Privatization and Renationalization of ABC Airlines

CASE Privatization and

Renationalization of
15 ABC Airlines
Instructor’s Manual—Guidance for instructors
This Instructor’s Manual is prepared for the sole purpose of aiding classroom teaching of the
cases found in the Integrated Case Studies for Accounting text. It is strictly not for students or
posting.
The solutions/points are mostly suggested guides and instructors are therefore advised to use their
judgement when analysing and discussing the cases. Instructors are encouraged to consider
various alternative views as appropriate.

Synopsis
ABC Airlines was founded by the Deeland government in 1947. It provides convenience for the
citizens to travel domestically and internationally. In the economic boom in the 1980s ABC Airlines
was privatized as it was suffering losses. The airlines then had significant growth and expansion.
In the early 2000s, ABC Airlines faced another problem caused by the financial crisis. The
company’s revenue further decreased as a result of the crisis since people were not travelling and
flight bookings dropped tremendously. The airlines somehow managed to gain a better position
before in faced another crisis in 2005, caused by poor revenue management and escalating fuel
costs. Some analysts concluded that the airlines was in a very bad condition and would soon file
for bankruptcy. After all the crises faced by the airlines, it went through another terrible crisis in
2014 where the airline lost two of its planes—one disappeared and the other crashed. It was recently
renationalized. The status of ABC Airlines is being discussed: whether it should be renationalized,
or its privatized status would be preferred for its sustainability.

Teaching objectives
In this case students will be able to:
• Analyse the effective management of a company in terms of strategic management, operations
management and risk management
• Discuss the importance of corporate governance in a company
• Evaluate the benefits and disadvantages of the company from being both privatized and
renationalized
• Outline the process of share buyback
 Privatization and Renationalization of ABC Airlines

• Analyse ways to save a company’s position, where the company faces operational, financial and
other issues
Audience for the case
• Undergraduate students studying for accounting and business-related courses
• Postgraduate students studying for accounting and business-related courses

Brief suggestion on how the case may be used in class

Opening trigger questions
• How do you effectively manage a company in terms of strategic management, operations
management and risk management?
• Discuss the importance of corporate governance in a company.
• What are the benefits and disadvantages of a company from being both privatized and
renationalized?
• What is share buyback? Outline the process of share buyback.

Consolidate through self-learning

• Get students to search on strategic management, risk management and operation management
issues similar to ABC Airlines and analyse the company’s performance/position/strategies, etc.

Ways in which the class may be conducted

• Group discussion
• Presentation
• Individual learning
• Literature review and internet search

answers to application questions

1 What are the differences between privatized entities and nationalized entities?
2 What had caused BZ Fund to buy back shares from the minority shareholders and
renationalize ABC Airlines?

3 What is the effect of renationalizing ABC Airlines to the airline itself, shareholders and
other stakeholders?
4 Do you think the company should be renationalized? Why?
5 Is there any other method to remedy the situation ABC Airlines is in?