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> "...the stupidity of AA for selling these tickets..." From the article: "Each had paid American more than $350,000 for an unlimited AAirpass and a companion

> "...the stupidity of AA for selling these tickets..." From the article: "Each had paid American more than $350,000 for an unlimited AAirpass and a companion ticket that allowed them to take someone along on their adventures. ... [T]he marquee item was the lifetime unlimited AAirpass, which started at $250,000. ... For an extra $150,000, they could buy a companion pass. Older fliers got discounts based on their age. When American introduced the AAirpass in 1981, it saw a chance to raise millions of dollars for expansion at a time of record-high interest rates." From Wolfram Alpha: $400000 (1981 US dollars) in 2015 equals: $1.059 million (2015 US dollars) (based on Consumer Price Index) These individuals each gave American Airlines more than a million dollars for expansion during a time when it was really hard to get money from banks. In exchange for their investment, they got a lifetime, unlimited travel ticket for two. (Notice that older investors were permitted to invest LESS to get the same benefits, in recognition that an older person would realize less benefit from the compensation.) AA was looking for non-traditional investors. I think that unlimited air travel for two for the rest of the investor's life is a reasonable alternative to a cut of the company's profits for a one-million dollar outlay, don't you?

danieltillett 11y ago
Some of the holders of these tickets racked up over a million dollar a year of travel! Multiple this by 30 years and it was stupid.
- simoncion 11y ago
  1) This is a tragically short-sighted way to look at the cost of these tickets. You cannot look at the retail price of the service; you must look at its actual cost. 2) What is a better compensation for a one-million-dollar investor to whom you don't wish to give a share of the company?
  - danieltillett 11y ago
    In the end even AA came to the conclusion that these tickets were sold far too cheap. As I have posted already I don't cut AA much slack because of what they did to me, but the essence of stupidity is selling something far below its true value because you did not consider how others might use it.
    - simoncion 11y ago
      It's not at all clear that AA actually did anything to you. Check my comment in this thread containing "papersplease.org" for more info. I'm also not at all convinced that your analysis of the value of these tickets is correct. Again, see my other comments in this thread for more info.
      - danieltillett 11y ago
        AA put me on the SSSS list. I am not on this list with any other airline so I blame them. Maybe they were following some sort of stupid rule imposed by someone else, but if so why only AA.
- wycx 11y ago
  One million dollars of travel is not one million dollars of lost revenue, unless all the flights are guaranteed to be 100% booked.
  - danieltillett 11y ago
    No, but the tickets were worth far more than what AA sold them for. The best guess of what they were really worth is their last attempt to sell them when nobody was willing to pay the price.
    - simoncion 11y ago
      > No, but the tickets were worth far more than what AA sold them for. This is short-sighted. There's opportunity cost to be considered. AAL needed money at the time they were granting the tickets to investors. The way to figure out the total benefit of the tickets to AAL is to consider what would have happened if AAL had not used the tickets as investor compensation and had instead: 1) gotten the same amount of money from regular banks 2) entirely gone without the money This is neither an easy analysis nor a straightforward one. I would also expect the penny-pinchers of a in-danger-of-failing company to forgo such an analysis, and instead play the "These lifetime tickets granted as investor compensation are costing us too much! We have no choice but to renege!" card.
      - notahacker 11y ago
        Bearing in mind that the tickets were sold on an ad hoc basis over the course of more than a decade, and each individual pass sale represented a negligible sum compared with American's running costs, I suspect (2) was a surprisingly attractive option. When airlines actually need to raise funds, they borrow big, and have plenty of high value assets to secure lending against, and plenty of scope to refinance when interest rates come down. It's pretty difficult to view this as a smart fundraising strategy as opposed to a questionable promotion with ridiculously loose terms. But ultimately neither the odd $xxx,xxx in revenue from a frequent flier nor the implied $xxx,xxx per annum foregone from the promotion's biggest abusers are likely to have made a great deal of difference to AAL.
peteretep 11y ago
I have tried and failed to find data on what that would be worth if you'd bought AAL stock instead. Maybe someone else can find historical AAL prices?
- danieltillett 11y ago
  Didn't AAL go bankrupt? In this case the stock would be worth zero.
- simoncion 11y ago
  It looks like before the bankruptcy, they traded on the NYSE under the LCC symbol [0]. However, I too am having difficulty finding historical stock data. I might stop by the library to ask a librarian later today. :) [0] http://www.forbes.com/sites/maggiemcgrath/2013/11/15/the-new-american-airlines-lands-a-new-ticker-symbol/ http://www.forbes.com/sites/maggiemcgrath/2013/11/15/the-new...

