Running Head: EXECUTIVE SUMMARY
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8-2 Executive Summary: Safety Issues in Company B
MBA 620
SNHU
EXECUTIVE SUMMARY
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Transglobal Airlines is planning to acquire Company A and Company B, the
firms specializing in chartered flights for luxury vacations. The analysis of both the
companies has been completed, and it is found that Company A and Company B are
ideal for acquisition as they possess unique strengths. However, while researching in
order to ensure up-to-date and accurate information, it has been found that two of the
aircrafts of Company B have been grounded for the last couple of months. The reason
behind this is some technical issues and FAA safety violations. Due to the grounded
flights and technical repairs, the revenue of Company B has decreased by 10% in the last
month. The mitigation expenses have further increased the operating costs and added
nearly $80,000. The ground crew members of Company B have mishandled the situation,
thereby leading to negative feedback from the customers. All such situations have had a
significant and direct impact on Company B in the last month.
The news of Company B’s flights being grounded due to safety issues will
definitely affect the revenues of the company. However, there are a number of other
factors that this news will affect. It is likely to affect the value of the company. For
instance, it will have a negative social impact (Della & Repon, 1999). It will affect the
emotions of the people, and people are less likely to choose the flights of Company B
for their vacation owing to the potential risk to their lives. The news will ultimately
result in the spreading of the negative image of the company in the market, thereby
affecting the reputation of the company.
The grounding of the aircraft of Company B will significantly affect the initial
performance as well as analysis of the company (Della & Repon, 1999). The revenue of
the company, profit margin, as well as the number of aircraft in the fleet, will have to be
taken into consideration again.
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The situation also involves additional risks. Some of the risks are the imposition
of penalties and restrictions on the flying of the aircraft due to violation of the FAA
safety rules. The authorities of FAA may take certain legal action against the company
for risking the lives of people. This can further affect the revenue of Company B as well
as its image in the market.
The current situation of Company B will have a significant impact on the
recommendation made previously relating to the acquisition of Company B by
Transglobal Airlines. It is mainly because Company B was selected as an acquisition
target due to the reputation of the company as a value leader. However, the reputation of
the company has been affected due to the safety issues identified in the past couple of
months. So, Transglobal Airlines will have to contemplate again on whether to acquire
Company B or not.
In order to make the final decision, additional information relating to the situation
will be required. The required information includes how Company B is dealing with the
situation. What are the different corrective measures are taken by the company, and how
the company commits to ensuring that safety issues are not compromised in the future.
EXECUTIVE SUMMARY
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References
Della Rocco, P. S., & Repon, F. (1999). US Department of Transportation Federal
Aviation Administration.
