Unlimited Travel: Deals Too Costly For Airlines?

May 7, 2012 — -- American Airlines "unlimited" first class travel program offered an "all-you-can-fly" lifestyle to 66 AAirpass holders, some of whom lived it up so much that American had to stop the program, igniting a rash of lawsuits. But that's not stopping other airlines from extending unlimited flying offers.

Steven Rothstein was treated like royalty after he bought unlimited first-class travel for two with American Airlines in 1987 for $250,000. But after the airline realized it was losing more than $1 million from Rothstein alone, not to mention the other 65 pass holders, the company revoked his AAirpass, spurring ongoing litigation about whether he and others abused the system or if American Airlines just made a bad business bet.

In 1990, American Airlines raised the price of an unlimited AAirpass with companion to $600,000, The Los Angeles Times reported. In 1993, it was bumped to $1.01 million. The next year, American Airlines stopped selling unlimited lifetime passes altogether.

Rothstein, 61, has accumulated more than 30 million miles. In July 2004, he flew 18 times, visiting cities as far as Nova Scotia, New York, Miami, and London, "some of them several times over," the Los Angeles Times reported. The airline claims he sometimes picked out strangers at the airport and gave them surprise first-class upgrades with his companion pass, including a woman he just met in New Delhi for a trip to Chicago, valued at nearly $7,500, the newspaper reported.

A spokesman for American Airlines said the company did not cancel the AAirpass product, though it did discontinue selling the lifetime AAirpass.

American Airlines offers one AAirpass product in the market today, which provides pre-paid, unrestricted travel at a fixed rate.

"Lifetime" offers from airlines or any business are rare these days, as companies run the risk of losing money from customers, now with a life expectancy of 78.5 years in the U.S. according to the Centers for Disease Control, who may be savvy with arbitrage opportunities. Or, customers may have to fight back for their unlimited offer, as one California Bank of America customer successfully did last month after a number of bank acquisitions took place.

Instead, airlines are offering flexible flying within a finite period of time, like months or a year.

Surf Airlines, a new company based in Santa Monica, Calif., is planning to offer unlimited flying memberships on private planes starting this summer, pending procedural approval from the Federal Aviation Administration (FAA).

Memberships will cost between $800 and $1,500 a month, pending the FAA approval, said co-founder and CEO Wade Eyerly. Surf Air's services are catered toward frequent or elite travelers, offering a respite from long lines and added fees. The company planned to have 500 people apply to be the initial founding members, but due to an "overwhelming response," it stopped taking applications in 15 days.

Eyerly, 32, and his brother David, 27, have closed fundraising for their startup and are awaiting final FAA licensure.

David is a licensed commercial pilot who attended Embry-Riddle Aeronautical University. Wade spent the last five years in intelligence, two of which while working for the White House under former Vice President Dick Cheney.

Traveling as much as 27 days a month and always receiving a second security screening before he flew for work, Eyerly said, "I had a pretty intense understanding of what frequent travelers go through."

Surf Air's first route will be between San Francisco and Los Angeles, but Eyerly said about 25 markets in the U.S. in which the company's business model may function.

"We're initially going to demo our model works on route in California but intent to introduce other routes," Eyerly said.

The concept, at least, of unlimited private travel has grown in popularity.

Six weeks after the company launched a placeholder website late last year 12,000 people signed up to join its email list. Eyerly said interested people can join a wait list for membership.

Rick Seaney, CEO of FareCompare.com, said there have been offers in the past that were "somewhat unlimited" in nature.