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View Full Version : American Airlines' "US$ 500,000 unlimited lifetime 1st class" airpass unravels...


airship
14th Feb 2013, 16:39
WARNING: AVIATION CONTENT!

I was amazed to come across this BBC "Fast Track" report (http://www.bbc.co.uk/programmes/p015126w) concerning an American Airlines' airpass sold to customers back in the mid-late '80s apparently.

A single, one-off US$ 500,000 payment was a heck of a lot of money 25 years ago. In exchange for an AA airpass allowing unlimited worldwide 1st class travel for the holder + 1 companion and for the lifetime of the airpass holder...

AA apparently no longer offers any similar "lifetime" airpasses, and no longer wish to honour their previously existing ones, citing abuses. I guess it doesn't help much that they're once again under chapter 11 bankrupcy protection (apparently most US airlines ask for this every few years or quite regularly) and even in the process of negotiating a merger with another US airline currently.

Shirley, one day all those accumulated but as yet unused "free air-miles", having been so freely distributed by airlines, supermarkets et al will come back to haunt us all? Just how much do all these already distributed yet unused "airmiles obligations", represent in real money terms today? Merely a few hundred US$ billions, a few trillions, the equivalent of 1 year's Global GDP?

Do you have some sympathy for Jack Vroom from Dallas who actually forked out US$ 500,000 over 25 years ago when he could afford it, yet today finds himself grounded...? :sad:

con-pilot
14th Feb 2013, 17:01
In 1988 (25 years ago), someone that could fork over a half a million bucks for a lifetime pass, most likely could have bought his own jet.

Probably wishes he had now. :p

G-CPTN
14th Feb 2013, 17:04
What would a 25-year-old executive-jet be worth nowadays?

rgbrock1
14th Feb 2013, 17:07
airship:

US Airways and American Scare-lines will be merging together shortly to become the largest American carrier, by # of passengers carried. This according to the Wall Street Journal.

con-pilot
14th Feb 2013, 17:36
What would a 25-year-old executive-jet be worth nowadays?

Depends on what type of aircraft. Some for about what they cost 25 years ago, inflation you know, some only worth scrap and some worth about half of what they cost.

Take the Falcon 900* for an example, back in 1988 they cost about ten million USD, trans Atlantic/Pacific capable, today are on the market used from 9-7 million USD.

For less expensive, take the Westwind II, last built in 1987, today worth about 500,000 USD. Initial cost a little under 2 million USD, I think.

But there is one thing that need be considered about the original cost, most of the purchase price can be written off tax wise by deprecation. At least in the US.

But very, very few people/business keep the same corporate aircraft for 25 years. I think the average upgrade span is around seven years.


* After the original Falcon 900, Dassault introduced the Falcon 900B in 1991 and all early original 900s were converted to B models.

airship
14th Feb 2013, 17:38
What would a 25-year-old executive-jet be worth nowadays? Or even, what would an executive jet "capable of flying to all corners of the globe" in the manner of AA, have cost 25 years ago? Plus operating costs + (con-)pilots :ok: + maintenance etc.?!

rgbrock1, I believe the current ch. 11 bankrupcy protection afforded to AA, together with the impending merger you mention are in fact actually hindering Jack Vroom's lawyer from going to trial (if you paid attention to the BBC video report)...

G-CPTN
14th Feb 2013, 17:40
Then you have to add expenses (fuel, hangarage and servicing) and salaries to the initial capital cost.

radeng
14th Feb 2013, 17:49
I hope he wins. It's at least a breach of contract.

I wonder if he could make the brown stuff hit the fan by complaining to the DFW police that he is the victim of fraud?

con-pilot
14th Feb 2013, 17:51
Then you have to add expenses (fuel, hangarage and servicing) and salaries to the initial capital cost.

Which again, the majority can be written off on taxes, operational costs.

I'm not trying to get anybody to buy an aircraft here, nor provide justification for owning one, I just made a comment.

If business/corporate aircraft were not worth what they cost, the corporate aircraft industry would not be a multi-tens of billions, USD, industry world wide.

For example, the corporate aircraft industry and aircraft sales are exploding in China.

airship
14th Feb 2013, 18:09
Now now, con-pilot, calm down, what you originally wrote was: In 1988 (25 years ago), someone that could fork over a half a million bucks for a lifetime pass, most likely could have bought his own jet. Your own replies since, explain the difference between "forking out" US$ 500,000 for the AA airpass and the purchase price of actually buying a capable executive jet (US$ 10 million -ie. 20 times the cost of the AA airpass, but excluding all operating costs).

