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Feb 20, 2024

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TRANSGLOBAL ANALYSIS AND PROPOSAL FOR ACQUISITION Pointia Desravines MBA-620-Q2778 Measuring Success in an Org 23TW2 Southern New Hampshire University 9-1 Project Submission: Acquisition Proposal Remi-Pascal Joyeuse February 4 2024

SITUATION ANALYSIS OF TRANSGLOBAL AIRLINES Internal Analysis • TransGlobal Airlines is a global airline carrier that holds a dominant U.S. presence with a private charter division. • TransGlobal Airlines is a publicly held company with multiple management figures including a board. • TransGlobal Airlines based in Miami, Florida • TransGlobal Airlines employees approximately 40,000 • Flights to 242 destinations, across six continents and 52 countries. • Annual Gross Revenues of $20.683 billion, net • income of $2.099 billion, and an adjusted earnings per • Share of $3.22 with an increase of 28% year-over- year. • An internal culture of safety and stewardship, with an emphasis on valuing both employees and customers

SITUATION ANALYSIS OF TRANSGLOBAL AIRLINES External Analysis: • Market segment: First Class, Luxury, Business Class, and Economy TransGlobal Airlines' global market share is 18% (ranked 2nd behind American with 18.6%), while their U.S. market share is 18.3% (ranked 2nd behind Southwest with 19.1%). Customer retention rate of 80% with new customer growth of 27% per year (pre-COVID). Airline companies worldwide and TransGlobal U.S. domestic carriers are major competitors. Several economic risks are posed by the Covid pandemic, which is an external threat. As well as international exchange rates, and political and regulatory risks associated with acquiring another airline.

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ACQUISITION RATIONALE TransGlobal Airlines is considering acquiring two smaller airlines TGA's Southeastern U.S. division specializes in chartering aircraft for luxury vacations using light aircraft with a maximum capacity of 60 passengers. This division handles private charter flights for Fortune 500 companies and other clients. The results of the further analysis revealed that two airlines (Company A and Company B) have aircraft fleets that will be able to meet the needs of the regional luxury chartered flight market segment that TransGlobal Airlines will be acquiring within the planned acquisition process

PROPOSE D ACQUISITI ON Company A • Based in Miami, FL • Has 165 employees • Founded in 1981 • Market Segment: Luxury Tourist, Business class • Competitors: Delta, American, Bahamas Charter, Cape Air, Seaborne • Privately Held Company- with a board • Annual Revenues $28-29 million • year-over-year growth 2.5-2.9% • Seat Occupancy Average of 74% with 66% return customers Company B • Based in Orlando, FL • Has 98 employees • Founded in 1988 • Market Segment: Tourists, Business Class • Competitors: Delta, American, Sun Country, Frontier • Privately held - with a board • Annual Revenues: $26-27 million, 3% • Annual Revenues $28-29 million, 2.5- 2.9% year-over-year growth, GPM 33%, NPM year-over-year growth, GPM 45%, NPM 8% 0.2 • Seat Occupancy Average of 62%, 40% return customers

