were on the same page or something.
Great minds think alike. So this must have been some kind of fluke.
I’m sure there’s a corrolary for morons.
The continued popularity of “reality” shows would seem to serve as an existence proof for your corollary.
I read the full Article yesterday, this isn’t exactly “looking for minuscule things”, if people are selling their tickets they deserve to have them revoked, that’s plain fraud.
The people that gave away passes free to friends family or hell strangers they happen to like, that’s their right and they should not have them revoked as long as it wasn’t prohibited in their contract.
The people that were blocking out seats and canceling them at the last minute, which is also against the airline rules also deserve to have their passes canceled. They would block first class seats until the day of the flight so they couldn’t be sold and basically ensuring someone else could have the seat as an upgrade. This is fraud too, especially since this was usually done with no intention of flying and done with fake names.
I have sympathy for the people who shelled out big money and took the airlines to the cleaners legitimately, I love that these are costing them millions a year. Serves them right.
Interesting story but I see no malfeasance by AA here.
Not at all. For anyone that bothers to read the story, it is obvious these people were all abusing the system. For those that didn’t bother to read it, it consists of people booking extra seats under fake names so they wouldn’t need to sit next to anyone and selling their companion passes to people they didn’t know. Clearly fraudulent use of the passes in both circumstances.
A special” revenue integrity unit” was assigned to see if any pass holders had broken the rules of the program. These customers used to enjoy special treatment due to the AAirpass, and then they were investigated.
Translation: we’re going to comb through every detail of the agreement, and if we find that you’ve violated it in any way, knowingly or unknowingly, we’re going to revoke that pass so fast it will make your head spin.
Same thing happens in the medical insurance business all the time: Oh…you need an expensive procedure done? Let us just check the application you originally submitted to us to determine whether there was anything omitted or any of the dates are wrong…wait…HERE’S AN OVERSIGHT YOU SAID YOU DON’T HAVE ASTHMA BUT NEEDED A NEBULIZER WHEN YOU WERE 13…NO CANCER TREATMENT FOR YOU!
I’m sure there is a clause stating the person that bought the ticket has to be the one that flew. If they found out they gave the ticket to a friend or relative that would probably void the deal.
No, actually these passes were sold with companion tickets that allowed the owner of the pass to fly with a companion free of charge. There was no specification that this person had to be a spouse or blood relative, just that they had to fly with you. So literally asking a stranger to fly with you was allowed (well, wasn’t specifically prohibited) and should not be a reason that these tickets are revoked.
Selling your companion ticket or accepting any kind of compensation or barter for it is grounds for revocation.
DO NOT WRITE HERE
Okay
Sounds like a case of “tough titties”. Also, when the pool is only 64 people, any investigation is more than an “extremely small percentage”. That’s just math.
Tough titties Turkleton!
actually no… That isn’t math. If they investigated 32 of the 64 it would not be a small percentage… It would in fact be a significant percentage. Percentages don’t really care how large the sample size is.
Well, 1 out of 64 is 1.5%. Usually when you talk about “extremely small percentages” you’re talking about fractions of a percent. They investigated at least two people so that’s 3% right there.
Agreed. That may be small, but EXTREMELY (just think about that word for a moment) small, no way.
Umm, the pool size is pretty important when determining percentages. Say, what percent is 1 out of “X”? If you were to be undertaking an activity with a known danger of fatality, would you be more willing to give it a shot if your chances of dying were 1 in 1,000,000 or 1 in 64? The point I’m trying to make is that claiming percentages are independent of pool size is one of the most factually incorrect statements I’ve seen in some time. That’s just math bro.
That’s because AAirpass is a huge program many small/medium sized businesses use to prepay for travel to hedge against fare increases and to get increased flexibility in changing/cancelling travel plans. 64 people have unlimited lifetime passes, but I bet there are over 100,000 AAirpass holders.
AA just discovered why its never a good idea to finance your current operations by passing the buck to the future. They wanted payouts then, and those making the decisions knew they wouldn’t be around for the consequences.
How long will it take for our government to realize it doing the same will come back to bite us?
Why not restart the program for $1M each and $500K for the companion? How many millions can they rake in before chapter 11 wipes them all out?
The current price is something like 4 million and 1.5 for the companion. There haven’t been any takers.
That’s why they have to lower the price.
They’re in chapter 11. And they sold the passes so they wouldn’t have to take out bonds with double digit interest in the 80s.. it just turns out the bonds would have been cheaper in the long run.
The things people do to weasel out of their obligations are absurd and sad. AA’s response to these “abuses” is similar to a child who spends more time dreaming up creative ways to get out of his homework and excuses for why it isn’t finished than he would simply completing the assignment. A whole freakin’ investigative team? For 64 people? Jesus. Reading the full article, what stands out to me is that most of these “abuses” aren’t even in violation of the contracts the customers signed.
Bad form, American. Sack up and honor your committments you two-timing bastards.
