On its twitter page today, KLM Royal Dutch Airlines announced it will return to the Chilean capital, Santiago (SCL), starting February 2, 2014. The service will be operated thrice weekly on a boeing 777-300 via Buenos Aires in each direction.
This route development underscores Air France – KLM’s continuing growth in the Latin America region and their commitment to expanding their market presence in the intercontinental realm. Santiago de Chile, as an end-of-line destination in a relatively remote part of the world, has not welcomed a new international service to Europe for many years.
Returning to Chile after over a decade of absence
KLM has been flying nonstop from its Amsterdam hub to Buenos Aires (EZE) since 2011, and has an on/off history with serving the Southern Cone region of Latin America. Prior to resuming the nonstop Amsterdam – Buenos Aires route in 2011, KLM previously operated a 2-3 weekly service from AMS to BUE, with continuing service to SCL all the way up until 1998/1999.
The flights were numbered KL 791/792 and flown on a 747-200 series aircraft. On the outbound AMS-EZE sector, KLM made a technical stop in Rio de Janeiro as the 747 could not operate all the way to Buenos Aires with sufficient payload, and the Rio stop also included a crew change.
Fast-forward to 2011, the advent of the Boeing 777-300 series allowed KLM to fly to Argentina nonstop, and became KLM’s longest flight on a nonstop basis lasting roughly 14 hours in each direction.
Tag-on to Santiago will improve economics of existing flight to Buenos Aires
When KLM launched Buenos Aires, the service operated as a daytime flight on the outbound sector ex-Amsterdam, and the return was an overnight service from Argentina, arriving at Schiphol airport mid-afternoon the following day.
KL707 AMS1010 – 2020EZE 772 135 (14hrs 10mins)
KL708 EZE2220 – 1535+1AMS 772 135 (13hrs 15mins)
However, the tag-on service to Santiago de Chile offers a much more convenient schedule for passengers traveling between The Netherlands and Argentina/Chile as the flight will now operate as a red-eye outbound from Amsterdam, arriving in BUE the following morning, and the tag service will continue onto Santiago and return back during the day. The flight will then leave Buenos Aires in the late afternoon and arrive back in Amsterdam by mid-morning the following day.
Per the KLM Corporate News websites, the weekly schedules commencing February 2nd 2014 are as such:
The winter and summer publications reflect the seasonal IATA Northern Summer/Winter time-zone changes incorporating Daylight Savings adjustments. KL 701 will operate outbound from AMS three times a week on Tuesday, Thursday and Sunday and on Monday, Wednesday and Friday from Santiago.
Overall, it’s a win-win situation for KLM as it provides more convenient scheduling for business travelers and connections on either end at Amsterdam, along with making better operational use of the aircraft flying onward to Chile. It’s uncertain whether KLM will offer 5th-freedom services on this route between Buenos Aires and Santiago, which allows passengers to book roundtrip tickets between the two markets who are not traveling onward to Amsterdam.
The 777-300 equipment deployed to Buenos Aires as-is is very high-density, offering 35 seats in World Business Class, 350 seats in Economy Class and 40 seats in the Economy Comfort Zone that offers 10 cm extra legroom. That’s a lot of capacity to be sending to a single market on a less-than-daily basis, but when it comes to flexibility within its fleet, KLM can only select from a limited number of available aircraft to operate this longer-range route. Adding Santiago is a sure way to help improve load factors and drive up yields despite the cost increases of an additional flight cycle and extra crew services to operate the EZE-SCL sector.
SkyTeam will now compete more aggressively against OneWorld in Chile – Europe
At present, only three carriers fly nonstop from Santiago de Chile to Europe: Air France operates a daily service to Paris alternating between a 777-200 and 300ER series aircraft, LAN Airlines alternates between a daily and 9 weekly service to Madrid on a Boeing 787, which continues on to Frankfurt, and Iberia operates a daily service to Madrid, alternating between an Airbus A340-300 and 600 series plane.
The current week, according to data in Innovata, shows a pretty evenly split market share breakdown between these three carriers. However, the balance is obviously skewed towards OneWorld in terms of alliance domination. Iberia and LAN benefit from code-sharing on the Santiago to Madrid nonstop sector, and also interline traffic on each others’ metal on connecting flights across South America and Continental Europe, North Africa and the Middle East bi-directionally.
Air France, however, benefits from having a similar network out of its Paris Charles de Gaulle hub, along with a much larger intercontinental network out of CDG than Iberia does at MAD. For that reason, Air France has been largely successful ever since implementing a nonstop flight from Santiago to Paris in the late 2000’s, whereas previously, the route relied on a connection in Buenos Aires in between both cities. Many European carriers have followed a similar strategy with Santiago in past years: KLM, British Airways, Lufthansa and Alitalia all once flew to Santiago with a BUE stoppover, and SWISS had a long-standing service extending to Santiago via Sao Paulo, which was dropped in 2009.
