China’s new bullet trains plan to challenge airlines

Published Jun 6, 2011


Ma Xiaojing will abandon airlines for trips to Beijing from Shanghai after suffering through delays that can triple the length of the two-hour flight. Instead, she will take the new bullet train.

“It’s so annoying when you hurry to the airport, board on time and then get stuck in the cabin for hours,” says Ma, a marketing manager for a Shanghai-based luxury goods company. She takes her iPad to pass the time during delays, studying English and watching the television show Friends.

“I will definitely take the bullet train.”

A 221 billion yuan (R227bn) high-speed rail link connecting China’s most important cities in less than five hours is due to start service later this month. The line, designed to carry 80 million passengers a year, will challenge Chinese airlines that have delays on at least one in four flights nationwide.

Airline delays

Jack Xu, an analyst with Sinopac Securities Asia in Shanghai, said: “There will be plenty of travellers willing to switch to trains as they can’t stand any more airline delays.

“Given how much the line cost, the ministry will have to try and win every one of them,” he said.

The blue-striped, silver-bodied bullet trains, built by Beijing-based CSR, will begin their 1 318km journeys at the capital’s South Station, about 6km south of Tiananmen Square. They will travel at speeds of up to 300km/h to Shanghai’s Hongqiao station, which is next to the city’s main domestic airport. The Lujiazui financial district is a 40-minute subway ride away.

The rail ministry said last week that the line had passed a preliminary check and met standards for running as fast as 350km/h. Operations would start “soon”, it said.

Rail Minister Sheng Guangzu said in an April 13 interview with state-run People’s Daily that there would be about 90 services a day when the line opened. There would be non-stop services and ones stopping at stations on the way, he said.

Zhao Jian, a professor at Beijing Jiaotong University, which specialises in rail engineering and management, said second-class fares from Beijing to Shanghai would likely cost about 600 yuan to 650 yuan.

According to International’s online travel agency a one-way June 30 flight with China Eastern Airlines costs about 640 yuan.

The rail ministry declined to comment on fares, timetables and targets for the bullet-train line, which is known in Chinese as “Jinghu”, or Beijing-Shanghai.

The line is the centrepiece of a 2 trillion-yuan investment in high-speed rail. The country, already home to the world’s biggest bullet-train network, planned to have 16 000km of high-speed track by 2015, the rail ministry said in January.

Five bullet-train lines were already in service at the end of last year.

Ma, who travels to Beijing from Shanghai as often as three times a month, has already taken high-speed trains on trips to Suzhou and Hangzhou, which are both in eastern China. “The experience is pretty good,” she says. “Stations are easy to use, the trains are comfortable and… the services are reliable.”

The introduction of bullet trains on other routes has caused fare increases and a reduction in cheaper regular services. The start of the Hangzhou-Shanghai high-speed line last October, for instance, led to a 56 percent jump in second-class fares, according to state-run China Daily.

The rail ministry has announced nationwide plans to slow bullet trains to 300km/h from 350km/h beginning next month to pare operating costs and ticket prices.

The attempt to boost sales follows a first-quarter loss of 3.76 billion yuan, according to a statement. The ministry operates most of China’s passenger train services.

Concerns about losses and mounting debts have contributed to the yield gap between the ministry’s one-year notes and government debt more than doubling this year to 117 basis points, according to Chinabond data. The ministry has sold 70 billion yuan of bonds this year, making it the nation’s biggest issuer.

The total debt was at almost 2 trillion yuan, People’s Daily said in a May 9 report citing spokesman Wang Yongping.

Zhao said the ministry faced a debt crisis by 2015 if passenger levels fell short of projections. He expects the Beijing-Shanghai line to carry fewer than 30 million passengers in its first year.

It would be very difficult for the government to reduce fares to win more travellers because of construction costs, he said.

By comparison, Amtrak’s Acela Express high-speed service carried 3.2 million commuters along the Washington-New York-Boston corridor last fiscal year.

Passenger choice

Expansion of China’s high-speed network has slowed since Sheng replaced Liu Zhijun as rail minister in February.

The Ministry of Environmental Protection said on May 12 it had halted work on a line between Tianjin and Qinhuangdao in the north and barred services on a route in Shandong province because they had not passed required evaluations.

CSR, China’s largest listed train maker, has fallen 23 percent in Hong Kong trading since Liu’s departure, while the benchmark Hang Seng index has gained 1.9 percent.

China Eastern, the biggest carrier in Shanghai, expected the new line to affect as many as 10 of its routes from Hongqiao airport, including services to Beijing, Tianjin, Jinan and Xuzhou, said a spokesman, who declined to be identified.

“Bullet trains will definitely lure some passengers from carriers,” said Li Lei, an analyst with China Securities in Beijing, who expects as much as 10 percent of airline passengers to ditch planes for trains.

“Airlines will have to assign smaller planes to the route or offer better ticket prices.”

China Eastern was banking on services, including online check-in and the ability to book trips weeks in advance, to help retain business travellers, the spokesman said. It planned to make travel more flexible, for instance, allowing passengers to fly into Shanghai and then leave from another city at no extra cost.

But frequent delays may hinder airlines’ attempts to retain customers. About 25 percent of flights nationwide last year were delayed, according to a May 4 report by the country’s aviation regulator. - Bloomberg

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