That's a very serious difference in affordability don't you think? Anyway, it's not as if Jack Vroom ever asked for anything more than to fly on standard AA commercial flights...?! So let's leave executive jets out of this, if at all possible...?! :ok:

con-pilot
14th Feb 2013, 18:32
You combined two or three posts and questions into one. So I really cannot answer you.

The original intent of my first comment was that a half a million dollars would make a down payment, not the entire purchase price. As if one had a half million dollars laying around to give to an airline, he may had been able to purchase an aircraft.

Perhaps he went to a bank and borrowed the half million and that was all he could borrow. If so, I completely understand why he is POd.

In any case, my original comment was intended to be humorous.

bnt
14th Feb 2013, 19:40
Well. you wouldn't need to buy the whole jet, just a fraction of one, from e.g. Netjets (http://www.netjets.com/).

er340790
14th Feb 2013, 20:21
Getting back on track, it seems the small print in the deal was severely lacking.

Consequently some holders would pick out people at random to travel first class as their companion(!), others would sell the 1st class seat to other travellers and pocket the loot, some sold their homes and basically became nomadic, banking the new airmiles they earned along the way to pay for hotels (neat!).

Apparently none of these were prohibited per the contract. When the airline discovered what it had let itself in for, it start unilaterally withdrawing the cards whenever possible.

Basically they underestimated their passengers ingenuity!!! And anyone who could drop $0.5m back in the 80s probably knew a thing or two.

BREACH OF CONTRACT BY THE AIRLINE. PLANE & SIMPLE, aha! :}

con-pilot
14th Feb 2013, 21:03
Consequently some holders would pick out people at random to travel first class as their companion(!), others would sell the 1st class seat to other travellers and pocket the loot, some sold their homes and basically became nomadic, banking the new airmiles they earned along the way to pay for hotels (neat!).

Apparently none of these were prohibited per the contract. When the airline discovered what it had let itself in for, it start unilaterally withdrawing the cards whenever possible.

Probably a lot of truth in that, makes sense, as usually people will milk a cheap cow till it runs dry. Even though in this case that cow was not all that cheap. :p

G-CPTN
14th Feb 2013, 22:04
The weakness of the original offer was the 'companion'.

Without that the traveller wouldn't be able to sell anything, or act as 'courier' for others.

Make it pass holder only and it returns to being reasonable.

Tankertrashnav
14th Feb 2013, 22:09
What would a 25-year-old executive-jet be worth nowadays?


At least it would be worth a little more than an American Airlines 1st Class "lifetime" airpass, it would appear!

Metro man
14th Feb 2013, 23:25
Similar thing happened with a free air miles scheme.

David Phillips, a civil engineer from California, pulled off possibly the most notorious frequent-flyer coup. He became known as “the pudding guy” in the air industry after spotting the phenomenal returns available from Healthy Choice chocolate deserts, which in 1999 were being used in a special promotion at his local supermarket. By shelling out just $3,000 on the tasty treats, he earned $25,000 worth of frequent-flyer miles - enough to pay for travel for the rest of his life. Airlines are now more careful about the small print of what they offer.

airship
15th Feb 2013, 16:05
Just wondering...

When any US airline goes into Ch. 11 bankrupcy protection, is eventually restructured or whatever, and then comes out into the "brave new world order" again:

Do any other independent, "sister or other holding companies" etc. (the companies which actually buy, finance and own all the Boeings / Airbuses aeroplanes) "used by" the US bankrupt airline get trawled into the overall process (as opposed to being simple creditors to the airline)?

How much does say AA say, pay for the "dry-lease" or equivalent for perhaps leasing their aircraft from 3rd parties? Just as Google, Amazon, Starbucks coffee etc. have found to their dismay, the general public don't appreciate these companies avoiding fair taxes which should normally be paid in the countries where the profits and corporation tax were earned and payable.

At least once a year, we all see the grand announcements at the time of an on-going air-show. How XXX airline has ordered XXX numbers of Boeings or Airbuses for their fleets.

I increasingly get the impression that whilst so many US airlines seek bankrupcy protection under Ch. 11, the real profits are simply being transferred to other "holding companies" elsewhere in the form of "overly-excessive" invoice amounts for leasing these aeroplanes. :confused: