CUHK Business School Research Finds the Rise in High Speed Rail Leads to a Significant Improvement in Airline Services

HONG KONG SAR – Media
OutReach – 17 June 2021 – Trains are making a comeback. After losing ground for
decades to the far sexier and faster travel by plane, people are increasingly
making a return to good old fashion rail as a viable mode of getting around (at
least for short to medium distance trips), thanks in part to rising concerns
over the impact of air travel on global carbon emissions as well as the coming
online of more and more high speed rail which has made travel by train faster
and more comfortable.

 

And nowhere has this boom been more apparent than in China,
which in the space of just over a decade has built the longest
high speed rail network in the world, stretching nearly
38,000 km and accounting for two-thirds of all high speed rail track in the
world. This boom has also been mirrored in air travel, with the sector in China
transporting a record
660 million passengers in 2019 before the pandemic hit.

 

The fast pace of growth in these rival sectors in China
provided a group of researchers with the ideal conditions to study how this
second coming of the golden age of rail has affected airlines. The study,
titled Competition
and Quality: Evidence from High-Speed Railways and Airlines,
found that the rise in high speed rail led to a significant improvement in
airline services, mainly in the form of reduction in flight delays.

 

“While it’s true that both flight volumes as well as
airline choice has grown dramatically in recent years as China’s aviation
market has opened up, it’s also no secret to anyone who’s been through an
airport in the country that serious flight delays are a chronic problem,”
says Yang
Yang, Assistant Professor at the School of Hospitality and
Tourism Management at The Chinese University of Hong Kong (CUHK) Business
School and one of the study’s co-authors.

 

“This has made high speed rail a really attractive way
for people to get around between cities, and it was an opportunity for us to
study how competition between the two modes of transportation affected airline
service quality.”

 

Shorter
Flight Delays

The research, which was carried out in collaboration with
Prof. Hanming Fang at the University of Pennsylvania and Prof. Long Wang at
ShanghaiTech University, looked at close to 900,000 non-stop domestic flights
from Beijing by 41 airlines to 113 destinations between 2009 and 2012. To
measure service quality, the researchers focused on flight delays in arrivals
and departures, as well as travel time.

 

They compared the length of delays for flights to 11 cities
that are also served by the Beijing Shanghai High Speed Rail, a 1,318-kilometre
long track, to flights that that were not served by the line. The study found
that the entry of this high speed track in 2011 led to a reduction of an
average of 2.54 minutes in delays in flight arrivals. It also found that the
launch of high speed rail services led to a 2.5 percentage point-reduction in
arrival delays of 15 minutes or more.

 

These results were stronger for airlines did not operate on
the hub model (such as budget carriers that fly point-to-point) and which have
less market power, as well as flights on short and medium distance routes.

 

The
Need for (High) Speed

Whereas high speed rail has operated in different parts of
the world for decades, (Japan’s Shinkansen,
the world’s first high speed rail system, began in 1964, whereas France’s TGV
launched in 1981) China only really got into the game well after the turn of
the millennium. While planning reached back as early as the 1990s’, it was not
until 2008 that the country launched its first high speed passenger-only
service between Beijing and Tianjin, comprising of a 117-kilometre line. The
boom that followed saw tens of thousands of kilometres of high speed track laid
in the following decade in a network that now covers nearly every single
province and region.

 

And the country is not done. China is seeking to almost
double its high speed network to around 70,000
kilometres by 2035. Also, while train speeds have increased from a
maximum of 200 kilometres per hour to 350 kilometres per hour, the country is
pouring resources into developing even faster rolling stock, including a Maglev
prototype that is capable of reaching up to a blistering 620
kilometres per hour.

 

Going back to the latest study, the researchers then sought
to find out whether the reduction in flight delays following the launch of a
directly competing high speed rail service was due to direct efforts by an
airline company to improve the quality of its service, or whether there was
some other external variable at play.

 

“There’s
only so many ways an airline can reduce travel times,” says Prof. Yang, adding that for example it was difficult
to reduce flight times without sacrificing safety or buying a completely different
model of aircraft.

 

The researchers found that the coming online of high speed
rail led to a reduction in delays in flight departures of an average 5.28
minutes, leading them to suggest that the entry of competing high speed rail
services drove airlines to directly speed up checking-in and boarding
processes, as well as by improve training for crew.

 

“Everyone knows it’s hell to sit on the tarmac waiting
for a plane to take off,” says Prof. Yang. “Airlines can see that if
their market is about to be encroached by high speed rail that they should
focus on getting their passengers off the ground as quickly as possible.”

 

The study also found a 1.39-minute reduction in average
runway taxiing times at the destination airport, although the researchers noted
was something that airlines are unlikely to be able to control.

 

Quantifying
the Benefits

By looking at flights on specific dates and times, Prof.
Yang and her collaborators also eliminated a slew of alternative explanations
for the improved timeliness by airlines, from reduced air passenger and airport
congestion as a result of increased transportation volumes, to restructuring in
flight schedules.

 

Using the estimates of the time saved, the researchers
roughly calculated that the launch of competing high speed rail services would
have conservatively saved passengers an aggregate of just under 2,100 Chinese
yuan per flight.

 

When this number was applied to the outbound Beijing
destinations that were also served by the Beijing-Shanghai line, it means that
the introduction of just this one line would have translated to total passenger
savings of 15.72 billion yuan, assuming that that airline travellers flying out
of Beijing purchased a round-trip ticket and a discount rate of 5 percent, and
that comes even without taking into account reductions in airfare as a result
of increased competition.

 

“We live in an age where the price of a train ticket is
still cheaper than flying, but the time cost of travelling by train is fast
dropping,” adds Prof. Yang. “The findings speaks volumes about the
disruptive competition that high speed rail represents to air travel.”

 

Reference:

Fang,
Hanming and Wang, Long and Yang, Yang, Competition and Quality: Evidence from
High-Speed Railways and Airlines (June 26, 2020). PIER Working Paper No.
20-022, Available at SSRN: https://ssrn.com/abstract=3636308 or http://dx.doi.org/10.2139/ssrn.3636308

 

This
article was first published in the China Business Knowledge (CBK) website by
CUHK Business School: https://bit.ly/3g0CC2l.