Bleeding Edge: Oasis Hong Kong
Hong Kong has for many years been a fortress hub for Cathay Pacific, which has responded forcefully to competition from the likes of Dragonair (now a subsidiary). In recent years the growth of the HNA Group’s airlines Hong Kong Airlines and HK Express has opened up Hong Kong but prior to them Oasis Hong Kong tried something new.
The airline was formed by Rev. Raymond C. Lee, his wife, Priscilla H. Lee and Steve Miller, with Miller as its CEO. He had been the founder and the first CEO of Dragonair so was no stranger to the industry.
Oasis targeted the extremely competitive sector from Hong Kong to London as its first route. By the time Oasis started operations, almost a year after originally planned, there were 5 other airlines operating on the service. Air New Zealand posed little danger, with a daily through service to Auckland, but British Airways, Qantas, Virgin and Cathay had deep pockets and established operations.
The difference Miller perceived for Oasis was that it was planning a low-cost operation on the route and was able to initially offer prices as low as 75GBP one way. However, the airline in many ways looked very much like a full-service carrier. The 747-400s used were equipped with business class and even in economy the airline offered many things that no budget carrier would – such as free onboard entertainment, ticketing, headphones, blankets, pillows, meals and baggage handling.
The initial fleet consisted of a pair of ex-Singapore Airlines 747-412s built in 1989. Both had seen service with Air Atlanta Icelandic since and became B-LFA and LFB. They were equipped in a configuration offering 81 business and 278 economy class seats.
So, Oasis Hong Kong rather than being truly low cost was more like low price. This was an issue that had faced various airlines prior to the low-cost revolution. Simply lowering your price but keeping your costs relatively high (even if lower than a standard mainline airline) was not a pathway to sustainability. The extra challenge of long-haul low-cost had always been how to keep costs low enough to make the enterprise viable. This was a conundrum that Oasis Hong Kong was never able to solve since long-haul travel is inherently more expensive than short-haul for a number of reasons such as aircraft utilization, customer service needs etc.
Oasis got off to a shaky start on October 25, 2006 when its inaugural flight to London Gatwick was delayed when embarrassingly the Russians refused the airline permission to overfly its territory. Unfortunately, this didn’t become apparent until the aircraft was ready to leave the gate and passengers waited onboard for four hours before being disembarked. When approval was finally received after midnight it was too late to take off and the flight was delayed until the next morning.
Miller joked that it had given the airline plenty of publicity but even days afterwards remained perplexed since the airline had the route code and had paid the fee. Despite this setback the carrier did well in its first 6 months and claimed to have broken even.
Oasis Hong Kong got over the tricky beginning well and in fact won several awards. It was chosen in 2007 as "World’s Leading New Airline" and "Asia's Leading Budget/No Frills Airline" at the Annual World Travel Awards 2007. In addition to this, the company was also named as "New Airline of the Year" by the Centre for Asia Pacific Aviation of Australia (CAPA New Airline of the Year 2007), and was voted in 2007 World Low Cost Airline Congress Awards as "Best New Service" and "Best Business Class Carrier" held in London (Recognising the airline industry 2007).
In late 2007 the airline started serving its second destination - Vancouver. A further pair of 747-400s joined in May and November 2007 to operate this route but both of these were series 481s sourced from All Nippon. This pair seated 71 in business and 268 in economy. A third 747-481 arrived in March 2008 just prior to the airline’s failure.
Unfortunately for Oasis Hong Kong its decent start could not continue. As well as heavy competition and a tenuous pathway to profitability it faced a third major issue: rapidly rising fuel prices. When it started operations, fuel costs were $60 a barrel but by 2008 this had risen to $100 a barrel. In this environment the relatively inefficient 747s were expensive to run and made the carrier’s business model unsustainable. Raising fares to enable profitability simply made it like one of the other existing airlines, all of which had more latitude to weather a fare war anyway.
Oasis began to look around for investment but was unable to find the funds. It was only a matter of time before Oasis Hong Kong succumbed and in fact it survived for only 18 months. On April 9, 2008 the airline ceased operations at 2pm local time due to debts of $128 million. Reportedly at the time each flight was costing the airline $128,000. The airline’s 700 staff were unemployed and over 30,000 travellers lost their tickets.
The carrier had plans to acquire up to 11 747s and fly to Oakland, Chicago and New York but in the end its model of full service, long-haul low-cost was just not sustainable even in a market with cheaper fuel. Future long-haul low-cost airlines like Air Asia X, Norwegian, Lion Air etc would heed the lessons and adapt their true low-cost approach to longer services.
Alnur, D. An Analysis: Oasis Hong Kong Airline’s Business Strategies
RZJets.net Oasis Hong Kong
2006, October 27. Sobie, B. The true story behind the Oasis Hong Kong launch failure and omens for low-cost long-haul airlines. Flight Global
2008, April 10. Budget airline Oasis files for liquidation. South China Morning Post
2008. April 10. Lessons to be learned from demise of Oasis. South China Morning Post
3/1/2020 07:51:35 am
Bleeding Edge: Oasis Hong Kong
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I'm Richard Stretton: a fan of classic airliners and airlines who enjoys exploring their history through my collection of die-cast airliners. If you enjoy the site please donate whatever you can to help keep it running: