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Hong Kong Budget Airline Oasis Halts Operations

The budget airline Oasis has shut down and applied for liquidation, one-and-a-half years after it started its long-haul budget flights. All of the airline's flights have been canceled, as Claudia Blume reports from Hong Kong, the airline's home base.

Chief Executive Officer Stephen Miller announced the airline's closure at a news conference in Hong Kong on Wednesday.

"It is with great regret that Oasis Hong Kong announces that today the airline has voluntarily applied to the Hong Kong court to appoint a provisional liquidator. We have therefore suspended all passenger services with immediate effect," he said.

Miller did not disclose the extent of the airline's losses or what caused them. Analysts say the two main reasons for Oasis' financial difficulties are high fuel costs and the competitive environment in Hong Kong.

Edward Wong, an airline analyst for Hong Kong financial services company Quam, says the city is not a good hub for budget airlines, in part because landing fees at the city's airport are high.

"For example, look at other low-price airlines in Europe. Those airlines can use second-tier airports to lower their airport fee but for Oasis - because the company is based in Hong Kong and Hong Kong has only one airport, so the company can't [have] that advantage," explained Wong.

The airline's provisional liquidator, accounting firm KPMG, says it will try to find new investors for the company. Wong thinks this will not be easy, given Hong Kong's difficult environment for budget airlines.

Oasis began flying to London in October 2006 and added services to Vancouver a year ago. One-way flights to London cost as little as $130. The budget airline had planned to offer flights to Germany and Australia later this year.

Oasis is the fourth airline worldwide to stop flying within two weeks. Three U.S. carriers - ATA Airlines, Aloha Airgroup and Skybus Airlines - ceased operations because of surging fuel prices and slowing demand.