I got over a dozen emails in my inbox last night with a link to this story, so I assume many will find it interesting. Check out this Los Angeles Times article about American’s AAirpass, which offered lifetime first class travel on American for a few hundred thousand dollars. It’s one of the most interesting airline reads ever, in my opinion, and really does raise a lot of interesting questions.
Think American was in the right, or were they just trying to pull a fast one to get the liability off their books?
@Dan: Wouldn't this be a tricky contract to cancel in bankruptcy? The AAirpass holders are not creditors. Certain executory contracts (i.e. contracts where both parties have ongoing duties to perform) may be cancelled, but that is dependent on state law, and it is unclear whether AAirpass holders have any ongoing duties here.
@Chin: If AA went bankrupt in Chapter 7, you wouldn't get anything back. Not a dime.
I was sad when that one guy...
@Dan: Wouldn't this be a tricky contract to cancel in bankruptcy? The AAirpass holders are not creditors. Certain executory contracts (i.e. contracts where both parties have ongoing duties to perform) may be cancelled, but that is dependent on state law, and it is unclear whether AAirpass holders have any ongoing duties here.
@Chin: If AA went bankrupt in Chapter 7, you wouldn't get anything back. Not a dime.
I was sad when that one guy said he was tired of flying. Made me wonder if Lucky will ever get tired. I guess it's harder to be bored if you are flying a variety of airlines, as opposed to being stuck with AA/OneWorld.
The price seems ok to me. However, what if AA bankrupt, not chapter 11 but chapter 7? How much money can you get back?
From a legal perspective, AA can cancel a large majority of its contract in bankruptcy court. They should not have a problem cancelling some of these passes, and not others, as normally in chapter 11 you are allowed to keep contracts that are beneficial to you and annul the other ones (although you may have to pay compensation). If AA is purchased out of bankruptcy (like Chrysler), I suspect the acquiring airline would demand these...
From a legal perspective, AA can cancel a large majority of its contract in bankruptcy court. They should not have a problem cancelling some of these passes, and not others, as normally in chapter 11 you are allowed to keep contracts that are beneficial to you and annul the other ones (although you may have to pay compensation). If AA is purchased out of bankruptcy (like Chrysler), I suspect the acquiring airline would demand these passes all be cancelled. If the purchasing airline is willing to pay more for AA without these contractual liabilities, the bankruptcy court will almost certainly discharge the contracts.
I find the greatest fault with AA's executives and lawyers who wrote and approved the contracts. The early contracts did not forbid double booking, getting reimbursed by a companion, etc. While some pax's behavior did not set the highest ethical standards, they were maximizing their benefits and did not violate the contract. OTOH, AA's attempts to bribe witnesses were certainly unethical and possibly illegal.
Contrary to many here, I don't think the passes were a...
I find the greatest fault with AA's executives and lawyers who wrote and approved the contracts. The early contracts did not forbid double booking, getting reimbursed by a companion, etc. While some pax's behavior did not set the highest ethical standards, they were maximizing their benefits and did not violate the contract. OTOH, AA's attempts to bribe witnesses were certainly unethical and possibly illegal.
Contrary to many here, I don't think the passes were a good deal. You don't know how a company and its competition will evolve, and I wouldn't want to get married to a company. I like AA a lot, but again not knowing the future prefer to renew the relationship year by year. From their approach to the status granted, they feel the same way.
Allen - adding to your comment - back in the days when airlines did not routinely check ID, AA policy (dictated from the top - Robert Crandall) was to tell customers they were committing fraud and confiscate their ticket if they attempted to fly under someone else's name. Against the rules, yes. Fraud - very likely not, and a very costly policy (I know folks who refused to fly AA for many years after being so accused).
The Air Pass system was pretty good if you had the money and sure cheaper than having your own jet. I have little sympathy though for people who abused that system or even people who abuse the current frequent flyer point systems. I accumulate tons of miles and have for years, but I never sell my miles. I never even thought of it. What the abusers did was not ethical and American Airlines was right to go after these people.
This article does a really good job of showing just how malicious AA's revenue management team can be. AA unlike any other airline has a history of taking RM matters so deeply in their own hands that they practically act like law enforcement. Its not okay for an airline to detain you in a private room at an airport in a foreign country for interrogation.
If AA instead spent the gross amount of money they...
This article does a really good job of showing just how malicious AA's revenue management team can be. AA unlike any other airline has a history of taking RM matters so deeply in their own hands that they practically act like law enforcement. Its not okay for an airline to detain you in a private room at an airport in a foreign country for interrogation.
If AA instead spent the gross amount of money they spend on revenue protection on improving costumer and employee satisfaction, i think they would see a much better, nonetheless more positive, monetary return.
You guys make it seem like they were abusing the system without AA cooperating. These were the days BEFORE online reservations. The AAgents KNEW what they were doing, and worked WITH the AirPass customers...Just like UA 1K's hold a ton of award reservations because there is no penalty to cancel, AirPass customers knew the ins and outs of the system, and AA allowed it. They only cut it off when it was no longer convenient...
You guys make it seem like they were abusing the system without AA cooperating. These were the days BEFORE online reservations. The AAgents KNEW what they were doing, and worked WITH the AirPass customers...Just like UA 1K's hold a ton of award reservations because there is no penalty to cancel, AirPass customers knew the ins and outs of the system, and AA allowed it. They only cut it off when it was no longer convenient to fulfill their contract. Just remember that when AA isn't the flavor of the day as it is now...
