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, and still is, offered in a variety of formats, including prepaid blocks of miles. But the marquee item was the lifetime unlimited AAirpass, which started at $250,000. Pass holders earned frequent flier miles on every trip and got lifetime memberships to the Admirals Club, American's VIP lounges. For an extra $150,000, they could buy a companion pass. Older fliers got discounts based on their age.
Well done to Vroom and Rothstein — they loaned $350,000 to a struggling company in the 1980s and then extracted millions of dollars' worth of in-kind repayment over the next three decades. It's just predatory lending; nothing new here.
I had no idea you could buy lifetime passes. That's insane. All-you-can-eat deals only work because food is cheaper in bulk, the people that don't eat much are subsidizing the people that eat a lot, and there's a natural limit to how much a person can eat, period. It doesn't work if you're losing money on every single transaction! And you can't sell a seat that gets taken by someone else.
Vroom, a former mail-order catalog consultant, used his AAirpass to attend all his son's college football games in Maine. He built up so many frequent flier miles that he'd give them away, often to AIDS sufferers so they could visit family. Crew members knew him by name.
Checking Vroom's bookings for first-timers, Cade came across Auyon Mukharji, a recent college graduate abroad on a music scholarship. He was scheduled to fly from London to Nashville with Vroom on July 30, 2008.
Working with airline security, Cade hatched a plan to confront Mukharji at London's Heathrow Airport, challenging him to admit he had paid Vroom.
"Mukharji appears to be naive, without financial wherewithal, and most probably very anxious to return 'home,'" American's head of global investigations wrote in an email.
At check-in, American agents detained Mukharji and escorted him to a private office. A former New York police detective working in American security offered a free ticket to Nashville if he'd confess to giving Vroom money.
But Mukharji insisted he hadn't, and American ultimately released him and gave him a coach ticket home. He could not be reached for comment. ...
Inside Heathrow, Vroom headed for the VIP lounge, where an American employee handed him a letter and said he could never again fly on the airline.
wierdo: "I do have to wonder what possesses people to be led by an airline's security team into a small room, though?"
More importantly, this is a loss in terms of opportunity costs. Our imaginary flier that uses this service conceivably would have flown fly anyway (e.g. For real business) at least some of the time). Granting these services mean you can't bill him for anything, ever. It's a loss of an entirely different kind.
It's because those are unsold tickets, not because "flying the plane is free, so what the hell, why not?" More revenue is a good thing. And if the marginal cost is pennies, how come you never see a last-minute ticket go for five bucks?
But why are they charging for bags? Because they just woke up one morning and decided to be evil? Why weren't they evil fifty years ago?
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