Question

I am a huge animal lover and have always been hesitant to fly with my dog. Back in 2009, Pet Airways launched, “the first and only airline created exclusively for the transportation of pets. It also provided flights for shelter pets. Pets traveled in a specially equipped main cabin. However, in 2012 the New York Times reported that the company closed in 2011 due to a history of losses which resulted in cash flow problems and concerns from auditors.

Questions:

1. What improvements in the business model might have made this company more sustainable?

2. Do you envision another start-up company with the same objectives?

Answer 1

1. Pet airways was founded in 2009 in Florida for the purpose of transporting pets in cabin to spare them the inconvenience of travelling in cargo. The charges for transporting a pet ranged from $150-$1200. The company transported over 9000 pets in the first two years of operation. However, Pet airways shut shop in 2011 citing ongoing losses, cash flow problems and auditor concerns. The company may have been more sustainable with the following changes in the business model:

a. Better working capital management to manage cash flow problems. One major problem Pet Airways was facing was 'cash crunch' to pay for day to day operational expenses. Short term working capital loans, hedging cost of fuel and better asset liability matching may have avoided this.

b. Better compliance with financial reporting to soothe auditor concerns.

c. Improving the business model to generate higher revenues and reduce costs, thereby stemming losses. Pet airways contracted airplanes from companies who provided compromised airplanes which could not function as promised.

2. Transporting pets with dignity is an attractive niche in the airline industry. People are attached to their pets and have the purchasing power and are willing to pay top dollar to ensure their pet's comfort. This is definitely an area where one can envision a start-up with similar objectives-a safe and comfortable transport option for pets.

Polish airlines' LOT, is one such airline that allows pets to travel in cabin, in the baggage hold or in the baggage hold as cargo.