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In 1981, the American airline industry was going through some drastic changes.
After the implementation of the Airline Deregulation Act of 1978, American Airlines, a leading
aviation company reported a loss of $76m.
The company urgently needed some cash for expansion but interest rates were record high
so they decided to use their customer base to generate cash.
Someone in the management had a ‘brilliant’ idea - they would offer a lifetime free first-class
air travel pass to their wealthiest customers.
The travel pass would be truly limitless - no sneaky ‘conditions apply’ limitation attached
to the scheme.
The person holding this pass could fly on American Airlines at any time it wanted, to
any destination it wanted, for as many times it wanted, for the rest of its life after
paying a one-time fixed membership fee.
The entry price of the pass was set to be $250k - adjusted to inflation - around 700k
dollars in today’s money - quite a lot but look at what you would be getting - a truly
luxurious service for a lifetime.
For a multimillionaire who travels a lot, this was a pretty good deal.
For an additional $150k, you could add a companion pass which allowed you to take a partner with
you on your traveling adventures.
If you can’t quite grasp what’s being offered here, let me paint a picture for you.
On a fine Saturday morning, you could fly to London for a nice brunch, then to Paris
for a lovely evening.
The next day you could be in South Korea for a musical concert or in Hong Kong for shopping
and then back to your home by Monday using American Airlines flights connecting all major
cities in the world.
You could do this every weekend for all your life - different times, different locations.
Not to mention the access to the faster queue, Admirals Club, American's VIP lounges that
came free with the pass.
Once the costly part of your vacation budget has been taken care of, every holiday is a
world-tour.
If you're a business person, you'll never have to worry about traveling costs, which
is generally a big part of business expenditure.
It was like owning a fleet of world-class private planes.
All of these for $250k.
If all of this sounds crazy to you.....
like who would fly to London just for brunch?
Someone would actually do that.
A total of 66 people realized what a steal it was and signed up for the program.
This includes some popular names like baseball hall-of-game Willie Mays, American's Cup skipper
DennisConner and Computer Magnet Micheal Dell.
Two names on this list are particularly important - Jacques Vroom and Steve Rothstein.
These two men would make the complete use of their unlimited free travel passes and
would make American Airlines question themselves - why did they even start this scheme?
Rothstein bought both the AAirpass and companion pass after spending a total of $383k and over
the next 21 years, he proceeded to book more than 10,000 flights.
Being a lover of flying, Rothstein flew wherever he could, he flew for work, he flew for vacation
and he flew just for the sake of flying.
He took 1,000 flights to New York City alone, 500 flights each to San Francisco, Los Angeles,
and London; close to 100 flights each to Tokyo, Paris, Sydney and Hong Kong.
He was airborne almost every other day.
He went to London sometimes a dozen times a month.
He flew to Ontario just for a sandwich and Paris for a brunch.
He was getting the best first-class air travel service one could possibly get at the time.
He would sleep long night trips, flight crew memorized his name, his preferences, his favorite
meal.
He bypassed long lines, booked flights for backup plans in case his weekend plans changed
or the weather turned bad and never worried about cancellation fees.
All AAirpass holders were provided with private booking agents from the company to solve the
toughest booking puzzles.
These agents could help pass holders procure the last-minute booking during festival seasons
or get the last seat on the only plane leaving during a snowstorm.
So, booking hundreds of flights a month wasn't a difficult job either.
In Steve Rothstein's own words, this was the best investment he’d ever made, one that
completely changed his life.
The other guy, Jacques Vroom did all of this AND he went a step further.
He bought an unlimited pass and a companion pass for a total of $400k - the biggest purchase
he had ever done in his life.
He didn’t have all the cash so he took a loan at 12% interest.
He knew what he was getting himself into.
Jacques Vroom traveled around the U.S., as well as Europe and other parts of the world,
often staying at his destination for just a few hours before flying back again without
spending anything.
When his son was in college Mr. Vroom would regularly fly to Maine every Saturday to watch
him play football.
He also flew to Washington D.C. to pick up his father-in-law so he could babysit for
Vroom's children, explaining to a bemused passenger that it was ‘cheaper than paying
a local teenager'.