Fascinating indeed. I read the article and the links. Clearly, cancelling thousands of reservations at the last moment was abusing the system. No sympathy for an AAirpass member who did that or sold their companion tickets.
AA sold those passes to raise money. AA was thrilled to have those funds when the passes were sold. It wasn't the purchasers fault that AA or their attorney's didn't limit the usage of the pass.
The methods used by AA to after its customers whom legitmately used thi program are reprehsensible. The AAirpass customers did not violate the terms and conditions of the program. However, American attempted to entrap them or use unsavory tactics to get companion flyers to state false information in order to remove their customers as liabilities on their books. They should be sued for breach of contract.
I wonder what would prevent a person who owned such a pass from simply living on planes and at the lounges. No need to pay for food or bed -- sleep on the long-haul flights, eat on the flights and in the lounges. (I realize that back in the '80s when this program was started, sleeping on flights was not as feasible as it is today, due to the advent of lie-flat seats.) Why have...
I wonder what would prevent a person who owned such a pass from simply living on planes and at the lounges. No need to pay for food or bed -- sleep on the long-haul flights, eat on the flights and in the lounges. (I realize that back in the '80s when this program was started, sleeping on flights was not as feasible as it is today, due to the advent of lie-flat seats.) Why have a home at all? Why ever leave the secured zone of the airport? I guess laundry would be the biggest issue, but hey, now that AA offers pajamas to its long-haul first-class passengers, maybe it wouldn't be an issue after all. :D
@Carl did you miss the part where they were costing American millions? They clearly were not American's best customers.
And people say UA is bad. Pretty sure they've never detained someone to coerce a confession before.
As i posted on Gary's site, interesting loyalty dynamic. American actively going after its best customers, using gestapo tactics, while at the same time customers abusing their investment. Makes me wonder if loyalty is a fool's errand.
I'm surprised the author doesn't mention Mark Cuban as an owner of one of these AAirpass offers. He has stated he bought his pass for $500K but transferred the pass to his father when he bought his private jet. He likes telling about taking last minute 1st class seats to Vegas from Magic Johnson. I guess the tickets came with guaranteed seating. How great would that be for impulse flying.
Lucky,
If the Neiman Marcus deal ever comes up again, all of us from the readers of this blog should chip in and buy it for you, now that you have come to the dAArkside from UA. We will be seeing diet coke with lime on the AA menus :-)
250k in 1984 was for a company that flew mainly in the US from Texas. 550k today for a company that flies all over, with...
Lucky,
If the Neiman Marcus deal ever comes up again, all of us from the readers of this blog should chip in and buy it for you, now that you have come to the dAArkside from UA. We will be seeing diet coke with lime on the AA menus :-)
250k in 1984 was for a company that flew mainly in the US from Texas. 550k today for a company that flies all over, with a FF program that allows for travel on CX and BA is fine.
I can always sell the house and mortgage the kids college ed. I would call beaubo and get a few Thai farmers to do it for me....
3MM++ is for the real billionaires, who own netjets anyway.
I think if AA had made the pax pay taxes from the beginning and disallowed award miles accrual, that would have been fine for them and it would still be offered today.
I would've jumped on one but I was a toddler when this rolled out. On the other side of the world, no less. $250k in 1984 is $550k today, inflation-adjusted, though that doesn't necessarily tie to airfare inflation / deflation adjustment since then.
Great article!
There is a big difference between booking flights you take, causing American to lose money and booking over 3,000 flights, the vast majority of which get cancelled. If that isn't fraud, I don't know what is.
As always, airlines and oil companies are vilified. Maybe Delta is trying to get around that by being in both industries, because as we all should know, two negatives make a positive.
Its typical now for a company to think that contracts are one sided. If it works for me, great, but if I start to loose money on it, I (the company) am going to find SOME way to get out of it. It shows how much they value their customers, even if they end up holding the short end of the stick. Always remember that when someone tells you that a company is a person...they aren't.
AA really did a job of negative advertising with their fraudulent yanking of these passes. Those two who bought the passes saw a good deal and it makes AA look very bad and I would hesistate to buy a pass if you have to worry about AA filing a lawsuit against you. Bad business practices from AA.
Thanks for posting this. Very interesting.
I actually have a friend who has one of these passes. I don't think he ever abused it, but I do remember one year he had a girl friend across the country and didn't think anything about flying back and forth for weekend trips.
@ Blaine -- I don't believe they did, though I could be wrong.
Wow, just a FASCINATING story! Thanks for sharing. Did they offer a coach AAirpass?
@ Mike -- Tough to say. First of all, I'm probably better off saying what I'd value it at vs. what I'd actually pay for it, since right now I'm not in a position to drop $250K+ on flights.
That being said, if it was just on one airline (like American), I'd say probably $250K. After a while the product gets boring. That being said, if it were on any airline in an alliance, I'd have to say at least double that.
...wondering out loud if there would be any way for AA to be pursuing the demise of these bad boys (passes) via bankruptcy.
Spoken by a "discontinued" HHonors Lifetime Silver member. They just up and did away with this paid membership program. Even without bankruptcy.
Much more than that.
@mike $1 milllllllion dollars
Ben--fascinating read indeed! Question--what would you realistically pay for a lifetime first class pass on any Star Alliance carrier?
I would shutter to think what Lucky would DO if he was able to purchase this Lifetime Airpass.