China High Speed rail impact China Aviation

China has spent $569 billion on fixed-asset investment in railways and roads over the past two years. That may help to double the country's share of world exports to 23 percent in the next decade, according to China International Capital Corp economist Zhang Zhiwei.

Over the next five years China will spend as much as 3.5 trillion Yuan on railway construction, 750 billion Yuan on rail rolling stock, 3.5 trillion Yuan to 4 trillion Yuan on highways, 300 billion Yuan to 350 billion Yuan on airports, and 900 billion Yuan on ports, according to Macquarie.

China High Speed rail impact China Aviation

The nation's 2 trillion Yuan in spending on a high-speed rail network will give it almost as much track by next year as the entire rest of the world, even before the 16,000-kilometer network is completed in 2020. More than 7,000 kilometers of track have already been laid and another 6,000 kilometers are schedule to open by 2012.

Sample of China high speed rail ticket prices
Beijing–Shanghai (high speed line opens June 2011):
1st class seat ¥409 (US$63) only found on day-time trains;
2nd class seat ¥327 (US$50)

The USD33 billion high-speed rail link on the lucrative Shanghai-Beijing sector is scheduled to be opened in Jun-2010. The rail link, which commenced construction works in Mar-2008, will reduce travel time between the two major cities from 14 hours to just four hours and expected to transport more than 80 million passengers one way.

Some estimates put the loss in revenue for China’s aviation industry (from reduced traffic and price pressure) at up to CNY10 billion (USD1.5 billion) in 2012, or 3-4% of the total.

CAAC Director Li Jiaxiang stated some 50% of flights less than 500 km in length could become unprofitable because of competition from high-speed trains and around 20% of flights of between 800 and 1000 km could run at a loss for the same reason. However, sectors above 1500 km are not likely to be threatened

Roundtrip airfare between Beijing and Shanghai has been US$375-395 High-speed train tickets are selling for approximately 40% less than current airfares.

China’s airlines, in reaction to the hazard of high-speed rail, are investigative new route opportunities as the influence of high-speed rail on some ‘bread-and-butter’ Mainland Chinese domestic routes becomes apparent. As part of this, the nation’s ‘Big Three’ carriers are increasing the pace of international expansion. Chinese airports likewise have to turn their attention to new opportunities, particularly offshore.

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