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American Airlines Unlimited AAirpass Scandal – What Do You Think?

by on May 8, 2012 · 30 comments

in American

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An interesting story came out on Saturday in the LA Times about savvy frequent flyers who purchased American Airlines’ storied unlimited lifetime first-class AAirpasses back when they were first launched in the 80′s. Not only did these AAirpasses, which started at about $250,000 (you could add a companion for another cool $150,000) and eventually went up to $3 million, include airfare on any route in first class where there was an available seat, but they even included taxes and fees, and you would rack up AAdvantage miles. Well, that was during the airline’s heyday. Since it’s been in financial straits in recent years, American has formed a crack team of investigators hoping to uncover AAirpass fraud and revoke these privileges since they cost the airline millions of dollars a year. This morning I talked about it with MSNBC host Craig Melvin, which you can view here.

The abridged version is that two men named Jacques Vroom (seriously, the name could only be better if we were talking about a high speed auto chase) and Steve Rothstein took aadvantage (ha) of their passes to the extreme for years- they were known to get off to Europe several times a week…with companions (sometimes just strangers they happened to meet). Initially this wasn’t a big deal because they did not ostensibly violate any of the terms of the AAirpass. AA employees even helped them take maximum advantage by allowing them to book fake passengers so they’d have open seats next to them. However, once American realized they were losing millions of dollars, they encouraged their investigators to uncover instances where the men sold their companion tickets, and to revoke the AAirpasses, though details are still murky. Meanwhile, the men have not only flown around the world, but also accrued over 30-40 million miles each, and are currently banned from the airline pending court trials–though who knows when that will happen because of the bankruptcy.

In general, I think these guys took it to the extreme and I don’t really feel bad that they got banned. A lot of their behavior was just outright gluttonous- like booking empty seats and making reservations they knew they’d probably cancel. If you poke the sleeping bear too many times, you can’t be surprised when it awakes and eats you alive. That being said, I think American was shady in how they proceeded with the investigation (if what is written in the article is true about them coercing people to admit to lies). I can’t really feel bad for these guys- they got their investment back many times over and they could still be flying if they weren’t so brazen.

But what do you think? Was AA wrong to finally pull the plug on their passes? Am I being too hard on these guys because I’m just jealous they had a first class AAirpass for so many years?!

Should Rothstein and Vroom get their air passes back?

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  • Matt MSP

    The only thing that matters… did they do anything which was prohibited by the contract and cause to revoke the entire AAirpass from them?

  • http://twitter.com/mindleftnumb Mindleftnumb

    You mean the only thing that SHOULD matter. What ends up mattering is often different.

  • Megan

    If they violated the contract by selling companion passes, or any other such thing, you’re not being too hard. A contract is a mutual agreement by each party. They knew the terms (or should have known them) and, if they broke the rules and AA is offended, that should be the end of that agreement. Pretty cool that they got to rack up so many miles on the deal. Hope they feel good about what they did – they’re probably gonna have to pay for it in some way or another.

  • Matt MSP

    Exactly. Do I think these guys were a little sketchy? Ya. But when hundreds of thousands of dollars are being thrown around, it’s the contract that matters, not Matt’s opinion or Brian’s opinion.

  • Anon

    indeed, from what I’ve read, the contrat terms did NOT prohibit selling or booking “empty seats”. AA stepped over the line IMHO.

  • Alex

    I’m disappointed you “don’t really feel bad that they got banned” without knowing whether they actually violated the contract. The rule of law is still important in my book.

    And btw, if these guys did NOT violate the terms then I wouldn’t feel bad for the airline. They made a business decision and miscalculated, now they need to deal with it.

  • Wj1207

    AA was moronic for selling the passes in the first place. This is a product ripe for “adverse selection” Only people who are going to fly way too much are going to stump up $300k in the first place. This is a great example of why AA is in trouble.

  • SeaBee3

    It’s AA’s fault – they never put those things in the contract and terms. They even helped them in their planning and travel – that shows nothing but acceptance of their travel patterns/habits. Good for them seeing the long-term value of their investment. AA just made a rookie mistake in how they wrote the terms of the pass.

  • LarryInNYC

    Of the alleged violations, the only ones that I think actually amount to anything are selling the companion seat and booking a fake companion to force an empty seat next to them. Everything else — flying internationally twice a week, flying with different friends or acquaintances, offering the spare seat to people in need seem to be well within the bounds of the spirit of the program.

    Even the things that are a little outrageous still seem to be within the specified parameters of the program (although, honestly, the article does not make clear *exactly* what terms governed the program and how the terms changed over time).

  • http://www.facebook.com/neilhenderson8 Neil Henderson

    WHAT!? Frequent flyers who found the cracks in a system and ‘abused’ it??? I’m SHOCKED! SHOCKED and DISMAYED I say! ;o)

  • thepointsguy

    No one knows whether they actually violated the contract, so I was just basing my opinion from the article.

    Agree AA needs to deal with it- my position would be a lot stronger against them if they decided to pull the entire AAirpass program because it was unprofitable

  • thepointsguy

    Agree that flying a lot wouldn’t disqualify someone since there are still lots of other AAirpass users.

    It seems like AA may have had poor legal teams when they created the AAirpass contracts and if it comes to light that none of these activities were banned, then they should deal with it

  • Mark The Shark

    Nice interview! I think they crossed a gray area, but American should honor the contract, and based on what I read, these frequent fliers did nothing not in their contract (even if in future contracts, the rules changed).

