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HONG KONG, April 11 – The escalating price of jet fuel has been pinpointed as the main culprit for the collapse of long-haul budget airline Oasis Hong Kong. Another factor that contributed to strained company finances was the decision to buy instead of leasing the aircrafts. According to the International Air Transport Association, in the past year alone, fuel prices have surged more than 60 percent.
In an open letter Oasis founders Raymond and Priscilla Lee explained, “As oil prices sharply increased, the fuel costs took up the majority of our budget.”
“We have found it next to impossible to obtain a credit facility from financial institutions to carry out fuel-hedging programs. We only managed to hedge once successfully.”
They went on to say that they had purchased aircraft instead of renting them, placing a huge strain on the group’s financial resources.
Since halting operations last Wednesday, thousands of passengers have been stranded in Hong Kong, London and Vancouver, British Columbia.
The company has already submitted a voluntary filing for liquidation in the Hong Kong Courts.
Cathay Pacific Airlines has announced plans to accommodate the stranded Oasis passengers by offering discounted one-way tickets and adding flights.
The company is the fourth budget carrier to shut down in recent months due to high jet fuel prices, joining Aloha Airgroup, ATA Airlines and Skybus Airlines.
My sources tell me Hainan Airlines have been conducting due dilligence, looking at an acquisition, but there are some sticky problems with some of Oasis financing arrangments. Apparently Oasis have been losing USD2 million a week. Hainan have long been after some international routes however and a purchase of Oasis may give them that. Rather like the mainland bailed out Tung Chee Hwa’s OOCL all those years ago, will China bail out Raymond Lee ? The liquidation hearing is on June 11th, and is being handled by KPMG. It’ll be interesting to see if they let it go under or who alternatively may emerge as a savior.