Page 43 - Cambridge IGCSE Business Studies

3: Enterprise, business growth and size

CASE STUDY Budget airline failures

Working in pairs, read through the following articles about business failures. For each business, discuss what you
think were the main causes of their failure.

Article A
1time Airline was the second largest low-fare private airline in South Africa by market share. It
was one of three low-cost airlines operating in South Africa.
In November 2012 the airline stopped all its fl ights. Th ey were no longer able to operate at
profi table levels.

Article B
Zambezi Airlines’ aircraft were repossessed by the owners, General Electric Commercial Aviation
Services (GECAS) for failing to pay arrears amounting to more than US$2 million. Th e previous
year the government had suspended Zambezi Airlines’ operating certifi cate because of safety
concerns.

Article C
Pacifi c Blue stopped fl ying domestic routes in New Zealand. It had been diffi cult to make any
money on these routes. Aviation analyst, Rob Mercer, was not surprised by the news. ‘Th e New
Zealand market wasn’t big enough to support three domestic carriers,’ he said.

Article D
At the end of January 2012, Malév Hungarian Airlines announced that it could no longer fund its 41
operations. It ceased all fl ight activity on 3 February 2012, aft er 66 years of continuous operation.
Th e airline’s total debts were $270.5 million at the time of shutdown.

Causes of business failure and why new businesses fail
Figure 3.8 shows some of the most common reasons for business failure.

Poor
planning Poor cash-
Economic flow
influences management

Poor
Competition management
skills
Reasons
for
Business
Failure
Poor Lack of
marketing objectives

Failure to
Poor choice invest in new
of location technologies
Lack of
finance

Figure 3.8 Causes of business failure