9 ms·

Frequent fliers who flew too much (2012)

89 points by kawera 10y ago

gricardo99 10y ago
Reminds me of the guy who gamed a pudding air-miles promotion to great benefit: http://gizmodo.com/how-an-engineer-earned-1-25-million-air-miles-by-buying-1339646546 http://gizmodo.com/how-an-engineer-earned-1-25-million-air-m...
- pif 10y ago
  Wonderful read, thanks!
  - ubernostrum 10y ago
    Obligatory warning that this wouldn't work the same way today, at least in terms of getting you frequent-flier status with an airline. Airlines have learned to give out two classes of "miles": one class is only redeemable for tickets (or transferrable to rental cars, etc.), and those are handed out like candy. The other class earns the enduring status levels that get you things like complimentary first-class upgrades, and can only be earned by actually flying (the frequent-flier community calls them "BIS" -- "Butt-In-Seat" -- miles), or in some cases by spending $20k+/year on their affiliated credit card. Also my favorite gimmick of all time, another now-closed loophole, was someone who realized the US Mint will sell you dollar coins at face value, with free shipping for orders over a certain amount. So buy, say, $X worth of dollar coins for $X with free shipping, charge to your airline-affiliated credit card, go deposit them in your bank and immediately pay off the card. For the cost of the time you spent placing the order and going to the bank, you get X frequent-flier miles.
    - ghaff 10y ago
      > or in some cases by spending $20k+/year on their affiliated credit card. There may be examples but I'm not aware of airlines that give you status through credit card spending today. The one sorta exception I know of is that United does currently waive their qualifying dollar spend requirement for some status levels given sufficient spend on an affiliate card.
      - asavadatti 10y ago
        So does Delta.
      - ubernostrum 10y ago
        They don't directly give you status, but in addition to waiving dollar-spend-on-tickets requirements, there are cards which convert part of their redeemable-only mileage earning into status-qualifying mileage earning when you hit spend thresholds. Before the American Airlines merger, you could get to low-level status on US Airways this way. Sign up for or renew a lounge membership, and you got 5,000 qualifying miles. Then hit both spend thresholds on the Barclays affiliated credit card, and 20,000 miles from that would convert to qualifying, putting you at 25k for the year, good for Silver Preferred. I believe it's still possible on Delta to reach Silver Medallion status, in the first year you have their top-end Reserve Amex, by hitting bonuses and spend thresholds that award or convert to qualifying miles.
      - URSpider94 10y ago
        Delta will give you 10k status miles per year if you get their AmEx Platinum card and meet a spending bar.
    - JoshTriplett 10y ago
      > So buy, say, $X worth of dollar coins for $X with free shipping, charge to your airline-affiliated credit card, go deposit them in your bank Strictly speaking, that's against the policy of most credit cards, which normally charge a premium for anything equivalent to a "cash advance", because of rewards among other reasons.
      - giarc 10y ago
        Cash advance and buying coins from the mint are totally different things.
        JoshTriplett 10y ago
        The rules on many credit cards directly prohibit the purchase of "negotiable instruments" or "currency" or similar. Along the same lines, many credit cards will charge cash advance fees and rates for purchasing foreign currency.
    - camiller 10y ago
      There was also a incident where a guy bought travelers checks (fee free through AAA) and simply cashed them and paid the credit card bill, over and over..... eventually they stopped awarding miles for travelers checks purchases.
    - deleted 10y ago
      [deleted]
    - zhte415 10y ago
      > Also my favorite gimmick of all time, another now-closed loophole, was someone who realized the US Mint will sell you dollar coins at face value, with free shipping for orders over a certain amount. So buy, say, $X worth of dollar coins for $X with free shipping, charge to your airline-affiliated credit card, go deposit them in your bank and immediately pay off the card. For the cost of the time you spent placing the order and going to the bank, you get X frequent-flier miles. This is genius. It also helps the economy. Banks hate putting small value cash into circulation - a $1 note for example 'costs' a bank the same amount to stock in a cashier desk as a $20 note in terms of space and time needed, leading to much complexity from central banks of how to get money into circulation. Coins have a pretty good amount of time in circulation, notes of low denominations don't, don't know about dollars (probably with a long tail as used as currency in many developing economies) but a £5 note has an average circulation lifetime of around 3 months before it is too crumpled, water stained, and plain worn out.
ghaff 10y ago
Quite the interesting read. It sounds as if there was some rather questionable behavior on both sides. That said, it's a good lesson about a couple of things: - Be careful about grabbing revenue today in exchange for incurring not well understood costs more or less indefinitely into the future. - Characteristics like unlimited/completely free/etc. can lead to unexpected behaviors that are pretty far outside the norm.
- douche 10y ago
