KLM and Lufthansa Plan South American Expansion

European national carriers Lufthansa and KLM Royal Dutch Airlines are to expand their networks in South America this winter with new flights into Brazil and Argentina, respectively. From October 30, Lufthansa will launch a five-times weekly Airbus A340-300 service from Frankfurt to Rio de Janeiro, while one day later KLM will resume flights between Amsterdam and Buenos Aires after a ten year gap. The Dutch carrier will offer a three-times weekly Boeing 777-200ER schedule on the route, which at 14 hours 10 minutes outbound and 13 hours 15 minutes on return will be the longest two direct sectors in its network.

Source: Flightbase (February 14-20, 2011)

The largest market between Europe and Brazil is to Sao Paulo with nine airlines currently offering over 120 weekly flights in an O&D market of just under 1.7 million travellers in 2010. Further competition is expected this year as Iberia and Singapore Airlines (in partnership with Air Europa) add flights to the Brazilian city from Barcelona. Rio de Janeiro, an O&D market of almost 877,000 passengers from Europe in 2010, is served by just six airlines which together offer 53 weekly services. Lufthansa already flies to Sao Paulo from Frankfurt and Munich and its new Rio de Janeiro schedule is a logical expansion. The Frankfurt – Rio de Janeiro route is already flown by Brazilian carrier TAM which offers five weekly flights and from February 20 Lufthansa has been codesharing on these services. In 2010 just over 26,000 O&D passengers travelled between the two cities.

Lufthansa will not be new to the market as it served Rio de Janeiro between 1956 and 2005. “South America, with its dynamic economy, is one of the most important growth markets for Lufthansa,” said Dr Alexis von Hoensbroech, Vice President Hub Development and Capacity Management Frankfurt, Lufthansa. “Lufthansa is now significantly expanding its services to the region and from next winter will offer 76 flights per week to five destinations in South America. That compares with 42 flights to three destinations in 2007.” Thanks to the expansion of Brazil’s oil and gas extraction industry, many German and international firms have set up offices in the port city, making it an increasingly popular destination also for business travellers. In the run-up to the World Cup and the Olympic Games, Rio de Janeiro will also remain a strong tourist magnet.

Source: Flightbase (February 14-20, 2011)

With regard KLM's expansion to Buenos Aires, the table above illustrates that there is a big gap in the market for the airline to exploit, and with its strong regional network and the support of its SkyTeam partners, especially sister carrier Air France, it will be able to offer connections from around the continent, rather than focusing on just point-to-point traffic. Air France already offers a weekly schedule from Paris CDG, handling over 64,000 O&D passengers in 2010. However, Air France and KLM will face greater competition in March from oneworld rival British Airways which will join its sister carrier Iberia in serving the Argentine market directly when it launches a daily schedule from London Heathrow using a Boeing 777-200ER. The airline currently offers flights via Sao Paulo. Approximately 1.5 million O&D passengers travelled to the Argentine capital from Europe in 2010, with 45,000 travelling on indirect services from Amsterdam.