> 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.
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.
The logic in your comment seems sound. However -according to the article in the OP- when this program was first created bank loans had very high interest rates. I can't verify the truth of this statement, so I have to take it on face value.
Also, don't forget that the low end of the lifetime unlimited flights program cost between $600k and $700k, and the high end (flights for two) cost a little more than one million USD in inflation-adjusted dollars.
To speak to your first two paragraphs:
It could be argued that AA could have discontinued the program in the 1990's or so... maybe they should have, I have no idea. But that would not have freed them from their existing obligations.
To speak to your third paragraph:
AA is being rather dishonest when they use the retail price of services to demonstrate the impact of this program. They really have to quote the actual cost, which -I'm sure- can be difficult to determine.
If one is attempting to stir up sentiment for one's decision to renege on a lifetime contract, I suspect that one would want to do as little honest analysis as possible. :P
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.