Business Development: Transat Case Study Analysis Assignment

This case study examines Transat A.T., focusing on its acquisition by Air Canada, financial performance, and strategic initiatives. The analysis includes the negotiation details, the rationale behind Air Canada's offer influenced by the grounding of Boeing 737 MAX jets, and the impact on Transat's market position. It compares Transat with Sunwing, analyzes Transat's solvency and liquidity ratios, and reviews its five-year strategic plans, highlighting the impact of increased debt and the grounding of the 737 MAX. The study also discusses the purpose of audited financial statements and the importance of Travelife certification for sustainable tourism practices, detailing Transat's efforts in employee awareness, recycling, and partnerships.

PART B:
Answers 10.
Reference site –( https://www.transat.com/en-CA/corporate/media/news-releases/124223
https://www.cbc.ca/news/business/air-canada-boeing-737-max-1.5112015).
Transat AT agreed to get in to a negotiation with Air Canada for sale of its corporation at $13 per
share. This news has been announced on May 16, 2019. The transaction shall be completed after
a 30 days negotiation on the definitive agreement regarding transaction and material terms.
Transat AT finally accepted the quotation of Air Canada because it was in the interest of the
stakeholder, the economic and regulatory environment in which both the airlines operates. The
premium value of 148.5% that is $13 per share for a 20 days weighted average trading price is
being offered by Air Canada (Transat.com, 2019).
According to CIBC analyst Kevin Chiang (May 1, 2019) Air Canada is having problem with its
24 fleet Boeing 737 Max jets. Which have been grounded due to two crashed as a result of
default software. Acquiring Transat would relive Air Canada from loss of capacity due to Max
being grounded for so long. By taking over Transat's fleet of Airbus 330s and 321s it could get
Air Canada out of its current losses and problems, While safeguarding It’s future. As Transat
will help gain stronger market in Canada and countries it has strong foothold. In this way it will
cushion against a long-term grounding of Air Canada’s Boeing 737 MAX planes (Transat,
2019).
Answer 11.
As Sunwing is a competitor of Transat it is more obvious that they both are competing for the
same market. Sunwing is a vacation travel company and a Toronto-based carrier. It does not fly
any transatlantic routes at present. But it has remarkable business performance in destinations
between Canada and U.S. and Caribbean. Thus it is not as expanded and huge as Transat. So
comparing it will be an unequal comparison. The annual report of Sunwing for 2018 is not
detectable online (CBC, 2019).
The Solvency ratio of Transat, 2018:

Debt-
Equity
ratio
Total Debt 960486
Shareholders’ Equity 599,374
Debt-Equity ratio 1.60
Liquidity Ratio Transat, 2019:
current ratio
current asset 1,151,719
current liability 835,848
Current Ratio 1.38
The ratios are in positive and are higher than 1. This proves that it is having enough liquidity for
any financial crisis. The Loans are higher than the equity. This is not a worrying situation too, as
its operation may generate enough revenue to cover the interest.
Answer 12.
In their 5 year strategic plans the key points is –
 To build a sustainable business profitability system. By investing in hotel development
and creating a new business unit to operate exclusively on hotels in Caribbean and
Mexico.
 To satisfy customers with user-friendly service at a low price. By creating synergies
between the various divisions of Canada.
 To improve the digital footprint and develop new systems for revenue management or air
network planning.
 To increase the network density of flights by increasing flight frequencies on all routes
and to consider potential feeder/defeeder alliances for increasing the customer base.
To achieve these goals of strategic plans the company will be increasing its debt. The expenses
will be doubling according to the estimates. This will ultimately decrease the solvency and
profitability ratio. The liquidity ratio will fall as the liability will be increasing. The total cash
reserve is $593.7 million as at October 31, 2018 which is not enough for the estimated plans.

The potential impact of the 737 Max grounding on the plan has impacted Air Canada highly.
They are losing the revenue and the customers due to their 24 fleet 737 Max grounding. This has
impacted positively to all the other airlines and also to Transat. This has influenced the Air
Canada to get into the sales delete such at lucrative share price (Transat, 2019).
Answer 13.
The main purpose of an Audited financial statement of a public company is to provide accuracy,
accountability and transparency to the stakeholders. The stakeholders are the shareholder and
other who have invested in the company or are related to the company in any way. They want to
compare the audited statement with the peers to make investment decisions. Thus the proper
rules and regulation has to involve in the auditing. It should be done from a qualified CA or
auditor. All kinds of entities like bank, suppliers, investors needs to analyze the financial
statement in order to form an opinions about their financial position and their reliability. A
qualified audited statement indicates that it is free from material misstatements, and is correct
and fair according to the general accepted accounting principles (Raiborn et al, 2017).
Answer 14.
A Travelife Certified is dedicated making holidays more sustainable by improving the social,
economical and environmental impacts of the travel business. Business that proves to meet the
Travelife Sustainbility criteria are certified and promoting their achievements to others. In
October 2018 Transat achieved the title of Travelife Certificate. It was first time awarded to the
largest tourism company in the world for it full range of its activities. As quoated by Annick
Guérard, Chief Operating Officer, Transat it took them 12 years to model a structured approach
aimed at becoming a sustainable tourism company.
$ mentioned criterias for evaluation and Travelife certificate.;
Employee awareness- They conduct a yearly awareness campaign to understand the importance
of sustainable life.
Recycling, re-use and processing- To achieve Level 3 of Quebec government ICI ON RECYLE
certification at Montreal head office.

Awareness- Raise awareness to integrate the guide into the on boarding process and to follow
Responsible Procurement Guide to all franchisee agencies.
Partnership- To promote partnership with SOS Children’s Villages. It also contributed to
implement many projects in our destination countries
Transat complied with more than two hundred criteria covering the workplace practices, the
product range, business partners and customers. It also started with deployment of a tool to scale
the employee satisfaction in real-time for nearly 1,600 employees with a bi-monthly response
rate of over 80%. This practice has maintained a high commitment rate (Transat, 2019).

References:
Transat.com (2019). [online] Transat.com. Available at:
https://www.transat.com/getmedia/9c702348-4b09-47d4-b32a-73d82884182c/2018-Annual-
Report.aspx [Accessed 23 Jun. 2019].
Transat (2019). Travelife certification 2018-2020 | Transat. [online] Transat. Available at:
https://www.transat.com/en-CA/corporate-responsibility/travelife-certification [Accessed 23 Jun.
2019].
Transat (2019). Transat AT Inc. announces execution of exclusivity agreement with Air Canada
for the acquisition of Transat AT Inc.. [online] Transat. Available at:
https://www.transat.com/en-CA/corporate/media/news-releases/124223 [Accessed 23 Jun. 2019].
CBC (2019). Air Canada adjusts fleet through end of July to account for 737 Max groundings |
CBC News. [online] CBC. Available at: https://www.cbc.ca/news/business/air-canada-boeing-
737-max-1.5112015 [Accessed 23 Jun. 2019].
Raiborn, C., Butler, J.B., Martin, K. and Pizzini, M., 2017. The internal audit function: A
prerequisite for Good Governance. Journal of Corporate Accounting & Finance, 28(2), pp.10-
21.