Imagine having an air-pass with a one-time fee to have unlimited first-class travel for life. Like forever — every single time! Three decades ago, 28 people had this golden opportunity and needless to say — a few of them exploited the hell out of it.
Introduced by American Airlines, the ‘unlimited AAirpass’ was one of the greatest travel deals of history.
However, this mind-blowing scheme didn't last for long. Because of the irresistible deal, more people signed up for it than anticipated. This forced the company to revoke the contracts of its top customers by any means necessary.
Once Upon A Time
In 1978, a free market in the commercial airline industry was introduced in America under the Airline Deregulation Act. As a consequence of this act, there was a surge in the number of flights, passengers and miles flown as well as a rapid plunge in the fares.
This cost American Airlines a huge loss of $76m in 1980. They were threatened by the changing industry and shrinking profit margins.
Desperate times call for desperate measures. Airline companies needed money but could not borrow money because the interests at the time were sky-high. As such they came up with a unique idea of the unlimited AAirpass: they decided to raise capital from their own customers by providing the ultimate travel plan costing only $250k ($560k in 2018 dollars). They could also purchase a companion pass for an additional $150k, to bring anyone along with them during their travel. The company only opened up this plan to their top customers, hence they assumed that the plan would not be exploited. Little did they know they would be soon proven wrong.
And They Lived Happily Ever After…
The unlimited passes were mostly purchased by wealthy individuals — baseball Hall-of-Famer Willie Mays, America’s Cup skipper Dennis Conner and computer magnate Michael Dell.
In order to gain a wider audience appeal, the company even contacted the most frequent fliers individually.
In the early 80s, Steven Rothstein, then an investment banker in Chicago, was contacted by the company to purchase the AAirpass. He was told how the AAirpass would be an excellent deal for him based on the number of times he travelled.
Rothstein purchased both the AAirpass and companion pass at a total of $383k.
He religiously followed the contract — and in the next 25 years, he booked more than 10k flights to every destination possible. He visited London over a dozen times per month, visited Ontario for a sandwich and sometimes even offer his companion pass to a complete stranger at the airport: just because he could.
Another gentleman, Jacques Vroom, a then direct marketing catalogue consultant in Texas took a loan for 12% for 5 years and forked out $400k to cut the deal. In the next couple of decades, he, like his privileged peer did not miss any opportunity to use his pass.
They flew on their ‘personal private jets’ so much that the flight crew members had memorized their names and favourite meals.
Much later, in 2007, the financial crisis once again got a hold on American Airlines.
The company discovered that the AAirpass users were using the scheme to their liking. More digging revealed that Steven Rothstein and Jacques Vroom each cost the airline $1m per year in taxes, fees, and lost ticket sales.
The desperate situation forced the airline to dig up some ‘dirt’ on the duo in order to revoke their passes.
According to the Los Angeles Times, Vroom booked flights for strangers and let them enjoy his privileges. Occasionally, he allegedly even accepted payments for the tickets. On the other hand, Rothstein had made over 3k reservations in four years time, out of which 2.5 were cancelled!
Though neither of these practices was fraudulent as according to the original contract, this did not prevent the company to use the data to cancel the duo’s membership.
Not much later, in July 2008, Vroom was confronted by agents at London’s Heathrow airport. And a few month’s later, Rothstein was cornered too, at Chicago O’Hare. In both cases, they were informed that their pass privileges had been revoked and that they could never fly on the airline again.
The F(l)ight Was On
The wrongful termination of the contract riled up the duo. This drove them to file lawsuits against American Airlines for their injustice and failure to abide by the original contract. However, they were mercilessly crushed by the company’s lawyers.
In 2011, the airlines filed for Chapter 11 bankruptcy, taking Rothstein and Vroom into an unending legal limbo along with them.
Regardless, this episode had pressured the company to analyze all the ticketing and program policies time and time again to avoid any future fraudulent behaviour from their passengers.
One of the duo, Vroom, is a substitute teacher and hosts lectures in a Dallas neighbourhood.
Rothstein works for a trading firm in New York. He still has the 1998 letter from the former president and chairman of American Airlines, Bob Crandall, with whom Rothstein once flew on the supersonic Concorde.
“I am delighted that you’ve enjoyed your AAirpass investment,” the executive wrote.
“You can count on us to keep the company solid, and to honour the deal, far into the future.”
Ah! The irony.
Do you know about any other such loopholes in history that people exploited a lot? Do let us know in the comments section!
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