Yes, that's exactly what they're hoping for. As the traffic from China->EU will probably grow faster than EU->China (of course they'll travel both way, but I mean the starting country) it's a good idea to already "get in touch" with those Chinese pax that might spread mouth-to-mouth propaganda within their communities. If they can offer the flight from Hangzhou for the same as from Shanghai, then certainly many people will book that flight, and make KLM more money (I assume lower costs at Hangzhou for taxes etc.) while at the same time probably gaining some new pax for KLM. People tend to remember the airlines they've flown with and the chance they'll book again on them is (according to my experience) higher than to choose another airline when the costs are comparable. So, yes, KLM (and LH) are risking something with that strategy, but considering many 5 Million towns in Europe would be considered "big" and attract direct international flights, this will also be the case in China, and even more so every year as the potential customer base is growing quickly. I say go ahead with that strategy as long as they don't loose (more) money than they do on other routes.