Aussie Air Government Strategy Paper

Table of Content

It Is among the arrest corporations and employers of the country and Is responsible for enabling the growth of tourism within Australia as well. It has a current market capital value of LAG$11 billion. It is also used to maintain domestic transportation schedules with companies to coordinate their events. Susie Air was recently approached by Down under Air (DEJA) and received an offer to purchase their outstanding shares, which would privatized Susie Air. However, the airline must remain at least 51% owned by Australian investors at all times according to rules made when it was initially privatized.

Since the company began issuing stock, the share prices have been closely monitored to ensure the company remains owned by an Australian company. Now, Susie Air shares are trading for AU$4. 20. If the company were to be negatively affected In the upcoming negotiation, the way of life for Australian citizens and the Australian economy could suffer greatly. Market Information Substitutes – There are other substitutes for a consumer ruling on Susie Alertness (AAA), but those airlines might not be as safe or as reliable. For domestic price, but their travel time would be longer.

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Similarly, for international transportation, nonuser could choose to take a ship from Australia to another country and get a cheaper price, but it would also take much longer to get to the destination. Therefore, the buyer’s propensity to substitute is not very strong. Threat of new entrants – The threat of new entrants is very low. Airlines take substantial capital to start, and even f someone had enough capital, there is the challenge of differentiation and competing with Ass’s already established record. Susie Air is known for safety and punctuality, so it would be hard for an inexperienced airline to compete with their reputation.

The availability of skilled workers and access to technology would also be hard to come up with for a new airline, because AAA is the largest private employer in Australia, so many of the skilled laborers are already employed. Any other airline Mould have to educate new recruits to transition them into an airline. Product life cycles are long. Planes are built to withstand the elements for many years, so it is likely that if a new airline started up, Susie Air would have the substantial capital to put into marketing and advertising to retain their business because they do not have to spend as much on buying new equipment.

A newer airline could gain advantage by starting out with the newest, safest planes and technology, but both of those things would require even more capital to get started, increasing their risk. Buyer’s power – Potential buyers of airline tickets are usually concentrated in urban areas that will see a lot of businesses and traffic. Australia also gets many tourists, so any area with a national landmark or sight to see will probably have an airport nearby. Buyer volume can depend on their reason for traveling. Tourists or people traveling to see family are going to buy very few tickets per year.

People traveling for business Mould be flying more often and could require a better price. Buyers’ switching costs are relatively low among other airline choices. Switching costs when switching to train or ship will also be lower. All it takes is for a buyer to make a few other phone calls or go online and they can purchase tickets elsewhere. There may be a small cost associated with driving to a train station that may be further than the airport, but not enough to make a buyer stick with Susie Air if they have a negative experience.

Price sensitivity would also depend on the type of traveler. If someone is traveling or business and therefore they do not have to pay for their own ticket, that person Nil not be sensitive to price. If the traveler is someone who travels once a year to see family or a tourist sight, then they will be more sensitive to price increases. Supplier’s power – Fewer suppliers means that each supplier has more power. For Susie Air, they control most of the market, so they have a lot of power. They would be considered a price maker.

Even though the price of major inputs is high because of the need for skilled labor and high-tech equipment, airlines are able to pass on price increases to consumers easily. Airlines are spread out within Australia because they are mainly used to cover long distances, so supplier concentration is low. Volume is very important to suppliers because every flight has to have a certain number of people going from origin to destination in order to cover costs. The more people on the plane means the higher the profit. If Susie Air does not get the required number of people on a trip, then they begin losing money.

Competition – the Australian government ran Susie Air, so they were the dominant party in the market. Now that they have been biblically held in recent years, Susie Air remains nee of the largest corporations and private employers in Australia. The little competition they do have would have to come from international airlines, in countries that they frequent, such as Malaysia and India, or other much smaller countries in Southeast Asia. Exit barriers are high, because there is a high need for this service in Australia and there is such a large amount of capital needed to start an airline.

Those are both incentives for Susie Air to stay in business no matter what. There is also the issue of switching costs, because all the tails of Ass’s airplanes are painted with he kangaroo, which is the national animal of Australia. Down Under Air may have to repaint all the tails of the airplanes if they acquired Susie Air, which is not exactly an inexpensive thing to do. In addition, Susie Air is known for being safe and on time. Because we do not know how Dud’s standards compare to AX, there could be an issue that could cause a loss of Jobs or business.

Detailed information about firm’s operation as it pertains to the purchased item The Foreign Investment Review Board (FIR) is representing the federal government of Australia for the negotiation regarding the private takeover of Susie Air. The FIR was created in 1975 to ensure that the level of foreign ownership of Australian companies was in the best interest of Australia’s citizens. Susie Air was made a publicly traded company in 1993 when the government sold its 51 percent stake in the company. When Susie Air was made public, there was an established rule that the company must remain majority owned by Australians at all times.

As a member of the FIR, one of our responsibilities is to oversee the takeover and make sure it does not violate this rule. Susie Air is a significant part in the Australian economy by being one of the largest employers in the country. While overseeing the takeover, we must make sure it complies with federal law, and that Australia’s economic interests are protected by the outcome. The FIR has the authority to grant approval at any stage of the takeover, but must make sure that every part of the deal is carefully inspected to avoid breaking the law. The takeover of Susie Air may cause jobs to be outsourced.

