You have been asked to evaluate Company A and Company B and make your recommendation for acquiring one or both companies. Based on your initial assessment, y
Scenario
You have been asked to evaluate Company A and Company B and make your recommendation for acquiring one or both companies. Based on your initial assessment, you have created balanced scorecards for both companies. You are now ready to analyze the information you have gathered so far about the two companies so that you can compare the costs, benefits, and risks associated with acquiring each company and make a well-informed decision.
In this milestone, you will first analyze the current situation of TransGlobal Airlines using the given data and other sources to understand their business environment. You will also evaluate the performance of Company A and Company B using the balanced scorecards you created in Milestone One.
Prompt
Write a report with your performance evaluation of the three companies involved in the acquisition.
Specifically, you must address the following rubric criteria:
- Situation Analysis of TransGlobal Airlines (parent company). Use the provided TransGlobal Company Information and Financials to highlight the company’s current business environment.
- Internal environment: culture, leadership, internal processes, human resources, operations, and financial performance
- External environment: competitive, market, regulatory, customers, suppliers, and other relevant stakeholders
- Balanced Scorecard Analysis of Company A. Using the balanced scorecard for Company A from Milestone One, describe your analysis of Company A’s performance. Perform a cost-benefit-risk analysis to explain whether the benefits justify the costs of acquisition.
- Opportunity cost: What will it cost to move forward with this opportunity?
- Risk: Identify and explain the magnitude (low, medium, or high) of the risks this acquisition poses to the parent company related to its market, financial, cultural, and operational environments.
- Balanced Scorecard Analysis of Company B. Using the balanced scorecard for Company B from Milestone One, describe your analysis of Company B’s performance. Perform a cost-benefit-risk analysis to explain whether the benefits justify the costs of acquisition.
- Opportunity cost: What will it cost to move forward with this opportunity?
- Risk: Identify and explain the magnitude (low, medium, or high) of the risks this acquisition poses to the parent company related to its market, financial, cultural, and operational environments.
What to Submit
Submit a 6- to 8-page Word document using double spacing, 12-point Times New Roman font, and one-inch margins. If references are included, they should be cited in APA format
MBA 620 TransGlobal Airlines Information
Location, Size, and Age of the Firm
• Name: TransGlobal Airlines • Home Country: USA • HQ Location: Miami, FL • Size: 40,000 employees • Age: began operations in 1951
Customer Segment and Target Market
• Class: global airliner with dominant U.S. presence • Market: global • Destinations: 242 destinations serving 52 countries across six continents • Market segment: first class, luxury, business class, and economy • Global market share: 18% (ranked 2nd, American is number one at 18.6%) • U.S. market share: 18.3% (ranked 2nd, Southwest first at 19.1%) • Retention: 80% return customers • New customer growth: 27% annually (prior to COVID) • Passenger kilometers: 278 billion (American is number one at 287 billion)
Major Competitors
All international and domestic U.S. airlines
Company Leadership
Publicly held with a board, president, VP admin, CEO, CFO, COO, VP sales, division VPs, subsidiaries
Current Financials
• Annual gross revenues: $20.683 billion • Annual net income: $2.099 billion • Adjusted earnings per share of $3.22, a 28% increase year-over-year • Delivery of 88 new aircraft during the year • Number of aircraft in fleet, end of period: 1,062 • Average age of aircraft: 13 years • Domestic revenue grew 7.7% in the last quarter on 1.6% higher passenger unit revenue (PRASM)
and 6% higher capacity. Domestic premium product revenue grew 11% and corporate revenue grew 6%, driven by strength in business and leisure demand through the holiday period. Revenue and margin improved in all domestic hubs, with revenue up 10% in coastal hubs and 6% in core hubs.
• Atlantic revenue grew 0.8% in the last quarter on 2.4% higher capacity and a 1.6% decline in PRASM, driven almost entirely by foreign exchange rates.
• Latin revenue grew 6.7% on a 6.3% increase in unit revenue and 0.4% higher capacity. This revenue improvement was driven by continued double-digit unit revenue growth in Brazil and Mexico.
