The year was 1981, and American Airlines was finding themselves in a much tighter situation than they had ever been.
Before, when the system was more rigid, fares and routes were under control of the federal Civil Aeronautics Board (CAB). Fare prices were virtually the same across airlines, which are often adjusted according to fuel pricings. As the fuel crisis hit the country, plane tickets became increasingly expensive, passengers were forced to pay more than ever before. Across the states, communities were pressuring the authority into making a change. In 1978, following the Airline Deregulation Act, the government no longer controlled much of the airline industry, leading to a new era of free market in commercial aviation. This meant companies were now responsible for their own routes and fares, with new airlines being opened by new private firms. Consequently, air travel became a lot cheaper than it once had been, and became a disaster for airlines when paired with the previous oil crisis in 1973.
Back to American Airlines (AA), which were of course among companies suffering from colossal financial damage. A $76m loss was reported in 1980, and AA was drowning in a changing industry with fierce competition. To fish the company out of irrelevancy, Robert Crandall – the airline’s president – decided to take actions. AA introduced the A’Airpass. At $250,000 ($560,000 in 2018 dollars), passengers could buy a lifetime membership of unlimited first-class flights, with all their flight expenses included, to travel to anywhere domestic or international, anytime they wanted. With an extra $150,000, people could also purchase a companion pass, allowing them to bring one person along for the ride. The idea behind A’Airpass was that it was a good bargain. At its then pricing, companies could buy these passes and awarded them to their top-performing employees.
It didn’t take long for AA to realize that A’Airpass was a horrible idea. The deal was just too good to ignore. A’Airpass’s model resembled that of a buffet restaurant. At such restaurants, you pay a fixed amount of money, but can potentially eat as much as you want. While theoretically speaking, one can eat the entire buffet counter in one sitting, no one can do it, not to mention people who cannot consume huge amount of food per meal. AA took advantage of this and applied it to their own business. However, what they failed to notice was that unlike a buffet where customers would pay in cash to eat for one meal, their A’Airpass was essentially ‘pay once, come back and eat every day’. Before AA could have a chance to react, 28 lucky (and of course wealthy) people had already purchased such a pass.
Steve Rothstein, an investment banker in Chicago, was already one of American Airlines’ frequent fliers at the time when he purchased the A’Airpass. For the next 25 years, he would take around 10,000 flights in total, sometimes as frequent as twelve flights per month. Rothstein might fly to London to have lunch with his friend, then came back to Chicago in the same day. Other times he flew to Boston to watch a baseball match, then returned home in time for dinner. He also flew very frequently to Ontario to get his favorite sandwich from a restaurant called Geoff’s. To put it into perspective, American Airlines had to pay thousands of dollars out of their pocket whenever Steve got hungry. Jacques Vroom, a marketing consultant also spent his $400,00 on the pass and used it to its fullest. He flew to the East Coast to cheer for his son’s football games, and popping to France and London for casual coffee talks. When his daughter had a middle school project on South American culture, he took her to Buenos Aires to see a rodeo and flew back the next day. Another super-traveler under the name Mike Joyce once used his pass to fly round-trip to London 16 times in 25 days.
The result was a $1,000,000 in taxes, fees and ticket sales loss per super-traveler each year, and American Airlines was quick to set out for a cause to revoke these holder’s passes before their ship sank to the bottom of the ocean. It was discovered that in a span of 4 years, Rothstein had made 3000 flight reservations, 2500 of which he then cancelled. The reason for this was that Rothstein wanted to help out complete strangers by giving them a first-class upgrade, or getting them home if their flights were cancelled. In order to achieve this, his tickets had to be booked in advance. And since he could not know the name of whoever he was helping next, he had to make up names to fill in the forms. The same case was true for Vroom, who booked flights for strangers and allegedly accepted payment for tickets on certain occasions. AA considered them ‘fraudulent activities’ and used that as an excuse to revoke the two gentlemen’s passes. Lawsuits were filed against the company, but were all unsuccessful.
The other passes which were already in regulation, however, were left untouched. Today, over 20 pass-holders can still use their pass to travel freely as long as they step on an American Airlines plane. These includes Michael Dell – founder and CEO of Dell Technologies, and Mark Cuban – a famous American businessman and investor who is more commonly known thanks to his appearance on Shark Tank. A’Airpass was rebranded as Airpass, no longer offered lifetime unlimited flights, but instead pre-paid fares at a discounted price, with memberships now costing $10,000 per year per traveler.
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