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Tue May 8, 2012
American Tries To Take Back Unlimited Airfare
Originally published on Wed May 9, 2012 5:07 pm
AUDIE CORNISH, HOST:
What do Baseball Hall of Famer Willie Mays and computer magnet Michael Dell have in common? Both men, many years ago, paid hundreds of thousands of dollars to American Airlines for what is essentially a golden ticket - fly anywhere on American anytime, first class, the flight attendants know your name and your favorite drink for life.
The airline first offered the unlimited air pass back in 1981. Only a few dozen people could afford the price tag, which started at a quarter of a million dollars. Now, here's the catch. In recent years, American began a concerted effort to get some of those passes back because the people who held them were still using them a lot.
Ken Bensinger wrote the story for the LA Times and he joins me now. Hi there, Ken.
KEN BENSINGER: Hi, Audie. How are you?
CORNISH: Good. So to start, tell us about one or two of the people you met in the course of your reporting who were doing all this flying on this unlimited pass.
BENSINGER: Well, perhaps one of the kings of the air pass program was Jacques Vroom, interesting man from Dallas who, over his 20 or so years in air pass, accumulated 37 million frequent flyer miles flying on it.
CORNISH: Oh, my gosh. And how do you do that? I mean, essentially, is that common for people who had these passes?
BENSINGER: I think it varied. Some flew a lot less. Some people, like Vroom and a few others, flew an enormous amount, flying four or five days a week. Steve Rothstein from Chicago, an investment banker, flew a tremendous amount, originally for business and then pretty soon for his entire lifestyle. He just loved to fly and was happier on a plane than anywhere else.
CORNISH: How much money did American say that these pass holders were costing the company?
BENSINGER: So American looked at their flight patterns and calculated every flight they had taken, what the seat would have cost if it had been sold to a regular customer and an investigator for American calculated that Jacques Vroom, in a five year period, flew $5.4 million worth of flights. That same investigator also said that she thought Rothstein was costing them about a million dollars a year in lost business opportunity.
CORNISH: Now, this person you're describing is Bridget Cade. She takes over what American calls its Special Revenue Integrity Unit.
BENSINGER: That's right.
CORNISH: Describe how the investigators worked because how do you catch someone acting inappropriately with a perk that they've paid for?
BENSINGER: Well, it's a great question. Bridget Cade pulled tons and tons of flight records of the people she was looking into and, all told, she looked at at least five air pass holders and looked for kind of patterns or unusual things. And, in the case of Rothstein, she looked at a high rate of cancelling reservations and a habit he had of booking flights or upgrading what appear to be strangers at the last minute into first class.
With Vroom, she had a suspicion that she thought he might be making money off this, that he might be actually selling the companion seat or selling the miles. So, once they got these suspicions, the airline decided to kind of run a sting operation and catch people red-handed on this. And a bit of an embarrassing thing because the first several people that they thought they were going to catch and admit that they'd paid for these tickets, in fact, denied it. And the airline cajoled them and, in one case, detained someone. In another case, barged into someone's office. Another case, actually took away a person's frequent flyer miles trying to force them to admit that they had paid for their tickets, none of whom did.
And that's something that came up in the legal cases because people felt these were unfair tactics and show that the investigation was hasty. Later in the court cases, they did, in fact, find some people who claimed they had paid Vroom in his case for tickets, which muddied the water a bit. However, Vroom's attorneys argue that the original contract Vroom signed doesn't have any prohibition on selling those tickets at all.
CORNISH: Now, what effect has American's bankruptcy had on its legal efforts to try and get some of these air passes back?
BENSINGER: The bankruptcy actually threw a monkey wrench into the plans of the lawyers because, typically, in bankruptcies, as was the case here, it freezes most of these lawsuits and that's what happened. Both lawsuits pending involving Vroom and Rothstein are now in legal limbo. The Rothstein case seemed to be leaning in American's favor, but the Vroom case seemed to be leading in his favor and now both are stuck. And their attorneys say they don't have the highest hopes that these are going to get resolved any time soon.
There's also kind of a nuclear option for American in bankruptcy, which is they could be able to convince the judge that they should be able to cancel all the air passes.
CORNISH: Ken Bensinger, thank you so much for talking with us.
BENSINGER: Audie, thank you so much for having me.
CORNISH: Ken Bensinger is a business reporter for the Los Angeles Times. Transcript provided by NPR, Copyright National Public Radio.