Milestone 2

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.
Guidelines for Submission
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. Consult the Shapiro Library APA style guide for more information on citations.
ATTACHED FILE(S)
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 $4.1and $3.8at December31, 2019 and 2018, respectively 899 729
Fuel Inventory 230 186
Expendable parts and supplies inventories, net of an allowance for obsolescence of $25.8and $32.12at December31, 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 $5,360and $4,983at December31, 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 $0.0001par value;1,500,000,000shares 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 $ 4,893 $ 4,310
Total Liabilities and
Stockholders’ Equity $ 20,321 $ 18,978

Copyright, SNHU, 2021. All rights reserved.

Big_INCOME_2019
3/4/21
TransGlobal, Inc.
Consolidated Statement of Operations(INCOME STATEMENT)
(For instructional purposes only)
All values in millions, except per-share data 2019 2018 2017
Operating Revenue:
Passenger $13,313 $12,519 $11,635
Cargo 237 272 234
Other 1,252 1,202 1,085
Total operating revenue 14,803 13,994 12,954
Operating Expense:
Salaries and related costs 3,535 3,383 3,167
Aircraft fuel and related taxes 2,683 2,840 2,127
Regional carriers expense, excluding fuel 1,129 1,083 1,091
Contracted services 832 685 664
Depreciation and amortization 813 733 700
Passenger commissions and other selling expenses 628 611 575
Landing fees and other rents 555 523 473
Aircraft maintenance materials and outside repairs 551 496 501
Profit sharing 517 410 335
Passenger service 394 371 354
Ancillary businesses and refinery 392 534 471
Aircraft rent 133 124 111
Other 558 543 507
Total operating expense $12,718 $12,336 $11,076
Operating Income $ 2,084 $ 1,658 $ 1,879
Non-Operating Expense:
Interest expense, net (95) (98) (125)
Gain/(loss) on investments, net 37 12 –
Miscellaneous, net (75) 50 (22)
Total non-operating expense, net (132) (36) (147)
Income Before Income Taxes 1,952 1,622 1,732

Income Tax Provision (451) (383) (723)
Net Income 1,501 1,239 1,009
Basic Earnings Per Share $2.31 $1.79 $1.40
Diluted Earnings Per Share $2.30 $1.79 $1.40
Cash Dividends Declared Per Share $0.48 $0.41 $0.32
Copyright, SNHU, 2021 All rights reserved.
BIGCASHFLOW2019
3/4/21
TransGlobal, Inc.
Consolidated Statement of Cash Flows
(All data are for educational purposes only)
(in millions) Year ending December 31, Year ending December 31, Year ending December 31,
Cash Flows From Operating Activities: 2019 2018 2017
Net income $ 1,501.1 $ 1,239.1 $ 1,009.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization $ 812.76 $ 733.40 $ 699.71
Deferred income taxes $ 463.85 $ 429.52 $ 706.01
Pension, postretirement and postemployment payments greater than expense $ (290.34) $ (248.77) $ (1,039.80)
Changes in certain assets and liabilities:
Receivables $ (244.05) $ 34.01 $ (134.78)
Fuel inventory $ (43.77) $ 102.03 $ (125.02)
Prepaid expenses and other current assets $ 29.60 $ (138.56) $ (17.95)
Air traffic liability $ 142.96 $ 93.53 $ 89.43
Loyalty program deferred revenue $ 27.40 $ 100.45 $ 125.65
Profit sharing $ 111.47 $ 73.37 $ (16.06)
Accounts payable and accrued liabilities $ 45.35 $ (131.63) $ 300.73
Other, net $ 96.67 $ (77.78) $ (15.43)
Net cash provided by operating activities $ 2,653.0 $ 2,208.7 $ 1,581.7
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments $ (1,053.03) $ (1,166.39) $ (851.49)
Ground property and equipment, including technology $ (501.32) $ (461.01) $ (373.79)
Purchase of equity investments $ (53.53) $ – 0 $ (392.05)
Sale of equity investments $ 87.86 $ 8.82 $ – 0
Purchase of short-term investments $ – 0 $ (45.66) $ (291.28)
Redemption of short-term investments $ 64.87 $ 241.21 $ 183.90
Other, net $ 18.26 $ 39.68 $ 66.44
Net cash used in investing activities $ (1,436.9) $ (1,383.4) $ (1,658.3)
Cash Flows From Financing Activities:
Payments on debt and finance lease obligations $ (1,045.47) $ (961.07) $ (396.14)
Repurchase of common stock $ (638.30) $ (495.97) $ (528.09)
Cash dividends $ (308.60) $ (286.24) $ (230.19)
Fuel card obligation $ (106.75) $ 2.20 $ 200.28
Proceeds from short-term obligations $ 551.08 $ – 0 ` $ – 0
Proceeds from long-term obligations $ 647.75 $ 1,179.30 $ 772.76
Other, net $ (6.61) $ 18.26 $ (48.49)
Net cash used in financing activities $ (906.9) $ (543.5) $ (229.9)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash $ 309.23 $ 281.84 $ (306.40)
Cash, cash equivalents and restricted cash at beginning of period $ 865.35 $ 583.51 $ 889.91
Cash, cash equivalents and restricted cash at end of period $ 1,174.6 $ 865.3 $ 583.5
Supplemental Disclosure of Cash Paid for Interest $ 151.5 $ 118.4 $ 122.8
Non-Cash Transactions:
Treasury stock contributed to pension plans $ – 0 $ – 0 $ 110.2
Right-of-use assets acquired under operating leases $ 146.1 $ – 0 $ – 0
Flight and ground equipment acquired $ 204.7 $ 29.3 $ 82.2
Operating leases converted to finance leases $ 59.8 $ 2.2 $ – 0
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:
Year Ended December 31,
(in millions) 2019 2018 2017
Current assets:
Cash and cash equivalents $ 907.5 $ 492.8 $ 571.2
Restricted cash included in prepaid expenses and other $ 66.8 $ 14.8 $ 12.3
Noncurrent assets:
Cash restricted for airport construction $ 200.3 $ 357.7 $ – 0
Total cash, cash equivalents and restricted cash $ 1174.6 $ 865.3 $ 583.5

