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Analysis of Transglobal Airlines
"The data collected from the performance analysis will assist us in assessing the relative
opportunity costs and risks associated with Companies A and B. We will start by
comprehensively analyzing Transglobal Airlines to thoroughly understand its current business
landscape and any potential acquisition plans."
Internal Environment
In 1951, Transglobal Airlines was established to become a leading player in the aviation industry.
Over the years, the airline has steadfastly built a robust presence in the United States and has
expanded its operations to encompass a network of 242 locations worldwide. These locations
effectively serve 52 countries spanning six continents, showcasing the airline's global reach.
Transglobal Airlines proudly employs a workforce of 40,000 individuals to support its extensive
operations, contributing collectively to its success. The organizational structure includes key
leadership positions such as the board of directors, president, vice president, chairperson, chief
financial officer, chief operations officer, and department vice presidents, who play pivotal roles
in guiding the company toward its strategic objectives.
Transglobal Airlines has set a remarkable goal for itself-to be ranked among the top 10
companies globally in employment evaluations by 2030. This ambitious goal is not just a target
but a testament to the company's unwavering commitment to improving employee satisfaction
and well-being. To achieve this, the company has launched a comprehensive program addressing
critical issues related to labor conditions, inclusivity, and professional recognition, which have
previously impacted its assessment ranking.
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Through the implementation of this comprehensive program, the airline is striving to create a
more positive and inclusive work environment, attract top talent, foster collaboration, and
enhance overall job satisfaction. The company is confident that these efforts will improve
employee morale and productivity and elevate its standing within the industry, making it more
prosperous and competitive by 2030.
Transglobal Airlines offers its customers a variety of options, including first-class prestige,
economy plus, and economy, to cater to different preferences and budgets. Despite facing tough
competition from international and domestic airlines across the United States, Transglobal has
maintained an impressive overall profit margin of 18% as of 2019 (Bush, 2021). Specifically, the
profit margin is even higher in the domestic market at 18.3%. This competitive profitability is
not just a number but a testament to the company's financial strength and resilience in the
market, instilling confidence in its potential for further growth and success.
To further enhance customer satisfaction, the airline focuses on streamlining internal procedures
and emphasizing the Pacific region, which has seen a 5% decrease in revenue. Additionally,
Transglobal plans to upgrade its ticketing and reservation systems, introducing smartphone apps
that are more convenient for customers to access services on their mobile devices. These
enhancements are anticipated to improve customer retention rates and attract new customers to
Transglobal Airlines.
External Environment
The external factors that can be analyzed are competition, market conditions, and customer-
supplier relations that should be considered. The airline industry is highly competitive
worldwide. The goal is to reduce the difference between Company A and Company. Customer
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experience so that customer loyalty will increase is something that we will focus on more. With
Transglobal Airlines' strong presence within the United States, the customer retention rate is
80%, with a 27% growth rate with new customers. (SNHU Study material)
The Federal Aviation Administration (FAA) consistently updates its regulations to keep pace
with technological advancements, such as the reintroduction of the MAX 737 aircraft (Duncan,
2022). The Department of Transportation (DOT), the Federal Aviation Administration (FAA),
and the Department of Justice (DOJ) collaborate to oversee industry acquisitions, ensuring
compliance with specific criteria and commercial guidelines for flight operations. Airlines must
adhere to the Safety Assurance System (SAS) to meet legislative requirements, further ensuring
safety and operational standards in the aviation industry.
Balance Analysis of Company “A” Opportunity Cost
Understanding the potential for capital appreciation in an investment is crucial for institutions
that rely on marginal utility to evaluate financial decision-making (Fernando & Drury, 2021). A
thorough review of Company A's financial records, strategy, assets, and budget is essential to
assess its transactions' value accurately. This assessment is particularly important for Transglobal
Aviation in ensuring the availability of funds for aircraft acquisition.
Company A has consistently demonstrated increasing profits throughout the years, with an
operating income of $2,379 and marketable securities valued at $86,438. These figures affirm
Company A's high profitability, reflecting a net income of $44,319.
