Budget Airlines in Hong Kong: Oasis Hong Kong Airlines
Rev. Raymond C. Lee and his loving wife, Priscilla, founded Oasis Hong Kong Airlines in October 2006. Their reason is to provide long-haul travel accessible and available to all passengers. Because their aim is to provide access and availability of long-hauled flights to all passengers, they provided low-cost fares and the opportunity for passengers to customize their flight experiences by offering either business or economy class trips. Through their vision and mission, which is based on biblical principles of having a deep respect for all races, creeds, religions, Oasis Hong Kong Airlines extends its dedication of providing affordable and accessible business and leisure trips to all passengers. This provides all passengers with low fares and high quality and standards of comfort, safety, and service, thus, contributing to the building of an aviation culture in Hong Kong that helps to strengthen Hong Kong’s position, being the leading aviation hub in the whole of Asia Pacific. At present, the airlines fly daily non-stop between Hong Kong, from Hong Kong International Airport, and London in Gatwick Airport, and six times weekly between Hong Kong and Vancouver, Canada. In the future, Oasis Hong Kong Airlines plans to add routes and services to Europe and North America, thus, changing the future of long-haul travel to and from Asia (2007).
From this brief history and information about Oasis Hong Kong Airlines, it can be understood that the positive intentions of the airlines transcends not only in providing services and convenience to customers, but also in offering and helping the city of Hong Kong with its advantage in terms of tourism, economy, and technology. With this, it would be helpful and essential to analyze the advantages, strategies, and the competitive advantages of Oasis Hong Kong Airlines in the market.
PEST Analysis
The PEST Analysis establishes a good analysis of the external effects on a company by breaking them into essential and obvious sorts. External factors or the macro-environment of a specific organization, such as the Oasis Hong Kong Airlines pertains to the outside factors that the organization has no control of. This analysis should be done in order to assess the different factors that may serve to the future problems of the organization in terms of its operations in the market.
Political – Political aspects include government policies and regulations, legal issues, and formal and informal rules, from which the organization must base its operations (2007).
For the Oasis Hong Kong Airlines, the political factors that it must take note of include travel policies and restrictions of the British government, and other countries from which it wishes to operate. This is in line with the additional security imposed by the government of the United Kingdom in battling terrorism and threats in their country.
In addition, Oasis Hong Kong Airlines must also comply with other agreements, such as its Open Skies Agreements with the United States, which would serve to open the aviation industry of Hong Kong to other countries. However, many more barriers can be identified, such as the restrictions in air services agreements or ASAs, alliances, mergers between carriers, limited access to airport infrastructures and ground handling services, access to computer reservation systems, and code-sharing arrangements (2000).
Economic – Economic aspects of the business affect the purchasing power of customers or passengers, and the cost of capital of the organization (2007).
Economic factors that must be taken note of by Oasis Hong Kong Airlines include additional taxes, increase in oil and commodity prices, increase in ticket prices, and global exchange rates.
It has been reported that Hong Kong’s aviation industry contributes largely to its economy, being an international trading center in the Asian region. Its air transport contributed 8.1% in Hong Kong’s GDP in 1998, along with the employment of 325,851 individuals in both the import/export and tourism industries (2000). In 2006, new records were set by the Hong Kong International Airport, with passenger estimates of 9.1% and cargo throughput of 5.2%, thus, producing a total of 44.45 million passengers and 3.58 million metric tons of cargo ( 2007). In this regard, it can be seen that tourism and the import/export industries in Hong Kong serve to be the primary contributory factors in its economic activity. However, because the Hong Kong dollar is still dependent on the US dollar, changes in the value of the US dollar can still affect the purchasing power of the Hong Kong dollar.
Sociological – This includes the demographic and cultural aspects of the macro-environment of the organization. Sociological factors affect the needs of the customers and size of its market (2007).
