The Standard is still following up on the collapse of Oasis. As I mentioned last week, it does appear that the directors of the company had some serious disagreements (Feud not fuel downed Oasis):
Quarrelling between various investors led to the collapse of Oasis Hong Kong Airlines not high oil prices or a flawed business model as previously thought, sources told The Standard.
The likely demise of the start-up carrier was triggered by a fallout between the partners in the company, people familiar with the situation said. Chairman Raymond Lee Cho-min wanted to keep Oasis in business, but other investors were unwilling to pour in more money after additional cash injections and wanted to pull out following repeated disagreements, the sources said.
The revelation left open a brighter glimmer of hope that the citys only long-haul budget airline could be resurrected, and flights could take off again, if the shareholders quarrel is resolved. A source close to one investor said there may be progress on finding a white knight in about a week.
Budget airline? I think not. Anyway, the story goes on to say that the other directors were unhappy with Raymond Lee because he had not made any further investment in the company. However it does appear that he did take out a loan:
Unable to raise more funding from existing investors, chairman Lee is believed to have pledged his stake in the company as collateral to take out a US$10 million personal loan from Cheung Kong Group.
Despite fighting amongst the company's partners, sources close to the bank creditors of Oasis Airlines said they were comfortable with the company's financial situation after Raymond Lee's US$10 million injection and had not triggered the provisional liquidation.
The irony being that this loan appears to have prevented the rescue of the company that was being discussed early last week (because Lee's shares were pledged as collateral). I think we can safely conclude that the other directors would have been happy to sell out to a new investor, whereas Lee felt that the company could survive, and so he took out the loan to try to keep it going. Maybe he would have been successful if the other directors had agreed - or maybe the other directors were correct that the best strategy was to sell out. Since they couldn't agree, the company went into liquidation.
The latest rumour is that either Cheung Kong or Victor Li plan to acquire Oasis. This has some logic to it, given that Li had previously bid for Air Canada, but Cheung Kong have issued a fairly comprehensive denial. The problem with reviving Oasis is that the new company would need to offer a very comprehensive guarantee to cover tickets that were issued, and that would presumably have a major impact on cash flow. I suppose the other question is whether anyone has a workable business plan.
I think everyone agrees that Oasis had a flawed business plan, but not on what was wrong with it. Here's one view (Flawed model led to airline's demise):
The demise of Oasis stemmed from a flawed business model allocating too many seats for the premium class, according to the Centre for Asia Pacific Aviation.
Oasis marked out 22 percent of its total seating capacity to 81 business seats in a generous layout, whereas Malaysia's AirAsia X will only set aside 7 percent or 28 seats in its new planes and Australia's Jetstar allocates 12.5 percent to business-class seating.
"The Oasis example reinforces our view that a sustainable low-cost, long-haul airline model must stick to core principles of high aircraft utilization and high seat density to achieve a sustainable cost position," said AirAsia X chief executive Azran Osman- Rani.
I don't agree that it was a mistake to have a large business class cabin. If Oasis could sell all 81 seats at HK$10,000 (one-way), that is HK$810,000 of revenue. Selling the remaining 368 economy-class seats at HK$1,800 that would only generate HK$662,000. Reducing the number of business class seats would not have increased income.
It's well-known that business class is more profitable than economy, and "premium economy" can also be very profitable for those airlines that offer it. The way that budget airlines make economy pay is to pack in as many seats as possible and maximise the number of flights every day, neither of which are feasible if you are operating from Hong Kong to London and Vancouver. So Oasis needed to do something else, and a cut-price business class was as good as anything else.