Lifetime AA passes: Unintended Consequences for AA

Fascinating article here about lifetime passes for unlimited first class travel which American Airlines sold in the 1980's for $350,000 (plus $150,000 extra for unlimited first class companion rides). The passes were last sold in 1994, and in what might called an early "fatwallet" effect, they have had some rather unintended consequences for AA and for those who bought them. People who bought them wound up flying all the time. One passenger would upgrade interesting people he met in the airport to ride with him, another sold the companion ticket. AA has sued and/or revoked the passes used in this way.

Apparently in 2004 the passes were briefly offered again, in the Neiman-Marcus catalog, for $3 million: they had no takers.

It was an interesting way for AA to finance itself back in the 1980's.

Are there any other such "lifetime" deals that, if the company indeed survives a lifetime, could be lucrative deals?

The passes were a good deal, but 350k of 1980's money would buy a lot of air travel now if invested in the markets instead of the AA pass.

It's probably a decent deal, all things considered. Remember the tickets yield miles. These miles have considerable value, and can be redeemed for flights on partners, merchandise, lodging, etc.

That said, if the T&C didn't prohibit selling passes, or using the companion addon for an additional adjacent seat (frequently encouraged by airlines for oversized baggage or pax), that's not fraud. Similarly, booking lots of reservations and then canceling them later isn't fraud either.

I met a nice couple from DFW on a plane once who were pass holders. They got their money's worth many times over, as they ran a small business in those days and their annual travel bills were 50-100k anyway for long-haul F and lots of domestic short-notice Y. Keep in mind that airfares out of DFW were quite high in those days due to the captive hub. They also accumulated millions of AA miles over the years and gave a lot away to family to accompany them on trips.

It was a decent alternative to buying a fractional or full share in a jet. Pretty sure Mark Cuban bought one in the early 2000's, before he caved in and bought the 757 with Broadcast.com money.

Zaos said:   It's probably a decent deal, all things considered. Remember the tickets yield miles. These miles have considerable value, and can be redeemed for flights on partners, merchandise, lodging, etc.

That said, if the T&C didn't prohibit selling passes, or using the companion addon for an additional adjacent seat (frequently encouraged by airlines for oversized baggage or pax), that's not fraud. Similarly, booking lots of reservations and then canceling them later isn't fraud either.

Agreed. But none of the alternative redemption outlets were available for Aadvantage in the 80's. Just flights and sometimes rental cars, and at redemption levels we would consider dirt-cheap by today's standards.

the airline can make money out of this if they can pick the partipicants like the health insurances do. Instead of just picking the healthy and young ones, pick the old and sick ones.

Any of them FWers?

What was also really cool about these is AA paid all the taxes. They don't do that on award tickets.

And the taxes at AA's main European destination, LHR are quite high for F tickets.

As I understand it the reason for booking the extra seat on every flight was that unlike all other kinds of tickets, the passholder received the frequent flyer miles for his own ticket and the companion ticket. So what many would do is book a seat for themselves, and for their dog or something, then at the gate find someone who wanted a free upgrade to first class and change the name so they would get the miles for that seat as well.

RedCelicaGT said:   I was expecting to hear about adverse action, ie lifetime ban from a CC issuer.

I was thinking the same thing. lol

I'm surprised this survived through AA recent bankruptcy.

wadewood said:   I'm surprised this survived through AA recent bankruptcy.It didn't or at least it may not. Hence, the reason that the article linked in the OP points out that because of the bankruptcy the lawsuits are in limbo.

Pretty disgusting behavior by AA. If you sell a pass for a lifetime of first class travel you should not be surprised when people use it to *gasp* take a lot of first class flights. This shows how much faith you should place in any kind of guarantee or long term promise that they make to you.

lonestarguy said:   CPAESQ said:   I agree - in the 80's you could buy a house - 4 bedroom colonial for $85,000 which in today's dollars (post bubble) is worth $400,000 conservatively in today's dollars. Therefore, people were in the 80's were forgoing about $1.6 Million in today's purchasing power for these first class tickets. even more when you think about how there was not a lot of credit cards / financing alternatives back then.. if you didn't have cash you couldn't buy it.

Great buy for trust fund kids with tons of idle time and income for travel.. But I agree 1.6M would buy a lot of airfare.

In 2012, you can still buy a 4-bedroom for under $80,000 in some places -- http://www.realtor.com/realestateandhomes-detail/4904-Whiterock_...

