April 19, 2021

The $250,000 Unlimited Flight Pass offer: A Terrible Mistake

We all make mistakes, even companies. After all, companies are people, too.

In this video, we’ll talk about the mistake American Airlines made. They sold the infamous unlimited lifetime Ah-Airpass.

In the 1980s, American Airlines were short of money. And the airline desperately needed it for fuel… which costs money. In desperate times, come desperate solutions. Such as the airpass of American Airlines. The idea was simple. When the pass was first offered in 1981, it cost $250,000, and you could spend an additional $150,000 for a companion pass. So, if you bought both you were looking at a total of $400,000. In exchange for that you got unlimited, free first-class travel anywhere in the world, on any American Airlines flight, for life and with the companion pass, you could take anyone with you. So, 28 people bought this offer.

Even though $400,000 is a lot of money, soon American Airlines realized that they had made a terrible mistake in their pricing. American Airlines assumed people won’t use the pass much, but they failed to consider super travelers like Steven Rothstein.

Steven, a Chicago investment banker, bought the unlimited Airpass in 1987. Over the next 25 years, he booked over 10,000 flights. That’s an average of more than a flight a day. He would fly to London for lunch with a friend, or to Boston for a baseball game, then back home for dinner. Sometimes he would fly to Providence, Rhode Islands, just to get his favorite sandwich.

This meant that whenever Steven got hungry, American Airlines had to pay hundreds of thousands of dollars in fuel, and other costs – not to mention lost ticket sales. A lot of other people used this pass much more than expected, too. Mike Joyce once used his pass to fly round-trip to London 16 times – in 25 days. Keep in mind, too, that back in the 80s, when the pass was first offered, flying cost a lot more than it does now. When you adjust for inflation, the cost of flying is now about 50% less.

Soon, American Airlines realized the terrible mistake they’d made. They estimated that super travelers like Rothstein were costing them over $1 million a year each. By 2008, Rothstein had traveled over 10 million miles or 16,000,000 km. Rothstein and others would often use their passes to help complete strangers for a free flight. That normally wouldn’t be a problem – except that in order to have the option to do it, the pass-holders would regularly book their companion pass seat under a fake name, like Bag Rothstein, or Benedict Cumberbatch.

In 2008, American Airlines accused Rothstein and two others of fraud, and said by booking under false names, they had broken their contract. Security agents cornered them at airports, revoked their passes, and told them that they would never fly on American Airlines again. And the passengers did what all Americans would do – sued the company, but for Rothstain’s case at least, the outcome wasn’t clear as it was settled privately out-of-court.

American Airlines stopped regularly offering the ultimate lifetime pass in 1994, though they did offer it once in 2004, for $3 million, plus $2 million for a companion pass, which no one bought. After all, with $5 million, you can buy your own plane. 25 people, though, still have lifetime passes including Michael Dell, from Dell computers, and Mark Cuban from Shark Tank.