As our recent policy paper on high-speed rail (HSR) noted, China has emerged as one of the global leaders in HSR, recently unveiling the world’s fastest train — with top speeds of 245 piles per hour — and proceeding apace on a plan to build 8,000 miles of ultraspeed lines by 2020.
China Southern Airlines Co., the nation’s largest carrier, and Air China Ltd. are slashing prices to compete with the country’s new high-speed trains in a battle that Europe’s airlines have largely already ceded.
Competition from trains that can travel at 350 kilometers per hour (217 miles per hour) is forcing the carriers to cut prices as much as 80 percent at a time when they are already in a round of mergers to lower costs. Passengers choosing railways over airlines will also erode a market that Boeing Co. and Airbus SAS are banking on to provide about 13 percent of plane sales over the next 20 years.
“There’s no doubt that high-speed rail will defeat airlines on all the routes of less than 800 kilometers,” said Citigroup Inc. analyst Ally Ma. “The airlines must get themselves in shape, increase their profitability and improve the network.”
As the lede states, HSR has had a similar effect in Europe. A few years ago, Air France dropped its five daily trips between Paris and Brussels as a result of the growing popularity of high-speed rail among travelers. The same thing happened with the routes between Paris and Stuttgart.
Not that the airline industry in China is necessarily hurting. The country’s explosive growth has led to an urgent need to expand all sorts of transportation infrastructure. This year, some 25 airports will begin construction, including a second one in Beijing. China ordered 160 Airbus airplanes in November 2007.
China’s experience offers an instructive model as we embark on our own push to revitalize our aging rail infrastructure. As travel demand has increased, HSR has offered greater choice, reliability, and price competition for Chinese consumers. Is there any reason why China can provide that kind of infrastructure upgrade for its travelers and we can’t?