I have faith that AA will not set them up for situations that would invoke a breach of contract. Nope no way. [rolls eyes]
My interpretation of one future event]
[Investigator]: “It says here that you must fly first class. Yet I have video evidence of you stepping into the business class to help an elderly wheelchair bound woman into her seat. During this you sat in a seat to help her move from the chair into her own designated seat. This seat was not yours and a breach of contract. You now have your rights revoked and must pay the fees for your use of that seat to help the woman…..which amount to $1.3 million dollars. ” [Investigator now steps aside and hands a large bundle of money to an elderly woman snickering like snidely whiplash]
Or something similar.
Unlimited flights in first class for $350,000?
How much is the purchase and annual upkeep on a private jet whether it be 100% ownership or lesser a la partnership or fractional ownership? I’m surprised they only had 64 people sign up.
Private propeller plane (King Air) will set you back several $Million. Add in about $400k operating costs per year and yes, this would be an amazing deal. Even the $3million for a lifetime pass would be.
It’s only valid for life. Some of them may have since passed away.
Doing the conversion for inflation, that $350k in 1984 would be $772,626.93 today…still a bargain relative to private plane fractional ownership costs, particularly if you’re looking to go to Paris.
Honestly though, this hasn’t cost the airlines millions, simply because these people would not have taken all these flights if they didn’t have this pass. Not even close.
Sure it costs them (a) the flights these people would have taken normally, and (b) flights that others don’t take because they were full and these guys booked tickets on them. But I’d guess that total is well below the generous “millions” that AA estimates they have lost.
Have you ever flown overseas or domestically in the past five or ten years? Most flights these days are booked to capacity, and the days of a half empty flight from LA to New York are over.
For every seat taken by one of these lifetime members, AA can’t sell that seat to someone else. Since many of these people were probably asking flights (as you said) that they wouldn’t have taken otherwise, I can easily see how they could cost AA huge sums of cash.
That said AA gambled and their bet was a loser. Too bad for them.
Do you want to know why the flights are always booked to capacity and why so many people have first class upgrades????
It is because of employees of airlines. Each airline has like 20 to 60 thousand employees and every one of them gets free flights and free upgrades to first class domestically and they only have to pay customs taxes going internationally (basically like $100 to go anywhere).
Basically you have at least 200 thousand people who can fly for free in any unpaid seat, they can even fly on other airlines for free.
Employees also get a free companion for one static person and couple of free buddy passes for anyone for the year.
Next time you are on a flight the reason why it is filled up to capacity is from employees, not from paying passengers.
Not true. I worked for a major airline for 10 years. We got discounted tickets, but not for free. And no free first class upgrades, what are you smoking?
Some airlines (like Air Canada) do give free flights to employees and their families, but they only get to fly standby. If there’s empty seats, they can fly, if the seats get booked, they get booted off. As such, while they fly free, they’re not causing the airline to lose much revenue beyond the extra fuel and consumables.
I’ve got two friends who work for an airline, and it’s not like that at all, actually. I’ve used buddy passes from them, and at most it saves me 25% or so on a coach ticket, with no upgrades.
I had the same experience with airline employees. They get discounts, no 1st upgrades.
The only time I’ve flown for free with an airline employee is when a friend of mine who is a pilot took me up in a single engine Cessna he likes to fly for fun.
American also covered the taxes for all of the flights that they took (including any empty seats they booked), and gave them frequent flyer miles, which could then be transferred to others or used to book other tickets. That second part I think is crazy – they should have specified that any flights taken using the pass were ineligible for miles accrual.
Actually, now that I read the entire article, it appears several (if not many) of the ticket holders were selling their companion tickets to people, which was a violation of the rules. Seems they were making quite a bit of money selling international flights.
It wasn’t always a violation of the rules. The original passholders’ contract had no such clause.
It still kinda falls under “bad consumer” though, doesn’t it?
why? it’s like you are given tooo much food and you sold the extra to some people.
“Turns out that costs American a lot of money, and they’re trying to shut the whole thing down as a result.”
So when people default on their mortgage because they can’t afford it, it’s called immoral by the corporations, but when corporations want to get out of a written contract because they can’t “afford” it, it’s called a strategic business decision.
+10000000000000000
Never in my life have I seen a number that large (excluding federal defecit).
THEY’RE A BUSINESS, THEY’RE ALLOWED TO DO THINGS DIFFERENTLY THAN THE INDIVIDUAL PERSON.
Unless of course, when trying to be treated like a “person” benefits them. Like when they do something bad and want to shield their high-dollar-C-suite types.
I know there is a lot of hate toward AA here, but if you read the linked article, there is some rather suspicious behavior by the flyers. It looks like one guy was selling his companion tickets, which was explicitly not allowed through the terms of the AAirpass agreement. It’s not clear exactly how much proof they had, but there were definitely enough red flags that AA had every right to investigate.
the two guys in the article bought their pass 3 years before they said you can’t sell the companion pass.
Another guy sold his companion. two others are not mention.
My problem is how they try to get the companion to say they paid for the seats even though it was given to them for free by the Airpass holder.