Copyright, SNHU, 2021 All rights reserved

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
Balanced Scorecard-Company A
BASIC BALANCED SCORECARD TEMPLATE 3
COMPANY NAME
ADDRESS [Insert text CITY STATE ZIP
Category STRATEGIC OBJECTIVES KEY PERFORMANCE INDICATORS TARGET VALUES KPI ACTION PLAN DETAILS STUDENTS KPI SELECTION RATIONALE
YEAR 1 YEAR 2 YEAR 3 EXAMPLES OF PROGRAMS/INITIATIVES BUDGETS SELECTION RATIONALE CAUSE-EFFECT RELATIONSHIP
FINANCIAL Increase Sales Sales Revenue 27091 27876.639 28685.061531 Increasecustomer fairduring festive seasons .The company can reduce waiting times andstreamline operations of the airline.Prioritizeprofitability over renue growth and restructure whole fleet to increase passengers capacity.Increaseworkforceto 200 budgetfor workforce increase by increasing salaries from $2910000 to$ 3200000 Opearting cost afffects the profitability of business anddetermines its sustainability.A business is sustainable if it can minimize its operating cost while at the same time increasingicreasing profitability.Profitability is a competitive adavantage hence increaisng a company profitabilitygives it a competive edge over its rivals Reducing operating cost increases the firms net profit whileincreasing can increase o.Increase in revenue increases profits.Hence increasing revenue and decreasing operating costs helps achieve an increase in profit
Lower cost s Operating Costs 8840 lower by10 % Lower by 10 %
Increase profits Net profit
Net profi t margin 8% Increase by 3% Increase by 3%
Net profit margin:
INTERNAL PROCESSES Reduce Carbon Footprint sustainable aviation fuel reduce by 10% reduce by 10 % reduce by 10% sustainable aviation fuel and fuelling digitalisation an optimiazation can be used to achieve carbon footprint .Digitizing operationsto aidin retaining top notch talent SAF budget is five times the convection fuel. Budgetary allocation for HR technology :$320 per employee clients embrace clean technologies and energies, hence reducing carbon footprint attractsmany clinets and justify the setting of high prices while digitizingHR operations aids in retaining the employees Digitizing HR operation helps eliminatespaper thus reduces overelaince onunclean energywhich helps reduce carbonfoot print
Reducewaste on product produces digitize operations by 40% by 50% by 80%
CUSTOMER/MARKET Improve customer loyalty Number of repeat clients increase by 20% increae by 30% Increase by 35% Customer loyalty can be improved byincreasing responsiveness, rewarding repeated clientsby offering discountsand providing extra value. Increase new clientbytaking advantage of online ratings and reviewing sites,recontacting old cutomers, creating loyalty program s Budget for setting up loyalty programwil be roughly $6000 Customer loyaltyincreases profist, improves revenues andalso enables sustainabilty growth .Increasing new clients also improvessales revue and profitsand minimizes cost of increasing return on investment .New customer enables the aviation firm to create build a strong brandcustomer loyalty programs Increasing customer loyalty improves market growthwhileexpanding of market sharewidens the firm’soverall customer base as a potential new clients follow the lead of existing ones.
Grow Market share Number of New customers increase by 15% increae by 20% Increase by 30%
LEARNING AND GROWTH Improve employee retention Employee turnover reduce by 20% Reduce by 20% Reduce by 25% Program in support of employe retention includerecognizing and rewarding employees, enouraging worklife balance ,identifying a clear caree path for for employees and creating learning and development programs. Programs forincreasing employee engagementare team-building activities and recognition programs for employees. Allocate $50000 for development program Increasing employeeengagement and retention canhelp reduce employee turnover Improving employee engagement result in an increase in employee retention levels
Increaseemployee engagement open communication
Balanced Scorecard-Company B
BASIC BALANCED SCORECARD TEMPLATE 3
COMPANY NAME
ADDRESS [Insert text CITY STATE ZIP
Category STRATEGIC OBJECTIVES KEY PERFORMANCE INDICATORS KPI TARGET VALUES KPI ACTION PLAN DETAILS STUDENTS KPI SELECTION RATIONALE Category
YEAR 1 YEAR 2 YEAR 3 EXAMPLES OF PROGRAMS/INITIATIVES BUDGETS SELECTION RATIONALE CAUSE-EFFECT RELATIONSHIP
FINANCIAL Increase Sales Sales Revenue increase by 20% Increase by 20% Increase by 20% Minimum aircraft of 30 . Achive 90 % seat capacity and increasecustomer fair by 20% during vacations .Differentiate into business and economic clas to attract moreclients . Invest in aircraft with a lifespan of 25 years to reduce operating costs.Convert 40% of aircraft into economy class and teh newly acquired into business class Increase captiatl expenditure on aircraft acquisition by 50% Redicung operating cost will increase business profitabilty.Increase in sales revenuesis likely to transalte into more working capital which can faciliatate the purchase of additional aircraft without relying on debt financing conidering that its current debt is $80000 An increase in revenue increase profist and a decrease in operating costs also increases revenues FINANCIAL
Lower cost s Operating Costs Reduce lower by10 % Lower by 10 %

