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Low Cost And Long Haul: Can It Work?

Last November Hong Kong-based Oasis Airlines started offering flights from Hong Kong to London’s Gatwick airport at ridiculously low prices. Hong Kong being a former British colony means that there is enough traffic between the two countries. Over the years British Airways and Cathay Pacific had established a cozy duopoly on the route. Now, Oasis, the new challenger, has shaken things up a bit. Oasis’s economy class passengers pay between two-thirds and half (about 250 pounds for a return ticket) of what they would have previously paid to travel between the two cities.

Last November Hong Kong-based Oasis Airlines started offering flights from Hong Kong to London’s Gatwick airport at ridiculously low prices. Hong Kong being a former British colony means that there is enough traffic between the two countries. Over the years British Airways and Cathay Pacific had established a cozy duopoly on the route. Now, Oasis, the new challenger, has shaken things up a bit. Oasis’s economy class passengers pay between two-thirds and half (about 250 pounds for a return ticket) of what they would have previously paid to travel between the two cities.

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Smart idea I thought — one that would work even though it is almost impossible to consistently make money in the airline business.

It’s not as if this hasn’t been tried before. Low cost flights on short routes have been growing in popularity over the years. Southwest pioneered the concept in America in the late 1970s, which then spread to Europe and most recently to Asia. But, over long transcontinental routes the idea failed the one time it was tried. In the late 1970s Laker Airways, started by Sir Freddie Laker brought low cost travel between London and New York but eventually went bankrupt.

It’s not hard to see why the idea has failed. Low cost airlines squeeze every inch of space on the aircraft and offer a narrower seat pitch. This works fine on short flights but it’s impossible to complete a long flight without having a comfortable seat. Then there is the one class (no business class) model that keeps costs low by stripping out food and other luxuries. Again, it is impossible to complete a long flight without having had something to eat and passengers generally don’t like paying for full meals on long haul flights. Faster turn around times at airports are another advantage of the short haul low cost model but with 12-hour long flights the planes have to be kept on the ground for at least a couple of hours before they can fly again.

So what are the chances of Oasis succeeding? I suspect they are not too bright as they strive to offer a fair number of frills with low cost pricing. There are two classes of service and food is served though there is a charge for drinks. Passenger opinions on Airlinequality.com suggested that the company’s model was not a whole lot different than the legacy carriers in terms of the frills they offer. At least two posts mentioned that their flights were only half full.

Filling business class seats would be a challenge as business travelers would be loath to touch an airline that does not have a frequent flier program and the flexible timings (British Airways has 3 flights a day on this route and Cathay has 4). Also, international aviation these days is increasingly based on the power of alliances. Passengers would want to travel further from London onto say Manchester or Dublin. In the other direction they may wish to travel on to Bangkok from Hong Kong. As of now, Oasis has not formed any alliances to take care of the needs of these passengers. (They do have one with easyJet but passengers have to transfer airports in London to take advantage of that alliance.)

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Initially, Oasis will need to stick it out. They plan to start flights to Oakland and Chicago soon. Hopefully, they will succeed. And for us, the harried travelers, flying will get cheaper.

Do airline carriers such as Oasis have a chance of making any money?

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