Airline network choice and market coverage under high-speed rail competition |
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| Affiliation: | 1. Asper School of Business, University of Manitoba, Canada;2. Transport Institute, University of Manitoba, Canada;3. Sauder School of Business, University of British Columbia, Canada;1. Department of Logistics and Maritime Studies, Hong Kong Polytechnic University, Hong Kong;2. Asia-Pacific School of Logistics, Inha University, Incheon, South Korea;3. Graduate School for International Development and Cooperation, Hiroshima University, Japan;4. Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, BC V6T 1Z2, Canada;5. China Academy of Financial Research, Shanghai Jiao Tong University, China;1. Department of Computer, Control and Management Engineering, Sapienza Università di Roma, Via Ariosto 25, Roma, Italy;2. Asper School of Business, University of Manitoba, 181 Freedman Crescent, Winnipeg, Canada;1. School of Economics and Management, Anhui Normal University, Wuhu 241000, China;2. School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China;1. Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, BC V6T 1Z2, Canada;2. China Academy of Financial Research, Shanghai Jiao Tong University, China |
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| Abstract: | While the existing literature has focused on the short-term impacts, this paper investigates the long-term impacts of high-speed rail (HSR) competition on airlines. An analytical model is developed to study how an airline may change its network and market coverage when facing HSR competition on trunk routes. We show that prior to HSR competition, an airline is more likely to adopt a fully-connected network and cover fewer fringe markets if the trunk market is large. Under HSR competition, the airline will, for a given network structure, have a greater incentive to cover more fringe (regional or foreign) markets if the trunk market is large, or the airline network is close to hub-and-spoke. Further, the airline will, for any given market coverage, move towards a hub-and-spoke network when the trunk market is large, or the number of fringe markets covered by the airline network is large. Both effects are more prominent when the decreasing rate of airline density economies is large. We further show that HSR competition can induce the airline to adopt network structure and market coverage that are closer to the socially optimal ones, thereby suggesting a new source of welfare gain from HSR based on its long-term impacts on airlines. Implications for operators, policy makers and specific countries (such as China) are also discussed. |
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| Keywords: | High-speed rail Airline Network choice Market coverage Traffic density Welfare |
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