Sky Air Inc Case

Sky Air, Inc.

Samuel Kaplan stared at the proposal sitting on his desk from Thyestean Ventures outlining their proposed investment in Sky Air, a small, regional airline. Kaplan was somewhat disappointed in Thyestean’s terms. The offering price, $6 million for a 30% equity stake in the company, seemed to be far too low. Kaplan knew that Sky Air had huge promise. After all, he had built the company up from scratch over the past ten years. The investment from Thyestean Ventures was expected to allow Kaplan to diversify his wealth at a time when his family was beginning to grow. (Sarah Kaplan, Samuel’s wife, was pregnant with triplets.)

As Samuel sat in his office in downtown Idaho Falls, he wondered how to respond to Thyestean’s offer. Should he reject the offer outright? If he decided to negotiate, how could he improve his bargaining position? Finally, how could he maximize the value that Thyestean Ventures was willing to pay for their 30% equity stake? Today was February 4, 1997 and he had less than two weeks to come up with a counter proposal.

Sky Air

Sky Air was founded by Samuel Kaplan in the summer of 1986 shortly after he was discharged from the Air Force. Samuel had trained as a mechanical engineer at the Air Force Academy and had served for ten years in the Tactical Air Command. In addition, Kaplan was a talented golfer, having won the U.S. Amateur Championship when he was only twenty years old. During the past ten years, Kaplan had had little opportunity to play golf, although the completion of a PGA quality course in Idaho Falls seemed to offer hope of increasing his playing time.

Kaplan, who grew up in Idaho Falls, believed that a regional airline based there would be highly profitable. Idaho Falls was a market that was then only served by Vixenne Air. Vixenne had a dismal track record for safety violations and on-time service. Kaplan felt his military experience would allow him to run an efficient, safe airline.

Kaplan began service in August 1986....