American cracks down on AAirpass usage

Veritas

Veteran
Aug 19, 2002
882
148
www.usaviation.com
In today's Los Angeles Times:

The frequent fliers who flew too much

<snip>

"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."

<snip>


Rothstein, she found, would sometimes pick out strangers at the airport and give them surprise first-class upgrades with his companion pass. Once he flew a woman he'd just met in New Delhi to Chicago, a lift American later valued at nearly $7,500.

There was nothing in the AAirpass terms prohibiting that. But Cade considered the habit striking in light of something else she found. Rothstein made 3,009 reservations in less than four years, almost always booking two seats, but canceled 2,523 of them.

To Cade, this was evidence that Rothstein reserved flights he never intended to take. It also allowed him to hold seats until the last minute and offer them to strangers, she said later in court depositions, preventing American from selling them. Cade decided it was fraud and grounds for revocation.

<snip>

Vroom's travel history told a different story, Cade found. Time and again, he booked trips with people he'd never flown with before, traveling round-trip to Japan or Europe without even staying overnight.

"We suspect he is selling his AAirpass companion tickets," Cade wrote in a February 2008 email. That, she later said, was against the rules.

<snip>

Creative uses seemed limitless. When bond broker Willard May of Round Rock, Texas, was forced into retirement after a run-in with federal securities regulators in the early 1990s, he turned to his trusty AAirpass to generate income. Using his companion ticket, he began shuttling a Dallas couple back and forth to Europe for $2,000 a month.

<snip>


In discovery, company lawyers tracked down a Dallas woman who had cut Vroom a $2,800 check to fly her son to London. An elderly couple gave him $6,000 for a trip to Paris. And bank records showed more than $100,000 in checks to Vroom written by owners of a local jewelry store who frequently flew with Vroom.

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.
 
A contract is a contract. Unless American had conclusvie proof that the Airpass rules were being violated it should not have canceled any. The article makes it sound like AA was very heavy-handed in the approach they took. They clearly didn't like the rules they set, and wanted to find any possible reason to change them mid-game.
 
I agree it could have been handled differently, but it isn't a tough argument to make that either activity (speculative bookings and bartering seats) violates the intent of the contract.

So far, at least one state court has agreed with AA... they upheld the contract termination and didn't award Rothstein damages.
 
There are clearly people who abused the system but what is more striking that AA made extraordinarily generous offers for travel - motivated by a need to raise cash - and they have suffered for years because the offer they made was so generous that they couldn't possibly have estimated the implications the offer would have had on their business model.

Thus, history will likely show that the AAirpass was just of the many commitments that AA made which had to be revisited in BK. Whether they attempt to cut off even more of their most loyal customers remains to be seen - but you have to ask if it is really worth filling up the best seats on their planes with passengers for whom AA no longer continues to gain hardly any new revenue.

The challenges AA faces with the AAirpass are indeed one of the very unique features of this restructuring.
 
A contract is a contract. Unless American had conclusvie proof that the Airpass rules were being violated it should not have canceled any. The article makes it sound like AA was very heavy-handed in the approach they took. They clearly didn't like the rules they set, and wanted to find any possible reason to change them mid-game.
This is standard behavior for AA, both in their business dealings and the manner in which they deal with their employees.

Nothing to see here, boys and girls - move along now.