BALANCED SCORECARD-COMPANY A 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 Increasing the average ticket price, offering new destinations or flights, improving the efficiency of the fuel system, and increasing employee satisfaction are all things that can be done. Increase market share by focusing on growth An increase in passenger costs will lead to a decrease in expenses and an increase in gross profit, ensuring that budgets are met. In the last two years, there has been a decrease in expenses resulting in a gross profit the following year. Liquidating older aircraft will provide capital for replacements; about $200k-300k /year is still needed.mn Offering new destinations and routes will attract new customers and generate revenue. As we increase personnel, we can provide more flights, increasing revenue. To increase customer satisfaction and profits, we can adjust the routing of existing flights by using the data from actual flights Adding new destinations and updating flight routes and schedules can attract new customers, which results in increased revenue. Increase Revenue Revenue Growth 5% Increase 7% Increase 10% Increase Manage Costs Annual Departuring Costs 3% Decrease 5% Decrease 8% Decrease Reduce average age of fleet Total assets 5% Increase 7% Increase 10% Increase INTERNAL PROCESSES By introducing a mobile app and offering a loyalty program, we will make it easier for customers to interact with our brand. In addition, customers will be able to cancel their reservations at any time, as well as make updates as needed. The goal of the project is to increase productivity and improve processes in order to achieve this goal. Turnaround times are reduced as a result. It is estimated that updating and improving mobile apps (replacing old technology with more recent technology, updating old technology with more recent technology) will cost around $30k annually. Mobile KPIs measure revenue, average check size, customer acquisition costs, retention rate, downloads, and user satisfaction. Increasing personnel like ground workers and engineers will improve the turnaround process, reducing downtime. An increase in personnel means more downtime and higher industry benchmarks. In addition to the constant improvements to the mobile app, customers can interact more with the company, resulting in more flights, higher customer loyalty, and more revenue for the company. Increase Mobile Access Mobile APP Downloads 20% Increase 40%increase 60 % Increase Reduce Aircrafts Turnaround Time Aircraft turnaround time 90% min 60 Min 45 Min CUSTOMER/MARKET As a result of the launch of the mobile app, we will be able to improve the time it takes for check-ins, mobile tickets, and frequent flyer programs. As a result of doing this, we will increase the audience for our survey. We will also make it easier for people to fill it out than ever before. It is estimated that the average annual income for frequent flyer loyalty programs is $76k based on the statistics survey. Increasing the efficiency of the company by improving the reservation process, check-in process, and ticketing process will result in a reduction in waiting times, thus improving efficiency. New customers will eventually be attracted by it. Reservations and tickets will reduce desk personnel, allowing more funds to be allocated elsewhere. A growing customer base and a satisfied repeat customer base will increase profits. Increase Customer Satisfaction Ratention Customer Satisfaction Surveys 1-10 Rating 7 8 9 Increase new customer Growth Net profit 3% Increase 4% Increase 5%i ncrease market Share 3% Increase 4% Increase 5% Increase LEARNING AND GROWTH Enhance training and career development opportunities for employees. Employee recognition and future development incentives should be implemented to improve the working environment. A survey of employee satisfaction can be conducted to ensure that when changes need to be made, the voice of the employees is heard. The changes can be seen by them. Developing and improving training, recognition, and incentive programs will average 90k a year. Improve employee engagement. Employee engagement can also be boosted through regular communication, feedback, and support from colleagues and managers. If employees feel heard, it can boost morale and engagement. Investing in the success of your organization and contributing to its growth begins with employees feeling valued and considered. Increase Employee Retention Turnover Rate 10% decrease 5% Decrease 3% Decrease Increase Employee Engagement Customer Satisfaction Surveys 1-10 Rating 5 7 8

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RATIONALE FOR COMPANY A KPI’S Financial KPIs : • Reduce the average age of the current fleet by purchasing updated aircraft. To offset new aircraft purchases, we will sell the oldest aircraft in the fleet. • TransGlobal repaid some debt, resulting in an influx of cash that will be invested in new aircraft for improved fuel efficiency, which will save the airline money. • Enhance the customer experience by improving boarding times and turnaround times on the ground and phasing out older aircraft. • Increase the price of tickets to offset the improvements Internal Process KPI's • Increase fuel efficiency by 20% by replacing older/aging aircraft with new ones and addressing the aging fleet. • Training upgrades for the new cloud-based reservation system for all employees. • Develop a marketing campaign to target younger travelers/students for tourist and vacation locations, as well as Fortune 500 companies for luxury charter flights Customer KPI's • Enhance the check-in experience through a paperless boarding system, capturing new customers through technological advancements, customer interest, and marketing our new, improved technologies. Promote fuel efficiency of new aircraft, improve flying experience, increase customer satisfaction, and promote our commitment to solving economic environmental problems. • Select and implement frequent flyer programs for customers based on research and selection. • Updating and implementing a new customer app with a new cloud-based reservation system that allows the airline to adjust departure times based on customer demand, providing customers with better options and greater convenience. Learning KPI's • Enhance the cloud-based reservation system and implement a paperless boarding system, reducing the on-ground turnaround time for customers. As a result, employee and customer interactions will be positively impacted. • Integrating human resource benefits administration and accounting processes to streamline all aspects of the organization, improving employee satisfaction and reducing employee turnover.

OPPORTUNITY COST AND RISK • Opportunity Cost: Moving forward with the acquisition of Company A would result in a missed opportunity to acquire a fleet of 55 aircraft with capacities of 20- 60 passengers. This would result in losing 18.9% of the Caribbean destination market share. • Risk: Market Risk: Low impact risk in limiting the customer segment to luxury and business class passengers • Financial Risk: There is a medium impact risk because Company A's aircraft fleet has an average age of 14 years, compared to 25 years for a typical aircraft. • Cultural Risk: Company A's employees have been talking about unionizing, which has a medium impact on TransGlobal Airlines' culture.

