Transaero: Turbulent Times (Simplified Chinese Version)
(8 pages of text)
Case (Pub Mat)
By January 2015, OJSC Transaero Airlines (Transaero) was the largest Russian open joint-stock airline and the second-largest airline carrier in Russia and Eastern Europe combined. Tracing its history back to 1990, Transaero was the safest airline in Russia and was ranked 17th in the world in 2015 in terms of safety. In September 2015, the public learned that Transaero had serious financial troubles, which could lead to bankruptcy for the firm. The news came as a shock because Transaero had demonstrated a stable performance accompanied by sound financial results for many years. The 2015 news revealed that Transaero was unable to service its debt of US$4 billion, including the company’s lease obligations. Was it possible for the safest, second-largest Russian airline company to avoid bankruptcy?
This case is suitable for use in an undergraduate-level core course or in the early stage of a graduate-level course on accounting or finance, where students are required to analyze an organization’s financial statements. It is also relevant in credit management courses teaching the approval or rejection of loans. The case covers issues related to incorrect valuation (of its brand and its operating expenses) leading to profit inflation, the underestimation of liabilities, and hidden negative equity in the financial statements under International Financial Reporting Standards requirements. The case also discusses the effects of bankruptcy on the sustainable development of companies. It will allow students to
- analyze the most common reasons for bankruptcy using financial analysis methods;
- discuss possible ways of resolving the solvency crisis for the company; and
- understand the social consequences of the bankruptcy of large firms, and the connection between sustainable development and the company’s bankruptcy.
Transportation and Warehousing
Russia, Large, 2015
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