“Another guy sold his companion.” Well, I’d think that guy would be in a lot of trouble!
Well, the dude allegedly started selling the companion ticket to random people, which is against the rule. But otherwise, AA is not revoking anyone who are using it properly. No problem with that.
one guy sold his companion when he shouldn’t. The other two didn’t have anything on their contract that said they couldn’t.
2 other people, it didn’t say why it was revoke.
This is kind of petty IMO. If there’s only like 64 people with these passes who cares where they decide to fly? Its not like they’re getting a flight all of their own, they’re getting on planes that are already going to where they want to go. If there were a million people with these passes maybe I’d see the problem but 64?
But think of all the first class seats they take up and as we all know, the first class section is always jammed with people. For sure they are losing money every single time they fly.
/s
I just think it would be fairly awesome to have the last name Vroom.
Recission for unlimited tickets? Good god…
“It soon became apparent that the public was smarter than we were.”
Enough said.
Well, the rich public, anyhow. The hoi-peloi has no chance at this sort of thing.
First it was John Pinette getting singled out by all-you-can-eat Chinese buffets, and now American Airlines has ratcheted up the nonsense with all-you-can-fly customers. What is the world coming to?
You made a commitment, AA. Live with it.
Why? Because I know you’d try to nail a customer to the wall if they did anything remotely similar.
Seems simple enough. To cancel the program just refund the membership price. Obligation null and void.
Nope. That would be like selling someone insurance and when they put a claim in, you just refund their payments. AA made a deal and they should stick with it. They are sticklers for the rules when it is to their advantage, they should be sticklers the other way around.
Great idea, AA…because people with 6 or 7 figures worth of disposable income are probably not as smart as you at figuring out what is a smart use of their money.
/s
Picture me hocking everything I own…and maybe a few things I didn’t…to come up with $350k.
Then I just live on the airlines. Just fly around in first class all the time – free meals and drinks. Wash up in the airport lavatory once in a while – even if I don’t need it. And on occasion, of course, get a comped hotel room for a night when a flight I booked gets cancelled for a mechanical.
You forgot that those passes came with free access to the “Admiral’s Club”. I think some of those have showers, so you’re good there.
Also you still earn miles on all the trips you take, which you can use to book hotel stays.
I would buy that book. Proposed title “First-Class Hobo.” Make sure you don’t give the movie rights away.
Larger Admiral’s clubs have showers, and all of them have free well brand booze where local liquor laws allow it.
Thought experiment: buy your homeless boozehound frat buddy a 30 day Admiral’s Club pass for $95 (actual price), and wait for hilarity to ensue.
“It soon became apparent that the public was smarter than we were.”
That about sums it up….
This almost reminds me of the whole, millionaires vs. billionaires thing with the sports team owners vs. players. Not that the AA execs are billionaires, but you get the point — it can be a bit hard to care. Most of these folks can afford to fly with or without the lifetime pass.
On a more consumer level, I bought a lifetime subscription to Sirius for $399 back in 2007, which at the time was $100 cheaper than normal, plus they let me pay for it in monthly installments. It also included free internet radio (which now costs extra). If you figure that typical service costs $16/month plus
$3.50 for internet, call it an close to $20/month. The $399 has most definitely paid for itself long, long ago.
I’m still waiting for the other shoe to drop… I was surprised that they didn’t pull some shenanigans with the merger. The have told me that while my plan does include free internet radio, it does not include the smartphone app… nice. I’m sure they’ll keep whittling away at the packages until the lifetime folks are down to nothing.
Does it include new Sirius radios/tuners with the price? If not, why would it include a free app? Did they even have an app back then as that was the year that the iPhone was just released.
The apps are free, they’re saying that the “lifetime subscription” does not include this new method of delivery. If they’re included for free in every other paid subscription, I’d consider that pretty shady and worthy of a lawsuit, but if it’s only included at an additional fee, then that’s fair.
I think that I owned one of these lifetime passes, and I knew AA was trying to void it, I would be very afraid to eat what they served me on the flights. Just a little poison would save AA millions of dollars. I’m sure the thought crossed their mind.
Heck. For that much, they should have had a special flight for all these guys, then crash that plane. Problem solved.
All this investigation sounds like it could be rather pointless if they can now shed the passes in bankruptcy.
Sounds like they should have worked on the rules a bit to avoid abuse.
How can you defraud them when everything is free???
$350,000 back in the day adjusted for inflation is a lot of money, maybe not enough to cover a lifetime of passes, but it is their fault for selling it.
Expensive program customer uses little = good customer!
Expensive program customer uses a lot = bad customer, rule-breaker, spawn of Satan!
I think every spoiled brat CEO in this world grew up as the rich kid on the block who always changed the rules to every game, during the game, so they’d be the winner.
This is what it is! Spoiled Kid Syndrome!
F*ck AA. You offer the deal and people are going to maximize usage.
Are there legal calls on how long “Lifetime” is? In the internet world, lifetime seems to last about 5 years. What about the real world?