The Predicament of Domestic Airline Service after the Introduction of Taiwan High-Speed Rail

Abstract

Abstract The launch of the Taiwan High-speed Rail (HSR) service in 2007 has significantly changed intercity travel in the Taiwan western corridor. The HSR links Taipei with Kaohsiung (Zuoying), a total distance of 345 kilometers (km), via a ninety-minute journey. Notably, this new service has considerably reduced air transportation volumes, bringing about a decline of approximately 70 percent. This study uses statistical data covering the period following the establishment of the high-speed rail to examine its impact on the domestic airline industry. Over relatively short distances, such as 350 km, high-speed rail has various advantages over air travel, including higher frequency and more reliable departures, a central location of departure, and reduced time-consuming security checks, among others. Accordingly, airlines must revise their competitive strategies. This study makes several suggestions, which may be useful for airlines in Taiwan and elsewhere planning to introduce high-speed rail. For example, airlines should consider adopting a low-cost carrier business model as well as focusing on flights to regions not served by high-speed rail. For example, airlines could operate leisure routes linking the populated western seaboard of Taiwan with the east coast and the offshore islands. This approach would facilitate integration between high-speed rail and the airlines. Airlines can incorporate high-speed rail services into their networks as hubs to complement and substitute for short-distance aircraft services.