Embraer Nabs $1.1 Billion Legacy Order

Indigo Air has agreed to buy up to 75 Embraer Legacy business jets with a potential value of $1.1 billion. The deal includes 25 firm orders and options for 50 additional aircraft.

Embraer Vice Chairman Samuel D. Hill told B/CA at the NBAA convention in New Orleans that the manufacturer has been in discussions with the Chicago Midway-based operator since 1999 when the concept was still in its infancy.

Flying since summer 2000, Indigo sells individual seats on charter aircraft flying four weekday-only roundtrips between MDW and Teterboro. Using Falcon 20s, that service is currently targeted at the airlines' high-yield business travelers and is priced competitively with full-fare coach tickets.

Indigo CEO Pete Pappas says the first Legacy, due for delivery in August, will be placed on the MDW-TEB route. Future aircraft will be deployed as Indigo grows its route structure. He also hopes to deploy Legacies between under-served city-pairs, pre-selling the seats to corporations for a quasi-corporate shuttle. That will help guarantee a return on the Legacies while serving companies that require lift but prefer to avoid the operational and capital burden of using their own aircraft. As they're removed from the scheduled service, the Falcons are likely to be used for charter until they're returned to lessors.

Based on the Embraer ERJ135-LR, the Indigo aircraft will be outfitted in a custom configuration accommodating up to 19 passengers in business-class style seating. Trading capacity for range, the Indigo aircraft will have a range of approximately 1,700 nm. Typical Legacies boast a 3,200-nm range.

The relationship between Hill and Pappas goes back to Pappas' tenure at American Eagle, where he placed a multi-billion dollar Embraer Regional Jet order. Pappas says his experience with the ERJs at American convinced him "it's a very reliable aircraft backed by a very solid company." He added that the configuration "will satisfy our customers' desires for a private jet experience."

The deal is contingent upon financing, in which Embraer will not participate. Indigo co-chairman and investor Robert Lunn says Indigo is fully funded through next summer and that negotiations for additional capital, stalled until several weeks after September 11, 2001, are beginning to bear fruit as investors see the increase in demand for private jet travel.

American Express owns 11 percent of Indigo and is expected to take a more active role in the sales and marketing of Indigo service.

Prior to the Indigo signing, Embraer said the Legacy order book stood at 92 -- including 48 firm orders and 44 options. Embraer's Hill believes there's also potential for the Legacy in the fractional market -- where the Legacy, priced in the super-midsize category, can offer superior space and range to existing models. He says discussions with current and proposed fractional operators are ongoing.

By David Rimmer