Buyout Proposal: Alaska Air Group Inc.
Number of words: 1385
Based in Washington, Alaska Air Group was founded in 1985 in order to act as a holding airline firm. The firm then merged two companies, namely Jet America Airlines, as well as Horizon Air. It operates different aircraft, including Boeing, Airbus, and Ambraer, among others. Currently, the company functions via Alaska Regional, Horizon, and Alaska Mainline. Going by the trends, Alaska Air Group Inc. firm has not been making a consistent profit, as it appears to fluctuate over the years since 2008. Moreover, airline operations were substantially hindered amidst Coronavirus virus disease 2019 (COVID-19). This problem was orchestrated by measures instituted to curb the disease spread. The issue did not only hamper Alaska Air Group Inc. but also other air traveling-based firms operating globally. Moreover, this situation was unprecedented and because of that aspect, most companies did not have a backup plan to salvage the aftermath turmoil. Presently having a market cap of $7.128B, Alaska Air Group Inc. is worth considering when deciding on a company for the buyout (Yahoo Finance). With its type of stock labeled mid-cap, Alaska Air Group Inc. has established itself as one of the leading firms in the air transport sector, making it stable. However, the coronavirus disease wreaked havoc, causing dismal financial performance in the past two years.
Alaska Air Group Inc. is the best buyout choice due to several reasons, some of them related to the recent coronavirus pandemic. For example, the firm currently operates in a debt situation at the company, there is no doubt that it has financial distress. The firm had a debt value of $3.57B, which was an increment from that of last year. From the balance sheet, the company had a $3.55B cash value. Meaning, it had a net debt of around $22M. Moreover, the current liabilities of the company stand at $7.32B, which is higher than the total cash and short-term receivables. An aspect worth noting is that the deficiency exceeds the market cap, and because of this scenario, the firm should review its balance sheet keenly. If the firm is forced to clean its balance sheet quickly, then the shareholders are more likely to suffer dilution. Therefore, a buyout is worth it because the company is in financial distress, and this way, a short-term and long-term revival plan can resurrect it so that it can perform optimally.
Furthermore, the firm’s earnings per share (EPS) is at -4.93 within the last few months, meaning the company is losing money. Because the firm has a mid-cap stock, a buyout is advisable, as the investors can still stabilize amidst challenges that have disrupted the airline industry. Moreover, these financial elements promote a buyer’s bargaining power, and with that in mind, acquisition cannot be difficult. Another aspect is that mid-cap firms are appealing and they can grow easily, leading to the revenue increase (Lu 538). However, the uncertainties of coronavirus disease frustrated the company’s development in recent years, causing significant losses. These problems are projected to subside as most airlines can now operate, thanks to the availability of vaccines, allowing people to commute and interact freely, in what is now termed as the post-COVID-19 era. The buyout plan is also viable because it is not difficult to obtain credit that may be needed to grow the franchise. Notably, mid-cap firms typically progress properly during the expansion section of the business cycle.
After the buyout, I will embark on a series of short-term activities in order to help the firm grow. Firstly, I will make early strategic planning, that is after the takeover. The workforce is one of the most important parts of this idea and since the line of business is not changing, I will ensure to keep the previously employed workforce in order to ensure that there is a continuous flow of work as it was there before buyout. This step will then be accompanied by changing the company’s mission and vision. Organizational restructuring is also equally crucial, as it will unify all the employees, leading to desirable work output. Having a clear vision and mission will help the staff to work in unison as long as they buy-in to these stipulations. Another factor worth considering in short term is adopting the collective bargaining agreement (CBA) that was initially in place. In this realm, setting new terms of employment may be necessary in order to encourage the staff to keep working hard. That is, crafting an applicable CBA is important, as it will help in determining new operations. Another short-term goal is marketing the company to various potential customers. This objective can be achieved by increasing the promotion budget in the next four months. Robust marketing can be achieved by using both social media and mass media.
Apart from short-term objectives, long-term goals are worth considering in order to keep the business operational. Noting it is a post coronavirus disease, the main long-term goal is increasing the revenue so that EPS can be within the desirable range, as this will lure potential investors. Importantly, long-term goals do not exist in isolation. Instead, both of them coexist in a number of ways. Incorporating income increment into the policy-making and planning process is crucial. As a crucial long-term plan, making new policies and a robust strategy will help the business to install the desirable culture and promoting the name of the brand. Another long-term change is improving customer experience. This aspect can be achieved by training employees thoroughly so that they can handle the customers appropriately. Achieving this goal can include redesigning service research that may include unleashing questionnaires and then offering certain incentives for the customers who respond to them. Building a name for the firm within the community is also another crucial long-term goal. This feat can be achieved by engaging in specific outreach projects. One way of achieving this objective is by encouraging workers to volunteer in various designated community programs, especially when they are free. Such employees can then be rewarded accordingly; for example, by giving them time off, providing gift cards, and offering bonuses. Another way is by sponsoring high-profile charity events, which is a short-term goal, but it adds value to the brand recognition.
In summary, Alaska Air Group Inc. buyout is a viable option and worthy of investment. The company has a mid-cap stock, and because of that, it can withstand unforeseen turbulences just like those orchestrated by the coronavirus disease. One important merit of acquiring this business is because currently, it is running on debt, hence offering a purchase bargaining opportunity. Another reason for choosing Alaska Air Group Inc. is that the airline industry is a booming sector, and as such, there is a high likelihood that the business will pick quickly. Mid-cap companies have the advantage of overcoming obstacles, and this is one merit that Alaska Air Group Inc. offers. That is, these types of firms are appealing and they have a high propensity for growth. Short-term and long-term goals are very important for every firm. Therefore, it is possible to overcome obstacles if there are robust workable objectives. The first short-term goal is to retain the previous employees, as this strategy will help in keeping a continuous workflow, hence avoiding disruption of bringing new staff, some of which will require training. Adopting the previously used CBA is also crucial. Any changes that can be done in this situation can be considered afterward, that is after gaining stability. Altering employment terms can also be very crucial in that it will encourage staff to work hard, especially if it is a desirable change. A long-term goal worth considering is keeping the business afloat. This way, the firm will be able to operate efficiently. Besides, designing a robust plan and desirable policies falls in the category of reinstating the brand name. This can be followed by engaging in community-based outreach projects, either by sponsoring, as well as encouraging employees to get involved in actual programs.
Lu, Wen-Min, et al. “The Effects of Corporate Governance on Airline Performance: Production and Marketing Efficiency Perspectives.” Transportation Research Part E: Logistics and Transportation Review, vol. 48, no. 2, 2012, pp. 529-544.
Yahoo Finance. “Alaska Air Group Inc. (ALK).” Yahoo.com, Sept. 2021, https://finance.yahoo.com/quote/ALK/financials?p=ALK. Accessed 19 Sept. 2021.