Now, KLM is once again re-trying this strategy, boosted by the growth in the Chilean aviation market and its relative economic stability, unlike Argentina which is much more subject to dynamic fluxes and the demand cycles in the travel market is quick to reflect these ebbs and flows. Moreover, rather than cannibalize the existing daily service on Air France, the new KLM flight will actually complement the service by providing a secondary 3-weekly option for lucrative business traffic and another major intercontinental hub in mainland Europe, aside from Paris.
Air France-KLM and SkyTeam growth in Latin America should serve as wake-up call to Star Alliance
Despite its massive financial hurdles and impending pressure to meet its Transform 2015 programme goals, Air France-KLM has been exploding all over the Latin American map in recent years. KLM has or will return to Buenos Aires, Rio de Janeiro and Santiago since 2010, and Air France has added Lima, Panama City and Montevideo in that same period. These two carriers, in tandem, have been capitalizing on the growth in surging markets such as Rio, or filling voids in markets that have been abandoned by other European carriers, such as Montevideo.
SkyTeam has also been aided by recent additions of Aerolineas Argentinas to its member list, and the growing ties between Gol in Brasil and SkyTeam interline and codeshare partners. Air Europa, another SkyTeam member, has also expressed interest in starting services to Chile, which would secure SkyTeam a slot in the important Chile – Spain corridor.
The OneWorld approach in Europe – Latin America has always been reliance on Iberia’s Madrid hub as the intercontinental gateway to the Southern Cone, or the more circuitous flow method over North American hubs. British Airways’ presence in Latin America is fairly restricted to big-name markets such as Rio, Sao Paulo and Buenos Aires, but IAG and OneWorld will be aided by the impending addition of TAM Airlines to OneWorld in the near future, as it deflects away from Star Alliance post merger with LAN Airlines.
SkyTeam currently holds the leading market share at 34.6% of the market share in Europe – Latin America, according to data published by CAPA in March 2013. This number will remain the same once TAM migrates to OneWorld.
Star, on the other hand, holds 20% of the market share between the two regions, but this number will drop to 15% after the cutover. OneWorld currently stands at 22%, but this number will jump to 27% in the future.
These numbers are impressive and telling at the same time: Star Alliance has been very lethargic in growing Latin America, somewhat similar to its pattern of behavior in developing routes to secondary cities in China relative to its European rivals. It would seem logical that Star’s largest power player, Lufthansa would have capitalized on expanding to cities such as Lima or San Salvador (where Star member Avianca holds major hubs), Panama City (hub for COPA Airlines), as well as consider re-adding Santiago or exploring secondary cities in Brasil, such as Salvador de Bahia, Recife, Fortaleza, Belo Horizonte or Brasilia. Instead, Star seems content relying on its member TAP Airlines of Portugal to serve the Brasilian networks.
SkyTeam is the most balanced in Europe – Latin America
Alongside its links to Central, North and deep South America, SkyTeam also serves a host of destinations in the Caribbean via Air France-KLM to Paris and Amsterdam. While International Airlines Group (IAG) serves a total of 17 destinations in this region vs. 12 for SkyTeam, both trump Star Alliance, which does not serve a single market in the Caribbean via Lufthansa Group, TAP, SAS or any of its other members.
In totality, the mere fact that SkyTeam appears to be the most dedicated to the region is impressive alone given the fact that countries such as Britain and Spain have historically capitalized on stronger cultural, linguistic and business ties to Latin America versus France and The Netherlands. Even more interesting is the lethargic rate at which Latin American carriers have grown (more like reduced) their European networks: neither Avianca, LATAM, Aerolineas Argentinas, the major intercontinental flag carriers in Latin America, have expanded their route maps in recent years.
On a final note, the threat of the Gulf Coast and ME3 carriers cannot be overlooked, either. Emirates, Etihad, Qatar and Turkish Airlines have been flexing their muscles slowly in the Latin American corridor recently. All four are present in Brasil, and 3 of the 4 are present in Buenos Aires, and have set sights on expanding in Chile, Colombia and Peru to capitalize on growth opportunities there. Fortunately for existing players, the Gulf Coast carriers are more limited in fleet range and aircraft availability due to geographic distance, but the ME3 and Turkish also benefit from lower cost structures that allow them to pursue ultra-long haul routes with minimalized risk.
As someone who lived part of his life in Santiago, Chile, I am just thrilled that the Flying Dutchman, my most favorite airline in the world, will be returning to SCL in a few short months. Chi- chi-chi, le-le-le, Viva Chile!