Australian Aviation Academy Case Study - Strategic Business Transactions and Key Client Matters - Business Assignment Help

Assignment Task :

Business Overview

Australian Aviation Academy ('AAA') is a flying school that provides aircraft pilot training and specialist instruction services to individuals ('clients') which was incorporated in the State of NSW in 1980. Michael Nash and Mary Saunders are the Directors of AAA, in addition to being the Chief Flying Instructors accredited by the Australian Civil Aviation Authority ('ACAA'). 
AAA is located at Newcastle Airport, a private airport on the outskirts of Sydney. Each year Newcastle Airport is the location of the annual air-show and AAA is a key participant in the air-show's program. Michael and Mary view the expense of the air show as a marketing exercise aimed to attract new prospective students. 
AAA employs three Grade 1 Instructors and five Grade 2 Instructors, in addition to six administrative staff who manage the accounts receivables and payable functions, and student licensing confirmations with the ACAA. The instructors receive company benefits of "free" independent (non-instruction) flying time of 200 hours per year to any location in Australia; however, this flying time is the minimum required by the ACAA to maintain the Instructor rating licence. 
AAA is generally a highly profitable business, however in the 2018/19 financial year student enrolments were at an all-time low and a tax loss of $220,000 was reported.

Strategic Business Transactions & Key Client Matters

The Directors have provided the following statement of the strategic business transactions and key client matters which have occurred over the 2019/20 financial year. 
i. To improve AAA's profitability, AAA decided to diversify the scope of services offered to their clients and to widen their client base. After discussions with various international airlines, on 14 October 2019, Michael and Mary signed a pilot training contract with BBA Airways Inc. in London, United Kingdom. The contract provided for the exclusive training for all new Australian based and recruited flight crew. This cost BBA Airways AUD $1,500,000 per annum, payable to AAA in a lump sum on 1 November of each year for five years. It was agreed between the parties that the annual lump sum would be paid into a AAA's Australian bank account. 
 

ii. Owing to the potential expansion of AAA, on 11 November 2019 AAA purchased the adjoining two blocks of land from Newcastle Airport at a total cost of $9 million (each block had equal value). To finance the purchase AAA borrowed 85% of the funds from the Commonwealth Bank at an interest rate of 5.7% per annual repayable over 30 years. Due to the risky nature of the loan, security was provided by way of title to Michael Nash and Mary Saunders personal homes, both located in exclusive harbour side suburbs of Sydney. 
AAA's intention was to consolidate the land titles and build a large training facility, to train students to fly commercial aircraft using flight simulators. However, when the planning application to consolidate the land titles was lodged, AAA met heavy opposition from Newcastle Airport together with the ACAA. Both organisations argued that the airport facility was only suitable for training of pilots for light aircraft. 

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