Article
When Tax Savings Turn into a Multi-Million Dollar Mistake
It started with what looked like a smart tax strategy. An entrepreneur, eager to take advantage of bonus depreciation, decided to buy a light jet before year-end. He had no personal or business use for the airplane, but reasoned that placing it into a charter fleet would offset costs and even generate revenue.
The plan seemed straightforward: acquire the jet, hand it over to a management company, and let charter revenue flow. The aircraft he bought was perfectly airworthy, but at the charter operator’s insistence, he spent hundreds of thousands of dollars on new paint, a refreshed interior, and upgraded Wi-Fi so the airplane would “match” the rest of the fleet.
Trouble in the Skies
Just two months into charter operations, a pilot noticed the engine’s ITT (Inter-Turbine Temperature) was running hotter than normal. The concern was documented in the aircraft’s logbook, but the management company brushed it aside, instructing pilots to keep flying. The problem worsened flight by flight. Four months later, during a scheduled inspection and oil change, the real issue surfaced: metal particles and fragments were found in the oil. A key internal engine component had disintegrated, causing catastrophic secondary damage through the core of the engine. The aircraft, purchased for just over $2 million, now faced an engine overhaul bill of more than $1 million, and a downtime measured not in weeks or months, but years.Where Things Went Wrong
Several critical mistakes compounded this owner’s situation: • No Buyer’s Representation – He assumed the seller’s agent would look after his interests. No one advised him about the risks of operating without engine program coverage. • Charter Revenue Assumptions – The plan to cover costs with charter flying was unrealistic. Once upgrades, downtime, and unexpected expenses factored in, the math never penciled out. • Weak Oversight of Management – The management company ignored early warning signs and continued flying the jet, leading to much greater damage and greater costs.How The Jet Agent Stepped In
After two years of downtime and not getting the support needed from his management company, the owner realized he was in over his head and came to The Jet Agent for help. Leveraging our network and deep experience in the Citation market, a $300,000 reduction in the cost of the engine overhaul was negotiated – plus, we uncovered hidden markups and kickbacks that were inflating the bill. This was a costly lesson in what can happen when buyers step into complex transactions without fiduciary representation.Lessons for Every Aircraft Owner
• Buying an aircraft without a buyer’s rep is never a good idea. • Acquiring a jet solely for charter revenue and tax savings rarely works—the numbers just don’t add up. • Due diligence in choosing a management company is essential. Not all of them put the owner’s interests first. At The Jet Agent, our role is to ensure that aircraft owners never find themselves in this position. With 25+ years of experience, we know the pitfalls and how to protect clients from them.
ABOUT THE AUTHOR
Denise Wilson, CAM, is the founder and President of The Jet Agent. Wilson has more than 25 years of experience in all facets of the aviation industry. This includes 20+ years of flying Citations and other jets in both business aviation and commercial operations, and 18 years assisting clients in the acquisition and sales of jet aircraft.
She previously served as founder & CEO of Desert Jet, collectively consisting of an aircraft acquisitions and sales division, a jet charter and management company, a jet maintenance business, and a popular FBO featuring a newly built private terminal, Desert Jet Center. Under her leadership, the company grew exponentially, ranking on the Inc. 500 list of the nation’s fastest growing, privately-owned companies five consecutive years.
As a jet aircraft broker and acquisition consultant, Wilson provides concierge-level acquisition representation, aircraft sales, and coaching to clients. She authored the Amazon #1 Bestseller “The Insider’s Guide to Buying and Selling Jets.”
