The Pass That Allows People to Fly Free Forever and the Airline’s Attempt to Kill It

American-AirlinesBack in 1981, in an effort to raise some quick funds, American Airlines introduced a $250,000 pass (about $641,000 today) that would allow customers to fly on its airlines for free for the rest of their lives. In 1990, they bumped the price to $600,000 (about $1.07 million today), and then in 1993 to $1.01 million (about 1.7 million today). Despite the sticker price, the airline has since admitted this is one of the costliest mistakes it has ever made.

Introduced in the summer of 1981, the unlimited “AAirpass” was originally envisioned as, to quote the airline’s former chief executive Robert Crandalll, something that “firms would buy for top employees” and it was thought that the scheme would bring in many millions of dollars in revenue in a very short timespan- essentially, easy money now to grow the company with, with future costs of having people use these passes being negligible to absorb. However, the AAirpass’ high cost resulted in a less than enthusiastic response from customers and in the end, only 66 passes were actually sold.

This is a shame for consumers, because those 66 customers got an amazing deal. As Crandall later noted, “It soon became apparent that the public was smarter than we were.”

According to the rather loose terms of the original AAirpass contract, customers who purchased one were entitled to free first class travel anywhere in the world and were given lifetime membership to American Airline’s Admirals Club, which grants priority boarding, same day booking and access to lounges across the world that offer free food and drink for members.

These benefits alone have seen some likening the unlimited AAirpass to “owning a fleet of private planes”. As one of the top frequent fliers, Steve Rothstein said, “A very fun Saturday would be to wake up early and fly to Detroit, rent a car and go to Ontario, have lunch and spend $50 or $100 buying Canadian things…” and then be back by dinner.

In another case, an individual travelled all the way to London 16 times in a single month, sometimes just staying long enough for a bite to eat before flying back home.

But it didn’t stop there. Savvy customers found ways to get even more out of their passes. You see, under the terms of the agreement, customers were still allowed to claim air miles on all flights they took, allowing those who used the service frequently (because why wouldn’t you?) to rack up literally millions of air miles in the space of just a handful of years, which they could give away to family and friends or in the cases of some customers, sell.

On top of this, because the AAirpass offered unlimited free travel, the airline were forced to absorb any and all fees customers incurred while using them (including taxes), meaning customers could literally book a dozen flights at a dozen different times for a single day and roll up to their airport whenever they felt like it, knowing that there would be no cancellation fees to pay for missing the other flights or additional duties or taxes to pay.

But we’re not done yet. On top of all this, American Airlines offered customers a chance to purchase a “companion pass” at a discount price (about 40% off), which granted all the same perks to anyone the original holder wanted as long as they flew together. Customers who opted for this particular upgrade utilised it in a number of impressively creative ways from booking an empty seat under a false name to score more elbow room in the already spacious first class, to ferrying friends and often random strangers across the world for free. In the case of a guy called Steven Rothstein, he’d sometimes book two tickets for every flight he took just to surprise people at the airport with a free first class upgrade.

If you’re wondering how customers came up with all these ideas for bending the rules, many of them didn’t. A lot of the aforementioned tricks like booking multiple flights on a given day or an empty seat were often suggested to customers by people working for the airline itself as part of the complimentary booking service provided to Admirals Club members.

According to an internal report from American Airlines in 2007, the top unlimited AAirpass holders cost the airline in excess of a million dollars that year, each. Although, it would be interesting to actually see how they tallied this up, because if first class wasn’t sold out on a particular flight an AAirpass owner took, the airline wouldn’t actually lose money other than taxes, the price of in-flight consumables and the like, as it’s likely many of these customers wouldn’t have taken the flights in question had they not had the unlimited pass.

Regardless, the results of this internal report were alarming enough that it prompted American Airlines to sic its so-called revenue integrity unit onto owners of the passes in attempts to find something they’d done that constituted a breach of the AAirpass’ terms.

