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Overview

In your role as controller of a division of TransGlobal Airlines, you are responsible for assessing the possible acquisition of the two identified small airlines in the Caribbean specializing in chartered flights for luxury vacations using light aircraft (60 passengers or less).

One of the important steps in this acquisition process is analyzing, understanding, and identifying all the external and internal elements that can affect the organization’s performance, and, as businesses are greatly influenced by their environment, all the situational factors that determine how day-to-day circumstances impact firms. You can assess situational factors by performing a business environment analysis. The analysis entails assessing the level of threat or opportunity these situational factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm’s environment. You will use the PESTEL method to perform this analysis.

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Prompt

Use the information provided to you in the TransGlobal Airlines Information document to perform a business environment analysis using the PESTEL method. Your task is to analyze the internal and external business environment of TransGlobal Airlines by identifying the impact of each PESTEL factor on the business environment.

Specifically, you must address the following rubric criteria:

  1. Identify one political factor that can affect the company’s business environment and explain any potential impact on acquisition strategy.
  2. Identify one economic factor that can affect the company’s business environment and explain any potential impact on acquisition strategy.
  3. Identify one sociological factor that can affect the company’s business environment and explain any potential impact on acquisition strategy.
  4. Identify one technological factor that can affect the company’s business environment and explain any potential impact on acquisition strategy.
  5. Identify one environmental factor that can affect the company’s business environment and explain any potential impact on acquisition strategy.
  6. Identify one legal factor that can affect the company’s business environment and explain any potential impact on acquisition strategy.

Guidelines for Submission

Submit a 1- to 2-page Word document using double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style. Consult the Shapiro Library APA Style Guide for more information on citations

MBA 620 TransGlobal Airlines Company 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: $13.2 billion • Annual net income: $1.5 billion • Adjusted earnings per share of $2.31, a 30% 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 Note: The popular 737 aircraft has been the subject of considerable controversy and safety concerns worldwide.

ASSETS:

Current Assets:

• Cash: $2,882 • Cash equivalents: $1,565 • Accounts receivable: $2,854 • Fuel inventory: $730,592 • Expendable parts and supplies inventories, net: $521,463 • Prepaid expenses: $1,262 • Other expenses: $1,406 • Total current assets: $8,249 • Property and equipment: $31,311

Other Assets:

• Operating lease right-of-use assets: $5,626 • Goodwill: $9,781 • Identifiable intangibles: $5,167 • Cash restricted for airport construction: $1,136 • Other noncurrent assets: $3,759 • Total other assets: $24,969 • Total assets: $64,529

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

• Current maturities of long-term debt: $2,287 • Finance leases: $1,518 • Current maturities of operating leases: $1801 • Air traffic liability: $5,116 • Accounts payable: $3,266 • Accrued salaries and related benefits: $3,701 • Accrued salaries related benefits: $3,287 • Loyalty program deferred revenue: $3,219 • Fuel card obligation: $ 1,075 • Other accrued liabilities: $1,078 • Total current liabilities: $20,204

Noncurrent Liabilities:

• Long-term debt: $8,873 • Finance leases: $8,253 • Pension, postretirement: $8,344 • Pension, postretirement Related benefits: $9,163 • Loyalty program deferred revenue: $3,509 • Noncurrent operating leases: $5,294 • Deferred income taxes: $1,478 • Other noncurrent liabilities: $1,387 • Total noncurrent liabilities: $28,885 • Stockholders’ equity: $15,440 • Total liabilities: $64,529 • Stockholders’ equity: $60,266

Margins

• Gross profit margin: 37.84% • Operating margin: 14.078% • Net profit margin: 10.14% • Cash flow margin: 30.35% • Debt to equity: .0782 • ROE: 31.03% • ROA: 7.08% • Inventory turnover: 23.35% • Receivables turnover: 16.47% • Aircraft capacity: 98% • Current ratio: 0.681 • Quick ratio: 0.3824

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