Lessons to be learned from demise of Oasis

PUBLISHED : Thursday, 10 April, 2008, 12:00am
UPDATED : Thursday, 10 April, 2008, 12:00am

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.

Hong Kong had been slow in catching on to the growing demand for budget airlines. Before Oasis was launched, the city was already behind Malaysia, Thailand, Singapore and even Indonesia. This was despite Indonesia's poor flight safety record. These countries boast long-established discount airlines that enjoy dedicated terminals at airports that serve their needs. Hong Kong's international airport does not offer such special arrangements. Oasis was thrust into this highly competitive environment - and that proved to be its undoing.

With its collapse, Hong Kong travellers will have fewer choices and face the prospect of higher fares. If they want cheaper flights, they will, once again, have to travel to Macau for budget airlines. However, it would be wrong to conclude that Hong Kong has no room for budget air travel. Air passenger traffic in Asia has consistently grown faster than the world's average. This trend is expected to continue. Affordable budget travel will only attract more customers. In a city full of small and medium-sized businesspeople, being able to fly cheaply is critical to their ability to run and develop their enterprises. For travellers who want to see the world on a shoestring, budget travel is the way to go. Oasis blazed a new trail and proved there is a viable market. It has, unfortunately, failed to come up with a sustainable business model. Hopefully, others will try and succeed where it failed.