11 ms·

The frequent fliers who flew too much (2012)

108 points by douche 11y ago

DiabloD3 11y ago
From May 5th 2012
- theumask 11y ago
  And? What's your point? I've found this story interesting, it shows that each time there is a possibility to exploit an opportunity like that it will be exploited, the greed and lack of consideration for other people will prevail.
  - gdy 11y ago
    Imagine a reverse situation: a man buys this lifetime ticket and dies in a car accident a month later. Do you think the company would return the money to the grieving relatives or they would exploit this opportunity with typical greed and lack of consideration for other people and keep the money?
  - lmm 11y ago
    I found the headline interesting and then on following the link realized I'd read it already. So it would have been nice to have a (2012) so I could've realized it was a repeat sooner.
  - SmellyGeekBoy 11y ago
    The point is that older articles are usually datestamped on HN.
  - lnanek2 11y ago
    It is a repost, though. I've seen this posted before various places over the years. I'm not really interested in old content I've read multiple times before.
JoshTriplett 11y ago
Similar things happened to hosting companies that sold "lifetime" hosting, though at least in that case it would have been possible to bound future costs per unit time (and thus cover it with an annuity or equivalent). But in this case, the cost was entirely unbounded.
gadders 11y ago
As an example of another promotion that went wrong: https://en.wikipedia.org/wiki/Hoover_free_flights_promotion https://en.wikipedia.org/wiki/Hoover_free_flights_promotion
- koyote 11y ago
  Wow, I had never heard of that one before. What were they even thinking? How could that have ended well in any way? I wonder if there's more to that than the Wikipedia article tells (like a disgruntled exec who wanted to take the company down with him before he left or something).
- NamTaf 11y ago
  How does Hoover apparently not have anyone who understands the concept of Total Cost of Ownership? If there's a cheaper TCO that involves having a vacuum cleaner, then people are going to buy the vacuum cleaner and throw it away!
danieltillett 11y ago
I am not sure which is worse - the stupidity of AA for selling these tickets or their pathetic attempts to get out of the contract when they realised they were idiots.
- netcan 11y ago
  I dunno. Seems a bit harsh. These are not unlike other open ended packages where the seller expects to come out ahead, on average. Slightly further afield, it reminds me of yesterday's thread on reedit. They revoked their unlimited free speech policy, so that they could stop hosting some really nasty stuff. Some people said "but you promised unlimited free speech forever." I don't know if there is a clean judgement you can make. promises should be made in good faith and kept. If a company makes promises that it can't keep, then what. Sometimes you hit a sort of promise bankruptcy. I think that's the case here. On a complete tangent… The owners of these passes are probably an interesting bunch. (A) I think their brains are wired for quirky beat the system thinking. (B) You have to have a mind for opportunistic life hacks, in order to jump on this.
  - danieltillett 11y ago
    Yes I was rather harsh [1]. The honourable thing for AA to have done would have been to buy back the tickets at their current value, not try and find a way to weasel out. 1. I am biased as I have hated AA ever since they decided to put me on some secret list (the SSSS list) for no reason which means anytime I flew AA I would be put through the wringer. Edit. For those interested here is the details about the ssss list [2]. I am not sure what my "crime" was, but I suspect it was because I often flew one way (around the world tickets). The crazy thing is it is airline specific as I am not on the list with any other airline. 2. https://en.m.wikipedia.org/wiki/SSSS_rating https://en.m.wikipedia.org/wiki/SSSS_rating
    - simoncion 11y ago
      > I have hated AA ever since they decided to put me on some secret list (the SSSS list) Can you prove that AAL did this? If you can't, then this is absolutely not the fault of AAL. This is the fault of DHS or TSA. Peruse the various air travel articles on the papersplease.org blog for more info. (I wish I could give you good search terms, but some recent relevant articles don't contain the term "SSSS". Maybe try "Secondary Screening"?
amelius 11y ago
I think we should just pay for what we use. Special loyalty programs just mess up the transparency of the market. And they can cause other problems as well, as illustrated in the article.
- blfr 11y ago
  Paying for usage appeals to nerds but most people don't know how much of the service they do/will use and have been burned by overage fees. They prefer to pay for the service that fits their need (talk to your family for as long as you want) rather than a utility (pay 2¢ a minute) even if the utility would turn out to be cheaper in the long run. We know that, we sell on the benefit, right? Especially that the prices should fluctuate if you were to pay for what you use. A taxi at night is already more expensive, and electric energy is sometimes cheaper but this should apply smoothly (but not necessarily predictably) to nearly every service: surge pricing everywhere and forever. The added cognitive burden and transaction costs simply aren't worth it a lot of the time so you get various all inclusive offers instead that have to favour some outliers.
  - deleted 11y ago
    [deleted]
Patient0 11y ago
