Strategic
ManagementCase 22MGM490 Section C
Submitted to: Professor Elie Chrysostome 26th April, 2012
Group: 14 Matt Johnson Ting Zhang Yin Zhang Dan Tracy
Hong Kong Oasis Airline
12-4-26
History February 2005, Oasis Hong Kong Airlines was founded October 26, 2006, the first flight, flight O8 700, took off from Hong Kong International Airport after a 24-hour delay June 28, 2007, Oasis offered non-stop service from Hong Kong to London, and began a service to Vancouver
Stephen H. Miller
1
Hong Kong Oasis Airline
12-4-26
History (cont.) The airline was voted "Worlds Leading New Airline" at the Annual World Travel Awards 2007 April 9th 2008, Oasis's CEO Stephen Miller announced at a press conference that the company would cease operations after suffering an accumulated loss of US$128 million The last flight, flight O8-901, departed from Vancouver at 10:15 am and arrived at Hong Kong at 3:09pm2
Hong Kong Oasis Airline
12-4-26
The Oasis Model Oasis Hong Kong Airlines offers low-cost long-haul flights with standard service offered in traditional carriers Offers two classes: economy & business class while other low-cost carrier only offer economy class One way route to London Gatwick (UK) & Vancouver
3
Hong Kong Oasis Airline
12-4-26
Key Strategic Issues Lack Airline Fleet Limited route selection
Frequent fluctuation in fuel price results a high fuel cost Lack of hubs and connections to primary cities Higher operating costs than expected4
Hong Kong Oasis Airline
12-4-26
External Analysis General Environment Industry Analysis Competitor Analysis
5
Hong Kong Oasis Airline Demographic Global Economical
12-4-26
Technological
General Environment
Political
Socio-cultural
Legal
General EnvironmentDemographic, Economical, Political, Legal, Socio-cultural, Technological, Global6
Hong Kong Oasis Airline
12-4-26
Demographic Segment Oasis Airlines target market focuses on frequent flyers between Hong Kong and major cities worldwide Focuses on economy class passengers as well as business class passengers First low-cost, long-haul carrier service in Asia.7
Hong Kong Oasis Airline
12-4-26
Economical Segment Signs of global economical recession since 2007 Rising in oil price since 2006 Hong Kong adopts a capitalist and liberal economic
system
8
Hong Kong Oasis Airline
12-4-26
Political Segment A stable political environment & high public transparency Low tax system
Well organized and developed transportationinfrastructure
9
Hong Kong Oasis Airline
12-4-26
Legal Segment Worldwide deregulation following United States International air traffics are regulated by bilateral air
service agreement between countries Different regulations in different countries
10
Hong Kong Oasis Airline
12-4-26
Socio-cultural Segment Higher rate of expenditure during the holidays Mixture of Eastern and Western culture
Bilingual in English and Cantonese Many people send their children to study abroad
11
Hong Kong Oasis Airline
12-4-26
Technological segment Introduction of newer and more efficient aircraft Converting older models to freighters
Many airline companies planned to replace theBoeing 747-400s with Airbuss A380, but were forced to hold the 747-400s longer due to an unexpected 22 month delay in the Airbuss A380 programs12
Hong Kong Oasis Airline
12-4-26
13
Hong Kong Oasis Airline
12-4-26
14
Hong Kong Oasis Airline
12-4-26
Global Segment Average air fares dropped by 35% Major airlines settling on few major hubs as foundation for connecting passenger and cargo traffic to other destinations. Worldwide competitive pressure triggered series of privatization of flag carriers in Europe and Asian countries15
Hong Kong Oasis Airline
12-4-26
Threat of NewEntrants
Bargaining Powerof Buyer
Rivalry Among Existing CompetitorsBargaining Power of Supplier Threat of Substitutes
Industry AnalysisThreat of new entrants & substitutes; Bargaining power of supplier & buyer16
Hong Kong Oasis Airline
12-4-26
High barriers to entry due to high startup cost Low
Competitive deal in airfare
Many airlines to
Threat of New Entrants
Bargaining Power of Buyer
choose from High
Rivalry Among Existing Competitors High
Moderate
No other low-costlong-haul airlines Many airline offer different types of services
Threat of Substitutes
Bargaining Power of Suppliers
High
Fluctuationin fuel price cause high fuel cost Acquisition price of aircraft is high17