  This kind of reminds me of a couple of situations in the sports world: Bobby Bonilla[1], middling former baseball player for the Mets, who cut a deal when being released by the Mets that they wouldn't have to pay him the balance of his contract now, but would have to pay 5X as much over 25 years, ten years hence. Thus a baseball player who hasn't taken the field in 15 years is making a cool $1.19 million. In 1976, the ABA finally collapsed, and arranged a merger with the NBA[2]. There were six remaining ABA teams, but the NBA would only accept four. The Indiana Pacers, New York Nets, Denver Nuggets and San Antonio Spurs were chosen to join the NBA. The two remaining teams, the Spirits of St. Louis and the Kentucky Colonels, disbanded. The owner of the Colonels reached a buyout agreement with the other ABA owners for $3 million, plus another couple from selling off rights to his players. On the other hand, the Silna brothers, who owned the Spirits, cut a deal to fold their team in exchange for $2.2 million, plus a 1/7th share of the television revenue of the four remaining ABA teams, in perpetuity. This probably seemed like a bargain in the mid-70s, when NBA Finals games were being shown on tape-delay. However, as the league expanded in popularity, that TV money exploded, to the tune of tens of millions of dollars a year. [1] https://en.wikipedia.org/wiki/Bobby_Bonilla https://en.wikipedia.org/wiki/Bobby_Bonilla [2] https://en.wikipedia.org/wiki/American_Basketball_Association%E2%80%93National_Basketball_Association_merger https://en.wikipedia.org/wiki/American_Basketball_Associatio...
  - ghaff 10y ago
    And of course it's even easier to make a decision that makes you look like a savvy businessman today while kicking costs or potential costs down the road when they're likely to be someone else's problem.
pixelbath 10y ago
One thing that bothers me: Much of the value calculation assumes the seats taken by these lifetime pass holders would always be 100% utilized and never empty. I don't think the opportunity cost is nearly as high as the article states, but I think that AA losing tons of money is more a result of other poor financial decisions than issuing around 60 lifetime passes.
- thfuran 10y ago
  Not only nonempty, but full fare. On a lot of flights, there are a fair number of people who would get a free upgrade into an empty seat if there were one. But that wouldn't earn AA any more money.
  - todd8 10y ago
    Yes, for domestic flights Executive Platinum flyers (basically 100K miles or more each year) get upgraded to any open first class seats for free. At other levels (50K+ or 25K+) can also upgrade to available empty first class seats, but it can cost a small amount.
    - deleted 10y ago
      [deleted]
- noonespecial 10y ago
  Taxes and airport fees are easily 20% (and that's just for US domestic) of the cost of a ticket which the airline had to eat every time these golden ticket holders flew (or even booked?). These fees unpredictably and radically increased over the time since the golden tickets were issued as well. There's more in the soup than just the marginal cost of the physical seat occupation.
  - scarmig 10y ago
    Do the taxes and fees scale linearly with the cost of the ticket? I would guess that as seats become more expensive, the amount taxes and fees comprise of the total goes down.
woliveirajr 10y ago
Company sold tickets for the price they wanted. They made the rules. They excluded everything that wasn't allowed in those rules. Time passes and company finds out the deal wasn't so good anymore (or never was in the first place). So they decide to go after those costumers who are using the tickets in unexpected ways, but that weren't forbidden. When the company has an extra profit for your last-minute ticket, or your cancellation (even when very ahead of time, so that they don't loose some revenue), it's just business, for-profit, hallelujah. When company does something that isn't profitable, they try to stretch rules' limits, the costumer misbehaved, costumers aren't allowed to gain from the company just because the company miscalculated something. Yes, it's good to be a company this way.
- AlyssaRowan 10y ago
  Agreed. Hiring someone specifically to try to do an aggressive, audit hatchet-job on special, star customers that had spent six figures on golden tickets with them doesn't make this story read very sympathetically for American Airlines to me. Perhaps it's naïveté on my part, expecting a business to have some care for its reputation as well as its bottom line, but as far as I'm concerned, if you're going to promise an elephant, you'd better at least have a pachyderm on backorder and not try to wriggle out of it the moment it inconveniences you, because that just makes you look callous.
  - Bartweiss 10y ago
    I can't help but feel that "they broke the rules!" is a hollow argument in a case like this. Most obviously, because it's not clear they did - Vroom's contract didn't prohibit ticket sales, but that was still the grounds for revocation. More broadly, though, the issue of selective enforcement is a thorny one. If you write a contract sufficiently byzantine and ambiguous, any legitimate use will rub up against the edge of some prohibited behavior. At that point you have a totally broken agreement - you preserve it for anyone whose behavior you like, and revoke it for anyone who crosses you. It's like the issue of selective policing. We live in a world where "don't commit any rules" isn't a viable answer, because there are endless lists of ambiguously defined rules on everyday tasks like accessing a computer. So if someone decides they truly want to pursue you, they can dig up a website where you mis-entered your birthday, declare it fraudulent misrepresentation, and try to put you in prison. If everyone is guilty, the only question is how you decide what to pursue. And in this case, it's painfully clear that American didn't pursue egregious violations or frequent offenders, they went after anyone who had taken advantage of a product they regretted selling.