For the Oasis Hong Kong Airlines, sociological factors include the conflict regarding the physical conditions of customers, their different shopping patterns, their business intentions or career patterns, and the safety of Hong Kong. It has been reported that Hong Kong boasts an impressive array of human resources that includes not only mainland Chinese who have been educated and trained in the West, but also a standing force of lawyers, accountants, and other professionals hailing from every corner of the world ( 2002). The role of the educational attainment, demographics, and occupation of the citizens of Hong Kong would suggest the increased rate of travel to other countries, along with their intention of availing of cheaper services.
Technological – Factors under technology include e-commerce, Research and Development initiatives, automation, and technological changes, which reduce entry barriers, lowers costs of production, and influence outsourcing decisions ( 2007).
In this regard, Hong Kong uses both hard and soft technologies, where hard technology refers to specifications of goods and the mechanism of production, while soft technology refers to business process that includes organization, marketing, and managerial knowledge and skills (2003). As such, the use of advanced technology and information systems in Hong Kong, most especially through the World Wide Web and e-commerce would contribute significantly to the technological aspects of the business.
Aviation Market of Hong Kong
To be able to identify and understand the aviation market or aviation industry of Hong Kong, its different characteristics must first be determined. Hong Kong has only one airport, the Hong Kong International Airport, reaching half of the world’s population within a flying time of only five hours, 24 hours a day. It has two runways, handles more than 49 aircraft movements per hour, and reaches over 130 cities around the world (2003). The Hong Kong International Airport has a significant role in the economy of Hong Kong, as air transportation activities are being serviced, including network and product externality. The hub-and-spoke operations in the airport provides additional route to its existing network, the network externality, while freight and passenger transports are its product externality, being complementary products of air services ( 2000). In addition, market entry barriers do not exist in Hong Kong for most products, along with the lack of tariffs on aviation products ( 2003), a sound judicial system, and low business taxes (2000). As such, it has been the most important source of international capital for Mainland China, as it provides a unique platform for business environments that is already familiar and supportive for many years in doing business, making an unrivalled wealth of knowledge in the future. The market of Hong Kong is also a channel for foreign capital into the Mainland, being its information hub for exploring business opportunities in Asia ( 2002). In this regard, it can be perceived that the extent or range of activities in Hong Kong serves to fuel its aviation industry, as it serves to be an effective and efficient means of enhancing and improving the economic advantages of Hong Kong.
Certain advantages to the economy of Hong Kong can be identified, as the contributions of its aviation industry. Primarily, the aviation industry of Hong Kong has contributed a lot to its transportation activities, which accounts for the transport of passengers, cargo, and mail. In this regard, the transfer of cargo and passengers from Hong Kong to other parts of the world is being facilitated more effectively and in lesser extent of time, compared to sea travel. With Hong Kong’s aviation industry, more and more visitors and tourists are able to visit the city, thus, contributing to its tourism industry. According to the Hong Kong Tourism Board, on the 2004 Hong Kong Tourism Statistics, the total amount that visitors spent on entertainment was HK$ 1641 million ( 2005). With the development of its aviation industry, visitors and tourists have been visiting attractions known in Hong Kong, such as the new Hong Kong Disneyland, Ocean Park, Ngong Ping 360, and many others. Because Hong Kong’s tourism activities are enhanced by its aviation industry, its economy would also be developed, as tourism and economy goes hand-in-hand. The influx of tourists and visitors in Hong Kong can help gain huge revenues with the increase in tourist travel. This can prompt the government of Hong Kong to come up and create more tourists destinations and hotels, which can generate job opportunities. Along with this, the development and improvement of Hong Kong’s aviation industry and market provided the city to improve its export and import activities, which opened opportunities for increased foreign investments. As such, both local and international businesses are being enhanced in order to improve the economy of Hong Kong. In this regard, the aviation industry of Hong Kong has become a primary means for the city to participate in globalization. Globalization enables Hong Kong to exchange goods, services, financial capital, and knowledge with other countries ( 2006), thus, further enhancing the economic activities of the city. Last advantage brought about by Hong Kong’s aviation industry is the increase in competition. Increase in competition in the aviation industry offers improvement and variety in terms of services. Competition allows organizations to further develop and enhance their services, thus, making the aviation industry with growth and advancement.