  • http://zzdouggo.blogspot.com/ Bottom-Feeding the High Life

    At first blush, I was ready to agree with most people here that AA went too far in its investigation. However, after thinking this through, I’m not so sure. While the investigative tactics may seem shady, I don’t see how offering the guest a first class ticket in exchange for admitting payment is particularly different from the government offering a low-level criminal immunity in exchange for testifying against {select high-level criminal here: mafia or drug kingpin, corrupt politician, insider trader, ponzi schemer, etc.} The only difference is that the guest of the pass holder didn’t pay for his seat, and thus had no crime (or contract violation) to be a witness to.

    I would have a big problem if the guest of the pass holder had taken the bait and claimed that he paid for the ticket, when he really didn’t. However, I would have had a problem not with AA but with the guest of the pass holder who lies in exchange for the bait. Cheers to them for their integrity.

    Meanwhile: “Vroom admits to getting money from some flying companions, but says it was usually for his business advice and not payments for flights. Other times people insisted on paying him, he said.” If he were a serious consultant, he would keep his consulting business separate from the people who he treated to flights, unless perhaps they were EXTREMELY good customers with whom he had already had a long business relationship and wanted to give them some kind of a perk. This seems to be asking for trouble, at least with AA and perhaps even the IRS.

    That said, AA’s claimed damages are pretty exaggerated – they seem to be valuing first-class tickets at face-value prices, whether or not they would otherwise be filled.

    In any case, this will probably be moot pretty soon. With AA in bankruptcy, can’t the airline break the contracts? And did AA ever try to buy out any of these guys?

    My favorite part of the article was the letter from Crandall thanking the pass holder for his participation. That is a classic.

    This of course is an example of why airline programs nowadays have so many rules and provisos – to protect them from people who read and write blogs.

  • Rak Siam

    Sounds like the rules were very different when these guys bought the paasses. If AA was too stupid to think of the implications then that is their own fault. Isn’t exploiting the program what this “hobby” is all about? If there was no prohibition against selling flights to folks using the passes then that’s too bad. Likewise why shouldn’t they be allowed to treat anyone they choose to the companion pass? So what if they knew them for 5 minutes or 5 decades? What’s the difference? AA thought they could exploit some fat cats and got taken in return. I will agree that making reservations and then canceling at the last minute is just poor form. But when the airline’s own personnel were telling these guys to book an empty seat for themselves using the passes then I don’t see how AA can turn around and accuse them of doing something wrong.

    How is this any different than booking a mistake fare? The airline offers a product/service for a price. The customer agrees to the price and buys their ticket. The airlines seem to think that they have right to change the contract at any time, yet they screw their customers at every turn if we want to do the same. I have no sympathy for them getting a little taste of their own medicine

  • Michael

    Until we see the contract they signed this is all moot under the bridge. If the contact did not state you can’t charge someone to fly with you for the ticket AA is wrong. You paid for the right to have any one fly with you, if the contract stated only 1 person can use the pass then he was wrong.
    I think AA dropped the ball on the terms of the Pass and when he has the AA staff helping him book fake seats won’t help them at court.
    I wish TV camera’s are allowed in court to watch this play out.

  • Suzannehendrix

    B-great job on the interview! You looked and sounded like a real pro!

  • Suzannehendrix

    Also, I agree that they should be banned. They abused the system and guys like this will cause the whole thing to get canceled.

  • John

    AA probably had a finance genius look at the present value of future cash flows, discounted by the high interest rates of the early 80′s, and thought this was a good deal for them (compared to, say, raising capital by selling bonds). Wondering if these were positive space or space available bookings.

  • Ken

    You could practically live in a first class cabin for the rest of your life with that pass.

  • Christian

    Typical of American Airlines not to honour their promotions/offers/contracts after they notice that their terms&conditions weren’t precise enough and customers ask for what they are owed.

  • Lee H.

    When the airlines realized that there were issues with them “abusing” the system, they should have received a warning as to the behaviors that were egregious, especially when they were aided and encouraged by AA’s customer service reps. When someone pays that amount of money and shows a certain amount of loyalty, they should be treated with respect. I’m sure, if they were to discuss it professionally, these people would have amended their ways to ensure they could continue receiving the benefits they paid for. It’s not like there were so many of these passes out there that a high-ranking official within the organization couldn’t have reached out to them. Hell, at least have the legal department send them a cease and desist letter citing the behaviors not allowed.

  • Asdfasdfasdasd

    How much do you get paid for such an appearance?

  • thepointsguy

    Haha I wish. I do it for free

  • Mrredskin

    I don’t see how you can defend them being banned for abusing the system when you admitted cleaning out PC mini fridges as a royal ambassador

  • Edward

    That this possibility existed, and that you could resell it is a hilarious wet-dream fantasy. AA should have given a warning shot. Banning them serves no purpose, doesn’t get lost dollars back, and is punishment more than justice. I’d like to see a documentary / movie on this. I can only imagine the stories! How about it Gabriel Leigh? (Frequent flier documentary guy).

  • Pandaexpressrocks

    Brian
    Why the evil laugh at the end?
    Lol

    Great interview. Very proud of u

  • LIH Prem (David)

    lol Brian .. what was with that little sinister chuckle at the end of the video segment?

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