Effects of High-Speed Rail Speed on Airline Demand and Price: Theoretical Analysis and Empirical Evidence from a Natural Experiment
Effects of High-Speed Rail Speed on Airline Demand and Price:
Theoretical Analysis and Empirical Evidence from a Natural Experiment
In this lecture, Professor Zhang will investigate, both theoretically and empirically, the effects of high-speed rail (HSR) speed on airline traffic and price, taking into account the degree of substitutability between the two services. The theoretical model incorporates two countervailing effects of HSR speed on airlines, namely the “travel time” effect and the “safety” effect: while increasing HSR speed reduces HSR travel time, it may bring about a safety concern which is especially true in emerging HSR markets such as China. The theoretical analysis suggests that air-HSR substitutability reinforces the HSR speed effect on airlines, and that the speed effect depends further on the relative dominance of the travel-time and safety effects. Moreover, HSR speed has a larger impact on airline traffic than on airline price. The empirical evidence from a rare natural experiment of HSR speed reduction in China confirms that HSR speed reduction raises both airline traffic and price, suggesting the dominance of travel-time effect. More importantly, consistent with the theoretical prediction, the HSR speed effect is empirically stronger on short-haul routes where the airline and HSR services are more substitutable.
Anming Zhang is a Full Professor in Operations and Logistics and holds Vancouver International Airport Authority Chair Professor in Air Transportation at Sauder School of Business, University of British Columbia (UBC). He served as the Head of the Operations and Logistics Division, Sauder School of Business (2003-2005), and as the Director of UBC’s Centre for Transport Studies (2003-2004). He had been the Vice President (Academic & Program) for the World Air Transport Research Society (ATRS) between 2006 and 2017. Dr. Zhang is the recipient of the “Yokohama Special Prize for Outstanding Young Researcher” awarded at the 7th World Conference on Transportation Research (WCTR) in Sydney, Australia in 1995, and of the “WCTR-Society Prize”, awarded to the overall best paper of the 8th WCTR in Antwerp, Belgium, in 1998. In June 2014, he won the “Best Overall Paper Prize” at the annual ITEA (International Transport Economics Association) Conference on Transportation Economics, Toulouse School of Economics, France. Dr. Zhang has published over 150 refereed journal papers in the areas of transportation, logistics, industrial organization, and Chinese economy. He has co-authored two recent books: Globalization and Strategic Alliances: The Case of the Airline Industry, 2000, Pergamon Press, Oxford; and Air Cargo in Mainland China and Hong Kong, 2004, Ashgate, London (Chinese editions published both in Hong Kong and Mainland China).