After poring over the contracts and doing extensive investigations, American Airlines were able to successfully revoke the passes of a handful of the customers who’d “abused” the system the most. For instance, American tried to coerce certain people who’d been given a free ride courtesy of some of the more generous AAirpass owners into admitting that they’d paid for their tickets. In one such case, it was noted in an internal email from American Airlines that the individual in question who’d been given a ticket by AAirpass owner Jacques Vroom, “appears to be naive, without financial wherewithal, and most probably very anxious to return ‘home'”. So upon the young man checking in, he was taken to a private office and a former police officer working security for American Airlines questioned him, then offered him a free ticket home if he’d just admit he gave Vroom money for a ticket.

In another case concerning Vroom, the individual, one Sam Mulroy, was told his flight was canceled, but that he’d be given a new ticket, free of charge, if he’d just say he paid Vroom for the original ticket. Mulroy denied paying anything. When the offer of a free ticket didn’t work, American Airlines froze Mulroy’s Frequent Flier account. When Mulroy complained to American Airlines and the U.S. Department of Transportation that he felt he was being extorted by the airline, his account was unfrozen.

In the end, Vroom did indeed lose his pass when it was discovered in a subsequent lawsuit that he really had accepted payment for at least a few flights. Vroom, however, claimed the payments were for “business advice” (Vroom is a very successful marketing consultant), not for the tickets. However, Vroom’s lawyers noted that it shouldn’t matter whether he accepted payments or not, as American Airlines didn’t explicitly ban the practice of selling tickets in their “unlimited” pass contracts until three years after Vroom purchased his.

Other customers who lost their passes included a retired bond broker called Willard May who’d been very openly using his pass to ferry people across America for a fee for about two decades and the aforementioned Steven Rothstein for things like booking empty seats for his suitcase under the name “Bag Rothstein”.  While May decided against pursuing the matter in court, Rothstein did. He ultimately lost when a judge ruled he had indeed violated the terms of his contract. (Amusingly given how it all turned out, Rothstein once met the aforementioned American Airlines chief executive Robert Crandall during a flight, prompting the then CEO to send Rothstein a letter saying, “I am delighted that you’ve enjoyed your AAirpass investment. You can count on us to keep the company solid, and to honor the deal, far into the future.”)

At least two others were also found to have been in breach of their contracts, according to American Airlines, but their tickets were not revoked for undisclosed reasons.

For the curious, you can still purchase an AAirpass today, though not too shockingly, American Airlines no longer offers an unlimited version. The last time they did so was in 2004, three years before they’d realised exactly how much these passes were costing them every year. At that time, they offered the pass through Neiman-Marcus for $3 million (about $3.7 million today) per pass.  Despite that this would have still been a pretty good deal for a certain type of wealthy flyer or certain businesses to have such tickets at their disposal any time, nobody bought any at that price point.

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23 comments

  • Quoting from the article: “After pouring over the contracts …”

    The proper word is, “poring,” not “pouring.”

    This, I trust, would have been caught by a professional proofreader.

    • are you an enlish teacher

    • Daven Hiskey

      @J.F. Gecik: If only money were available for such a proof reader who is focusing just on typos, rather than fact correcting/checking when reading through the article sometimes dozens of times through the process. Unfortunately, ads are not a very good way to provide excess revenue, particularly on a site that requires heavily researched (a.k.a very expensive) articles. We’ve yet to successful implement alternate revenue streams, though attempts have been made. Patreon has come-a-calling recently wanting TIFO to jump on board there, but I’m a bit skeptical that Patreon would work for an article-based site and it’s not an insignificant amount of work to set that up and run properly. But I have been brainstorming ideas the last couple months in my free time on how to make that successful. One of the first things such a successful campaign would fund would be an outside professional proof-reader to look at the articles with fresh eyes. 🙂

      However, on the “pouring” typo, (funny enough) this was actually caught, but dismissed immediately by me as I just assumed it was one of the many cases where UK English has an “extra” ‘u’. When I do put my typo/grammar/reading-flow hat on for the final few reads of a piece, I also have to be mindful of whether the particular author is using British English or American, which makes a difference both in spelling and certain grammatical conventions. Over the years, I’ve mostly gotten UK English down, but I do slip up on occasion such as with this one. And, of course, reading through a piece numerous times directly before doing typo/grammar checking is a sure-fire way to miss things on top of that. 🙂 But in this case, it wasn’t a miss, it was an incorrect assumption that I should have looked up, but didn’t owing to that it was around 12am when I finished editing this one after about a 13 hour work day. 🙂 I don’t normally work that long, but this time a year it’s work almost every day, all day, gearing up for the annual TIFO+ trying to take advantage of the one time of the year where ad rates are actually pretty good (November-December). Doing all this provides a relatively large percentage of TIFO’s annual budget (about 30%-35%-ish in those two months).

