Stimulus-Subsidized High Speed Trains Slaughtering Chinese Airlines And Jeopardizing Boeing's China Dream

china high speed train

Chinese high-speed trains are killing airlines as they open for new high-traffic routes.


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 per cent 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 per cent of plane sales over the next 20 years.

China Southern cut economy-class tickets to 140 yuan ($21) from 700 yuan on flights between Guangzhou and Changsha after a high-speed train started on the route in December. The trip now takes 2 1/2 hours by train instead of 9.

“The high-speed train is invincible on this route,” said Tom Lin, 30, a civil servant in Guangzhou, who opted to travel by rail. “There’s no doubt it’s more convenient for trips to the cities along the line. Airlines can’t compete with trains for the spacious seats.”

One wonders if they are charging fees that recoup both their ongoing costs and their initial investment cost, which can be quite expensive. If airlines have to slash ticket prices down to $21, something tells us that neither planes or trains are covering their costs.

If rates are uneconomic, made possible by government support, (we believe this is highly likely to be the case, but feel free to enlighten us) then Chinese airline vs. train competitiveness will come down to simply who can grab better subsidies. As stated in the article, the outcome will also effect the Chinese market aspirations of Boeing and Airbus.

Yet it all sounds like a pretty good deal if you’re travelling in China right now. Read more here >

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