Private-jet set wise up to sky-high price scams
● More than R75,000 for mystery sushi. Nearly R100,000 for plastic cups. And more fuel than the plane could possibly hold.
Such are the deceptions stinging the billionaires and mere millionaires of today’s private jet-set class. In an era of ultra-wealth, reports of shady billing related to private-jet travel are on the rise.
It says as much about this era of hyperwealth as it does about modern-day fraudsters. So much money is sloshing around that, inevitably, crafty operators are seeking a slice, trying to help themselves to what they figure is a mere rounding error to a billionaire. About a third of private-jet owners are worth more than $500m (R7.2bn), according to a 2018 report by VistaJet and Wealth-X.
Some fraud attempts are almost comical. One jet owner found himself charged £4,000 (about R75,000) for 240 sushi boxes apparently served on board his jet while it was empty, according to My Sky, a company whose software helps scrutinise and manage private-jet costs.
Another was charged à6,000 (about R97,000) for plastic cups after the provider mistakenly added two zeros to the invoice. Still another customer’s refuelling bill ended up exceeding the capacity of the plane’s fuel tanks by more than two tons.
Part of the problem is the sheer quantity of paperwork and bills associated with private air travel. One flight can generate dozens of invoices, for fuel, food, overflight permission, airport fees, on-ground services, crew hotels, repositioning flights and maintenance. And every trip is different. That makes it hard for globetrotting billionaires to keep track.
With complex assets like jets and yachts, “there is a tendency for people not to understand the cost structure, so if someone puts an invoice in front of them, they’ll sign it”, said Mike Brodsky, an MD at Deloitte Financial Advisory Services.
It’s not clear whether such attempts to overcharge are becoming more prevalent or simply more visible in today’s world of social media and technology. Though there’s no precise accounting of the amounts lost through inefficiency and fraud by ultrawealthy households, they are likely to run into the billions of dollars a year.
“Any numbers out there about fraud against ultra-high net worth people are understated, because many people won’t admit to it,” Brodsky said.
There are 21,000 business jets worldwide, which cost their owners about $32bn to run. This sum can be decreased by a quarter if operations are optimised, My Sky estimates.
One jet broker, who asked not to be named, said he’d seen evidence of overcharging and that it was common for jet owners to fall out with their management companies.
Some operators now say transparency has become an essential selling point.
“All our negotiations are focused on getting the best fares for our aircraft owners,”
Any numbers are understated because many [victims] won’t admit to it
said Bjorn Naberhuis, vice-president for business development at Global Jet Concept, adding that their clients could find invoices on their online portal and review cost breakdowns.
“The owners and their family offices are getting more and more educated and understand more and more about this market.”
But frustration remains high with the industry. A COO for a large family office, who didn’t want to be identified discussing private business arrangements, described jet-management companies as “a necessary evil” and said he’d recently switched to a new one. The old company had given him information that was disorganised and hard to review, and hadn’t tried to get him the best pricing, he said.
“It’s an absolutely nontransparent market,” said Kirill Kim, co-founder of My Sky. “You can’t control any of your costs.” Bloomberg