They could not be more different, and neither can really claim to be first to market. Yet with the launch in October of Oasis Hong Kong followed closely by Viva Macau, they're creating a stir in the Pearl River Delta's airline industry. At long last, the region has its very own low-fare airlines (LFAs).
Although both are offering cheaper seats than the region's incumbent carriers, Oasis and Viva are two vastly contrasting airlines with different business models. Oasis is flying long haul to Europe and the US from one of the most expensive airline hubs in the world, where competition is fierce. Viva will fly regionally to destinations including Phuket, the Maldives and the Philippines to start, and will be operating out of a smaller, less-expensive and relatively unknown airport.
There are some striking similarities, though. Besides their launch dates being within weeks of each other (at press time Oasis was slated for October 25, Viva early November) both airlines are determined to prove that the low-fare model can work in their respective home cities. They also share a hinterland, one of the most densely populated and fastest-growing regions of the world, and are hoping to attract significant outbound traffic from southern China and inbound traffic from Europe, the US and other parts of Asia. Moreover, unlike many of the existing LCCs (low-cost carriers) flying into Hong Kong and Macau from home bases in the Philippines, Singapore, Thailand and Malaysia, cargo is an important element of their business plans to help boost revenues.
It is in the attention paid by both management teams to distinguishing themselves from the image of the traditional "low-cost carrier" that their similarity is most readily apparent. Service and comfort are constantly emphasized, and questions about what they will and will not have on board seem to elicit the kind of responses one would expect of a crew trained to arm the doors and cross-check: We are low-fare; that does not mean we are cheap.
"We are not Ryanair," says Steve Miller, CEO of Oasis. "We will have normal baggage allowance and free food."
"Just you wait and see what we will have on board," says Pyne, wearing a green polo shirt and sporting a wide grin. "We are going to be a very fun way to fly."
And, lest anyone should have missed the recent press coverage, they will both have a business class.
The idea of a direct flight to London-Gatwick out of Hong Kong in a comfortable class for no more than HK$20,000 was something that Miller wanted to offer travelers right from the start (initial special offers are as low as HK$6,600). "When I saw that people have to make one or two stops before they finally arrive in London, I got to thinking, "Why should people be flying that way and pay such high fares'?" he says. "So I fingered with my calculator and plugged in the numbers. That's when I decided to fill a niche by creating an airline for people who would appreciate non-stop flights for less."
Oasis should have no difficulty with seat configurations, as it will start off with the biggest planes around: Boeing 747-400s. Viva, with a wide-bodied Boeing 767, has been similarly clear about the need for more expensive seats. It calls them the "Superstar" class.
Neither airline is going to have an easy time achieving its ambitions. In an environment where the direct Hong KongñLondon route is already served 10 times a day by Cathay Pacific, Virgin Atlantic, British Airways, Qantas Airways as well as Air New Zealand in October, the challenge for Oasis is clear. But the airline has made an encouraging start, selling 10,000 tickets within the first two weeks of taking bookings.
Miller is clearly focused on creating a buzz in his home market, saying he believes a low-fare carrier would be beneficial to Hong Kong's economy because of the up-and-coming cities in PRD and Asia.
"Hong Kong needs a budget airline because we could leak traffic and end up being a spoke to Bangkok, Dubai and other airlines in the PRD and Macau," he says. "We need to reclaim those passengers who are flying on airlines with one or two stops, and get them on board a Hong Kong airline. We have that right, so that Hong Kong can benefit from this in the long run."
Like Miller, Viva CEO Andrew Pyne is determined to dedicate his airline to his home in Macau.
For the former Cathay executive, the idea of creating a low-fare airline began as a mental challenge to prove the sceptics wrong.
"Three years ago I read an article that a low-fare model wouldn't work. It became a bee in my bonnet. I wrote down a bunch of ideas on a napkin at a Chinese restaurant in Texas, north of Armadillo and the more I scribbled, the more I got excited about them. I decided I wanted to use comfortable, wide-bodied aircraft and not narrow-bodied. I wanted to bring a low-fare model to Asia," he says.
Pyne toyed with the idea of Hong Kong at the start and even of working with Cathay to launch it, but found that Macau would be a much more logical secondary hub for low-fare airlines.
"In aviation terms [Macau] is a low-cost hub waiting to happen: an under-#8800;utilized airport, with low fees and charges, sitting on the edge of one of the most dynamic economic regions in the world ñ and with a population of 60 million within two and a half hours' surface travel time," he says. "The parallels to low-cost hubs elsewhere like Stansted in England or Hahn in Germany are clear."
Pyne also believes in Macau as a destination, as it grows into one of the biggest entertainment cities in the world.
"First and foremost, Macau is our home. It is our mission to project the new Macau on a global stage," he says. "The longer-term focus is on the inbound market flowing into Macau, but we can't neglect the broader PRD both in terms of inbound and outbound travel. We know that there is a great thirst for exciting and affordable travel destinations from across the border, and we want to provide a new gateway to the world for that market."
Will their models work?
As far as the incumbents are concerned, it's too early to tell, and many are obviously sceptical. "It remains to be seen what impact this new airline will have on the market, but they are certainly generating interest in London which can be no bad thing for those of us that already operate to the UK," says Virgin Atlantic General Manager Southern China and Taiwan, Chris Humphrey.
"As for whether they are really a low fare airline only time will tell, but I did hear Mr Miller say that his new airline had to achieve an average return fare in economy (class) of around HK$4,000 just to break even. That is not too different from many of the fares that are available in the market place today from the established carriers and, at Virgin Atlantic, full service is included."