In relation to competition in the aviation industry of Hong Kong, several airlines can be identified, serving to be the rivals or competitors of Oasis Hong Kong Airlines. Two airlines, namely, Dragonair and Cathay Pacific Airways, Hong Kong’s major home carriers, serve to be the tight competitors of Oasis Hong Kong Airlines. Cathay Pacific Airways is one of the leading companies in the world’s airline industry in terms of volume of sales and profitability. It has also one of the widest connections among other international airline companies made possible through global networking. At present, it operates scheduled passenger and cargo services to more than 104 destinations around the world, and ranks as the World’s Best Airline in 2003 and 2005 (2007). It currently operates a total of 106 aircrafts comprised by Boeings and Airbuses, with an average age of 7 years (2007). Dragonair is the second largest airline in Hong Kong, next to Cathay Pacific, and operates both cargo and passenger networks that reach a variety of destinations in the Asia-Pacific region, Europe, and the Middle East ( 2007). It currently operates 37 Boeings and Airbuses, with 400 flights a week to Mainland China ( 2007). Given the market of Hong Kong and the different airlines that can accommodate that market, it can be understood that the aviation or airline industry of Hong Kong can serve customers effectively and efficiently. This would not have been the evaluation in terms of Hong Kong’s aviation industry, if Hong Kong has not become China’s main entry port of business, foreign investments, tourism, and other economic activities. As such, it can be perceived that through the aviation industry of Hong Kong, the different economic, political, sociological, and technological aspects have been developed and improved.
Competitive Position of Oasis Hong Kong Airlines
In order to know and analyze the competitive position of Oasis Hong Kong Airlines, the theory of competitive advantage must first be taken note of. It has been mentioned that competition serves to be one of the means of the development of any industry, including the aviation industry. In this regard, competition serves to be the driving factor of improvement and development of the different airlines in Hong Kong. This emphasizes the concept of competitive advantage in the aviation industry, which refers to the edge of a particular organization over its competitors that is brought about its planned actions and strategies in terms of its market, operations, and management. This concept emphasizes all the important aspects in the operations and management of a certain organization, including suppliers, prices, resources, and capabilities. One of the theories of competitive advantage is the Resource-Based Theory of Competitive Advantage. This theory emphasizes the combination of the internal and external strategies, where internal perspectives refer to the organization’s core competence and the external perspectives refer to the structure of the industry (1985). In this theory, the resources of the organization are being assessed to determine its needed strategy for its perceived success in the market. In addition, Porter’s Competitive Rivalry can also be used in the analysis of Oasis competitive advantage. In this regard, it must be recognized that the company has many equally attractive competitors, making the airlines having little power in the situation (2007). In this sense, if the airlines can offer other services unlike the products and services of its competitors, then it can win its competitive advantage.
Using this theory on competitive advantage and Porter’s Competitive Rivalry, the competitive position of Oasis Hong Kong Airlines can be determined. Because resource-based competitive advantage emphasizes on the resources of the organization in focus, it can be perceived that the success of Oasis over its competitors can be brought about by its use of available sources. Primarily, the competitive advantage of Oasis Airlines lies on the fact that it was able to meet the needs of its customers. Meeting the needs of customers emphasizes the notion that customers at this time are more knowledgeable, more analytical, more demanding, and provide more strategic information (2000). This also emphasizes the fact that customers nowadays are not satisfied only with few products, and thus need a variety of products to satisfy their demands and needs. With the increase in the development and improvement in terms of the economy and tourism of Hong Kong, the organization saw the opportunity of providing new alternatives for passengers and cargo that may compete with the existing airlines in the city. In addition, because the airline is relatively new to the market, the analytical and more demanding characteristics of consumers would enable them to try the service being offered by Oasis Airlines. In this regard, the airline has taken advantage of the curiosity of its market.
