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11 April 2008

Oasis Gone

It was in the news yesterday announcing Oasis Airlines' liquidation. Oasis Airlines is Hong Kong-based and is a Low Cost Carrier (LCC) or more commonly known as a budget airline. They first started by plying the Hong Kong - London route and air fares were very attractive. Then they also open up the Hong Kong - Vancouver route shortly after as both cities are very popular destinations as a result of heavy Hong Kong migrant population which boomed during the pre-1997 handover days.

A typical Business Class return ticket between Hong Kong and Vancouver is about HKD 18,000. A typical Business Class return ticket for the same route on a typical Cathay Pacific flight would have amounted to about HKD 40,000 and above. So when it comes to the main bulk of the Economy Class seats, the prices were even more of a steal.

Reports showed that the airline adopted an incorrect business model which led to the airlines demise after just 18 months.

First, they were supposed to lease the aircrafts rather than buying them and that would mean a much lower hurdle to clear in order to break even. Unfortunately, as the travel industry is booming with increasing volume taking to the skies, they realised at a rather late stage that all the aircrafts for lease were all snapped up, resulting in Oasis having no choice but to buy the aircrafts with their already very small kitty.

Being a budget airline also meant that they don't have the financial resources to do fuel hedging like the bigger airlines. As such, every spike in oil prices directly impacted the airline's numbers.

The other thing that I felt contributed to the downfall is that it flies long haul as compared to the short haul routes of most of other budget airlines. We see this short haul airlines, loading up, flying off, moving passenger out fast in order to take in the next flight's passengers quickly and push off for the next flight, often with the same set of cabin crew.

Budget airlines only make sense when equipment utilisation is high. Unfortunately, due to the long haul nature of the route, it is some times hard to even get 2 flights in a day for the same aircraft.

The most lucrative market segment are the business travelers but given that punctuality and alternative connecting options are more often than not, an advantage exclusive to a Full Service Carrier (FSC), LCCs are often shunned from these executives' itinerary. Thus LCCs only have the Economy passengers to rely on for the majority of the revenue despite a very much leaner margin.

Just only a few days ago, Hainan Airlines (HNA) was in talks with Oasis Airlines about taking a share in the airline. However, the deal was dropped at the last minute when HNA realised how deep shit Oasis Airlines were already in. With the White Knight investor going up in smokes overnight, so did Oasis Airlines.

AirAsia was planning to add long haul routes under the branding of AirAsiaX but the plan was aborted at the very last minute. Perhaps CEO Fernandez knew something way ahead of the others?

So what's going to happen to the airline? Well, the way I see it, the airline may still operate albeit having temporarily suspended all flights. Current liquidation is akin to the US Chapter 11 where the financials going under the custody of the courts until a time where they are able to recover into the black. So I guess as long as it is not Chapter 7 which spells instant dead fish, they still have a chance to make it back.

However, from the looks of things, I don't think they are going to recover from this and so I guess it's goodbye to Oasis Airlines. It's been nice knowing you.

Images Credit: http://afp.google.com 



- Voxeros

1. Chocolate gal left...
Saturday, 12 April 2008 9:06 pm
Quite sad to know this.. the cruelity of the real world..


2. Kelly left...
Saturday, 12 April 2008 11:38 pm :: http://www.kellchan.blogspot.com/
One of my colleague was due to fly to Vancouver on Sunday with Oasis. He's "stranded" now.


3. JayWalk left...
Sunday, 13 April 2008 12:54 am :: 
chocolate gal: As the old saying goes, it's a dog eat dog world.

Kelly: I suppose there are other airlines lor. Northwest having promotion now. Go check it out.


4. Joan left...
Tuesday, 13 May 2008 1:03 pm
Greetings! My name is Joan. I a student studying at the Department of Marketing, The Chinese University of Hong Kong. I am conducting an academic research on consumer evaluation of airline companies and the liquation of Oasis Hong Kong Airlines, and I would like very much to hear your opinion. You are cordially invited to spend around 5 minutes to complete the questionnaire. Upon completion of the questionnaire, you may choose whether to enter a lucky draw or not. We will donate HKD$100 to a local charity picked by the winner. Five winners will be drawn.

For an English version of the questionnaire, please go to: http://www.my3q.com/home2/222/candykyho/37278.phtml 

For a Traditional Chinese version of the questionnaire, please go to: http://www.my3q.com/home2/222/candykyho/41895.phtml

Your participation is very important to the development of market research in Hong Kong. All your responses will remain anonymous and will be used strictly for academic purposes only. Thank you for your participation and good luck.


5. JayWalk left...
Tuesday, 13 May 2008 3:45 pm :: 
Joan: Hi Joan, welcome to the blog. I have your questionaire duly completed. Hope it helps.

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