• Pacific revenue was down 0.5% vs. the prior year on a 4.4% decline in unit revenue primarily due to continued softness in China. This was a 3.2 point improvement vs. the September quarter on improved trends in Japan.
Strategic Plans and Goals
The board of directors has recently approved a comprehensive plan identified as TransGlobal 2030. The plan is the result of eight months of data collection, customer focus groups, leadership retreats, and employee input. The TransGlobal 2030 vision is to lead the industry in three critically important areas: safety, excitement, and stewardship (SES). This SES vision has been translated into a collection of guiding principles and goal statements:
• SES Principles o We will always treat our customers with respect. o We will value our employees and business partners. o We will innovate to provide our customers with the most forward-thinking and exciting
travel experience. o We will build lifelong relationships with our customers. o We will protect our planet.
• SES Goals o Safely re-introduce and promote the MAX 737 aircraft1. o Expand the fleet of regional aircraft with capacities below 70. o Upgrade the reservation and ticketing experience, including smartphone apps and
integration with apps associated with lodging, ground transportation, and attractions. o Achieve top-10 status in the 2030 World’s Best Workplaces rankings (currently not ranked in
top 100). o Reach net-zero carbon footprint by 2075. o Accelerate adoption of fuel-efficient aircraft and alternative fuels. o Expand use of carbon offset measures. o Improve our Airlines.com safety rating from 5 stars to 7 stars. o Build brand awareness and customer loyalty. o Address workplace inequities and build an inclusive culture. o Train every employee in the basics of FAA’s SAS (Safety Assurance System) via 2-hour web-
based training. 1 The popular 737 aircraft has been the subject of considerable controversy and safety concerns worldwide.
ASSETS (in millions)
Current Assets Cash and cash equivalents: $1,268
• Accounts receivable: $1,256 • Fuel inventory: $321 • Expendable parts and supplies inventories, net: $229 • Prepaid and other expenses: $559 • Total current assets: $3,629
Other Assets:
• Property and equipment: $13,776 • Operating lease right-of-use assets: $2,476 • Goodwill: $4,304 • Identifiable intangibles: $2,272 • Cash restricted for airport construction: $280 • Other noncurrent assets: $1,657 • Total other assets: $24,765
Total assets: $28,394
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities • Current maturities of long-term debt: $806 • Finance leases: $200 • Current maturities of operating leases: $352 • Air traffic liability: $2,251 • Accounts payable: $1,437 • Accrued salaries and related benefits: $1,628 • Loyalty program deferred revenue: $1.416 • Fuel card obligation: $ 324 • Other accrued liabilities: $474 • Total current liabilities: $8,888
Noncurrent Liabilities
• Long-term debt: $3,000 • Finance leases: $904 • Pension, postretirement Related benefits: $3,719 • Loyalty program deferred revenue: $1,544 • Noncurrent operating leases: $2,329 • Deferred income taxes: $641 • Other noncurrent liabilities: $610 • Total noncurrent liabilities: $12,747 • Total liabilities: $21,635
Stockholders' equity: $6,759 Total liabilities and stockholders’ equity: $28,394 Margins
• Operating margin: 14.08% • Net profit margin: 10.14% • Operating cash flow margin: 41.7% • Debt to equity: 3.20 • ROE: 31.04% • ROA: 7.39% • Receivables turnover: 16.47% • Aircraft capacity: 98% • Current ratio: 0.408
• Quick ratio: 0.2839
- MBA 620 TransGlobal Airlines Information