Hong Kong Oasis Airline
12-4-26
Hong Kong Airline Industry Hong Kong act as a hub and connection point for air traffic between the eastern and western world Over 100 airlines operate flights to about 160 locations worldwide, The Hong Kong International Airport handled around 40.7 million passengers and 3.4 million tons of cargo during its first year of operation Hong Kong International Airport ranked 5th busiest airport in the world By 2005, airport authorities had already reported a profit of HK$1.41 billion attributable to equity shareholder. The Board of Directors declared a dividend of HK$1 billion, payable to the HKSAR Government
18
Hong Kong Oasis Airline
12-4-26
Operation Statistic for Hong Kong International AirportYear Passenger Movements 28,631,000 30,394,000 33,374,000 33,065,000 34,313,000 27,433,000 37,142,000 40,740,000 Airfreight movement (tonners) 1,628,700 1,974,300 2,240,600 2,074,300 1,637,797 2,642,100 3,093,900 3,402,000 Aircraft movement 163,200 167,400 181,900 196,800 206,700 187,500 237,300 263,500
1998 1999 2000 2001 2002 2003 2004 2005
20062007 2008
44,443,00047,783,000 48,582,000
3,580,0003,742,000 3,627,000
280,000295,580 301,00019
Hong Kong Oasis Airline
12-4-26
Competitor AnalysisCathy Pacific Airways, Air Hong Kong, Hong Kong Dragon Airways20
Hong Kong Oasis Airline
12-4-26
Type of CarriersScheduled Airlines
Commercial Carriers
Feeder Airlines
Charter Airlines
21
Hong Kong Oasis Airline
12-4-26
Major Players
Hong Kong
International
22
Hong Kong Oasis Airline
12-4-26
Cathy Pacific Carrier type: de facto flag carrier Largest airline in Hong Kong Reputation as best in the industry with regular & frequent updates of seats, entertainment systems, meal options, and other in-flight amenities Named Airline of the Year by: Skytrax in 2003 & 2005 Air Transport World in 2006
Two loyalty programs: the Marco Polo Club, Asia Miles Established large number of code-share agreements with major carriers worldwide23
Hong Kong Oasis Airline
12-4-26
Hong Kong Dragon Airlines Carrier type: flag carrier Headquartered in Hong Kong Wholly owned subsidiary of Cathy Pacific Had its own loyalty program: Elite Later merged into Marco Polo Club, Asia Miles
24
Hong Kong Oasis Airline
12-4-26
Air Hong Kong Operates an express freight network to 12 destinations in nine countries, including China, Japan, Malaysia, Philippines, Republic of China (Taiwan), Singapore, South Korea and Thailand. Headquartered in Hong Kong Subsidiary of joint-venture between Cathy Pacific & DHL
Cargo fleet Focuses on Asia market25
Hong Kong Oasis Airline
12-4-26
Internal Analysis Competitive advantages Tangible and intangible resources Core competences value chain Performance appraisal
26
Hong Kong Oasis Airline
12-4-26
Competitive Advantage Oasis marketed itself as a long-haul, low-fare carrier thatoffered exceptional value with customizable options Oasis would only serve long-haul routes Offered two classes of service, targeting both economy and business-class passengers
Competitors offered only economy27
Hong Kong Oasis Airline
12-4-26
Competitive PricingHong KongLondon round-trip departing on October 31,2006, and returning on November 10, 2006 (depending on level of travel restrictions)
AirlineHong Kong - London round-trip economy ($) Hong Kong - London round-trip business ($)
Oasis
Cathay Pacific
British Airways HK$2,250 ~ HK$4,525 HK$21,350
Virgin Atlantic HK$5,532 ~ HK$17,263 HK$44,897 ~ HK$46,813
HK$1,000 HK$5,880 ~ HK$9,550 HK$6,600 HK$44,952
Cathy Pacific was 190 to 380 % more expensive than Oasis
28
Hong Kong Oasis Airline
12-4-26
Aircraft Utilization & Efficiency It was expected that Oasis could achieve average aircraft utilization in excess of 15 hours per day Low operating unit cost on a per available seat/kilometer basis Spending a large proportion of time in cruise, an aircraft flying long-haul would have fewer takeoffs and landings Lower maintenance costs for the airframe and engines Lower fuel consumption
29
Hong Kong Oasis Airline
12-4-26
Aircraft Utilization & Efficiency (cont.) Using secondary airports to save on costs Gatwick instead of Heathrow in London Oakland instead of San Francisco in California (initial plan) Milan in Italy and Cologne in Germany under consideration (didn't follow through) Flying into hubs of major low-cost carriers (EasyJet, G