Another competitive advantage of Oasis Airlines over its competitors is its flexibility, by custom designing solutions for the airlines’ customers, in anticipating their needs (2007). Customizing the needs of its passengers led the airlines to offer two hot meals and soft drinks for free on both classes, free service of snacks and alcoholic drinks for the business class, free headphones, blankets and pillows in both classes, purchase of noise-canceling headphones and amenity kits, and having a seat-back TV with at least 16 channels, along with 12 channels of audio (2007). In addition to such services is the emphasis of Oasis Airlines of the significant role Information Technology play in its performance. Michael Wirth, the airlines’ head of Information Technology pointed out that the organization’s IT plays an intrinsic part in their corporate development, as it supports the airlines’ new generation business distribution model. Through the Information Technology of Oasis Airlines, the airline is able to implement its direct distribution model, which enables passengers to directly buy tickets from the company through its web site. In this regard, the challenging part of implementing this model is to make the system secured, convenient and safe ( 2007). In relation to this is the adopted IT system of Oasis Airlines is its distribution system, which has three major channels, namely, consumer-direct, direct through-trade, and indirect through-trade. Through the indirect through-trade system, tickets are sold over the Global Distribution System, where travel agencies are connected and bring the airlines with wider reach and extent. Through the direct through-trade and consumer-direct channels, tickets are directly sold to consumers through the World Wide Web, and through their application of the Oasis Smart.Net service ( 2007). These distribution channels indeed increase the competitive advantage of the airlines, as they target the direct distribution of their tickets to further reduce the costs and spending of their consumers. In this regard, it can be perceived that in this competitive advantage, Porter’s Supplier Power and Buyer Power can be recognized. Through the distinctive and unique features of the airlines, it can be observed that the uniqueness of service of the airlines is attributed to its suppliers, which have the ability to substitute and make the features of the airlines cost-effective while meeting the demands of the passengers. On the other hand, the buyer power of the customers is also observed, as related to this particular competitive advantage, as being cost-effective, the passengers would be able to purchase services from the company to avail of its services. Because the features of the airlines are more user-friendly, and its price more affordable than its competitors, targeting low-spending customers would be easy to do.
One of the most important aspects of an organization’s competitive advantage is its team or employees. In this regard, teamwork and team leadership is being emphasized and becomes the source of the strength and cooperation of the whole organization. With regards to team leadership, both the roles and responsibilities of the team leader and his or her members interact with one another in order to fulfill their goals and objectives. Likewise, Oasis Airlines believes so. It has been reported that the airline is comprised only of a small team, having only a handful of employees that serve cross-departmental functions (2007). In this regard, the few employees comprising the organization have become one of the competitive advantages of the airlines. This is because it can be perceived that because the organization has lesser employees, dissipating information and knowledge is easier for them to control and manage, compared to larger organizations. Most employees comprising Oasis Airlines perform a number of functions and tasks, thus, making it easier for the organization to facilitate communication and responsibilities.
Last and most important competitive advantage of Oasis Airlines is their cheap ticket prices compared with their competitors. It has been reported that the price of a business class ticket offered by Oasis Airlines can be comparable to the price of an economy class ticket in other airlines ( 2007). This is line with the goal or objective of the airlines to provide its customers with affordable and available services that would suit their budget. In this regard, this strategy of the airlines is to raise the competition in the aviation industry of Hong Kong and to provide potential customers with convenience and quality at a lower cost. However, basing on Porter’s Threat of Substitution, it can be perceived that some airlines would be offering cheap prices similar to the strategy of Oasis Airlines. This is because, they deem that cheaper tickets would be more attractive to consumers, than higher ones, if and if the quality of service meets their expectations. In this sense, due to the threat of substitution, the power and the advantage of the airlines in the market may be weakened (2007). In addition, such advantage of Oasis Airlines in the market of Hong Kong and other countries can be analyzed using Porter’s Threat of New Entry. It has been reported that if the company has little protection for its key technologies, then new competitors can quickly enter its market and weaken its competitive position (2007). In this regard, to be able to preserve the competitive advantage of Oasis Hong Kong Airlines, it must be able to strengthen its barriers to entry and preserve its position in the market.
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