BALANCED SCORECARD-COMPANY B 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 Our key objective with our strategy is to generate revenue to pay off our debts first and then further develop our strategy. We will be able to compete with our opponents in the existing market by introducing new products and services. To acquire new customers/clients and establish our presence in the market, we will focus on how our products can be unique and meet the demands of our target markets As a company, we will be focusing on developing new products and services and expanding our business with 5-8 million dollars in the near future. For us to be able to pay off the debt, we will need to earn gross revenues and make sure that our new products are accepted by the market in order for us to pay off the debt. Based on the company's financial performance, net profits can offer insight into how well it is surviving. Profits will increase when there is a rise in profitability, which will provide more opportunities for investment. As a result of the updated features, customers will benefit because upgraded airplanes will save time. In addition, funding for maintenance will allow the enhanced features they have been waiting for to be improve FINANCIAL 5% 9% 12% 3% Decrease 5% Decrease 8% Decrease Our key objective with our strategy is to generate revenue to pay off our debts first and then further develop our strategy. We will be able to compete with our opponents in the existing market by introducing new products and services. To acquire new customers/clients and establish our presence in the market, we will focus on how our products can be unique and meet the demands of our target markets There will be a cost of approximately $2 million for developing a software application that simplifies booking reservations for customers. In addition, we will conduct survey research to find solutions to various problems. Conducting a customer survey is the easiest and most effective way to capture what consumers want. As a result of improving and updating our services, we will attract not only new customers, but also show repeat customers that their opinions and priorities are being taken seriously INTERNAL PROCESSES 7 8 9 3% Increase 6%increase 10% Increase Because these were the least positive consumer interactions, I chose them. Customers expect airlines to provide convenient schedules, streamlined check- in processes, and easy-to-understand reservation procedures. Since customer satisfaction is our top priority, we constantly conduct surveys and modify Developing a better navigation system and converting everything to electronic dates will cost about $2 million depending on how complex the project is In addition, these improvements can result in an increase in customer retention of 50% as a result of these improvements The addition of things like free WiFi, incentives, and customer loyalty programs will have a positive impact on frequnt flyer CUSTOMER/MARKET 6 7 8 10% 12% 18% To achieve this goal, we will concentrate on increasing the fuel efficiency of our aircraft rather than purchasing updated ones. The way to accomplish this is by reducing the number of unnecessary layovers, which is one of the methods that can achieve this. I believe that there should be a more direct route and a more direct flight on this route. As part of our plans, we will allocate $800 thousand towards employee training and methods that can improve employee satisfaction in the near future. It is crucial for the success of any organization to increase employee engagement. As a result, productivity can increase, job satisfaction can increase, and turnover rates can be reduced. It is vital to create a positive work environment, provide growth opportunities, and acknowledge and reward employees for their contributions and hard work in order to improve employee engagement. Employee engagement can also be boosted through regular communication, feedback, and support from colleagues and managers If employees feel heard, it can boost morale and engagement. Investing in the success of your organization and contributing to its growth begins with employees feeling valued and considered. This can also lead to a more collaborative and innovative work environment, as employees are more willing to share their thoughts and suggestions LEARNING AND GROWTH 10% decrease 5% Decrease 3% Decrease 5 7 8

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RATIONALE FOR COMPANY B KPI'S • Improve customer experiences and satisfaction by investing in new, updated aircraft. This reduces the average age of our fleet, lowers maintenance costs, and provides a rationale for increasing fares. • Boost employee wages and offer incentives for completion of safety regulation training and customer service training. • Develop a marketing strategy that maintains and grows customer loyalty Internal Processes: • Improve employee retention by providing wage increases above the industry average in the maintenance department and reducing overtime. • Offer paid training to employees to cross-train in the maintenance department • Increase the number of updated aircraft purchased, reducing maintenance. • Improved aircraft cleaning procedures and introduced enhanced food and beverage offerings. Customer: • Implementing an improved customer service training program, which will improve customer service for customers • Implementation of new SITA Horizon software creates a streamlined process for customers using new SITA Horizon software. • Improve aircraft cleaning by implementing an improved system. • Improve the overall value of flights for passengers by extending the range of food and beverage options for flight travelers. This will ensure that the improvements in the overall value of the flight experience will offset the increase in fares for customers. Learning: • Provide training on the new SITA Horizon software to all current and new employees • Implement mandatory • Offer incentives to employees for completing refresher training courses • Establish an internal process for the implementation of all HR functions

