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KLM promises bigger Buzz
AMSTERDAM, Netherlands -- Dutch airline KLM announced a shake-up in its low-cost operations on Wednesday, naming Buzz as its main budget carrier and promising to expand its service in an effort to grab a bigger piece of the lucrative market. The airline said Buzz, based at London Stansted airport, will become an independent unit within the KLM group on November 1. Buzz was selected over KLM's other budget carrier Transavia, which will continue to operate as a charter airline out of Amsterdam's Schiphol airport. The decision follows a review of KLM's no-frills operations, the fastest growing segment of the European airline market. The carrier said it expects the region's low-cost sector to grow by 20 percent a year until 2005 or 2006. KLM said it has already been approached by "a number of parties" interested in working with the carrier on its low-cost business. "If it means the success of the business going forward can be increased by effective partnership, we will do it," a KLM executive told an investors conference in Amsterdam on Wednesday. Starting in 2003, KLM said it will begin adding new routes to its existing 24 in Europe and replacing its BAe aircraft with Boeing 737-300s. It also plans to open a second hub in Bournemouth on the south coast of England, and will possibly add another UK base and one in Europe at later dates. Major carriers like KLM, British Airways, Lufthansa and Air France have been forced to slash ticket prices on routes across Europe as low-cost airlines encroach on their territory. Last year, KLM failed in its bid to buy Go-Fly from BA. The carrier was later sold to easyJet (EZJ) of the UK, creating Europe's biggest budget airline. EasyJet ordered 120 Airbus aircraft to meet projected demand. Based on existing price lists, the deal could be worth about $6.2 billion. Michael O'Leary, the chief executive of Ryanair, Europe's second-largest low-cost airline, expects traffic to grow 30 to 35 percent a year over the next two years, before "steadying back" to 25 percent annually. Earlier this month KLM, Europe's fourth largest airline, posted strong quarterly results but cautioned that looming global troubles, such as a possible war in Iraq, could drag its full-year bottom line into the red. Shares in KLM were up 6.1 percent to 10.95 euros at midday on Wednesday in Amsterdam.
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