I certainly think the frequent flyer miles thing was a mistake on the part of American Airlines (AA). But one of the things that bugs me about the article is that the 'marginal' cost of flying these folks is the same as the marginal cost of flying someone in coach, or flying someone in general. Weight * cost of gas to carry that weight + consumables such as food, tissues, Etc.

So when AA argues they 'lose millions' they are really saying that if they could sell this persons First Class seat to someone else on short notice they would make more money. But that assumption glosses over the fact that folks fly First with mileage upgrades, or get 'bumped' from coach on an over sale situation, or book way in advance and pay less. Since there isn't any discussion about what the average seat price is for First Class on the same flight when no AirPass member is flying, it didn't feel like they were being particularly objective with regard to price.

The fact that they could not sell AirPass + Companion for $3M (which according to them would have the owner 'ruining' AA in year 2 at this rate) seems to me to validate my feeling that they are over pricing their 'loss' here.