The recent JetLux indictment alleging over $2 million in credit card fraud may have been enabled by bargain hunting customers
Private jet charter brokers are often harangued for not having to disclose their mark-ups. The assertion is they are charging whatever the market will support, and savvy customers can negotiate better deals.
Several websites have launched in recent years connecting consumers directly with jet operators, ostensibly cutting out the middleman or at least the commissions. They claim to offer wholesale pricing making money via membership fees.
Of course, if you use them, you need to be experienced enough to know what questions you should be asking the operators to ferret out the flowers from the weeds.
All private jet charter operators are not the same
The quality of charter operators varies widely, including their ability to find replacement aircraft if there are mechanicals or pilots if one calls in sick. You also will want to know what type of experience their pilots have navigating in and out of mountain airports, high-traffic areas as well as islands if any of these are part of your itinerary.
A 2017 crash that killed both pilots flying a positioning flight from Philadelphia to Teterboro Airport underscores that point. The aircraft was on a Part 135 certificate, so it was available for the on-demand charter market and could also have been used to fulfill jet card flights, depending on the provider’s sourcing standards.
Plane & Pilot reported, “In the NTSB report, the agency noted Trans-Pacific Air Charter, the company that the pilot and co-pilot worked for, failed to adequately monitor its operations for safety.”
It also reported, the captain’s record was incomplete, and pilots who had previously worked with the captain of the flight told the NTSB they didn’t think he should have been promoted to the left seat. They also criticized his passivity in the cockpit and failure to use checklists.
Other troubling aspects included his failure to report a driver’s license suspension and a conviction for assault with a deadly weapon, including failed check rides.
Are you the problem?
So, please take this the right way: Sometimes customers or their surrogates are their own worst enemies when it comes to shopping for private aviation charter solutions.
The indictment of JexLux CEO Tomer (Tom) Osovitzki which we covered (below) is perhaps a good example. Much of the fraud was done with credit cards held by his wife, mother and himself that had been closed or had insufficient credit, meaning they would have been declined via normal processing.
By allegedly providing the charter operator with made-up authorization codes that were then force posted manually to override normal processing systems, the operators it seems, at least initially, would have been under the impression they had been paid, and then operated the flights.
Osvovitzki was only listed as a passenger on one of the dozens of flights he booked, so it doesn’t appear he was chartering the private jets for personal use. Instead, it looks like he was using the invalid cards to pay for flights he was booking for clients.
It’s likely those consumers paid JetLux with checks or wire transfers, say several people I spoke with. So while he was not paying vendors for their flights, he was collecting money.
Silver Air LLC, a private jet charter operator sued JetLux, Kim and Khloe Kardashian, and Scott Disick for $225,353 in unpaid private flights last year. It’s not known if those private jet trips were connected to Osovitzki’s indictment, however, one report claimed the Kardashians paid JetLux “large lump sums” of money to arrange their flights.
You might ask if Osovitzki was getting paid from clients, what was the point of committing an act, that if true, could land him in jail for up to 20 years?
Selling Below Cost Private Jet Charters
The answer seems to be is he may have been charging clients less than what the operators were charging him. In other words, instead of taking the operator price and marking it up, which is what brokers do, he was quoting clients a lower price than what the flight would cost.
Selling products below cost may work if you are a dotcom startup with millions of dollars in funding. In this case, it seems to be merely a way to execute fraud. Brokers I spoke with who didn’t know Osovitzki directly said they were familiar with JetLux through quoting trips.
Potential customers would tell them their prices were not competitive with JetLux. JetLux, it appears, may have been fostering the alleged scam with so it could sell charters at below-market rates.
In other words, JetLux, offering significantly lower prices, would win the business from the deal-seeking clients. Since the operators thought the payments had gone through, they provided the flights it seems.
It’s unclear if the operators ended up being paid or if they were charged back those amounts later. The Silver Air lawsuit indicates that at least in some incidents, the operator found themselves out of pocket.
Merchant agreements vary widely, as does the timing for merchants to receive funds. The money is provided by their financial institution, which then settles later with the customer’s bank. We are told it can take over 60 days for the merchant to know they were scammed.
Were you sold an empty leg?
As we’ve reported previously, other reasons you might be getting below market quotes is that you are being sold an empty leg. Empty legs are repositioning flights to bring the aircraft somewhere before or after a revenue flight. Since they are normally flown empty, they are often sold at up to 50% or more off typical rates.
The problem with empty legs is if the person paying $8,000 per hour changes their plans. Sometimes that happens while you are waiting at the airport. Perhaps you thought you got a great deal?
Why illegal charters are risky
Another reason for getting below market quotes is you may be flying on an illegal charter. Illegal charters are often operated with Part 91 certificated aircraft. Part 135 is the FAA regulation governing the charter of private aircraft for commercial purposes.
Part 91 covers the rules if you own or lease a plane, using it exclusively for your own missions. That can include business or bringing along friends or even letting friends use it. However, you can’t accept compensation.
Part 135 operators are subject to stricter regulations on maintenance, airports they can fly into, and pilot qualifications, including duty time limits.
European soccer star Emiliano Sala’s death in a January plane crash was on an illegal charter. It is believed to have been arranged by a sports agent.
In June 2018, the FAA proposed a $3.3 million fine against The Hinman Company for selling illegal charters. It said Hinman failed to meet the FAA’s Part 135 requirements for record-keeping, including pilot records and load manifests. The company also had no Part 135 training program in place. Finally, the pilots operating the flights were not authorized to conduct the flights under Part 135.
Celebrities and CEOs are targets for private jet charter fraud
One broker I spoke with said celebrities, senior business executives and high-profile individuals are most susceptible to getting scammed in private aviation. She said, in many cases, arranging private flights is delegated to a business manager, the finance or purchasing department, or assistant. That person is often under pressure to secure a private jet at the lowest possible cost. Those managers or gatekeepers are constantly getting sales approaches from private aviation providers.
In these cases, the intermediary may not have the necessary expertise to evaluate the options. They may assume all private jets and operators are the same focusing more on pretty pictures of the cabin and worrying about details such as catering or bringing aboard pets.
He or she can be easily conned into why one provider is giving them such a great rate. In some instances, the principals are also looking to trade social media posts and promotion for discounts.
Avoiding private jet scams
Reputable private aviation companies are constantly hit up for free and discounted trips. Most only trade promotion for flights with official and fully disclosed relationships that involves contracts that are reviewed by the appropriate legal teams.
Being offered below-market priced flights in exchange for social media promotion could be a warning sign that you need to dig deeper to understand what you are really buying.
Principals, be they celebrities or CEOs, need to mandate their surrogates evaluate private aviation options based on the quality of service and safety. Encouraging them to trade social media promotion for discounts or focusing just on price can put you in the middle of a scam or worse.
You may want to read, “How not to get scammed when you buy a private jet membership.” Subscribers to Private Jet Card Comparisons can access our curated list of private jet charter brokers. We also offer support in helping you identify the best vendors and programs for your needs.
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