Thorough industry analysis, illustrated by Southwest Airlines' acquisition of ATA Airlines for
$7.4 million in 2008, is essential in evaluating whether the acquisition of Company A aligns with
Transglobal Aviation's financial considerations. Based on these parameters, the acquisition cost
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of Company A, estimated to be between $7 and $7.5 million, appears to fall within Transglobal
Aviation's financial scope.
Company A boasts a remarkable 64% profit margin, a 21% net income, and a loyal customer
base of 66%. With an annual growth rate of 22% and actual seat usage at 74%, the company is
also renowned for its innovation and maintains a low employee turnover rate, reflecting high
employee satisfaction. Should Transglobal Aviation acquire Company A’s potential to yield cost
savings and enhance its investment recovery prospects?
Balance Analysis of Company “A” Risk
When considering investment in airline companies, it is essential to acknowledge the higher
associated risk. A failed transaction could lead to a substantial loss of up to $7.5 million. This
risk is attributed to Company A's customer base, primarily travelers, visitors, and Caribbean
industries, resulting in heightened competition. Despite the company's reputation for providing
luxurious and elegant services, younger travelers may favor competitors due to their coach seats.
Company A heavily relies on social input for consumer verification and booking processes.
Outsourcing HR and accountancy activities may result in additional expenses to support vendors
or acquire the necessary information to integrate these activities into their computer processes.
For enhanced operational efficiency, Company A needs to modernize its standard procedures.
Understanding The Balance Analysis of Company “B” Opportunity Cost
Company B, known for being cost-effective, generates lower profits than Company A. Its
earnings stand at 49%, and net income varies between 2% and 6%. This indicates that Company
B accumulates income slower than Company A. However, collaborating with Company B offers
the advantage of tapping into extensive industry contacts within the amusement park profession
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in Florida and surrounding areas, potentially benefiting airline companies and leading to
additional economic gains.
Company A surpasses Company B in size, boasting a staff 98 and a capacity for 40 flights. In
contrast, Company B operates on a smaller scale, managing only eight sites. An analysis of
Company B's recent earnings reports reveals a decline in income from $2,025,000 in 2017 to
$79,000 in 2019. This decline is attributed to purchasing a nearby luxury hotel in 2016, resulting
in decreased liquidity ratios.
Considering Transglobal Aviation's acquisition terms, the estimated purchase cost for Company
B could range from $18 million to $20 million. Despite being affordable, Company B generates
less profit than Company A, with earnings at 49% and net income ranging from 2% to 6%.
Nevertheless, partnering with Company B presents the advantage of its numerous industry
contacts in the amusement park profession in Florida and its surrounding areas, potentially
leading to additional economic gains for airline companies.
Understanding The Balance Analysis of Company “B” Risk
The partnership with Transglobal Aviation poses a significant risk for Company B, primarily
serving Florida and neighboring regions, catering to visitors, travelers, and independent
professionals. Company B requires assistance in retaining customers, given its low average
retention rate of 40%, compared to the industry's average availability rate of 62%. These figures
indicate that flights contribute minimally to the company's income. Furthermore, travel on
Company B's flights is more expensive, covering only half of a commercial flight, with each
journey incurring additional costs for fuel and personnel. Concerns also arise regarding the short
lifespan of Company B's aviation equipment, with an average flight duration of 18 years and
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serviceability of only 25 years, necessitating frequent equipment renewal and leading to
increased expenses for Transglobal Flights.
Additionally, Company B's reputation is a concern, evident in its higher staff turnover rate than
other airlines and the challenge of securing a stable core ground crew. The estimated quarterly
attrition rate for the company is 18%. Consequently, Transglobal Aviation must allocate
additional funds and effort toward recruiting and enhancing its management styles.
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References
Bush, M. (2021, April 13). Why are diversity and inclusion important in the workplace? Great
Place To Work.
https://www.greatplacetowork.com/resources/blog/why-is-diversity-inclusion-in-the-workplace-
important
Duncan, Ian. “FAA Finalizes Safety Rule Change Sought after 737 Max Crashes.” The
Washington Post, 7 Sept. 2022, www.washingtonpost.com/transportation/2022/09/07/faa-boeing-
oversight/
Fernando, J. and Drury, A. (2021, August 29). Opportunity Cost. Investopedia.
https://www.investopedia.com/terms/o/opportunitycost.asp
SNHU Study Materials