Thursday, April 10, 2008

Oasis Hong Kong Airlines Closed Shop, Good Luck AirAsia-X

April 9 (Bloomberg) -- Oasis Hong Kong Airlines Ltd., the 17-month-old budget carrier that challenged Cathay Pacific Airways Ltd. on some of its most profitable routes, ceased operations, crippled by high landing fees and rising oil prices.

KPMG was appointed as provisional liquidator and the airline is seeking new investors, Chief Executive Officer Stephen Miller said at a Hong Kong press conference. Oasis was losing more than HK$1 million ($128,000) a flight, the Hong Kong Economic Times said earlier, citing unidentified people.

The airline was unable to sustain its low-fare model because of a 73 percent surge in fuel costs over the past year and competition from Cathay Pacific and four other carriers on direct London flights. The fourth airline shutdown worldwide in two weeks left thousands of passengers stranded in Hong Kong, the U.K. and Canada.



With Oasis gone down to the drain, Tony Fernandes will be the last man standing to prove to the world Malaysia Boleh!, making low cost carrier Xtra Long business model viable and profitable. His original destination was supposed to be London but has not been launched to-date. He launched Gold Coast Australia and China destinations instead. These flying routes seem to be under-serve by other airlines, avoiding direct confrontations, is he lucky or smart?

The US crude-oil consumptions declined had been much shallower during recent recession periods(see chart). The rest of the world will be able to offset easily at 3% consumptions decline by the US. High crude oil price will continue to be a sticky problem especially it is heavily subsidized in the emerging markets. Let's see how strong AirAsia-X pricing power is, to get through this tough operating environment. My best wishes to Tony Fernandes.

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