belorn 10y ago
> the lifetime unlimited AAirpass, which started at $250,000 ... In one 25-day span this year, Joyce flew round trip to London 16 times, flights that would retail for more than $125,000. He didn't pay a dime. This is the kind of logic that always sound so wrong. He did pay, twice the amount, in 1994, which in 2012 is worth what, about twice again? So, in 2012 the company is repaying a $250k investment done in 1994. If this person had spent $250k on air line shares, how much "free money" would he have been given by the stock market (stocks which is restricted and can't be completely sold)? Is it more, or is it less, than the marginal cost on all the travel that he made between 1994 to 2012? It would have made a very interesting article if it included that.
- ghaff 10y ago
  I don't know about airline shares, but given an S&P 500 index fund, you can look at it a couple of different ways. -- The $250K invested would throw off $20K or so (before taxes) each year on average without touching the principal. -- If that amount had simply been invested in 1994 and allowed to compound, it would be worth about $1.5M today in today's dollars.
  - kilroy123 10y ago
    Huh, then I wonder if it really was worth it then?
    - ghaff 10y ago
      Well, if you're flying First/Business internationally every week anyway, you'll spend more than $20K/year pretty quickly. The question is what value you're actually getting out of it. Tangentially, this is one of the reasons that reward miles/points are so hard to value. Your stay at that fancy resort would have cost $10K had you booked it on your own dime--but would you actually have done that on your own dime? Anecdotally, I find that I do get some incremental pleasure/benefit out of things that I use rewards to get but often not so much that I would have actually paid the cash value for them.
- caf 10y ago
acqq 10y ago
Clicking on the "past" gives the previous bigger discussions, one with 70 and another with 200 comments. https://hn.algolia.com/?query=Frequent%20fliers%20who%20flew%20too%20much&sort=byPopularity&dateRange=all&type=story&storyText=false&prefix&page=0 https://hn.algolia.com/?query=Frequent%20fliers%20who%20flew...
sogen 10y ago
At school one class focused on analyzing cost of promotions... and a company this huge DID NOT calculate long-term profitability?!? Wow.
- ghaff 10y ago
  I'm guessing that they did but they used bad assumptions. For example, I could see them doing a query to see how often their most frequent flyers flew and using that number or some multiple thereof. It likely never occurred to them that "unlimited free" would completely change the way that some people would use the service.
- caf 10y ago
  Presumably they based it on the very high corporate bond rates that were the norm in those days.
jgw 10y ago
I don't think any discussion of "misguided promotional offers" is complete without a mention of Hoover's "free flight" fiasco: * http://news.bbc.co.uk/2/hi/business/3704669.stm http://news.bbc.co.uk/2/hi/business/3704669.stm Worth reading if you have a minute and are not familiar with it. The story beggars belief.
at-fates-hands 10y ago
Okay, so let me get this straight. . . - The program starts in 1981. - One of the executives that was there from 85-94 noted right away the customers were costing them money. - They raised the cost in 1991 - They raised the cost again in 1994 - And finally terminated the program in 2004. The company ran this for 20 years knowing full well since its inception that it was costing the company money and did nothing about it? I have absolutely ZERO remorse for what the customers got away with, none. The fact they had to play dirty pool to revoke them just shows how incompetent the executives were that were running the company. It's staggering to think they let a handful of customers practically bleed the company dry, while continuing to sell these in a sad attempt to generate revenue for the company.
- deleted 10y ago
  [deleted]
- ryao 10y ago
  I am not a lawyer, but these tickets look like a pyramid scheme to me. If I were an attorney and worked for American Airlines, I would consider claiming it was illegal for them to offer that to get out of it. I know that courts tend not to let companies out of bad deals, so that might make a bad situation worse. It reminds me of the guy who has a life insurance policy that allows him to invest the amount covered in stocks at prices 1 week in the past knowing what the future performance would've. The insurance company that purchased the one that issued that really wants to get out of it, but they have been unsuccessful. I recall that it is estimated that by the time he dies, his estate will be worth more than the insurance company due to that policy. At least American Airlines can take consolation in the fact that the total losses from their mistake will be limited by the ticket holders eventually dying naturally. In that insurance company's situation, the policy holders dying will ruin them.
  - idbehold 10y ago
    Do you have a link to the story about the insurance policy? Sound like a fun read.

