What else is a proper compensation to a (inflation-adjusted) 1 million dollar investor to whom you don't want to grant a share of the company?
Edit: To the downvoters: This is a serious question, not snark. Folks are claiming that these tickets were a stupid idea. If you read the article, you discover that these tickets were compensation to million-dollar investors. AA needed that money. They had to give something to get it. If they were to give something other than those tickets, what should it have been?
Remember that someone who has a million dollars laying around will expect that they get more than a million dollars out of their investment. That's generally how investment works.
I am voting you up since you are asking a serious question. The tickets were underpriced for what they offered. What AA should have done is auction off the tickets and let the market decide what they were worth.
It doesn't sound like they sold tons of tickets (e.g., demand wasn't that high), so unless they severely capped the number of tickets (which they probably should have done anyway), an auction wouldn't have yielded very different numbers.
The fact they increased the ticket prices a lot over the years suggests that the early tickets were very underpriced. When you sell something totally new and potentially open ended then it is always wise to get as much validation as possible from the market before setting the price.
I didn't say they were underpriced. An auction doesn't solve for accurate price without significant demand, which they didn't have. (The Hoover example elsewhere in this thread is counterfactual example.)
Note also that even though AA estimated that the passes (for certain individuals) "were costing it millions of dollars in revenue", no one bought one for $3M in 2004. The value of an unlimited pass is directly tied to how much you'd use it. A handful of individuals were at the far end of the bell curve.
A Dutch auction [1] would be the way I would auction of these passes. This way you find out the top price that the people on the far end of the bell curve think the pass is worth.
Dutch auctions work with one item (or multiple items where a single buyer would want n items of a limited supply: see eBay). That still wouldn't solve the problem in this case: remember, they didn't run out of passes. They sold every one they could at the offering price. Where there are multiple buyers, no rational buyer is going to look to pay a premium.
Edit: To the downvoters: This is a serious question, not snark. Folks are claiming that these tickets were a stupid idea. If you read the article, you discover that these tickets were compensation to million-dollar investors. AA needed that money. They had to give something to get it. If they were to give something other than those tickets, what should it have been?
Remember that someone who has a million dollars laying around will expect that they get more than a million dollars out of their investment. That's generally how investment works.