Private jet owners are being scammed frequently, overpaying for everything from sushi to plastic cups and fuel, a new report has found.
The chronic overcharging demonstrates a key nuance of our current era of "prosperity", in which the world's ultra-rich have so much money that fraud is pervasive in sums that are massive to normal people, but rounding errors to billionaires (more than a third of private jet owners are worth more than $500 million).
Some of the observed attempts at fraud have been egregious: one jet owner found himself charged $5,300 for 240 boxes of sushi that were apparently served on his jet while it was empty, according to company My Sky, whose software helps manage private jet costs. Another owner was charged $6,800 for plastic cups after the provider "mistakenly" added two zeros to the owner's invoice: a modest difference of $6,700. Yet another customer's refueling bill ended up exceeding the capacity of the plane's fuel tanks by more than two tons.
In addition to the astronomic wealth of the "marks", enabling such fraud is the bureaucratic red tape that accompanies the ownership of a private jet. One flight alone generates dozens of invoices for things like food and fuel, as well as airport fees and crew hotels. As a result, the simplest thing for those worth billions but constantly pressed for time, is simply to sign off on the bill without looking at it, something unethical operators are all too aware of and eager to capitalize.
Mike Brodsky, a managing director at Deloitte Financial Advisory Services told Bloomberg that "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."
It wasn't clear whether these scam attempts are more prevalent nowadays or if they’re just becoming more noticeable in the age of social media. However, the report estimates that inefficiency and fraud on ultra wealthy households likely totals into the billions of dollars per year.
“Any numbers out there about the amount of fraud against ultra-high-net worth people is understated, because many people won’t admit to it,” Brodsky continued.
Worldwide, there are 21,000 business jets which cost owners about $32 billion to run and operate. My Sky estimates that the sum decrease by 25% if operations are optimized.
One jet broker told Bloomberg that he has seen evidence of overcharging and that it's "common for jet owners to fall out with their management companies". As a result, some aircraft operators now say that providing transparency has become a must-have, in order to sell.
Bjorn Naberhuis, vice president for business development at Global Jet Concept, said: "all our negotiations are focused on getting the best fares for our aircraft owners."
The level of frustration within the industry is still very high. The CEO of a large family office called jet management companies “a necessary evil" after recently switching providers. He says that when his old company gave him information it was disorganized and hard to review, without trying to get them the best price.
Kirill Kim, co-founder of My Sky said: "It’s an absolutely nontransparent market. You can’t control any of your costs", and it will remain so until central banks allow markets to drop, prompting billionaires to finally question where all of their money is going.