Oasis: Crunched by credit and fuel

As liquidators picked over the carcass of Oasis Hong Kong Airlines last month, the hawks among the airline industry were asking whether the failure of the airline signalled the way to the graveyard for low-cost, long-haul airlines.

Oasis founder Raymond Lee, speaking as 700 staff were losing their jobs, defended the carrier’s business model.

“It’s not the key problem,” he said. “The major problem is a lack of capital. It would be better to run a budget airline with at least eight aircraft.”

AirAsiaX, in which the Virgin Group has a 16 percent stake, has been operating low-cost flights between Kuala Lumpur and Australia’s Gold Coast,

and plans to further test the theory that low-cost, long-haul can fly successfully by expanding operations to the UK and elsewhere.

Soaring fuel bills have forced several airlines out of business recently, including the Hawaiian airline Aloha and the business class airline Maxjet.

Industry experts say that Oasis’s business model of on-time, quality service and good legroom at discount prices made it especially vulnerable to high oil prices.

Operations and safety editor of Flight International magazine, David Learmount told the BBC that he was not surprised by the news that Oasis had run into financial strife.

“If you look at the budget airlines, they are all operating either domestically within their own country or within Europe. Europe has had completely open skies for years now, so flying within Europe is really like flying domestically.

“Airlines can complete comparatively short flights and turn their aircraft round quickly and they are not subject to rules and regulations that govern aviation in other parts of the world.”

The April 9 collapse of Oasis and several other airlines angered the head of the Association of Independent Tour Operators in the UK, Derek Moore. who called on the UK government to include scheduled carriers within the consumer protection levy set up to cover travellers using tour operators.

Moore said, “I’m fed up of seeing fly-by night airlines leaving innocent travellers in the lurch. It seems that anyone with a 737 sees themselves as the next Richard Branson - and to hell with the consequences when it all ends in tears.”

Raymond and Priscilla Lee, a wealthy Hong Kong real estate couple, started Oasis in October 2006, backed by the private equity arm of Value Partners Group, a large Hong Kong asset management company.

Oasis had problems from the start. Its inaugural flight to London Gatwick was delayed after Russia held back its right to overfly Russian territory.

Launch flights to London were priced at around HK$1,000 and sales were strong in the early months. It later added flights from Hong Kong to Vancouver.

Oasis was headed by Stephen Miller, one time founder of Dragonair, the airline since bought out by Cathay Pacific.

At the time of the Oasis launch, Miller told TravelWeekly, “I think this is going to be the airline of the future, it’s something that is going to catch on. We’re aiming at the niche between the highest

economy fare and the lowest business class fare.”