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Taking to the Train

Special Report - Infrastructure

As far back as 1991, Southwest Airlines was fighting against the possibility of high-speed rail in Texas. Twenty years on, high-speed rail has become a reality in many parts of the world. Exactly how it will impact aviation and the need for infrastructure development is open to question, though. The evidence is certainly mixed—and there is as much cooperation as competition.

In the United States, the Obama Administration’s stated goal is to bring high-speed rail to 80% of the population. Transportation Secretary Ray LaHood has suggested the cost could reach $500 billion over 25 years. But trains have never really taken hold in the country. Amtrak trains carry just 4% of the total domestic passengers carried by US airlines. Since 1970, the train system has eaten up an estimated $35 billion in subsidies and, moreover, it trundles along at a relatively sedate 80mph, compared with the 150mph-plus achieved in Europe and the near 200mph of China’s high-speed network.

In Europe, high-speed rail has already had a huge impact on aviation and the region’s congestion-hit airports. In 2007, the Madrid-Barcelona air route was among the world’s busiest but early the following year a high-speed rail link opened. The train now carries more passengers than the airlines between the two Spanish cities. And the line will be extended to France in 2012, linking Spain with the European network. Fares vary, as they do for airlines, but one estimate puts a train’s carbon emissions on the Madrid-Barcelona route at a fourth of those of an air service.

On the other hand, according to ACI Europe, the region’s airports provide a network of 150,000 city pairs compared with a high-speed network of about 100 city pairs. Only 40 new city pairs are expected to be connected by high-speed trains by 2030. That’s equivalent to a reduction in demand for flights of just 0.5%. Airlines have also cooperated with their rail rivals to bring passengers a seamless travel process and greater connectivity. For example, SNCF (French Railway) codeshares not only with Air France but also the likes of American Airlines, Cathay Pacific, and Emirates. Potentially, such agreements could free up valuable slots.

The biggest question mark hangs over the burgeoning Chinese market. Over the next five years, while $54 billion (CNY350 billion) is being spent on new airports, rail will benefit from more than $600 billion (CNY4.25 trillion) in investment. Already, there is more than 8,000km of high-speed track in the country and over 4,500km is expected to be added in 2011 alone. Vice Minister for Transport and Administrator of the CAAC Li Jiaxiang believes about 50% of flights less than 500km in distance could become unprofitable because of competition from high‑speed trains, and around 20% of flights 800-1,000km could also run at a loss.

Recently, the important Beijing-Shanghai high-speed rail connection opened. Soon after, a heavy thunderstorm delayed flights, adding to the bullet train’s appeal. Ma Xulun, General Manager of China Eastern, accepts there may be as much as a 20-30% drop in air traffic as a result, although he insists the long-term future for air service is still very positive. Nevertheless, it is thought rail could cost the air transport industry as much as $1.5 billion in 2012. And, by forcing Chinese carriers to shift focus toward international traffic, there is fear the cost could grow. In Japan, rail forced a route rationalization process on airlines and international services grew at the expense of domestic capacity. Chinese carriers, however, may find it harder to compete in the international arena.

The Chinese aviation market is likely to be strong enough to withstand the competition, though. Last year, domestic traffic grew 15.7% and there was a 20.6% increase in international traffic. At 240 million passengers a year, the Chinese domestic market is already the second largest in the world and, at current growth rates, will soon top the list. Nobody is expecting a reversal of fortune any time soon. Air China Chairman Kong Dong says rail is an opportunity as much as a challenge. “Airlines and high‑speed railways are not like water and fire,” he says. “Each has its own advantages.”


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