5.2.3 Oasis’s Management Problems
Regarding Oasis’s own management problems, the biggest one is the airline's long-haul mode of operation. Typical budget airlines provide short or regional routes. By completing comparatively short flights, budget airlines can turn their aircraft round quickly and provide more flights per day to generate more revenues. Additional advantage of short flights is that the airlines are not subject to rules and regulations that govern aviation in other parts of the world.
The long-haul mode of operation also caused other problems, that is, stiff competition by a number of well established carriers operating on its Hong Kong-London route, including British Airways, Qantas, Air New Zealand and Virgin Atlantic. One-way fares between Hong Kong and London were launched from £75 or HK$1,000 (excluding taxes and charges) by Oasis. However, as time went on, fares became uncompetitive with airlines like Air New Zealand and British Airways offering full-service for a similar price and flying into the more convenient and centrally located Heathrow, while Oasis was consigned to Gatwick. This is indeed especially in cases that Oasis targeted business passengers as its main sources of revenue.
Another one of the biggest problems for Oasis was its choice of aircraft and seat configuration. Oasis started service to London with two second-hand Boeing 747-400s, which had four fuel-guzzling engines and a seating layout that considerably underutilized the available space. The old engines required high maintenance costs. And with seat pitch of 32" in economy class and 50" in business class, the 747-400 cabins were configured for only 81 business and 278 economy passengers, which increased flight costs per passenger.
Moreover, instead of charging for all services and removing non-essentials features, as other budget airlines do, Oasis provided two hot meals and soft drinks free to all passengers and snacks and alcoholic drinks were also free for business class passengers. Moreover, free headphones, blankets and pillows were also distributed in all classes and each passenger had their own seat-back TV which had at least 16 channels available, in addition of up to 12 channels of audio. Revenue generated from low fares definitely cannot cover the high service costs.
Finally, Oasis never penetrated the lucrative corporate market, as Cathay Pacific has done. And unlike Cathay, which carries over 1.8 million tonnes of cargo and mail annually, it made little money from carrying cargo. Without diversified revenue, Oasis was dependent exclusively on its lower-yielding economy-class passengers.