- Location, Size, and Age of the Firm
- Customer Segment and Target Market
- Major Competitors
- Company Leadership
- Current Financials
- Strategic Plans and Goals
- ASSETS (in millions)
- Current Assets
- Cash and cash equivalents: $1,268
- LIABILITIES AND STOCKHOLDERS' EQUITY
- Noncurrent Liabilities
- Margins
,
INSTRUCTIONS
BigCo_BalanceSheet2019
| 3/4/21 | |||||||||||||||||||
| TransGlobal Airlines, Inc. | |||||||||||||||||||
| Consolidated Balance Sheet | |||||||||||||||||||
| (For instructional purposes only) | |||||||||||||||||||
| (in millions, except share data) | 12/31/19 | 12/31/18 | |||||||||||||||||
| ASSETS | |||||||||||||||||||
| Current Assets: | |||||||||||||||||||
| Cash and Cash Equivalents | $ 908 | $ 493 | |||||||||||||||||
| Accounts receivable, net of an allowance for uncollectible accounts of $4.1 and $3.8 at December 31, 2019 and 2018, respectively | 899 | 729 | |||||||||||||||||
| Fuel Inventory | 230 | 186 | |||||||||||||||||
| Expendable parts and supplies inventories, net of an allowance for obsolescence of $25.8 and $32.12 at December 31, 2019 and 2018, respectively | 164 | 146 | |||||||||||||||||
| Prepaid Expenses and Other | 397 | 443 | |||||||||||||||||
| Total Current Assets | $ 2,598 | $ 1,996 | |||||||||||||||||
| Noncurrent Assets: | |||||||||||||||||||
| Property and Equipment, net of accumulated depreciation and amortization of $5,360 and $4,983 at December 31, 2019 and 2018, respectively | 9,860 | 8,923 | |||||||||||||||||
| Operating Lease Right-of-Use Assets | 1,772 | 1,888 | |||||||||||||||||
| Goodwill | 3,080 | 3,080 | |||||||||||||||||
| Identifiable Intangibles, net of accumulated amortization | 1,626 | 1,521 | |||||||||||||||||
| Cash Restricted for Airport Construction | 200 | 358 | |||||||||||||||||
| Other Noncurrent Assets | 1,186 | 1,212 | |||||||||||||||||
| Total Noncurrent Assets | $ 17,724 | $ 16,981 | |||||||||||||||||
| Total Assets | $ 20,321 | $ 18,978 | |||||||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||
| Current Maturities of Debt and Finance Leases | 72 | 478 | |||||||||||||||||
| Current Maturities of Operating Leases | 252 | 301 | |||||||||||||||||
| Air Traffic Liability | 1,611 | 1,468 | |||||||||||||||||
| Accounts Payable | 1,028 | 937 | |||||||||||||||||
| Accrued Salaries and Related Benefits | 1,165 | 1,035 | |||||||||||||||||
| Loyalty Program Deferred Revenue | 1,014 | 941 | |||||||||||||||||
| Fuel Card Obligation | 232 | 339 | |||||||||||||||||
| Other Accrued Liabilities | 339 | 352 | |||||||||||||||||
| Total Current Liabilities | $ 6,362 | $ 5,850 | |||||||||||||||||
| Noncurrent Liabilities: | |||||||||||||||||||
| Debt and Finance Leases | 2,794 | 2,599 | |||||||||||||||||
| Pension, Postretirement, and Related Benefits | 2,662 | 2,885 | |||||||||||||||||
| Loyalty Program Deferred Revenue | 1,105 | 1,150 | |||||||||||||||||
| Noncurrent Operating Leases | 1,667 | 1,827 | |||||||||||||||||
| Deferred Income Taxes, net | 458 | 51 | |||||||||||||||||
| Other Noncurrent Liabilities | 436 | 305 | |||||||||||||||||
| Total Noncurrent Liabilities | $ 9,123 | $ 8,818 | |||||||||||||||||
| Commitments and Contingencies | |||||||||||||||||||
| Stockholders' Equity: | |||||||||||||||||||
| Common Stock at $0.0001 par value; 1,500,000,000 shares authorized | |||||||||||||||||||
| Additional Paid-in Capital | 3,505 | 3,675 | |||||||||||||||||
| Retained Earnings | 3,922 | 3,161 | |||||||||||||||||
| Accumulated Other Comprehensive Loss | (2,516) | (2,464) | |||||||||||||||||
| Treasury Stock, at cost | (74) | (62) | |||||||||||||||||
| Total Stockholders' Equity |