It reminds me of this story: http://ftalphaville.ft.com/2015/02/27/2120422/meet-the-man-who-could-own-aviva-france/ http://ftalphaville.ft.com/2015/02/27/2120422/meet-the-man-w... "When he was seven years old, Max-Hervé George was given a magic ticket by his father. It lets him turn back the clock, to invest with perfect hindsight week after week, steadily accumulating a fortune. The ticket is a life insurance contract and Mr George, now 25, has fought for years in the French courts to preserve its magic. He could be a billionaire by the end of this decade and, by the end of the next, his contract would be worth more than the insurance company which stands behind it, Aviva France. There is no mystery to the financial magic, however. Instead it is a story of grand stupidity, of how a French insurer wrote the worst contract in the world and sold it to thousands of clients. The company was L’Abeille Vie. In 1987 it began to offer a special deal to its richer clients, a Fixed Price Arbitrage Life Insurance Contract. Life insurance is a popular savings product in France, and typically the customer allocates their money among different investment funds offered by the insurer. But this contract was not typical: prices for the funds were published each Friday, and clients were allowed to switch funds at those prices anytime before the next price was published, even if markets moved in the meantime. L’Abeille Vie called this an arbitrage, but really it was a gift. Is the stock market up this week? Just call your broker to buy it at last week’s price and pocket the difference." ...
- peteretep 11y ago
  I'm conflicted about this. On one hand, there's a part of me that likes the fact they're sticking it to a bank. On the other hand, are we benefitting as a society because of this?
  - dangerlibrary 11y ago
    Hoping for benefits of the stock market that aren't captured by businesses or investors is a good definition of 'picking through scraps.'
  - SEMW 11y ago
    > are we benefitting as a society because of this? Arguably yes, though indirectly: society benefits from having a legal system that upholds contracts, even if one of the parties later changes their mind. Or to put it another way - the harm to society of enforcing a ruinously bad bargain against one bank is possibly less than the harm that would be caused by the precedent that banks can sometimes wiggle out of bad bargains they make.
Jgrubb 11y ago
A network comparison of the 3rd page with and without uBlock enabled. See if you can guess which one is which. https://i.imgur.com/iHZI27O.png https://i.imgur.com/iHZI27O.png
- deleted 11y ago
  [deleted]
teh_klev 11y ago
From last time around: https://news.ycombinator.com/item?id=3936310 https://news.ycombinator.com/item?id=3936310
nemo44x 11y ago
This is why you don't test in production. With any "all you can eat" scenario - especially high valued ones, it may be best to cap the number of participants so you can at least observe their behavior and cap your risk. It would also help with price discovery so you can truly calculate the value you are offering and price accordingly.
- simoncion 11y ago
  What else is a proper compensation to a (inflation-adjusted) 1 million dollar investor to whom you don't want to grant a share of the company? Edit: To the downvoters: This is a serious question, not snark. Folks are claiming that these tickets were a stupid idea. If you read the article, you discover that these tickets were compensation to million-dollar investors. AA needed that money. They had to give something to get it. If they were to give something other than those tickets, what should it have been? Remember that someone who has a million dollars laying around will expect that they get more than a million dollars out of their investment. That's generally how investment works.
  - danieltillett 11y ago
    I am voting you up since you are asking a serious question. The tickets were underpriced for what they offered. What AA should have done is auction off the tickets and let the market decide what they were worth.
    - basseq 11y ago
      It doesn't sound like they sold tons of tickets (e.g., demand wasn't that high), so unless they severely capped the number of tickets (which they probably should have done anyway), an auction wouldn't have yielded very different numbers.
      - danieltillett 11y ago
        The fact they increased the ticket prices a lot over the years suggests that the early tickets were very underpriced. When you sell something totally new and potentially open ended then it is always wise to get as much validation as possible from the market before setting the price.
Spooky23 11y ago
Back in 1981, 30 year treasuries were yielding 14% (http://www.nytimes.com/1981/08/08/business/treasury-bill-rate-at-14.54.html http://www.nytimes.com/1981/08/08/business/treasury-bill-rat...) So you really need to figure out what the total cost of borrowing millions at 20% interest is compared to the cost of goods sold for flights. The other key factor is the marketing value. AA sold these tickets for years, presumably they had some sort of value, perhaps as an incentive for point junkies to aspire to?
- danieltillett 11y ago
  AA sold these tickets for a long time after interest rates came down. They didn’t even both to prohibit people from selling their companion tickets to others, or making multiple booking that could be cancelled at the last minute. This was not a well thought out idea. Even if it was a good idea, the way they went around trying to break their own contract was not very good. The best way to handle something like this is recognise you made a mistake and buy back the tickets from their owners at their current market value.
pitnips 11y ago
"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." How is that even possible? Did he never actually leave the airport?
markbnj 11y ago
Typical behavior from a large corporation trying to wiggle out of a bad deal, but this... >> At check-in, American agents detained Mukharji and escorted him to a private office. ... caught me by surprise. Agents of an airline can detain you?
- scott_karana 11y ago
  I suspect most people would just comply without realizing they're able to decline. Particularly if they're in a foreign airport.
- davmre 11y ago
  I'd imagine you're always free to leave, in a legal sense, at the cost of missing your flight. The airline's ability to deny boarding gives you a strong incentive to cooperate.

