Azure, a limited liability company, was incorporated in Sepiana on 1 April 20X6. In May, the company

exercised an exclusive right granted by the government of Pewta to provide twice weekly direct flights between

Lyme, the capital of Pewta, and Darke, the capital of Sepiana. The introduction of this service has been well

advertised as 'efficient and timely' in national newspapers. The journey time between Sepiana and Pewta is

expected to be significantly reduced, so encouraging tourism and business developmentopportunities in

Sepiana.

Azure operates a refurbished 35 year old aircraft which is leased from an international airline and

registered with the Pewtan Aviation Administration (the PAA). The PAA requires that engines be overhauled

every two years, putting the aircraft out of commission for several weeks.

The aircraft is configured to carry 15 First Class, 50 Business Class and 76 Economy Class passengers.The

aircraft has a generous hold capacity for Sepiana's numerous horticultural products (eg of cocoa, teaand fruit)

and general cargo.

The six hour journey offers an in-flight movie, a meal, hot and cold drinks and tax-free shopping. All meals

are prepared in Lyme under a contract with an airport catering company. Passengers are invited to

'satisfaction' questionnaire which is included with the in-flight entertainment and shopping guide. Responses

received show that passengers are generally least satisfied with the quality of the food -especially on the Darke

to Lyme flight.

Azure employs ten full-time cabin crew attendants who are trained in air-stewardship including passenger safety

in the event of accident and illness. Flight personnel (the captain and co-pilots) are provided under a contract

with the international airline from which the aircraft is leased. At the end of each flight the captain completes a

timesheet detailing the crew and actual flight time.

Ticket sales are made by Azure and travel agents in Sepiana and Pewta. On a number of occasions. Economy

seating has been over-booked. Customers who have been affected by this have been accommodated in Business

Class as there is much less demand for this, and even less for First Class.

Ticket prices for each class depend on many factors, for example, whether the tickets are

refundable/nonrefundable, exchangeable/non-exchangeable, single or return, mid-week or weekend.

Azure's insurance cover includes passenger liability, freight/baggage and compensation insurance.

Premiums for passenger liability insurance are determined on the basis of passenger miles flown.

Required

(a) Explain the business risks facing Azure.

(b) Recommend how the risks identified in (a) could be managed and maintained at an acceptable level by

Azure.

Note: You should assume it is 5 December 20X6.