89 points by kawera 10y ago

Reminds me of the guy who gamed a pudding air-miles promotion to great benefit: http://gizmodo.com/how-an-engineer-earned-1-25-million-air-miles-by-buying-1339646546 http://gizmodo.com/how-an-engineer-earned-1-25-million-air-m...

pif 10y ago
Wonderful read, thanks!
- ubernostrum 10y ago
  Obligatory warning that this wouldn't work the same way today, at least in terms of getting you frequent-flier status with an airline. Airlines have learned to give out two classes of "miles": one class is only redeemable for tickets (or transferrable to rental cars, etc.), and those are handed out like candy. The other class earns the enduring status levels that get you things like complimentary first-class upgrades, and can only be earned by actually flying (the frequent-flier community calls them "BIS" -- "Butt-In-Seat" -- miles), or in some cases by spending $20k+/year on their affiliated credit card. Also my favorite gimmick of all time, another now-closed loophole, was someone who realized the US Mint will sell you dollar coins at face value, with free shipping for orders over a certain amount. So buy, say, $X worth of dollar coins for $X with free shipping, charge to your airline-affiliated credit card, go deposit them in your bank and immediately pay off the card. For the cost of the time you spent placing the order and going to the bank, you get X frequent-flier miles.
  - ghaff 10y ago
    > or in some cases by spending $20k+/year on their affiliated credit card. There may be examples but I'm not aware of airlines that give you status through credit card spending today. The one sorta exception I know of is that United does currently waive their qualifying dollar spend requirement for some status levels given sufficient spend on an affiliate card.
    - asavadatti 10y ago
      So does Delta.
    - ubernostrum 10y ago
      They don't directly give you status, but in addition to waiving dollar-spend-on-tickets requirements, there are cards which convert part of their redeemable-only mileage earning into status-qualifying mileage earning when you hit spend thresholds. Before the American Airlines merger, you could get to low-level status on US Airways this way. Sign up for or renew a lounge membership, and you got 5,000 qualifying miles. Then hit both spend thresholds on the Barclays affiliated credit card, and 20,000 miles from that would convert to qualifying, putting you at 25k for the year, good for Silver Preferred. I believe it's still possible on Delta to reach Silver Medallion status, in the first year you have their top-end Reserve Amex, by hitting bonuses and spend thresholds that award or convert to qualifying miles.
    - URSpider94 10y ago
      Delta will give you 10k status miles per year if you get their AmEx Platinum card and meet a spending bar.
  - JoshTriplett 10y ago
    > So buy, say, $X worth of dollar coins for $X with free shipping, charge to your airline-affiliated credit card, go deposit them in your bank Strictly speaking, that's against the policy of most credit cards, which normally charge a premium for anything equivalent to a "cash advance", because of rewards among other reasons.
    - giarc 10y ago
      Cash advance and buying coins from the mint are totally different things.
      - JoshTriplett 10y ago
        The rules on many credit cards directly prohibit the purchase of "negotiable instruments" or "currency" or similar. Along the same lines, many credit cards will charge cash advance fees and rates for purchasing foreign currency.
  - camiller 10y ago