108 points by douche 11y ago

DiabloD3 11y ago

From May 5th 2012

theumask 11y ago
And? What's your point? I've found this story interesting, it shows that each time there is a possibility to exploit an opportunity like that it will be exploited, the greed and lack of consideration for other people will prevail.
- gdy 11y ago
  Imagine a reverse situation: a man buys this lifetime ticket and dies in a car accident a month later. Do you think the company would return the money to the grieving relatives or they would exploit this opportunity with typical greed and lack of consideration for other people and keep the money?
- lmm 11y ago
  I found the headline interesting and then on following the link realized I'd read it already. So it would have been nice to have a (2012) so I could've realized it was a repeat sooner.
- SmellyGeekBoy 11y ago
  The point is that older articles are usually datestamped on HN.
- lnanek2 11y ago
  It is a repost, though. I've seen this posted before various places over the years. I'm not really interested in old content I've read multiple times before.

JoshTriplett 11y ago

Similar things happened to hosting companies that sold "lifetime" hosting, though at least in that case it would have been possible to bound future costs per unit time (and thus cover it with an annuity or equivalent). But in this case, the cost was entirely unbounded.

gadders 11y ago

As an example of another promotion that went wrong: https://en.wikipedia.org/wiki/Hoover_free_flights_promotion https://en.wikipedia.org/wiki/Hoover_free_flights_promotion

koyote 11y ago
Wow, I had never heard of that one before. What were they even thinking? How could that have ended well in any way? I wonder if there's more to that than the Wikipedia article tells (like a disgruntled exec who wanted to take the company down with him before he left or something).
NamTaf 11y ago
How does Hoover apparently not have anyone who understands the concept of Total Cost of Ownership? If there's a cheaper TCO that involves having a vacuum cleaner, then people are going to buy the vacuum cleaner and throw it away!

danieltillett 11y ago

I am not sure which is worse - the stupidity of AA for selling these tickets or their pathetic attempts to get out of the contract when they realised they were idiots.

