The impact of high-speed rail on civil aviation in China

Abstract

This paper examines the impact of High-Speed Rail (HSR) on the domestic Chinese aviation passenger market. Our dataset comprises a panel of 642 air and HSR routes from 2007 to 2014. During rapid HSR expansion from 2010 to 2014, the number of air passengers per route grew 32% for destinations that did not compete with HSR, but fell 7% for routes that faced HSR competition. A difference-in-differences approach shows that the introduction of HSR leads to more than a 50% fall in air travel over two years. Increased frequency of daily HSR routes further contributes to economically large declines in air passengers. The negative effects of HSR introduction and additional daily service to air travel increase substantially over-time and the recent expansion of HSR to Central and Western regions in China dampens demand for air travel more than coastal regions. These factors point to future challenges for aviation as China plans to expand rapidly HSR service inland.