Purchase Solution

Blue Sky Airlines: selling an option to existing shareholder

Not what you're looking for?

Ask Custom Question

Can you help me get started with this assignment?

Construct a one-page document "selling" your chosen option to your existing shareholders and bondholders based on the merits of your plan, in comparison to the short-term or long-term shareholder value of rest of the alternatives.

Consider that Blue Sky Airlines has the following options:

 The government has offered a potential "gift" to cover the incremental cost of fuel. This is an elimination of a 6% fuel excise tax as well as an interest-free $100 million gift in return for agreeing to purchase only US-manufactured aircraft over the three-year period with no reduction in aircraft cost financed by an additional debt at 10%.

 The company has been offered a fuel-hedging program that involves a one-time investment of $10 million but guarantees a 4% annual price increase in operating costs.

 The company has been offered a 5-year union contract for no wage increases in return for a guarantee of no reduction in jobs.

 The company has been offered a 10% reduction in the cost of a planned $600 million aircraft order by a foreign supplier financed by debt at 10%. Alternatively the company can forego buying new aircraft but incurs a 10% higher ongoing cost in fuel and labor.

 The company has the option to create a low-cost structure that will replace its existing labor structure. This involves taking the company to bankruptcy to void union contracts, reduces overall labor costs by 25% but involves a 40% premium in ongoing debt expense.

Purchase this Solution

Solution Summary

The response addresses the queries posted in 441 Words, APA References

Solution Preview

The response addresses the queries posted in 441 Words, APA References
Shareholder's Value: Long term and Short term Period

The first option, that is to accept the Government's potential gift to cover the incremental cost of fuel, is best for the shareholders of the Blue Sky Airlines because it will cause for the decrease in the fuel costs by 6%. The main problem that is faced by the aviation industry is the increase in the fuel prices. The price of the fuel for the aircrafts is increasing that is causing less benefits and an increase in the cost of the airlines (US Airlines Face Billions in Extra Fuel Costs, 2005).

Merits of the Option

This option is providing ...

Solution provided by:
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
Recent Feedback
  • "Thank You so much! "
  • "Always provide great help, I highly recommend Mr. Sharma over others, thanks again. "
  • "great job. I will need another help from you. "
  • "first class!"
  • "Thank you for your great notes. Will you be willing to help me with one more assignment? "
Purchase this Solution


Free BrainMass Quizzes
Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.