In the early 1980s, American Airlines, strapped for cash, decided to start selling passes for unlimited first-class travel for life. At the time, the passes cost $250,000 (around $600,000 in today’s dollars), with a companion ticket available for an extra $150,000 and discounts for older people.
“We thought originally it would be something that firms would buy for top employees,” said Bob Crandall, American’s chairman and chief executive from 1985 to 1998.
“It soon became apparent that the public was smarter than we were.”
The unlimited passes were bought mostly by wealthy individuals, including baseball Hall-of-Famer Willie Mays, America’s Cup skipper Dennis Conner and computer magnate Michael Dell. Mike Joyce of Chicago bought his in 1994 after winning a $4.25-million settlement after a car accident.In one 25-day span this year, Joyce flew round trip to London 16 times, flights that would retail for more than $125,000. He didn’t pay a dime.
“I love Rome, I love Sydney, I love Athens,” Joyce said by phone from the Admirals Club at John F. Kennedy International Airport in New York. “I love Vegas and Frisco.”
Rothstein had loved flying since his years at Brown University in Rhode Island, where he would buy a $99 weekend pass on Mohawk Air and fly to Buffalo, N.Y., just for a sandwich.
He bought his AAirpass in 1987 for his work in investment banking. After he added a companion pass two years later, it “kind of took hold of me,” said Rothstein, a heavyset man with a kind smile.
AAirpass” owners Steven Rothstein, left, and Jacques Vroom.
When American introduced the AAirpass in 1981, it saw a chance to raise millions of dollars for expansion at a time of record-high interest rates. It was such a good deal for flyers—who also earned airline miles on each flight—that American started regretting it. In 2007, a special “revenue integrity unit” was assigned to find out whether any of these rules had been broken, and whether the passes that were now such a drag on profits could be revoked.
The litigation over whether this was abuse of the system or a bad business plan is on hold for now, since American Airlines filed for Chapter 11 bankruptcy late last year.