netcan 11y ago
I dunno. Seems a bit harsh. These are not unlike other open ended packages where the seller expects to come out ahead, on average. Slightly further afield, it reminds me of yesterday's thread on reedit. They revoked their unlimited free speech policy, so that they could stop hosting some really nasty stuff. Some people said "but you promised unlimited free speech forever." I don't know if there is a clean judgement you can make. promises should be made in good faith and kept. If a company makes promises that it can't keep, then what. Sometimes you hit a sort of promise bankruptcy. I think that's the case here. On a complete tangent… The owners of these passes are probably an interesting bunch. (A) I think their brains are wired for quirky beat the system thinking. (B) You have to have a mind for opportunistic life hacks, in order to jump on this.
- danieltillett 11y ago
  Yes I was rather harsh [1]. The honourable thing for AA to have done would have been to buy back the tickets at their current value, not try and find a way to weasel out. 1. I am biased as I have hated AA ever since they decided to put me on some secret list (the SSSS list) for no reason which means anytime I flew AA I would be put through the wringer. Edit. For those interested here is the details about the ssss list [2]. I am not sure what my "crime" was, but I suspect it was because I often flew one way (around the world tickets). The crazy thing is it is airline specific as I am not on the list with any other airline. 2. https://en.m.wikipedia.org/wiki/SSSS_rating https://en.m.wikipedia.org/wiki/SSSS_rating
  - simoncion 11y ago
    > I have hated AA ever since they decided to put me on some secret list (the SSSS list) Can you prove that AAL did this? If you can't, then this is absolutely not the fault of AAL. This is the fault of DHS or TSA. Peruse the various air travel articles on the papersplease.org blog for more info. (I wish I could give you good search terms, but some recent relevant articles don't contain the term "SSSS". Maybe try "Secondary Screening"?

amelius 11y ago

I think we should just pay for what we use. Special loyalty programs just mess up the transparency of the market. And they can cause other problems as well, as illustrated in the article.

blfr 11y ago
Paying for usage appeals to nerds but most people don't know how much of the service they do/will use and have been burned by overage fees. They prefer to pay for the service that fits their need (talk to your family for as long as you want) rather than a utility (pay 2¢ a minute) even if the utility would turn out to be cheaper in the long run. We know that, we sell on the benefit, right? Especially that the prices should fluctuate if you were to pay for what you use. A taxi at night is already more expensive, and electric energy is sometimes cheaper but this should apply smoothly (but not necessarily predictably) to nearly every service: surge pricing everywhere and forever. The added cognitive burden and transaction costs simply aren't worth it a lot of the time so you get various all inclusive offers instead that have to favour some outliers.
- deleted 11y ago
  [deleted]

Patient0 11y ago

It reminds me of this story: http://ftalphaville.ft.com/2015/02/27/2120422/meet-the-man-who-could-own-aviva-france/ http://ftalphaville.ft.com/2015/02/27/2120422/meet-the-man-w... "When he was seven years old, Max-Hervé George was given a magic ticket by his father. It lets him turn back the clock, to invest with perfect hindsight week after week, steadily accumulating a fortune. The ticket is a life insurance contract and Mr George, now 25, has fought for years in the French courts to preserve its magic. He could be a billionaire by the end of this decade and, by the end of the next, his contract would be worth more than the insurance company which stands behind it, Aviva France. There is no mystery to the financial magic, however. Instead it is a story of grand stupidity, of how a French insurer wrote the worst contract in the world and sold it to thousands of clients. The company was L’Abeille Vie. In 1987 it began to offer a special deal to its richer clients, a Fixed Price Arbitrage Life Insurance Contract. Life insurance is a popular savings product in France, and typically the customer allocates their money among different investment funds offered by the insurer. But this contract was not typical: prices for the funds were published each Friday, and clients were allowed to switch funds at those prices anytime before the next price was published, even if markets moved in the meantime. L’Abeille Vie called this an arbitrage, but really it was a gift. Is the stock market up this week? Just call your broker to buy it at last week’s price and pocket the difference." ...

