Oasis Hong Kong Airlines Limited -

Topics: Low-cost carrier, Airline, Cathay Pacific Pages: 7 (1543 words) Published: November 6, 2011

Table of Content
1. 2. 3. 4. 5. 6. Company Background Liquidation Timeline Causes of Failure Impacts of Oasis’s Case What Should Have Done to Save Oasis from Bankruptcy Conclusion

Company Background
Oasis Hong Kong Airlines Limited
• Long-haul budget airline • Hub at Hong Kong International Airport • Founder Mr. Raymond Lee Ms. Priscilla Lee • Started operation – Oct 26, 2006

Company Background
• 2 routes
HK ↔ London (Gatwick) HK ↔ Vancouver

Company Background
Oasis Hong Kong Airlines Limited

• Start of business
– 5 aircrafts – 700 staff
Competitive Advantage Lower Cost Differentiation

• Marketing strategy
– Differentiate product by class, price & service level – Launch promotion as first marketing initiative – Using a Computer Reservation System – handled all inbound customer calls in a basis of seven days a week – partnered with various service agencies Competitive Scope



Full Service Airline/Oasis Budget Airline

Narrow Budget Airline Target

Company Background
• Business Model
punctual and top-notch services

• Organizational Structure – 3 key figures
Chairman Executive Director Chief Executive Raymond Lee Priscilla Lee Steve Miller

Priscilla Hwang Lee (L) and Raymond C. Lee, (R) invested in the new long haul airline 'Hong Kong Oasis,' with Chief Executive, Steve Miller

Liquidation Timeline
• Announced Liquidation – April 9, 2008

Oasis Liquidation Timeline

Causes of Failure
• High cost by High jet fuel prices – Jet-fuel prices - biggest share of airline’s cost – in the past year alone, fuel prices have surged more than 60 percent Escalating fuel prices since 2007

• High cost by Low fares
– tickets to Gatwick for as little as HK$1,000 one-way – Compared to Cathay Pacific’s flights to Heathrow: • Economy class - less than 20 % • Business class – one-third of the price

– Unique promotion - Oasis’s price promise guarantee
• 10% of economy class seats on every flight will be available at HK$1,990 oneway for at least one year.

– “buy one get one free” introductory offer on its business class service – Low fares are charming for customer but were insufficient to cover its operating expenses, leading to rapidly accumulating losses

Causes of Failure
• High Cost By Low capacity

- More legroom means less seats
In business class, Oasis put up to 60 inches, or 150 centimeters, compared with 38 inches on some budget carriers - In economy class it put 32 inches, compared with 31 inches on many carriers( e.g. British Airways and Virgin Atlantic

• Enhanced in-flight service and expensive equipments
- free meal, snacks and alcoholic drinks - free headphones, blankets and pillows - individual seat-back TV with 6 new Hollywood blockbuster movies and 12 channels of audio - led to higher cost, accumulating losses of about HK$1 billion over two years of operation Figure 7 – Oasis service provision

Causes of Failure
• High cost buying planes
- Oasis’s fleet consisted of 5 roomy Boeing Co. 747s aircrafts which cost over HK$80 billion. - purchased aircrafts instead of renting them, placing a huge strain on the group’s financial resources.

• Landing expenses
- Heavy tolls levied by Hong Kong International Airport, Asia’s third-busiest airport - no second-tier and cheaper airport like those in Europe to let them cut down operating expenses

Causes of Failure
• Wrong estimation in flying long-haul
– Wrongly anticipate flying long-haul can reduce maintenance and fuel costs – Flying long haul sectors burns more fuel and requires similar maintenance to short-haul aircraft in order to ensure airworthiness – suffering losses on almost every long-haul flight it flew. – losing more than HK$1 million a flight – over 400 crew size that placed a heavy burden on airline’s finance.

Undue concentration on business class
– Allocated...
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