Net profit margin:
INTERNAL PROCESSES Reduce Carbon Footprint sustainable aviation fuel reduce by 10% reduce by 10 % reduce by 10% Improve cleanless, providediverse mealsand beverages, reduce in-fligh noise and improveamenities $70000 The companyhas negative reviews which are attributed to poor operational efficiencies. In-fight noise is an indication that the aircraft has not shifted to cleanenergy Improve operational efficienciesincreases customer satisftacion while carbon print reductionenhance brandof the companywhichtransaltesto increase in market share INTERNAL PROCESSES
Improve operational efficiency overall equipment effectiveness industry average industry average Slightly above industry average
CUSTOMER/MARKET Improve customer loyalty Number of repeat clients increase by 40% increae by 40% Increase by 45% Increaseresponsiveness, rewarding repeated clientsby offering discountsand providing extra value. Increase new clientbytaking advantage of online ratings and reviewing sites,recontacting old cutomers, creating loyalty program s Budget for setting up loyalty programwil be roughly $12000 Thecompanyhas negative reviews from its clients which indicates disastifaction from clients, hence improving customer loyalty iskey to improving customer loyalty and increasing thefirm’s market share Increasing customer loyalty improves market growthwhileexpanding of market sharewidens the firm’soverall customer base as a potential new clients follow the lead of existing one CUSTOMER/MARKET
Grow Market share Number of New customers increase by 25% increae by 30% Increase by 35%
LEARNING AND GROWTH Improve employee retention Employee turnover reduce by 20% Reduce by 20% Reduce by 25% Program in support of employe retention includerecognizing and rewarding employees, enouraging worklife balance ,identifying a clear caree path for for employees and creating learning and development programs. Programs forincreasing employee engagementare team-building activities and recognition programs for employees. Allocate $40000 for development program Improving employee engagement result in an increase in employee retention levels LEARNING AND GROWTH
Increaseemployee engagement open communication

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