      • “While May decided against pursuing the matter in court, Rothstein did.”

        This sentence makes no sense. The author is saying that Rothstein did “decide against pursuing the matter.”

        Just trying to be helpful.

      • Thanks for the insights!

  • J. F. Gecik….

    Really?

    You can’t just point out the needed correction in good faith, and leave out the snide remark.

    That, I trust, tells the rest of us you are a professional… er… um… something.

  • IT WAS AN EXCELLENT ARTICLE……..SUCCINT, AND WRITTEN SO NICELY THAT IT CAN STRAIGHTWAY BE LIFTED FROM HERE, AND USED AS A CASE-STUDY PRIMER IN ANY TOP NOTCH BUSINESS SCHOOL…….TIFO TEAM, LIKE WINE U R GETTING BETTER AND BETTER WITH TIME. TNX.

  • In the spirit of editing, and asking a question:

    “In the case of a guy called, Steven Rothstein, ” should be, “In the case of a guy called Steven Rothstein,” and should really be, “In the case of Steven Rothstein,” or better. “Steven Rothstein…”

    I’ve noticed you use “called *name*” instead of just the name. Is there a reason for this? Are you hedging your bet that it may be an assumed name or is there a journalistic reason of which I am unaware?

    And really, is LOVEPAREEK your mother? And is his/her caplock forever stuck?

    **None of the above is meant as criticism. I don’t have many sites I visit regularly, but this one I visit daily. Love it. Great work!

    • @ ROB: CANT B HIS MOTHER SINCE I M A CENT PERCENT MALE…….BUT SINCE U HAVE RAISED IT, LET ME DISCLOSE A SECRET……WELL, I DIDNT WANT TO ….BUT I THINK NOW I SHUD………WHOA! I M YOUR FATHER……BUT DONT ASK YR MOTHER, FOR SHE WILL GET EMOTIONAL AND NYMPHO WHEN SHE WILL REMEMBER THE TIMES WE HAD…………………….. 😉
      PS: AND JUS BCOS OF CHANGED CIRCUMSTANCES, NOW DONT GO CALLIN ME PA……LET THAT TITLE B RESERVED FOR WHOMSOEVER RAISED U TILL NOW…….C, I ABANDONED U, SO I KINDA FEEL GUILTY BOUT THAT …..SOB SOB
      :’ (

    • Daven Hiskey

      @Rob: Thanks for the catch on the extra commas. 🙂 On the “called XYZ” instead of “named XYZ,” that is the way the Brits say it, at least if all TIFO’s British authors over the years (including the author of this piece) are any indication.

  • @ ROB: CANT B HIS MOTHER SINCE I M A CENT PERCENT MALE…….BUT SINCE U HAVE RAISED IT, LET ME DISCLOSE A SECRET……WELL, I DIDNT WANT TO ….BUT I THINK NOW I SHUD………WHOA! I M YOUR FATHER……BUT DONT ASK YR MOTHER, FOR SHE WILL GET EMOTIONAL AND NYMPHO WHEN SHE WILL REMEMBER THE TIMES WE HAD…………………….. 😉
    PS: AND JUS BCOS OF CHANGED CIRCUMSTANCES, NOW DONT GO CALLIN ME PA……LET THAT TITLE B RESERVED FOR WHOMSOEVER RAISED U TILL NOW…….C, I ABANDONED U, SO I KINDA FEEL GUILTY BOUT THAT …..SOB SOB
    :’ (

  • In this article, “The Pass Which Allows…,” in paragraph 13, the correct usage is “After poring over” rather than the inundation verb “pouring.”

    And dont get me started on hippopotamuses, octopi, bororygmi, platypi, …… 🙂

  • Typo in next to last paragraph: “in breech of their contracts” should be “in breach of their contracts”.