peteretep 11y ago
I'm conflicted about this. On one hand, there's a part of me that likes the fact they're sticking it to a bank. On the other hand, are we benefitting as a society because of this?
- dangerlibrary 11y ago
  Hoping for benefits of the stock market that aren't captured by businesses or investors is a good definition of 'picking through scraps.'
- SEMW 11y ago
  > are we benefitting as a society because of this? Arguably yes, though indirectly: society benefits from having a legal system that upholds contracts, even if one of the parties later changes their mind. Or to put it another way - the harm to society of enforcing a ruinously bad bargain against one bank is possibly less than the harm that would be caused by the precedent that banks can sometimes wiggle out of bad bargains they make.

Jgrubb 11y ago

A network comparison of the 3rd page with and without uBlock enabled. See if you can guess which one is which. https://i.imgur.com/iHZI27O.png https://i.imgur.com/iHZI27O.png

deleted 11y ago
[deleted]

teh_klev 11y ago

From last time around: https://news.ycombinator.com/item?id=3936310 https://news.ycombinator.com/item?id=3936310

nemo44x 11y ago

This is why you don't test in production. With any "all you can eat" scenario - especially high valued ones, it may be best to cap the number of participants so you can at least observe their behavior and cap your risk. It would also help with price discovery so you can truly calculate the value you are offering and price accordingly.

simoncion 11y ago
What else is a proper compensation to a (inflation-adjusted) 1 million dollar investor to whom you don't want to grant a share of the company? Edit: To the downvoters: This is a serious question, not snark. Folks are claiming that these tickets were a stupid idea. If you read the article, you discover that these tickets were compensation to million-dollar investors. AA needed that money. They had to give something to get it. If they were to give something other than those tickets, what should it have been? Remember that someone who has a million dollars laying around will expect that they get more than a million dollars out of their investment. That's generally how investment works.
- danieltillett 11y ago
  I am voting you up since you are asking a serious question. The tickets were underpriced for what they offered. What AA should have done is auction off the tickets and let the market decide what they were worth.
  - basseq 11y ago
    It doesn't sound like they sold tons of tickets (e.g., demand wasn't that high), so unless they severely capped the number of tickets (which they probably should have done anyway), an auction wouldn't have yielded very different numbers.
    - danieltillett 11y ago
      The fact they increased the ticket prices a lot over the years suggests that the early tickets were very underpriced. When you sell something totally new and potentially open ended then it is always wise to get as much validation as possible from the market before setting the price.

Spooky23 11y ago

Back in 1981, 30 year treasuries were yielding 14% (http://www.nytimes.com/1981/08/08/business/treasury-bill-rate-at-14.54.html http://www.nytimes.com/1981/08/08/business/treasury-bill-rat...) So you really need to figure out what the total cost of borrowing millions at 20% interest is compared to the cost of goods sold for flights. The other key factor is the marketing value. AA sold these tickets for years, presumably they had some sort of value, perhaps as an incentive for point junkies to aspire to?

danieltillett 11y ago
AA sold these tickets for a long time after interest rates came down. They didn’t even both to prohibit people from selling their companion tickets to others, or making multiple booking that could be cancelled at the last minute. This was not a well thought out idea. Even if it was a good idea, the way they went around trying to break their own contract was not very good. The best way to handle something like this is recognise you made a mistake and buy back the tickets from their owners at their current market value.

pitnips 11y ago

"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." How is that even possible? Did he never actually leave the airport?

markbnj 11y ago

Typical behavior from a large corporation trying to wiggle out of a bad deal, but this... >> At check-in, American agents detained Mukharji and escorted him to a private office. ... caught me by surprise. Agents of an airline can detain you?

scott_karana 11y ago
I suspect most people would just comply without realizing they're able to decline. Particularly if they're in a foreign airport.
davmre 11y ago
I'd imagine you're always free to leave, in a legal sense, at the cost of missing your flight. The airline's ability to deny boarding gives you a strong incentive to cooperate.