I know you can - but as a reference I was refering to a house in the early 80's in the NY suburbs. In other parts of the country the house selling in NY for 80k could have been selling for 20k. So overall - the point I was making is that back in the 80's 300K had a lot of purchasing power

AbbaZabba said:   What was also really cool about these is AA paid all the taxes. They don't do that on award tickets.

And the taxes at AA's main European destination, LHR are quite high for F tickets.

As I understand it the reason for booking the extra seat on every flight was that unlike all other kinds of tickets, the passholder received the frequent flyer miles for his own ticket and the companion ticket. So what many would do is book a seat for themselves, and for their dog or something, then at the gate find someone who wanted a free upgrade to first class and change the name so they would get the miles for that seat as well.

Seats purchased for baggage such as a violin does earn miles. Though I guess they wouldn't mind picking out a nice looking person to be their companion.

geo123 said:   wadewood said:   I'm surprised this survived through AA recent bankruptcy.It didn't or at least it may not. Hence, the reason that the article linked in the OP points out that because of the bankruptcy the lawsuits are in limbo.

AA isn't going to renege on this. The vast majourity don't engage in such more questionable tactics, and would just expose them to bad PR. Imagine some tabloid going crazy over this: AA in Bankruptcy, CANCELS PAID TICKETS. That's opposite of their BK goals where the main objective is to use it as leverage against creditors and unions.

ppatin said:   I would trade one of my kidneys for a pass like that.Too bad a kidney will only get you about one round trip 1st class international flight if you are lucky.

HumDoHamaraDo said:   What if you had bought lifetime passes on PanAm or TWA or Eastern.

Interesting question. So many current airlines are actually amalgamations of other older companies that I wonder what would happen if you'd gotten a lifetime pass on one of them. Delta is actually a combination of Delta and Northwest (and most of Delta's European network started off as Pan Am's), United is actually United and Continental (which itself was cobbled together from all sorts of other airlines,) AA includes what used to be TWA and US Airways was put together from god knows how many smaller operations.

gtalum said:   ppatin said:   HumDoHamaraDo said:   What if you had bought lifetime passes on PanAm or TWA or Eastern.

Interesting question. So many current airlines are actually amalgamations of other older companies that I wonder what would happen if you'd gotten a lifetime pass on one of them. Delta is actually a combination of Delta and Northwest (and most of Delta's European network started off as Pan Am's), United is actually United and Continental (which itself was cobbled together from all sorts of other airlines,) AA includes what used to be TWA and US Airways was put together from god knows how many smaller operations.

I suspect it would depend on the structure of the merger. Pan Am, for instance, filed for bankruptcy and its valuable parts were bought up by Delta and United. in that case, I suspect a lifetime Pan Am pass would be null and void. Northwest and Delta, however, merged without a bankruptcy, so a pre-merger Northwest or Delta pass would probably have to be honored.

Just spin off your lifetime pass department and let it go bankrupt and then ask uncle sam for any money that uncle sam ultimately fines you for such practices.

No wonder AA filed for Chapter 11.

The amount of money that AA claims this has cost them is BS because it assumes that every single one of those seats would have otherwise been sold for full fair. After all, we know that airplanes are always 100% full and no first class seats are ever filled with passengers who used frequent flier miles to upgrade :rolleyes:

Also, am I the only one who's disturbed by a private company's "agents" detaining people in a foreign airport?

ppatin said:   I don't see how using an unlimited pass to actually fly a lot could possibly qualify as abuse.I agree and is the reason that I put it in quotation marks. In my post, I used the term "abuse" as a shorthand way of describing a situation of a person who takes non-stop first class redeyes, so that he doesn't have to actually rent a place, or flies 10 times a week to random destinations just because he can and doesn't have anything better to do, etc... It was reasonable for AA to assume that people with enough cash to purchase these passes also had interests that caused them not to engage in the above actions, which, while allowable under the terms of the pass, would be expected to cause losses for AA.

Sucks for AA if the math didn't work out for them. Booking seats that you didn't intend to fill is another matter though.I wholeheartedly agree.

I agree their lost revenue calculations are wildly skewed in AA's favor. Similar to the RIAA's claims that every copy is 100% of the retail price lost.

He did damage AA with the speculative booking though, just not to the extent they claim. Considering upgrades with stickers or miles, every seat generally goes out full in F, so it cost them some sales plus the value of potential upgrade currency used.

IMO, they got him on speculative bookings as a kind of technicality. He paid for 2 seats, so he should have been able to book 2 seats.

There are other pass holders who AA has left alone. It would look really bad to 86 a nice elderly couple who are pass holders as well, but always fly together.