Low-fare, long-haul: Second time around

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Aircraft choice important
Aircraft choice could prove important in determining the success of low-fare, long-haul airlines. Existing low-cost carriers such as Germany's Air Berlin and TUI Group have ordered Boeing 787s — which Boeing says will be 20 percent more fuel-efficient than today's similarly sized jets — to move into long-haul operations.

Fly AsianXpress — in which Sir Richard Branson's Virgin Group has taken a 20 percent stake — has ordered 15 new Airbus A330-300s. The new long-haul arm of Virgin Blue, V Australia, has ordered Boeing 777-300ERs.

But Europe's largest low-fare airline Ryanair, which recently announced its desire to fly transatlantic routes with 50 widebody jets, is taking a different approach. Ryanair will wait for the aircraft market to soften before deciding if it can buy new or used jets cheaply enough to operate very-low-fare transatlantic services.

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Oasis Hong Kong loves the 747-400. "It's quite expensive to operate — unless you can fill it," said Chad. As long as Oasis can fill the 260 economy-class and — crucially — the 83 business-class seats on each of its 747-400s at prices 40 to 65 percent lower than its competitors, it will make money, he said.

Connecting service a disadvantage
Its competitive targets aren’t the other airlines providing nonstop service on its routes. Instead, Oasis targets carriers offering one- or two-stop connecting service. These airlines post the lowest fares, but since each takeoff and landing burns lots of fuel, their costs are higher than those of the nonstop carriers. Targeting connecting carriers is "proving extremely effective," said Chad.

Chad argues that because aircraft burn much more fuel on takeoff and landing than during cruise flight, long-haul routes are more suited to the low-cost model than short-haul networks. Each Oasis 747-400 is in the air for more than 15 hours a day, a utilization rate that short-haul airlines can only dream about.

Ultimately, the survival of low-cost, long-haul carriers may rest on their ability to attract business and high-end leisure passengers with low business-class fares. Oasis promotes the idea of "affordable luxury" so strongly that although it has been operating less than a year, some people have already flown business-class with the airline 30 times, said Chad.

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