OPPORTUNITY COST AND RISK • Opportunity Cost: A potential opportunity cost is incurred by acquiring 40 aircraft with a capacity of 12-50 passengers each. • Risk: • Market Risk: There is a medium risk to the economy, vacationers, and tourist customer markets, which are looking for low fares to Caribbean destinations, due to high oil prices • Financial Risk: There is a high financial risk associated with the maintenance and updating of Company B's fleet of aircraft because the average age of the aircraft in Company B's fleet is 18 years old. Aside from that, Company B's net profit margin is considerably lower than Company A's, at only 0.2%. • Cultural Risk: There is a high impact risk because of the employee turnover and low wages at Company B, which causes TransGlobal to have to take on the cultural and financial burden placed on it by Company B.

Proposal For Acquisitio n of Company A

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RECOMMENDATION AND RATIONALE • Acquisition: It is imperative to note that both Company A and Company B are high-quality airlines within the Caribbean destination airline industry. TransGlobal Airlines is considering the acquisition of Company B in the next few months, and after performing a side-by-side comparison and evaluation, it has been determined that despite Company B having some excellent qualifications, Company A is a more aligned organization for them. • Financial: Company A is in a better competitive position when it comes to revenue per year. It has a $28 million revenue per annum and a net profit margin of 8%. Company B sits at a $26-million revenue per annum with a net profit margin of 0.2%. As a result, it will be more challenging for Company B to improve their net profit margin going forward. Secondly, their fleet of aircraft has an average age of 18 years, which means that they will need to spend more money on maintenance compared to Company A, whose fleet is an average of 14 years, which is in line with TGA's fleet, which is an average of 13 years old. • Market: Tourists and business travelers are the target market segment of Company A, while tourists and business travelers are the target market segment of Company B. The market segment of Company A closely aligns with that of TGA's current first class, luxury, business class, and economy. In addition to expanding its chartered luxury vacationer division, TransGlobal will enhance its reputation as a global travel company. Aircraft capacities of Company A are 20-60 passengers, while those of Company B are 12-50 passengers. This company aligns more closely with TGA's desire to acquire aircraft that can carry 60 or fewer passengers. • Competitive: Both companies have Delta Connections with American Airlines as a major competitor. As a direct competitor of Bahamas Charter Airlines, Cape Air, and Seaborne Airlines, Company A competes with Sun Country and Frontier while Company B competes with Sun Country and Frontier. The competitors of company B are primarily discount airlines, while the competitors of company A are aligned more closely with the competitors of TransGlobal Airlines.

ASSUMPTIONS • Worst-Case Scenario: • Company A is well positioned for a transition, and its revenue stream is positive. However, there is a need for younger tourists and aircraft fleets to be modernized as well, and the industry's customer technology must also be developed to attract younger travelers. To attract new customers, TransGlobal must rapidly integrate brand awareness and customer loyalty into Company A's public image. This needs to occur while reducing turnover, merging both organizations' cultures, and building a more inclusive culture by offering Company A's employees additional opportunities and upward career mobility. • Best-Case Scenario: • A successful merger and acquisition of TransGlobal Airlines and Company A will attract new customers, expand the market segment for TransGlobal Airlines, and promote positive customer feedback for Company A's. It is important that TransGlobal and Company A both build a long-lasting relationship with the existing and new customer market segments by implementing a new Frequent Flyer program for Company A's customer market segment and offering improved/convenient departure times.

References: https://learn.snhu.edu/d2l/le/content/1445251/viewContent/28461093/View SNHU (February 2024). Interviews With Company Leaders: Company A. https://learn.snhu.edu/content/enforced/1445251-MBA-620-Q2778-OL-TRAD-GR.23TW2/Course %20Documents/MBA%20620%20Company%20A%20Confidential%20Interview%20Notes.pdf? ou=1445251 SNHU (February 2024). Interviews with Company Leaders: Company B https://learn.snhu.edu/content/enforced/1445251-MBA-620-Q2778-OL-TRAD-GR.23TW2/Course %20Documents/MBA%20620%20Company%20B%20Confidential%20Interview%20Notes.pdf? ou=14 MBA 620 TransGlobal Airlines Information https://learn.snhu.edu/content/enforced/1445251- MBA-620-Q2778-OL-TRAD-GR.23TW2/Course%20Documents/MBA%20620%20TransGlobal %20Airlines%20Information.pdf?ou=1445251

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