Wed, June 15, 2011
China > Mainland > Beijing to Shanghai -- Train or plane?

Rail prices shake up airlines

2011-06-14 02:53:07 GMT2011-06-14 10:53:07(Beijing Time)  Global Times

The Beijing-Shanghai high-speed railway moved one step closer to its debut after China’s Ministry of Railways (MOR) announced trial ticket prices Monday, which are deemed competitive by analysts compared with airline costs.

Hu Dongya, vice minister of the MOR, told reporters that there will be 63 pairs of trains running at 300 kilometers per hour (kph) on the high-speed railway every day, complemented by 27 pairs of trains running at 250 kph.

The shortest time for the 300-kph trains to complete the 1,318-kilometer journey is 4 hours and 48 minutes, almost half the shortest time needed by the 250-kph trains, which have more stopovers.

The railway is set to open at the end of this month. Currently, the fastest train linking Beijing and Shanghai takes almost 10 hours.

The ticket price for second-class seats on the 300-kph trains is set at 555 yuan ($85.61), which is about 40 or 50 percent of the cost of an air ticket. The price for business class seats on the train is 1,750 yuan.

For the 250-kph trains, the two prices are set at 410 yuan and 650 yuan respectively.

According to Hu, prices will be determined by the market.

Meanwhile, a full-price flight is about 1,130 yuan for economy class seats on trips between Beijing and Shanghai, lasting about one hour and 40 minutes. Passengers also pay 50 yuan for an airport construction fee and 140 yuan for a fuel surcharge, the Xinhua News Agency reported.

Ma Xulun, general manager of China Eastern Airlines, said earlier the high-speed railway might reduce the number of airplane passengers by 20 or even 30 percent after six months of operation, the China Business News reported.

Sun Zhang, a professor at the Urban Rail Transit and Railway Engineering School at Tongji University, told the Global Times that the expansion of the high-speed railway would definitely affect the airline industry.

“Take the Eurostar as an example. After its launch in 1994, about 76 percent of airline passengers turned to the railway linking London and Paris,” Sun said. “The 555 yuan ticket price is lower than the breakeven price of 720 yuan for airlines running the Beijing-Shanghai route, which is already very competitive,” Sun said.

“Now it is hard to say that taking flights is faster and more economical than taking high-speed trains, even without flight delays,” he added.

According to Xinhua, the MOR decided to slow the speed to 300 kph from the previously planned 350 kph due to cost and safety concerns.

The 221 billion yuan railway can transport 180,000 passengers daily, which will contribute to a 9.6 percent increase in the country’s overall railway passenger capacity, Hu said.

Li Xiaojin, a professor at the Civil Aviation University of China, told the Global Times that high-speed trains would force civil aviation operators to further optimize their business management practices.

“The railway has a much bigger capability, compared with the 8,000 to 9,000 daily passenger capability of airways. Air ticket prices will go down, and the discount will be decided further by the floating price of the high-speed line and its operations,” Li said.

China has invested heavily in its high-speed railway network, which reached 8,358 kilometers by the end of 2010. The network is planned to exceed 13,000 kilometers by 2012 and 16,000 kilometers by 2020.

The MOR reiterated plans to invest 2.8 trillion yuan by 2015, up 41.4 percent compared with the investment in the past five years.

However, the ministry is already in huge debt. According to figures released by the Shanghai Clearing House, the value of the MOR’s total assets reached 3.41 trillion yuan at the end of March, while its total liabilities stood at 1.99 trillion yuan.

Admitting difficulties in raising capital amid tightening monetary policy, Yu Bangli, chief economist of the MOR, said that by the end of 2010, the ministry recorded a 57 percent asset-liability ratio, which is still under control.

Sun noted that developing the high-speed railway is a long-term process, as it will take eight to ten years to get the investment back, and only works in developed areas that are densely populated.

“With a capacity of 180,000 people a day, the Beijing to Shanghai high-speed railway cannot be self-sustained if the number of passengers is less than 100,000 per day,” Sun said. “While the expansion of high-speed trains poses a threat to airlines, the two industries can seek ways to cooperate, such as air-rail intermodality projects.”

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