He used his companion pass to regularly take friends and family on worldwide trips as his
'companion' and even helped fly home AIDS victims to see their families.
Between 1990 to 2008, Vroom notched a total of 38 million miles, 2 million miles per year
on average over 18 years.
In comparison, Rothstein acquired around 30 million miles.
They were undoubtedly one of the most traveled persons in aviation history.
If you can't quite get the hold of these figures, George Clooney's character in the 2009 movie
'Up in the Air' clocked up a mere 10 million air miles and he was showered with attention.
The Airline increased the membership fee of Unlimited AAirpass from $250k in 1981 to $600k
in 1990 to $1.01 million in 1993.
The airline ended sales of the unlimited passes in 1994 except for a one-time offer in the
2004 'Neiman Marcus Christmas catalog' for $3 million for the pass and $2 million for
a companion pass; no one bought.
In 2007, American Airlines found itself in financial trouble once again.
A pricing analyst team was setup to take a hard look into the company’s expenses, especially
their unlimited travel pass.
What they found rocked all levels of management.
The team reported that only the two top users of American Airpass scheme - Steve Rothstein
and Jacques Vroom - were each costing the airlines $1 million in taxes, fees and lost
ticket sales per year.
In total, American Airlines had spent more than 40 million dollars to provide first class
flights to these two passholders and their companion only.
The other users weren’t too far behind either, they rounded up miles far beyond what the
airlines had anticipated.
A user, named Mike Joyce from Chicago, flew round trip to London 16 times in a span of
25 days - that could alone retail for more than $125,000.
For the airlines, the problem was not only that the pass holders were travelling too
much, even bigger issue was that they were booking too many flights only to cancel them
at the last moment.
Steve Rothstein made 3,009 first class reservations in less than four years, almost always booking
two seats, but canceled 2,523 of them.
Many times, these cancelled seats either went un-used or lower class passengers were given
free upgrades.
The document unearthed by LA times shows a list of bookings made by Jacques Vroom at
a given time, many of these bookings are unnecessary and duplicate.
In the email, an employee of the company expresses concern over the bookings Jacques Vroom makes
but doesn’t fly on because the company is responsible for taxes on them - $491 dollars
for each ticket.
alright… but none of these actions were against the terms and conditions of the scheme,
right?
You may say that... yes, these pass holders were abusing their privilege BUT they had
spent hundreds of thousands of dollars for it.
Their risky investment had turned out fruitful for them.
The American Airlines thinks otherwise.
After a detailed investigation, the American Airlines accused Steve Rothstein of “Speculative
Booking”.
It was said that Steve Rothstein used his companion pass to book flights in the name
of passengers he had no intentions of traveling with.
It allowed him to hold seats until the last minute and offer them to strangers, preventing
the Airline from selling them.
At multiple instances, Rothstein approached other passengers, for the first time at the
gate, and offered them first class travel on his American Airpass companion seat.
The Airlines considered it fraudulent behaviour and terminated his Airpass and all privileges
that came with it.
Steve Rothstein denied all allegations and claimed that he didn’t do anything that
was not permitted in the terms and conditions.
Something similar happened with Jacques Vroom too.
The company found that he used his companion pass to book trips with people he’d never
flown with before, traveling round-trip to Japan or Europe without even staying overnight.
It was speculated that he was selling his companion seat, carrying people for money
on his companion pass.
For months, the American Airlines tracked people Vroom had previously flown with, questioned
them and even pressured them to get a confession that they had paid Jacques Vroom for travel
on Airpass.
Jacques Vroom said that he never sold a seat to anyone and accused the Airline of foul-play,
that the company was just looking for an excuse to terminate his passes.
The American Airline had made a bad decision years ago, it was hurting and now they were
going after the most vulnerable AirPass holders for damage control — people they knew couldn’t
fight back
In July 2008, an American Airlines employee handed Jacques Vroom a letter and said he
could never again fly on the airline.
His passes were terminated.
Lawsuits were filed from both sides but fighting a billion dollar company is not an easy job.
These men never got their passes back.
Since then, a couple of other pass holders have been denied access to their unlimited
free travel scheme, while remaining pass-holders still use their passes to enjoy unlimited
first class travel.
So...yeah...that’s it…..The American Airlines may not be able to keep their promise but
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