    There was also a incident where a guy bought travelers checks (fee free through AAA) and simply cashed them and paid the credit card bill, over and over..... eventually they stopped awarding miles for travelers checks purchases.
  - deleted 10y ago
    [deleted]
  - zhte415 10y ago
    > Also my favorite gimmick of all time, another now-closed loophole, was someone who realized the US Mint will sell you dollar coins at face value, with free shipping for orders over a certain amount. So buy, say, $X worth of dollar coins for $X with free shipping, charge to your airline-affiliated credit card, go deposit them in your bank and immediately pay off the card. For the cost of the time you spent placing the order and going to the bank, you get X frequent-flier miles. This is genius. It also helps the economy. Banks hate putting small value cash into circulation - a $1 note for example 'costs' a bank the same amount to stock in a cashier desk as a $20 note in terms of space and time needed, leading to much complexity from central banks of how to get money into circulation. Coins have a pretty good amount of time in circulation, notes of low denominations don't, don't know about dollars (probably with a long tail as used as currency in many developing economies) but a £5 note has an average circulation lifetime of around 3 months before it is too crumpled, water stained, and plain worn out.

ghaff 10y ago

Quite the interesting read. It sounds as if there was some rather questionable behavior on both sides. That said, it's a good lesson about a couple of things: - Be careful about grabbing revenue today in exchange for incurring not well understood costs more or less indefinitely into the future. - Characteristics like unlimited/completely free/etc. can lead to unexpected behaviors that are pretty far outside the norm.

douche 10y ago
This kind of reminds me of a couple of situations in the sports world: Bobby Bonilla[1], middling former baseball player for the Mets, who cut a deal when being released by the Mets that they wouldn't have to pay him the balance of his contract now, but would have to pay 5X as much over 25 years, ten years hence. Thus a baseball player who hasn't taken the field in 15 years is making a cool $1.19 million. In 1976, the ABA finally collapsed, and arranged a merger with the NBA[2]. There were six remaining ABA teams, but the NBA would only accept four. The Indiana Pacers, New York Nets, Denver Nuggets and San Antonio Spurs were chosen to join the NBA. The two remaining teams, the Spirits of St. Louis and the Kentucky Colonels, disbanded. The owner of the Colonels reached a buyout agreement with the other ABA owners for $3 million, plus another couple from selling off rights to his players. On the other hand, the Silna brothers, who owned the Spirits, cut a deal to fold their team in exchange for $2.2 million, plus a 1/7th share of the television revenue of the four remaining ABA teams, in perpetuity. This probably seemed like a bargain in the mid-70s, when NBA Finals games were being shown on tape-delay. However, as the league expanded in popularity, that TV money exploded, to the tune of tens of millions of dollars a year. [1] https://en.wikipedia.org/wiki/Bobby_Bonilla https://en.wikipedia.org/wiki/Bobby_Bonilla [2] https://en.wikipedia.org/wiki/American_Basketball_Association%E2%80%93National_Basketball_Association_merger https://en.wikipedia.org/wiki/American_Basketball_Associatio...
- ghaff 10y ago
  And of course it's even easier to make a decision that makes you look like a savvy businessman today while kicking costs or potential costs down the road when they're likely to be someone else's problem.