danieltillett 11y ago

Some of the holders of these tickets racked up over a million dollar a year of travel! Multiple this by 30 years and it was stupid.

simoncion 11y ago
1) This is a tragically short-sighted way to look at the cost of these tickets. You cannot look at the retail price of the service; you must look at its actual cost. 2) What is a better compensation for a one-million-dollar investor to whom you don't wish to give a share of the company?
- danieltillett 11y ago
  In the end even AA came to the conclusion that these tickets were sold far too cheap. As I have posted already I don't cut AA much slack because of what they did to me, but the essence of stupidity is selling something far below its true value because you did not consider how others might use it.
  - simoncion 11y ago
    It's not at all clear that AA actually did anything to you. Check my comment in this thread containing "papersplease.org" for more info. I'm also not at all convinced that your analysis of the value of these tickets is correct. Again, see my other comments in this thread for more info.
    - danieltillett 11y ago
      AA put me on the SSSS list. I am not on this list with any other airline so I blame them. Maybe they were following some sort of stupid rule imposed by someone else, but if so why only AA.
wycx 11y ago
One million dollars of travel is not one million dollars of lost revenue, unless all the flights are guaranteed to be 100% booked.
- danieltillett 11y ago
  No, but the tickets were worth far more than what AA sold them for. The best guess of what they were really worth is their last attempt to sell them when nobody was willing to pay the price.
  - simoncion 11y ago
    > No, but the tickets were worth far more than what AA sold them for. This is short-sighted. There's opportunity cost to be considered. AAL needed money at the time they were granting the tickets to investors. The way to figure out the total benefit of the tickets to AAL is to consider what would have happened if AAL had not used the tickets as investor compensation and had instead: 1) gotten the same amount of money from regular banks 2) entirely gone without the money This is neither an easy analysis nor a straightforward one. I would also expect the penny-pinchers of a in-danger-of-failing company to forgo such an analysis, and instead play the "These lifetime tickets granted as investor compensation are costing us too much! We have no choice but to renege!" card.
    - notahacker 11y ago
      Bearing in mind that the tickets were sold on an ad hoc basis over the course of more than a decade, and each individual pass sale represented a negligible sum compared with American's running costs, I suspect (2) was a surprisingly attractive option. When airlines actually need to raise funds, they borrow big, and have plenty of high value assets to secure lending against, and plenty of scope to refinance when interest rates come down. It's pretty difficult to view this as a smart fundraising strategy as opposed to a questionable promotion with ridiculously loose terms. But ultimately neither the odd $xxx,xxx in revenue from a frequent flier nor the implied $xxx,xxx per annum foregone from the promotion's biggest abusers are likely to have made a great deal of difference to AAL.

peteretep 11y ago

I have tried and failed to find data on what that would be worth if you'd bought AAL stock instead. Maybe someone else can find historical AAL prices?

danieltillett 11y ago
Didn't AAL go bankrupt? In this case the stock would be worth zero.
simoncion 11y ago
It looks like before the bankruptcy, they traded on the NYSE under the LCC symbol [0]. However, I too am having difficulty finding historical stock data. I might stop by the library to ask a librarian later today. :) [0] http://www.forbes.com/sites/maggiemcgrath/2013/11/15/the-new-american-airlines-lands-a-new-ticker-symbol/ http://www.forbes.com/sites/maggiemcgrath/2013/11/15/the-new...