High-speed Rail deserves higher Ticket Prices?

On December 26, 2012, the Beijing to Guangzhou high-speed rail came into service, cutting the 2,298-km journey time to a mere 8 hours. However, the opening-up of this world's longest high-speed railway line incurs some criticisms: many passengers complain of “being forced to choose the high-speed rail” and have to bear higher ticket price.

Then, are the high ticket prices of high-speed rails reasonable?

First, because good infrastructure can last a long time, it’s reasonable to build in advance to some extent. However, such constructions with huge costs inevitably lead to high ticket prices that beyond people’s expectations: Standard seats of the Beijing to Guangzhou high-speed rail cost ￥865 ($139), about twice as much as a bunk on an older train though slightly cheaper than most flights; Business-class tickets on the line sell for ￥2727 ($438), more than a month's salary for many of Beijing's low-level white-collar. But, it is not a sky-high price that ordinary citizens and even migrant workers cannot bear.

Second, the high-speed rails are sectionalized. As for Beijing to Guangzhou high-speed rail, the rail not only connects the biggest cities like Beijing and Guangzhou, but also goes deep into China’s midland, connecting many second- or third-tier cities between Beijing and Guangzhou. Therefore, it is not comprehensive if we just compare the end to end ticket prices. If we just view end to end prices, when there are discounts for air tickets of Guangzhou to Beijing, the airlines may be able to compete with the high-speed rails, but for the lines of Guangzhou to third-tier cities such as Hengyang and Yueyang, the advantages of the high-speed rails are huge.

Taking Guangzhou to Yueyang as an example, the train price goes from ￥100 ($16)  to ￥375 ($60) while the journey time is cut from 9 hours to mere 3 hours. Considering that the labor force of Hunan mainly exports to Guangzhou, for such group of people, the high-speed trains bring huge convenience by increasing moderate prices. Therefore, in certain interval regions, whether in price or convenience, high-speed rails have obvious competitive advantages than airplanes, and in some middle-sized and small cities, there are no airports at all.

Thirdly, because of stopping common trains marked with T and K, no one can deny the fact of “being forced to choose the high-speed rails”. But the purpose of building the high-speed rails is to carry passengers and cargo separately, bringing into play the maximum potential of the existing lines’ transport capacity, reducing losses caused by waiting and avoidance. Before the opening up of the high-speed rails, there were trains with different speeds and different degrees of priority on the legacy lines. The train numbers with D and Z taking the leads run fastest, with the highest degree of priority, and goods vans run slowest, with the lowest degree of priority. If trains with different speeds and priority degrees run on the same line, it will cause the phenomenon that slow trains give way to fast trains, the mutual waiting and avoiding will seriously reduce the efficiency of lines.

Therefore, when all passenger transport are transferred to high-speed rails, the waiting and avoiding of trains due to different speeds can be avoided for the legacy lines, and freight rail capacity can be released. According to the initial estimate, with the opening-up of the Beijing to Guagzhou high-speed rail, the region between Beijing to Wuhan province could handle more 20 million ton cargo capacity each year.

Above all, we can understand the inevitability of high prices of high-speed rails, but China's Ministry of Railways shouldn’t take it for granted. What can they do to reduce people’s complaints about high prices?

First, subsidy to the ticket price is required.

For high ticket price is caused by the inevitable huge costs of constructions in advance, so the Ministry of Railways should use the future profit to subsidize the current losses. With the economic development, people’s income will increase, and they will also be able to bear higher ticket prices. At that time, there will be more profits for high-speed rails. Utilizing the future profits as the subsidies for the current losses is the very way to share costs between generations.

Besides, the Ministry of Railways should continue to use freight profits to subsidize passenger trains. Since the high-speed lines will free up existing railways for more cargo, the income brought by the newly added transport capacity should be partly used as subsidies of high-speed rails. Wang Lei, general secretary of the East China Working Committee of China Communications and Transportation Association, thinks that as long as the business sense of the Ministry of Railways catches up with times, and the joint problem that exists in the operation of logistics and express is solved, “several major express companies may rent three to four train cars each day, (the railway departments) may at least increase one to two times income.”

Second, the railway departments should pay attention to details to increase seat occupancy rate to lower costs.

At present, the problem of seat occupancy rate is mainly embodied in the insufficient occupancy rate for business seats and first-class seats. In fact, such seats are inadvisable. Taking the full fare of the line of Beijing to Guangzhou as an example, the gross income of one business car is only one third of that of the first-class car, and half of the second-class car. Therefore, reducing business seats and first-class seats and imputing more second-class seats may actually increase income and improve the operation performance of the Ministry of Railways as an enterprise.

Finally, the railway departments should strive for lowering construction and operation costs of high-speed rails.

According to investigation of media, from manufacture of trains, laying rails, the construction of tunnels and bridges to the construction of signal and dispatch systems, scandals exist in many upstream enterprises and the railway system. A series of news in the Chinese press revealed that railway officials had accepted enormous bribes, handed lucrative contracts to friends and cut corners on construction materials. Though it is more or less the problem left over in history due to being without a clear line between the functions of the government and enterprises, under the condition, it’s hard to avoid the doubt by the public that the construction and maintenance costs of the high-speed rails have been lifted due to the black case transactions among acquaintances.

Originally published on Oriental Morning Post | 2013-1-4