pixelbath 10y ago

One thing that bothers me: Much of the value calculation assumes the seats taken by these lifetime pass holders would always be 100% utilized and never empty. I don't think the opportunity cost is nearly as high as the article states, but I think that AA losing tons of money is more a result of other poor financial decisions than issuing around 60 lifetime passes.

thfuran 10y ago
Not only nonempty, but full fare. On a lot of flights, there are a fair number of people who would get a free upgrade into an empty seat if there were one. But that wouldn't earn AA any more money.
- todd8 10y ago
  Yes, for domestic flights Executive Platinum flyers (basically 100K miles or more each year) get upgraded to any open first class seats for free. At other levels (50K+ or 25K+) can also upgrade to available empty first class seats, but it can cost a small amount.
  - deleted 10y ago
    [deleted]
noonespecial 10y ago
Taxes and airport fees are easily 20% (and that's just for US domestic) of the cost of a ticket which the airline had to eat every time these golden ticket holders flew (or even booked?). These fees unpredictably and radically increased over the time since the golden tickets were issued as well. There's more in the soup than just the marginal cost of the physical seat occupation.
- scarmig 10y ago
  Do the taxes and fees scale linearly with the cost of the ticket? I would guess that as seats become more expensive, the amount taxes and fees comprise of the total goes down.

woliveirajr 10y ago

Company sold tickets for the price they wanted. They made the rules. They excluded everything that wasn't allowed in those rules. Time passes and company finds out the deal wasn't so good anymore (or never was in the first place). So they decide to go after those costumers who are using the tickets in unexpected ways, but that weren't forbidden. When the company has an extra profit for your last-minute ticket, or your cancellation (even when very ahead of time, so that they don't loose some revenue), it's just business, for-profit, hallelujah. When company does something that isn't profitable, they try to stretch rules' limits, the costumer misbehaved, costumers aren't allowed to gain from the company just because the company miscalculated something. Yes, it's good to be a company this way.

AlyssaRowan 10y ago
Agreed. Hiring someone specifically to try to do an aggressive, audit hatchet-job on special, star customers that had spent six figures on golden tickets with them doesn't make this story read very sympathetically for American Airlines to me. Perhaps it's naïveté on my part, expecting a business to have some care for its reputation as well as its bottom line, but as far as I'm concerned, if you're going to promise an elephant, you'd better at least have a pachyderm on backorder and not try to wriggle out of it the moment it inconveniences you, because that just makes you look callous.
- Bartweiss 10y ago
  I can't help but feel that "they broke the rules!" is a hollow argument in a case like this. Most obviously, because it's not clear they did - Vroom's contract didn't prohibit ticket sales, but that was still the grounds for revocation. More broadly, though, the issue of selective enforcement is a thorny one. If you write a contract sufficiently byzantine and ambiguous, any legitimate use will rub up against the edge of some prohibited behavior. At that point you have a totally broken agreement - you preserve it for anyone whose behavior you like, and revoke it for anyone who crosses you. It's like the issue of selective policing. We live in a world where "don't commit any rules" isn't a viable answer, because there are endless lists of ambiguously defined rules on everyday tasks like accessing a computer. So if someone decides they truly want to pursue you, they can dig up a website where you mis-entered your birthday, declare it fraudulent misrepresentation, and try to put you in prison. If everyone is guilty, the only question is how you decide what to pursue. And in this case, it's painfully clear that American didn't pursue egregious violations or frequent offenders, they went after anyone who had taken advantage of a product they regretted selling.

