China HSR Grabs Significant Market Share From Airlines

China, which is engaged in a massive high speed rail expansion project as part of both its economic stimulus and energy independence efforts, is witnessing a major shift of riders from planes to trains. As a result, airlines like China Southern are planning to focus on the international market, as short-haul trips are increasingly taken on high speed trains and not airplanes:

China Southern’s traffic on flights between Beijing and Taiyuan in Shanxi province fell about 60 percent after a high- speed rail link began operations, Si said. There was a 30 percent decline on Shanghai-Wuhan trips, he said....

China Southern Airlines Co., the nation’s biggest domestic carrier, will expand overseas flights in anticipation of a high-speed rail network causing traffic to decline on about a quarter of its internal routes.

Traffic may fall by more than half on 518 of the carrier’s weekly flights, Chairman Si Xianmin said today at a conference in Beijing. Of the airline’s about 160 domestic routes, 38 will compete directly with high-speed railway lines, he said.

“This will force us to expand overseas routes, on which we still have some competitive edge,” he said. “It will eventually cause an impact on the global aviation industry.”

The new rail network, due to be completed by 2020, will offer a cheaper alternative on routes covering about 80 percent of China’s domestic aviation market, Si said. That will force the carrier to challenge Air China Ltd. and Cathay Pacific Airways Ltd. on international services to offset dropping domestic demand.

“For short haul, passengers definitely won’t want to use the airlines,” said Jay Ryu Je-Hyun, an analyst at Mirae Asset Securities Co. in Hong Kong.

Some of the reasons for the shift:

High-speed train tickets will be about 40 percent cheaper than current air tickets, according to Si’s estimations. A five- hour rail trip from Shanghai to Beijing, for instance, will likely be about 700 yuan ($103), or about 60 percent of the price asked for the two-hour flight.

Train services may also be more convenient as stations are generally located downtown, while airports are on city outskirts. There are also fewer security procedures, which quickens boarding.

“Airlines will lose all their current competitiveness, like saving time,” said Si. “What’s more, the high-speed trains haven’t reported any fatal accident in the past more than four decades. That’s definitely a plus for passengers considering a trip by air or rail.”

Much of this is directly comparable to what will happen here in California. Although one can find some decent fares for a roundtrip flight tomorrow from SFO to LAX (around $100 on Virgin America), it's very unclear whether that will be sustained in a future where oil prices are certain to rise significantly. HSR, powered by renewable electricity, will not have that problem.

And while there will still be those travelers who choose Virgin America or Southwest over the high speed train, the Chinese experience, along with that of Spain and on the USA's own Northeast Corridor shows that many travelers will also pick HSR. HSR's job isn't to kill the airlines, but to enable them and the airports they serve to survive. Without HSR, we're either going to see people priced out of air travel entirely, or if the expected oil price increases fail to materialize, there won't be enough capacity to handle the passenger load. Either way, HSR is a necessary complement to maintain intercity connectivity in 21st century California, and to maintain California's global competitiveness.