Reverend blessed with an entrepreneurial touch
There probably couldn't be a worse time to start a long-haul, low-fare airline. Aviation fuel prices are rocketing, competition is keen and every week seems to bring a new terrorist threat.
But none of this concerns the Reverend Raymond Lee Cho-min, founder and chairman of Hong Kong's newest airline, Oasis Hong Kong Airlines, which will provide direct flights to London-Gatwick in October for fares as low as HK$1,000 one way.
'I'm a contrarian investor,'' he said. 'The last two years have seen 40 per cent wiped off the accumulated profits of the US airline industry, but what I saw was an unprecedented opportunity.'
In may take a miracle to get this bird flying, but Mr Lee, 51, has a history of taking flight off a trough. During a slump in US real estate prices in the early 1990s, he bought buildings in Boston whose value had crashed by 90 per cent, launching his property empire there called Oasis Development Enterprises, which he estimates now has holdings worth up to US$500 million.
Thereby hangs a singular tale. A bona fide man of the Protestant cloth, Mr Lee, born in Ithaca, New York, to a Hong Kong father and a Shanghai mother, has divided his life between here and the US since then. In 1992 he added a tie to his dog collar, and together with his wife, Priscilla Huang Lee, whom he met in Bible study class, plunged into the Boston property business.
Dean of Chapel at nearby Gordon College at the time and coming from a well-heeled Hong Kong property family, Mr Lee saw the Boston commercial sector being throttled by greedy management companies collecting fees of 15 per cent for doing often-unnecessary maintenance work.
'I saw meaningless, wasteful spending, which meant no money was being made,' he said.
Mr and Mrs Lee cashed in their stocks and bonds, pulled together funds from family and friends, raising US$8 million to buy their first Boston building. They dispensed with the management companies and took over the maintenance.
The results were dramatic. 'We made close to 30 per cent returns, even in down times. Occupancies rose from 65 per cent to 95 per cent. That pushed the value of buildings up seven times, so I got into bigger and bigger deals,' Mr Lee said.
And no, he does not think God and big business make uneasy bedfellows: 'There is no dichotomy. Having money and helping people is not mutually exclusive.'
Many of the staff he paid to paint, fix, and manage his buildings were young Cambodians - former gangsters whom his church helped train in artisan skills.
His fortune made, Mr Lee looked heavenwards again, and saw struggling legacy airlines, choked by antiquated working practices and network agreements. He saw carriers hamstrung by missed and late connections beyond their control. This, he noted, kept long-haul average utilisation down to 16 hours a day, when planes were designed to do 17. He was sure he could do better.
'I knew I could make money with point-to-point long-haul flights averaging 17 hours a day usage,' he said. Unfettered by network connections, he was sure he could eliminate the cost of missed slots.
Saying only that most of the airline comes from his own funding, he gave the Hong Kong government a commitment that his company would have US$100 million in order to get the requisite licence, and bring in as partners VTech's Allan Wong, who now holds 15 per cent of the venture, and Richard K Lee of Trinity Textiles, with just under 10 per cent. But objections from Cathay Pacific and other carriers delayed his plans, thwarting his schedule to lease of five aircraft, and forced him instead to later buy two 'middle-aged' 1989 Boeing-747-400s for US$40 million apiece, paid for with the aid of unspecified banks loan. Modern 747s would be only 8 per cent cheaper to run, he insists, 'but our capital costs are much lower than legacy carriers so their age doesn't matter'.
As other budget leaders like Ireland's RyanAir and the US's Southwest, Oasis also cut costs by seeking licences for his initial six routes from mostly secondary airports: Gatwick, Oakland in California, Chicago, Cologne, Milan and Berlin. 'Costs have been pared by using ... locally hired London pilots and hi-tech ticketing,' he said.
He is less upfront about the price of the tickets. The bulk of the economy fares are not actually that cheap. When pushed, Mr Lee admits only 10 per cent of the tickets to London will be HK$1,000. He's cagey about the price for the rest of the tickets, but in these competitive times, it seems likely he will have to undercut the major players, including Cathay Pacific and British Airways, with their 10 direct daily flights to London, never mind the 'one-plus-one' market of Eva, Thai, Malaysian and Singapore airlines, which fly to London via their respective hubs.
Where he could win is at the front of the plane. Mr Lee calculates that most corporate business travel budgets no longer stretch to Cathay Pacific's HK$44,000-plus round trip fare to London.
'I know that Morgan Stanley's business class budget for Hong Kong-London is only HK$28,000,' he explains. 'We plan to offer business class for HK$10,000 one way. It's a necessity for a businessman to arrive in tip-top shape and for that you need affordable business class.' For that alone, many passengers might say hallelujah.