belorn 10y ago

> the lifetime unlimited AAirpass, which started at $250,000 ... In one 25-day span this year, Joyce flew round trip to London 16 times, flights that would retail for more than $125,000. He didn't pay a dime. This is the kind of logic that always sound so wrong. He did pay, twice the amount, in 1994, which in 2012 is worth what, about twice again? So, in 2012 the company is repaying a $250k investment done in 1994. If this person had spent $250k on air line shares, how much "free money" would he have been given by the stock market (stocks which is restricted and can't be completely sold)? Is it more, or is it less, than the marginal cost on all the travel that he made between 1994 to 2012? It would have made a very interesting article if it included that.

ghaff 10y ago
I don't know about airline shares, but given an S&P 500 index fund, you can look at it a couple of different ways. -- The $250K invested would throw off $20K or so (before taxes) each year on average without touching the principal. -- If that amount had simply been invested in 1994 and allowed to compound, it would be worth about $1.5M today in today's dollars.
- kilroy123 10y ago
  Huh, then I wonder if it really was worth it then?
  - ghaff 10y ago
    Well, if you're flying First/Business internationally every week anyway, you'll spend more than $20K/year pretty quickly. The question is what value you're actually getting out of it. Tangentially, this is one of the reasons that reward miles/points are so hard to value. Your stay at that fancy resort would have cost $10K had you booked it on your own dime--but would you actually have done that on your own dime? Anecdotally, I find that I do get some incremental pleasure/benefit out of things that I use rewards to get but often not so much that I would have actually paid the cash value for them.
caf 10y ago

acqq 10y ago

Clicking on the "past" gives the previous bigger discussions, one with 70 and another with 200 comments. https://hn.algolia.com/?query=Frequent%20fliers%20who%20flew%20too%20much&sort=byPopularity&dateRange=all&type=story&storyText=false&prefix&page=0 https://hn.algolia.com/?query=Frequent%20fliers%20who%20flew...

sogen 10y ago

At school one class focused on analyzing cost of promotions... and a company this huge DID NOT calculate long-term profitability?!? Wow.

ghaff 10y ago
I'm guessing that they did but they used bad assumptions. For example, I could see them doing a query to see how often their most frequent flyers flew and using that number or some multiple thereof. It likely never occurred to them that "unlimited free" would completely change the way that some people would use the service.
caf 10y ago
Presumably they based it on the very high corporate bond rates that were the norm in those days.

jgw 10y ago

I don't think any discussion of "misguided promotional offers" is complete without a mention of Hoover's "free flight" fiasco: * http://news.bbc.co.uk/2/hi/business/3704669.stm http://news.bbc.co.uk/2/hi/business/3704669.stm Worth reading if you have a minute and are not familiar with it. The story beggars belief.

at-fates-hands 10y ago

Okay, so let me get this straight. . . - The program starts in 1981. - One of the executives that was there from 85-94 noted right away the customers were costing them money. - They raised the cost in 1991 - They raised the cost again in 1994 - And finally terminated the program in 2004. The company ran this for 20 years knowing full well since its inception that it was costing the company money and did nothing about it? I have absolutely ZERO remorse for what the customers got away with, none. The fact they had to play dirty pool to revoke them just shows how incompetent the executives were that were running the company. It's staggering to think they let a handful of customers practically bleed the company dry, while continuing to sell these in a sad attempt to generate revenue for the company.

deleted 10y ago
[deleted]
ryao 10y ago
I am not a lawyer, but these tickets look like a pyramid scheme to me. If I were an attorney and worked for American Airlines, I would consider claiming it was illegal for them to offer that to get out of it. I know that courts tend not to let companies out of bad deals, so that might make a bad situation worse. It reminds me of the guy who has a life insurance policy that allows him to invest the amount covered in stocks at prices 1 week in the past knowing what the future performance would've. The insurance company that purchased the one that issued that really wants to get out of it, but they have been unsuccessful. I recall that it is estimated that by the time he dies, his estate will be worth more than the insurance company due to that policy. At least American Airlines can take consolation in the fact that the total losses from their mistake will be limited by the ticket holders eventually dying naturally. In that insurance company's situation, the policy holders dying will ruin them.
- idbehold 10y ago
  Do you have a link to the story about the insurance policy? Sound like a fun read.