This means that the high-paying, stable, and skilled Jobs that many Australians have will disappear. Ticketing, sales, and office work may also be outsourced, which will cause our economy to be dragged down even more. It is our b to secure a binding agreement with Down Under Air (DUD) to keep our Jobs and services in Australia. Another responsibility we have is to make sure that the stock price of Susie Air shares stays as low as possible. Down Under Air plans to take on debt for their takeover and if there is a higher stock price, they will need to take on more debt.

If DUD assumes that they can take on more debt than they can handle, Susie Air faces bankruptcy that may require a government bailout. A low stock price Nil limit Dud’s debt burden for the takeover. The current management team of Susie Air has been outstanding. They have been able to grow as a trustworthy business for domestic businesses and international travel companies. It is important that we support any contract agreement that keeps Susie Air’s current management team intact. We also need to satisfy union workers because they have a fear of losing their Jobs after the acquisition.

Overall, as a member of FIR, we must facilitate and the Australian economy. Determination of Government’s strengths/weaknesses relative to those of the other parties Strengths – The government has the freedom to grant approval at any stage of the negotiation. We have leverage because we have more authority and power. The superiors of the government have emphasized the importance of this negotiation. It is an election year and the government, which Mould like to be re-elected, needs to demonstrate that it is sensitive to the economic concerns of working class voters. DUD intends to run Susie Air more efficiently than it is currently run.

DUD acquired fifteen percent from a third party not directly involved in this negotiation. Weaknesses – The government is not in control of Susie Air’s decision to keep all Jobs in Australia. If the share prices are too high, Susie Air Nil most likely go out of business and the government might bailout. We also know that Susie Air is well known for being reliable, safe, and on time. There could be an issue that causes a loss of Jobs, since we do not know of Dud’s standards and how they compare to Susie Air. Another weakness is that we do not know what the Union Nil do.

It is the Union’s choice to go on a sickout or not. We have to make sure everyone is happy in this negotiation. Opportunities – The government has the opportunity to make the stock price lower. A higher stock price means that DUD upon Under Air) must take on more debt. Therefore, the government prefers a lower share price that limits Dud’s debt burden. Threats – If DUD assumes more debt than t can handle and the lenders call for the assets guaranteeing the debt (the airplanes) to be sold, Susie Air not only risks bankruptcy but also going out of business and taking all of its Jobs along with it.

This would be a major concern in Australia and might require a government bailout. If the Union members do not feel that their Jobs are sufficiently protected by the terms of the purchase, they may stage sickout. Although the government cannot legally stop a complaint acquisition from occurring, in the third meeting, the government may threaten to use administrative and regulatory means to delay or discourage the deal. However, if the government delays, there is a chance of the union staging a sickout. It would be best to not delay the deal if possible.

Government’s overall needs, wants, and objectives Our main objective in this negotiation is to make sure any takeover is in the best interest of the country. Susie Air is an important part of the national economy. Any takeover that does not protect Australian interests could result in lost Jobs, poorer airline service, and public dissatisfaction with the government. It is an election year, so it is important for the government to seem concerned about working class voters and their income. The government’s two needs are upholding Australian law.

The first one is to make sure that at least 51 percent of Susie Air remains owned by Australian citizens. The second need is an agreed upon share price. Our overall want in this negotiation is to see a smooth transition to a new ownership group if a takeover bid is accepted. It is important that each of the other four players in the takeover process feel like they received a fair deal. For this deal to close, the overspent wants the stock price per share to stay relatively low so that Down Under Air does not take on unnecessary debt, which may drive them to look to outsource jobs to save money.

The Susie Air Jobs in Australia need to stay domestic. Another Ant is to convince Down Under Air to retain the current management team at Susie important in the negotiation. The union needs to retain as many Jobs as possible to keep their membership happy. If the union stages a sickout, it makes the government look like it played favorites to Down Under Air instead of union employees. Finally, the Susie Air Shareholders need to feel like the future of the company is promising and profits are likely to increase into the future. This needs to be done without a large number of Jobs being offshore.

Government’s specific goals and objectives for this negotiation The Foreign Investment Review Board is acting on behalf of the Australian government. There are three main objectives in this negotiation: retaining lobs in Australia, keeping the Susie Air management team in place, and keeping the stock price of Susie Air from increasing more than is necessary to reach a fair deal in the takeover bid by Down Under Air. The most important objective is to retain lobs. Our aspiration point and target are the same: 100% retention. Our bottom line is retaining 95% of current Jobs.