  • I liked the article, and was looking forward to learning more about it by reading the comments, until I read the comments.

  • @Daven Hiskey
    I really appreciate the quality of the articles that TIFO creates. It’s also nice to see your comments every once in a while. They are always so honest and polite and yet as sharp as a razor. It shows that you care about your viewers.
    Random question: Is there a policy banning authors from commenting on their articles? I’ve yet to see any respond, which if intentional is genius, because it creates a sense of a unified platform where if something needs to be said, then a single voice will say it in an amazingly undefensive way.
    Thank you for your dedication to truth.

    • @JOHNS: INTERESTING OBSERVATION….WONDER HOW I MISSED THAT ONE. YES, U R RITE, AND NOW ITS INTERESTING TO NOTE THAT THE AUTHORS NEVER COMMENT OR REPLY ON THEIR ARTICLES….BUT I REMEMBER THAT VERY EARLY, MAYBE SOME 2 YRS BACK, I SAW 2 OR 3 COMMENT REPLIES FROM THE AUTHORS THEMSELVES. WELL, SEEMS DAVEN IS A STRICT BOSS 🙂

  • 66 people taking advantage of this doesn’t seem so bad to me. If someone has the money to do that and takes advantage of what it gives, that’s fine. I can’t understand the issue. They offered free unlimited travel and Admirals Club entry for life, and are now complaining that 66 passengers have free unlimited travel and Admirals Club entry for life? What am I missing here? Shame on other companies for not taking AAdvantage of this great deal!

  • Wow, most of you people were trolled hard by J.F. Gecik. How about you focus on the content of the article rather than ONE word that was not correctly spelled. Well, rather not properly used, as the word “pouring” is actually spelling correctly.

  • There was an earlier American unlimited offer in 1973. American ran a full page ad in the LA Times offering lifetime free air travel for $10,000 per person, a very good deal at the time. For $17,000 you got first class. At the time, I realized that the offer was an exceptional value, but having just bought a house for $33,000, the fare, no matter how attractive, was out of my reach.

    Another consideration, at that time, was that the continued operation of American Airlines was in serious doubt. In fact, the company was issuing “equipment” bonds to investors that were backed by jet engines and even tires.

  • Sir:

    In harmony with the other examples of the shoddy AA-Security thinking you mention, I would point out that the “naive” kid those assholes sweated in the windowless room in the bowels of Heathrow is also a graduate of what is routinely called “the best college in the United States”, Williams College. At the time of the abuse by the AA thugs, the kid was nearing the end of his one-year Thomas J. Watson Fellowship. “The Watson is a rare window of time after college and pre-career to engage your deepest interest on a world scale. Fellows conceive original projects, execute them outside of the United States for one year and embrace the ensuing journey.” Though, I, too, am a Williams graduate; the kid is a good friend and Williams schoolmate of my cousin; he is a friend of my daughter; and, though young, he is an international-class mandolin player; the AA Jack-booted interrogators continually told him there was no acceptable reason for, me, essentially a stranger to him, to “give” him a $5,000 ticket unless there were some nefarious purpose at the root of it all. An hour or two of enhanced interrogation failed to reveal any nefarious underpinnings. Because there weren’t any. AA eventually sent the kid back on their nickel, and he got to Nashville for an award ceremony at which he was one of the honorees.

    AA didn’t really “successfully revoke” my “Lifetime Unlimited AAirpass” as a result of anything “discovered” in any lawsuit. They just unilaterally, without prior notice, stopped honoring it slightly before abusing the Williams kid, and a day or two after the Sam Mulroy “extortion” began. An AA security gentleman flew from Dallas to London on the same plane, then, in London, gave me a letter announcing an AA multi-million dollar suit against me for “fraud”, and forbidding me to fly on AA any more.

    Testimony in the mutual lawsuit, made largely irrelevant by AA’s bankruptcy, didn’t begin for a year or two after that.

    Not only did AA first change the AAirpass agreements to forbid compensation to the holder for use of the “Companion” seat some years after their contract with me, which had no such language, they absolutely condoned it for decades. You mentioned Willard May. There was another gentleman who used to fly frequently to international destinations on business. He and his assistant would have f/c tickets, and most often an accompanying client would have a coach or sometimes business-class ticket. The assistant, feeling very fortunate indeed to be going to Paris for a week on a photo-shoot, would usually change seats with the client, giving my friend and his client an opportunity to work on their agenda for the week, as well as fostering the sort of client-loyalty he sought and had. It also helped that he was a hell of a photographer.