British Airways' marketing manager, Choi Fong Vallis says the more traditional carriers are just going to have to get more creative to hold on to repeat business.
"We'll have to find more creative ways to get passengers," she says. "Price is obviously a very compelling proposition for those who really don't care about the schedule, network and onward connections to Europe from London. It wouldn't be sustainable for us to drop fares, and we would like to think we are providing value for money. We're making our flat beds even better with the revamp of our Club World flat bed in business class later this year, so people get what they pay for."
Cathay Pacific, which celebrated 60 years in Hong Kong in September, would not comment in detail, but did emphasize the importance of value for money. "Hong Kong is already well-served by some 80 airlines with different positioning to cater to different market needs," a spokesperson said. "Just like all our competitors, we have to ensure that our cost structures are competitive and provide customers with superior value for money."
Cebu Pacific Air, a low-cost carrier out of the Philippines that started flying the Hong Kong-Manila route 14 times a week in 2001, and boosted their flights to 21 flights a week in July this year, welcomes the arrival of Oasis.
"The airline industry has yet to see an LCC / LFA flying long-haul, so any carrier that is able to do this and succeed is a significant step not just for Asia, but for the industry," Candice Iyog, marketing director at Cebu Pacific Air, says.
AirAsia, which flies the BangkokñMacau and Kuala LumpurñMacau routes, also welcomes the arrival of Oasis, but is a bit sceptical of the fare structure.
"Oasis fares are good for consumers, but how long will they be able to sustain it?" Celia Lao, assistant general manager for Greater China at AirAsia, based in Macau, asks. "They have to be very careful to control their costs. If their fares are low, they will be able to attract passengers, but with the expenses of a Hong Kong airport and high fuel costs, it may be difficult for the carrier itself.
"We do hope they will be successful though, because Oasis can benefit Macau as well, by bringing long-haul passengers into Hong Kong from London and the US," she says.
Lao is optimistic about Viva Macau, but offers words of caution based on AirAsia's own experience for bringing passengers out of the PRD.
"We found out the hard way about immigration and the transport infrastructure in southern China, and soon realized how important it was to be communicating with them regularly to work out a way to help make it easier for travelers to cross over the border into Macau to fly onward to other destinations," she says.
To be sure, being based in the PRD is not all it is made out to be. Virgin's Humphrey points to the experience in Europe, where, he says, "the low-cost carriers have tended to operate from, and base themselves at, relatively small airports where costs are low, and turnaround times are quick." Macau would seem to be the better place for this model, he adds, as it has a smaller and quieter airport, and lower operating costs than at Chek Lap Kok.
"However, both places have a disadvantage: their close proximity to the mainland, with its poorly organized and utilized air space. Efficient ATC [air traffic control] is also very important to the traditional LCC model, and I am afraid that at present China lacks this."
Pyne realizes these challenges lie ahead for Viva.
"Clearly there remain a number of impediments to smooth cross-border flows through the PRD, and we're keen to see those reduced or removed," he says.
Pyne also appreciates that AirAsia has already made major inroads in boosting greater awareness of Macau.
"AirAsia pushed Macau in its own right as a pioneer," he says. "We know that for most of the world, Macau is an unknown quantity. The challenge is to generate enough noise in major markets to make Macau a global destination rather than a Greater China destination."
Tiger Airways intends to boost its weekly flights between Singapore and Macau from seven to 10 from 29 October to meet passenger demand this winter, says a spokesperson for the airline.
"Demand for Tiger Airways' Singapore-Macau route is strong," the spokesperson tells us. "[Both] Hong Kong and Macau are viable as airline hubs because they are strategically located to serve southern China and certain southeast Asian destinations. Both airports also have the infrastructure to support low-cost carriers. However, operating costs must be kept low to be attractive for them."
Viva Macau will start flying to the nearby regions of the Maldives, Indonesia, the Philippines, and Phuket, followed by longer haul flights to Moscow and Sydney next year.
"Our future goals are to become a global network with a strong regional network in place. We are offering a range of exciting, leisure-oriented destinations rather than simply duplicating what is already on offer from the PRD," Pyne says.
Oasis, however, is purely focused on long distance travel, and currently has rights to fly to Oakland, California; Chicago; Milan; Cologne/Bonn and Berlin in addition to London-Gatwick. Boston, Hawaii and New York are also being considered as additional routes about two years down the road, Miller says.
"Long-haul routes are more productive than short-haul, and we can work a full 24-hour day versus regional airlines that may only get a 12-hour day. We can get much more utilization and better fuel efficiency," he says.
The fortunes of both will be keenly watched as indicators of future trends.
"Potentially it is a significant step for world aviation, and not just Asia," Humphrey says. "If they really do turn out to be a low-fare airline, and if they make a success of it, I am sure that others will be tempted to follow. But those are significant ëifs'."
Meanwhile, two low cost carriers: Macau Asia Express and Golden Dragon are waiting in the wings to take off from Macau next year. Macau Asia Express, a joint-venture between Shun Tak, CNAC and Air Macau, will fly regionally and is expected to fly to new destinations in the mainland and Asia. Stanley Ho's Golden Dragon reportedly has rights to Nanning, Shijiazhuang, Nanchung, Zhengzhou, Jinan, Changsha, Guangzhou and Hohhot in China as well as Vietnam and Laos.