business news in context, analysis with attitude

There was a fascinating story in the Los Angeles Times over the weekend about people - specifically Steven Rothstein and Jacques Vroom - who spend hundreds of thousands of dollars with American Airlines to buy unlimited first-class tickets for life ... but who then found themselves targeted by the airline, which came to the conclusion that the passes were costing them millions of dollars in revenue and wanted to revoke the paid-for privileges.

“Passes in hand, Rothstein and Vroom flew for business,” the Times writes. “They flew for pleasure. They flew just because they liked being on planes. They bypassed long lines, booked backup itineraries in case the weather turned, and never worried about cancellation fees. Flight crews memorized their names and favorite meals.

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. Both agree it was the best purchase they ever made, one that completely redefined their lives.”

The story goes on: “But all the miles they and 64 other unlimited AAirpass holders racked up went far beyond what American had expected. As its finances began deteriorating a few years ago, the carrier took a hard look at the AAirpass program.

“Heavy users, including Vroom and Rothstein, were costing it millions of dollars in revenue, the airline concluded.

“The AAirpass system had rules. A special "revenue integrity unit" was assigned to find out whether any of these rules had been broken, and whether the passes that were now such a drag on profits could be revoked.

Rothstein, Vroom and other AAirpass holders had long been treated like royalty. Now they were targets of an investigation.”

You can read the entire piece here if you’re interested in the details.

But what the piece comes down to is an interesting discussion about how a business ought to act when it finds out that it made a decision that, while good for customers, ends up being bad for the business.
KC's View:
To be clear, it sounds as if the people who bought the passes were pushing the envelope on how they were used and who used them.

But in reading the story, it seems to me that American Airlines - trying to make it in a new era, with new fiscal pressures - made a tactical error in trying to revoke the passes. There are other things they could have done, like enforcing the limitations on usage and being clearer about these restrictions.

Did earlier administrations make decisions that, in hindsight, may not have been smart? Sure.

But you make a compact with the customer, you have to live up to that compact. You have to make sure that you are not being taken advantage of, but you never treat the customer like the enemy.

Which is what American seemed to do.

This piece is worth reading, and maybe even circulating to other people in your company. Elicit opinions about what they think American should have done, and how they should go forward. And see how they think this story applied to your company, your promises, your value proposition, and your customers.