SOURCE:.China.Central.Television,.undated.
RAND.MG1100-2.11
equivalent to the typical air travel time (Zhao, 1999). Likewise, travel time on the newly completed Wuhan-Guangzhou PDL is just under 3 hours, compared with a flight time of 1.5 hours for the 1,000-km trip.
While high-speed rail travel may offer some advantages in conve-nience and comfort, it is unlikely to offer any cost savings for the aver-age Chinese traveler. A coach-class ticket between Wuhan and Guang-zhou on the new high-speed train, for example, cost RMB490 (about $72) as of August 2010 (“Ministry of Railways: High-Speed Train Fares Are Consistent with Market Conditions,” 2010).5 By compari-
Chinese railroad officials insist that these prices reflect actual market conditions and that traditional train fares were inexpensive only because they were heavily subsidized. See “Min-istry of Railways: High-Speed Train Fares Are Consistent with Market Conditions,” 2010.
son, economy-class air fares between Wuhan and Guangzhou range from RMB370 for late-night flights to RMB470 for the early evening hours.6 The expensive fares of the new trains have undoubtedly dis-couraged many travelers—recent media investigations discovered some trains running with only a single passenger in a car (“Ministry of Rail-ways Responds: How 120% Occupancy Rates Are Calculated,” 2010). However, much of the cost of rail transit, including trains and tracks, consists of sunk costs. Fares on lines that fail to attract significant pas-senger traffic will probably be reduced to increase traffic and recoup some of the sunk costs. In contrast, almost 90 percent of air travel costs are variable, and even the 10 percent fixed cost for airplane ownership is not fully sunk, because airplanes can always be sold (Belobaba et al., 2009, p. 115).
The ultimate impact of rail and expanding automotive transit sys-tems on air traffic patterns is more complicated than simple competi-tion between rail and air. Major hub airports located on a high-speed rail line might see shorter regional flights decrease as passengers use the rail line rather than the connecting regional jets to reach their ultimate destinations. On the other hand, airports not served by the high-speed rail will likely see additional growth in passenger traffic as local per-capita earnings rise.
Domestic Versus International Traffic
Another important dimension of the air transport market is domestic versus international traffic. Nations have complete regulatory power over domestic air traffic. Historically, domestic routes are flown only by domestic airlines, generally referred to as the Eighth and Ninth Free-doms under the Chicago Convention (Belobaba et al., 2009, p. 22). Even the Open Skies Agreement between the United States and the European Union (EU) applies only to international flights (Kanter and Clark, 2010). International route regulation is typically based on bilat-eral agreements and is structured with roughly equal landing rights, i.e., landing slots or airport access. As such, a country’s international traffic is divided roughly evenly between domestic and foreign airlines.
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