Oasis goes into liquidation
Looking very silly

Repeat after me - Oasis wasn't a budget airline

Both the SCMP and The Standard have the collapse of Oasis on their front pages - with much more coverage inside. It's also the lead story on the TV news, where the main focus is the stranded passengers.  Bizarrely, it still seems to be compulsory to refer to Oasis as a "budget airline", even though it wasn't one.

A particularly splendid explain of this nonsense comes in the leader article in today's SCMP, which starts off down that blind alley only to come to its senses in the third paragraph:

Our city's first budget airline, Oasis Hong Kong, got off to a shaky start 18 months ago. Since then it has attracted thousands of customers and won an international award. But the story had a sad ending yesterday, when the airline voluntarily filed for insolvency and told the government of its demise.

The company's collapse does not bode well for the future of budget air travel in Hong Kong. This is despite the sizeable market for Oasis' discounted long-haul flights to cities such as London and Vancouver. Tens of thousands of Hong Kong students, for example, study in these cities and were attracted by the cut-price fares Oasis offered. The demise is all the more depressing in that Oasis was voted the world's best new airline only last year by travel professionals worldwide. Its safety record was impeccable. In short, it was a bold venture that could have made the city proud. In its short lifespan, Oasis sold more than 360,000 tickets and employed about 700 staff. Unfortunately, those who bought tickets for flights which will not now take off look likely to lose their money. We can only hope that the airline's failure will not deter other ambitious entrepreneurs from investing in budget airlines.

The problem with Oasis was the high operational costs required to fly long-haul flights, especially at a time of soaring fuel prices. Though often billed as a budget airline, it was more accurately described as a value airline. Its tickets were offered at a discount, but some of them were by no means cheap. For example, it ran a fully fledged business-class section. And unlike most budget airlines, Oasis provided full services for economy-class passengers such as booking, ticketing, meals and baggage handling. Most budget airlines make passengers pay extra. The add-on services made Oasis attractive, and helped it gain market share in a short time. But they also incurred costs that made them unsustainable.

Good grief. If Oasis wasn't a budget airline, then its collapse can't tell us anything about "the future of budget air travel in Hong Kong", can it? So the whole of the second paragraph is nonsense. Of course people were happy to pay less for a flight to London or Vancouver, especially as they didn't need to sacrifice comfort in order to do so. However, it must also be clear that not enough people flew with Oasis for it to survive as a "value airline" (whatever that might be).

It seems to me that there are two reasons why budget airlines are unlikely to prosper on routes out of Hong Kong. The first is that Chek Lap Kop is an expensive airport, and the second is that most routes are already very competitive - with fares to match. The way that budget airlines have prospered is to identify routes with minimal competition (and high fares) or to start new routes using secondary airports, not to fly on a route on already has five carriers competing. Or at least fly from Macau to Stanstead - not Hong Kong to Gatwick. 

Yes, there is Jetstar flying from Hong Kong to Singapore, but their cheapest return fare is around HK$1,600 (if you book in advance), which is quite attractive but not in the same league as some of the savings that Ryanair and Easyjet offered when they started competing with the established airlines in Europe.

The SCMP leads with the rumour that the rescue of Oasis failed because the chairman of the company "had pledged his shares in the carrier as collateral for a personal loan". Which doesn't exactly make sense, but what is clear is that shareholders of Oasis seem to have fallen out in a big way, and are now trying to blame each other for what has happened.

Comments

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Hustler

Thanks for the link pal. Never did thank you all these years. Cheers man!

Jess

Re the Jetstar HK-SIN route, like Oasis it isn't much cheaper than full service airlines. And most of the time UA, SQ offers promo fares that cost anything between 1200-1600 inclusive of taxes. Why would anyone want to fly Jetstar?

Their business is mostly from the Singapore side. Fares from SIN-HKG-SIN is way more expensive on full service airlines (anything from 20-40% more). Plus they have attractive promotions of SGD 19.99 (ex tax) one way flights in Singapore. Thus they haven't gone bust because people in Singapore are flying with them.

fumier

Another reason why new airlines are at a disadvantage in Hong Kong is that Cathay has an official monopoly on HK government business.

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