When Elite Status Becomes Worthless Overnight

Lately, it seems U.S. airlines are raising the bar for elite status almost as quickly as they trim the benefits for their most loyal customers, but this trend pales in comparison to the time American Airlines clipped the wings of one of their most frequent flyers.

Steve Rothstein had it made. The unlimited AAirpass he purchased for the very reasonable price of $250,000 entitled him to unlimited first class travel on American Airlines for the rest of his life. As an added bonus, Rothstein was able to accrue frequent flyer miles for each of the tens of millions of miles he would fly in the first few years after buying his “golden ticket” in 1987.

“I could go someplace and I wouldn’t even have to think about it,” Rothstein told the NY Post in a 2012 interview. “Just make the reservation and go.”

Rothstein was generous with his embarrassment of free miles as well. He donated most of the millions of air miles he accrued to charity and later purchased a companion pass for an additional $150,000 that allowed him to take friends along for the ride. Over the years, he used the passes to help fly stranded travelers to their destination, took a friend on a day trip to the Louvre and even took a priest on a trip to see the Pope.

Unfortunately, with AAirpass holders like Rothstein taking hundreds of flights and flying millions of miles each year, sometimes even reserving extra seats for a little extra elbowroom, the airline began to see the novel program as a very real financial strain. “We thought originally it would be something that firms would buy for top employees,” former American Airlines CEO Bob Crandall told the Los Angeles Times. “It soon became apparent that the public was smarter than we were.”

Much like United Airlines rescinding free business class companion tickets for thousands of its credit card holders or Delta’s decision to exempt ultra-low-fare-tickets from earning rewards miles, American officials began to rethink their agreements with AAirpass holders. The airline set up a special department to make sure that pass holders were following rules to the letter, with the goal of eventually finding cause to void the revenue draining agreements.

In the end, it was Rothstein’s generosity that was his undoing. Accused of fraudulently using the companion pass under false pretenses, the globe-trotting millionaire was effectively grounded with both his AAirpass and his rewards account revoked. A court decision found in favor of the airline and a series of appeals failed to restore Rothstein’s travel benefits.

There might just be a lesson in Rothstein’s fall from grace for elite flyers. Benefits earned (or in this case purchased) are by no means benefits guaranteed, a fact many of the most loyal airline customers have been frequently reminded of over the last few years.

While airlines might not miss many opportunities to make it more difficult to earn status and seem to be curtailing benefits for those who do, carriers still have some incentive to keep loyal customers coming back. Elite flyers will likely never be targeted in the way AAirpass holders like Rothstein were targeted. By the very nature of the agreements, the airline would never see a penny of additional revenue from flyers who could fly first class for free at a moment’s notice, making it not at all surprising when American found a way to nullify the contracts.

Though Rothstein eventually lost his wings, he certainly got his money’s worth while it lasted. The former globe-trotter estimates that while he still had his pass, he was able to take more than 10,000 flights, traveling more than 10 million miles and visiting countries like Australia, Japan and England dozens of times in a single year. All told, his $350,000 investment returned a value of nearly $21 million.

[Photo: American Airlines]