High-speed Rail

Limited competition with commercial aviation

Our long-term forecast considers the impact that other technologies, including high-speed rail (HSR), have on air travel. In 2010, worldwide railways carried 45 percent less passenger traffic, but 45 times more cargo traffic than commercial aviation. The total distance covered by railway networks was just 2.5 percent that of the aviation network. Analysis shows that (1) railways are well suited for carrying passengers over relatively short distances (terrain permitting), whereas aviation excels for longer journeys; (2) railways are an efficient mode for overland cargo transport; and (3) aviation is very effective for creating large transportation networks without heavy investment in infrastructure.

It has been 50 years since Japan introduced the world's first modern HSR service between Tokyo and Osaka. At the end of 2012, the world's longest HSR line with 2,230 kilometers between Beijing and Guangzhou became fully operational. A total of about 10,000 kilometers of HSR is in operation in China, more than in the rest of the world combined. Altogether, HSR still accounts for less than 2 percent of the world's railway lines.

Recent information from China confirms limited competition

Overall rail traffic growth (conventional plus HSR) in China has not changed significantly since the introduction of the first 350-km/hr HSR between Beijing and Tianjin in 2008. Growth in rail traffic remains slower than domestic air travel growth. The average distance per rail trip has also remained flat for the past few years. In other countries, average trip distance has typically increased after the introduction of new HSR lines. Of the roughly 1,350 domestic city pairs served by airlines in China, about 200 are on the HSR network. For markets with more than twice-daily service, only 17 have experienced more than a 25 percent reduction in capacity since 2009. Although airlines must adjust fares to compete with HSR, industry data shows that average airline fares on the busiest Beijing-to-Shanghai route have held up well since the 2011 HSR inauguration.

Intermodal strategies

HSR could compete with some airlines in high-volume, high-yield markets. Yet, the relatively short routes where HSR excels represent only a small portion of the market served by commercial aviation. Airline assets are highly flexible, because airplanes can be easily redeployed to more lucrative markets. In addition, the infrastructure investment for a comprehensive aviation network is much lower than for ground modes of transport. Aviation's network connectivity simply cannot be replicated by ground-based modes. Opportunities to develop intermodal solutions can potentially combine the advantages of both HSR and aviation.