The board plans to offer incentives such as low- interest or no-interest loans and/or Job training programs to make this happen. The second objective is keeping the management team of Susie Air in place for five [ears. This is our aspiration. The target is three years, with the bottom line at two [ears. Even at the bottom line, it is hoped the performance, both past and present of the airline, will convince DUD to retain management at the end of the two years. The hire objective is controlling the stock price. The government’s aspiration is to keep it from falling below $4. 0 per share and to see an agreement of the price per share to fulfill a legal requirement of the takeover. The target is $5. 50 per share, allowing the Susie Air Shareholders to increase their earnings while keeping the debt load of DUD at a minimum. The bottom line is $5. 75 per share. Government’s assessment of the other parties’ needs, wants, and objectives DUD wants to negotiate a legal takeover of Susie Air. It would like to do this by keeping the stock prices as low as possible to reduce the amount of debt the many has to take on to make this transaction work while also convincing the stockholders that they will be profitable.

Down Under Air plans to manage and operate the airline more efficiently than it is currently operated. It plans to be able to save money by offspring Jobs to other countries. In order to obtain control of Susie Air, DUD must obtain at least a 65% share of the outstanding stock. Stockholders of Susie Air want to maximize the value of shares of stock to increase the stock value. They want to accomplish this while also keeping as many of the current Jobs in Australia as humanly possible. A large number of the stockholders are of Australian ethnicity and want to keep the Job in the country.

They also wish to maintain the standard of Susie Air as an Australian icon that is crucial to the entire country. It also is a wish of current stockholders to maintain the current management team for as long as possible. The management team at Susie Air wants to first and foremost keep their current jobs for as long as possible. They also would like to maintain the current level of success under the potential new ownership of Susie Air. It also would be beneficial to the management team to have the stock value be at $4. 0 or higher to show potential in the airline.

The employees of Susie Air firstly want to ensure that none or very few at most of to maintain their current salaries and benefits package as well. Employees wish to continue their great reputation with their established customers should ownership change hands. The employees also wish to avoid having to perform a sickout, but they will if they feel their best interests are not being represented in the deal. This Mould be a bad situation for all parties involved and should be avoided at all costs. For the specific breakdown of each position, see Table 1-1 below.

Table 1-1 lobs Kept in Australia Aspiration Point (FIR) RA urge Given Keep 100 percent of Jobs in Australia Keep 100 percent of Jobs, offer Job training program Keep 100 percent of Jobs, offer low-interest loan/ tax breaks, Job training program DUD wants to offshore 1 5 percent of Australian Jobs. DUD wants to offshore 30 percent of Australian Jobs to cut costs. Management Contract Keep 100 percent of management team for 5 years. Keep 100 percent of management for 4 years. Keep 100 percent of management for 3 years. DUD wants to replace 50 percent of management within 1 year.

DUD wants to replace rent management with own people. Stock Price Government wants the stock price at a minimum of $4. 20 per share, legally must agree to price. Government wants the stock price agreement at $5. 25 per share to keep Dud’s debt low. Keep the stock price no higher than $5. 50 per share, AS gets more earnings and DUD keeps debt in check. AS wants the stock price to go up to $5. 75 per share and keep Susie Air safety and performance standards. AS wants Description of the specific strategies and tactics you plan to use in the negotiation ere FIR will treat this negotiation as one with Balanced Concerns.

This is because our relationship with each party is very important, and it is crucial that we continue our relationship with each party into the future. Our stakes are also high because it is an election year, so we must maintain a popular reputation. If we support a deal that the Australian population does not, we risk losing the election. As a member, our role is to be a fence sitter. That is why we will be gathering and sharing information only when we need to help guide negotiation between the main parties. As far as tactics to use during the negotiation, we plan to let others open iris.

If we open first and explain that the requirement is only 51 percent of shares that must be held by Australian investors, then that may become the Dud’s only offer. A second tactic we plan to use is to find a bridge solution. This means we will invent new options that still meet every party’s needs. We will go into the first negotiation focusing on getting as much information as possible. In subsequent negotiations, we will then use that information to brainstorm and suggest bridges between issues. We will use this specifically when talking about the percentage of the

Norfolk required to stay in Australia. A third tactic we plan to use is expanding the pie. Since everyone begins with a shortage of resources, we plan to expand the pie by offering creative solutions that use fewer resources or that have alternate added ‘alee. After we gather information through the previous tactics, we will use that Information to figure out the other parties underlying motives. Once we have done that, we can add in things like tax deferment (if their motive is cutting cost) or leasing newer technology (if their motive is efficiency). A fourth tactic we plan to use will be logrolling.

We expect that a main priority of the DUD will be to run the airline more efficiently and do so by laying off workers. We are prepared to give them a concession and cut the stock price in order to achieve our main goal, which is keeping as many lobs as we can. ‘What if” contingency analysis and creative options to create value What if the union has a sickout? There will be no Jobs to support the airline. The government has to make sure they do everything in their power to ensure Australia’s economic interests are protected. We can avoid a sickout by closing the deal sooner rather than later.

If Nee do not see agreement from the other parties on Job and management retention, Nee will add value with a tax break based on Australian employment and manufacturing airplanes in the company. We can also think of adding a no-interest government loan for value. For the DEJA, there could be a tax deferment, where they do not pay taxes for a certain amount of years to pay off debt faster. For the workers, there could be worker-training programs negotiated in the deal. Other deal sweeteners are to add infrastructure and technology improvements. Another way we DUD (if one is reached).

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Aussie Air Government Strategy Paper. (2017, Dec 22). Retrieved from

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