Price Tops Speed for Attracting Passengers

By Noel T. Braymer

How a person travels depends on several factors. Saving time is nice, but so is saving money. Safety and comfort are also factors in choosing how to travel. The best value for traveling is the best combination of speed, price, comfort and safety. If all things are generally equal, price usually is the deciding factor in choosing how to travel. Much is made about High Speed Rail service being as fast as air service for trips up to 500 miles long. It is not unusual for air traffic to dramatically decline when there is competing High Speed Rail service. This is often because High Speed Rail service is cheaper and as fast as air service, particularly in Europe.

This has been changing lately in parts of Europe with the rise of low fare, no frills airlines. This is particularly true in France as reported in a column in the Economist, dated August 13, 2014. Ridership peaked 3 years ago for the TGV and since then revenues and profits have declined. This affects the rest of rail service in France since profits from TGV trains are used to subsidize regional services in the Country. The French national railroad, the SNCF is looking at changes to rail service to compete with the low fare, no frills airlines which are also cutting into the revenues of Air France. This could include reducing direct service and increasing the number of transfers for travel from small towns. SNCF is also looking at carrying more passengers with low cost, no frills High Speed Rail service to compete with airlines.

Fifty years ago air travel was faster than it is today. The planes flew faster, there was less air traffic congestion in the air and on the ground and more flights flew non-stop to more places. Before 1978 the airlines were highly regulated. This protected the airlines with high fares and little competition which made it easier for the airlines to stay in business even with light loads that often came with the faster non-stop flights. Also few people flew years ago. Those that did fly usually did so on business, while most people rarely flew before the 70’s.

After 1978 and deregulation many airlines went out of business and since 1978 many new start up airlines have come and gone. To survive in a highly competitive world the airlines had to cut costs and airfares. This included dropping many non-stop routes since they are the most expensive and least profitable services to run. To fill the planes airlines switched from fixed prices to computerized ticketing which constantly changed the price of tickets on flights to match demand. Airlines also discovered hub and spoke operation to expand the number of markets while reducing the the amount of planes and employees needed to carry passengers. This also made the travel times slower than with regulations that supported non-stop service.

The media often makes comparisons between High Speed Rail service and Air travel. This is not a good comparison. High Speed Rail can compete with corridor flights between 200 and 500 miles in terms of travel time and cost. But this is only a small part of the total airline market and not as profitable as the larger transcontinental and international markets. Airlines in this country are getting out of the corridor market, or often use it as a feeder to their longer distance services.

When you look at the total travel market in this country, up to 88 percent of all travel by miles is by private vehicles such as cars, light trucks SUV’s and RV’s. Airlines carry just over 10 percent of all travel in this country by miles. To go after just a small segment of the Airlines market while ignoring the much larger market dominated by private vehicles makes no sense.

The main advantage of higher speeds for rail passenger service is not that speed will attract more riders. It is that higher speeds increases the productivity of rail passenger service. Most rail passenger service in the country today have average speeds of under 50 miles per hour. That is not competitive with auto travel unless traffic congestion is really bad on a route. But if rail services averages 100 miles per hour or more, you can now carry more than twice as many people with the same amount of equipment and employees in a day without doubling your costs. With flexible fares now common with the airlines to match supply with demand such trains would run full. Such a service would be competitive with autos for both speed and cost of travel.

The big advantage of a car is you can drive it almost anywhere. It is the ultimate in one seat travel. While you can’t take the train everywhere, it can be the best way to get to the busier and  more congested places which have limited parking. To better serve major markets, train stations have to be part of major destinations with jobs and services nearby plus you need good and easy connections to the most places possible. One of the biggest complaints about public transportation is the time wasted making connections, particularly when there are missed connections.

The start up of low fare airlines and deregulation of air travel in Europe is roughly at the stage now of where the US was 20 years ago. Since deregulation in the last few years we are seeing in the United States larger airlines merging with each other. There is now less competition, fewer carriers and available seats as well as higher ticket prices. With this there is a more stable and profitable airline industry.

In California there is a limited number of gates and air slots for for air travel. Both airlines and airports would like to use these limited resources for larger and more profitable markets out of State. High Speed Rail is being welcomed by many airlines and airports as a valuable link in the total travel market in the State, not as competition to their industry.

 

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