Legacy Market Overview

After almost nine months of no pre-owned market activity, the Legacy market showed its first signs of life.  With buyers eager not to miss the bottom of the market, three sales have consummated, bringing some level of activity to the market.  These identify the current level of buyers’ expectations.  When compared to the boom market of nine months ago this price level will undoubtedly remove several advertised aircraft from the market as the Sellers will be unwilling, or unable, to sell their asset at levels now realized.  The aircraft sold have all been less than two years old, with 800 hours or less total time, and varied in price from $16.5 to $18.5 million US dollars.  We believe these prices have either set the tone for, or defined the bottom of, the Legacy market and serve as a benchmark for future sales to operate from.   As of late July there are 22 Legacys on the open market.  Eleven of them are realistically priced.  Of the 22, 14 are EU aircraft, while 8 are registered in the US.  In total, 14 % of the fleet is currently for sale, which is actually low when compared to some models.  At the current rate of turnover, it will take 21 months to remove the current inventory from the market. 

Legacy Operator Focus:  London Executive Aviation

Founded in 1996 by Managing Director George Galanopoulous and Chief Executive Patrick Margetson-Rushmore, London Executive Aviation (LEA) has become not only one of the largest Embraer Legacy operators in the world, but also one of the larger management companies in Europe.  With a fleet of 23 aircraft, including four Legacys, they have extensive experience operating Embraers, and given their multi-aircraft-type fleet, they can easily compare the operating characteristics of the Legacy to other similar aircraft. We sat down recently with Mr. Galanopoulous to ask a few questions.

        
G-WCCI                                  G-RRAZ                       G-IRSH                        G-RUBE
The London Executive Aviation Legacy Fleet

As one of the first operators of a Legacy and having recently taken delivery of a new one in May 2009, you have the unique perspective of having watched the Legacy develop as an aircraft, and Embraer grow as aircraft company.  What differences have you seen between then and now?

The Legacy took time to get established and recognized in the charter market, as Embraer is not a well known manufacturer in the business aviation world. Once our clients flew on it though, they immediately appreciated the spaciousness and excellent comfort of the cabin. Over the past few years Embraer has made a number of upgrades to the Legacy, especially in the cabin with better and more functional floor plans as well as improved soundproofing and higher quality furnishings. Embraer today has a much better understanding of the demands of the private jet market.

As an operator, what is that you like about the Legacy?

The Legacy offers our customers tremendous cabin volume and seating capacity, which gives us the flexibility to complete a wide variety of missions for our customers, from the typical 3-4 passengers to up to 13 passengers.  Perhaps more importantly, the dispatch reliability of the Legacy is extremely high when compared to many private jets. We regard this as being of paramount importance. The most important aspect of our operation is our reputation for being able to dispatch the aircraft at the exact moment our customer requires it to be dispatched.

What do you hear from your customers that they like about the Legacy?  What is it that keeps them requesting that aircraft?

Our customers love the cabin size. And in particular, the three separate seating areas the cabin has.  Most importantly, due to the aircraft’s low operating costs, it allows us to pass on a lower charter rate to our customers for a cabin of its size, so they get a fantastic value with a Legacy that many other aircraft cannot offer.

Given that you operate numerous other large cabin aircraft, how does the Legacy compare in size, cost and reliability?

The cabin of the Legacy is as good as or better than any of our other large cabin aircraft.  The number of windows makes the cabin light and airy. The EEC (Embraer Executive Care, the hourly airframe maintenance programme) programme makes the maintenance predictable and the availability of spares allows us to have minimum downtime. I can only recall one occasion that we could not dispatch the aircraft due to unserviceability.

When did you first start LEA? There is always an interesting background story behind a company this size.  Would you care to share it with us?

I used to work for a small air taxi company, flying a Piper Seneca.  With my wife Amanda running Ops. We were joined by my partner Patrick, who has a financial services background, and the three of us launched LEA in 1996. We have grown from two aircraft then to 22 today. Not a very exciting story from an overview, but we certainly have enjoyed many extraordinary events.  The most important thing is that we still very much enjoy every single day of operating and growing the company.

Where do you want LEA to be in five years?

Hopefully, more aircraft.  Maybe twice our current fleet. We believe there are a couple of questionable years ahead for the industry. But because of our strength, we expect to expand and get more aircraft under management.

I understand that you have an Embraer Lineage 1000 coming in early 2010.  Are you excited about this aircraft from an operational and charter perspective?  What do you think will set this apart from the rest of the charter fleet?

The Lineage will be a good aircraft. It is a proven platform and very good value for money. Not dissimilar to how the Legacy started. It will compete with the Airbus and the BBJ. Its giant cabin, lower operating cost and lower acquisition costs will make it a very significant competitor in the large cabin charter market.  We are particularly excited that it will have the ability to fly from Dubai to London City Airport with 19 passengers, against even winter headwinds. 

For More information on London Executive Aviation, visit www.flylea.com

Legacy Market Movers

Since the last newsletter, there have been some interesting price reductions, and new market entrants that are turning into notable purchasing opportunities for buyers.  Similar to all sales markets, whether it is real estate, stocks or companies, the last sale merely guides the price, and the next sales price is driven by available inventory and the unique sales and financial condition of each seller and desire of the buyer.
Serial Number 1025 (pictured), a Cayman Registered EASA compliant aircraft, has lowered their price to $18.5 million US dollars.  With 900 hours, Rolls Royce Corporate Care and Embraer Executive Care, it is one of the rare aircraft available for EU operations that has the very desirable forward crew lavatory.

Serial number 1017 recently came to market.  Priced at $17.995 million, it is well within recent market transaction prices.  This aircraft does not have the forward lavatory, nor the dropped floor, but offers a maintenance pedigree that will be highly beneficial to the new owner.

Finally, making its second appearance on this list in as many quarters, the high time Flight Options aircraft have been further reduced to $13.665 million.  Being one of the highest time Legacys in the fleet with over 6,000 hours, they are the least expensive, making this a good entry aircraft for the experienced owner who is not alarmed by the total time.

Two new entrants are candidates for leases, SN 988 and 1010.  They are German registered and were recently operating on a JAR OPS certificate.

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About Business Air International

Business Air International (BAI) is responsible for the acquisition, sale and brokerage of private jets throughout the world.  Personnel in the department have decades of private jets experience and typically do approximately two dozen transactions each year, many of which involve trans-border cross-border transactions.  They are expert in the execution of contracts and aeronautical documentation regarding EASA, JAR-Ops, International Registry, FAA and individual country registration and certification.  Such knowledge and experience result in smooth, efficient, and successful transactions for their clients.  BAI specializes in medium cabin and larger private jets, particularly the Embraer product of line of Legacys and Lineages.