    For years, AA reservation people helped Steve Rothstein fly without a seat-mate. The story goes, part of which he told me himself, that he lost his company and several tens of millions of dollars through the destruction of his NYC financial offices in the 9/11 tragedy. Shortly before that or shortly after that, his teenage son was killed in an automobile accident. He got a bit depressed and anti-social for a while. AA rez agents agreed with his “logic” that he had bought and paid for the right to have two seats. So they let him have his solitude for a few years, then said he had defrauded AA by doing so. Adios, AAirpass. And a nearly half-million-dollar investment.

    Speaking of investments, let’s speak briefly of the $1,000,000 a year burden each of us caused AA. None of the fancy HBS friends of my son can figure out why that figure is not more-than-90% bullshit. Let’s take an approximation of a “reasonable worst case”. Say I, a worst-case, nefarious, fraudulent, abusive scumbag, fly internationally 2 days out of every week. And I take equally fraudulent and abusive scum with me in both directions. Say the variable costs, taxes, wine, baggage-handling, et al are $300 for each person, each flight. There’s $60,000. I’m sure I have missed come costs, but where is the $940,000?

    I did fly to London a lot. Back in the day, a “Special Services” person would meet the plane with a small marker-board in hand showing the names of “real” first-class passengers. AAirpass ticket holders were included among the names, and full-fare ticket holders; but those with frequent-flier mileage tickets, upgraded business-class ticket-holders and airlines employees were not. We on the list then got a golf-cart ride from the plane to customs, and therefore a jump on the crowds. I never saw more than 3 other names, on that board; out of 14 f/c seats. We never, ever, ever displaced a $12,000 ticket buyer. Never.

    Naturally, if we scum went to LA or NYC some weeks, the costs were probably lower. For 3 years in there, I worked at The Metropolitan Museum in New York; most every Monday, Tuesday, and Wednesday. I usually went to and from by myself. Mostly, because few wanted to go to NY at the crack of dawn on Monday and catch the last thing smoking on Wednesday evening. So for those 3 years, I was probably off my max fraud game!

    One evening early on, at a DIFFA benefit for AIDS-relief organizations, I thanked the then-president of AA for creating the AAirpass program that allowed me to carry dying, frequently -near-destitute AIDS patients around so they could spend their last week’s or days with families far from where they then lived. He said he was glad. He said AA was a “bold” company, and that he was glad I had been “bold” enough to commit the $500,000 up front, to be able to accomplish things like that. Later, when AA “discovered” a family had reimbursed me for my airport parking, and another bought me dinner, they suggested those things were proof of fraud. Motherfuckers.

    A transcript of the report from Sam Mulroy’s “interview” shows that Sam, a professional physical trainer, and a very good one, joked that though he hadn’t paid for an upcoming trip we were scheduled to make together, he probably would kick [my] ass around the racquetball court an extra hour or two” when we returned. The AA employee indicated it was good to have the first formal admission of my guilt.

    I also remember a peripheral friend of mine becoming afraid she was somehow going to get in trouble for flying with me one time. We met for coffee. She was worried she might have done me some kind of return favor that would make her guilty of fraud, too. She then told me, “you know, Jack, if some guy, say, flys you to Vail in his private plane, and you are not sleeping with him, you gotta do something for him, like a case of wine, or like that. And you remember, Jack, we were not sleeping together. So, did I get you some wine, or anything?” Even after a hard day at the office that day, I could, in fact, still remember she had never bought me any wine, nor had we ever slept together; nor had ANY kind of romantic or sexual connection or activity of ANY kind, EVER. Before or since. I told her, though I was not a lawyer, I thought she could rest easy. I’ve never seen nor heard from her again. Thank goodness for the double avoidance of fraud and fornication.

    I know dozens of wonderful, intelligent, ethical, hard-working people who are current or former employees of American Airlines. None of them is in revenue integrity, security, legal, or upper management.

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