Mon, Sep 24, 2018 page7

• China’s bullet trains a threat to Hong Kong’s airlines

  Flights on longer domestic routes in China provide a clear advantage in time, but high-speed train services over shorter distances offer more legroom, less security restrictions and stations in more convenient locations

  • By Prudence Ho and Dong Lyu / Bloomberg
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  Still bruised from a typhoon that grounded hundreds of flights, Hong Kong’s status as Asia’s top aviation hub faces a new threat: Chinese bullet trains.

  The world’s longest high-speed rail network extended to downtown Hong Kong yesterday, providing a direct connection to 44 mainland destinations. With the addition of services from Guangzhou and Shenzhen — the major cities closest to Hong Kong — what is now a day-long train trip to Beijing would be cut to nine hours.

  China’s high-speed network stretches for 25,000km and is a strong competitor for airlines in a market where congested airspace and limited landing slots mean regular flight delays. Since China’s first bullet-train service connected Beijing to the nearby port city of Tianjin a decade ago, Chinese airlines have lost customers, especially for journeys shorter than 800km — roughly the distance from Hong Kong to Changsha, the capital of Mao Zedong’s (毛澤東) home province of Hunan.

  

  Illustration: Yusha

  “The fact that passengers will get off the train in downtown Hong Kong rather than at the airport on an island and then have to take another train ride to the city will prompt many to choose trains,” said Yu Zhanfu (于占福), a partner at Roland Berger Strategy Consultants in Beijing.

  A bullet-train ride can cost less than half the price of a ticket on a Cathay Pacific flight to the 11 overlapping destinations, with the biggest savings for routes of less than 800km. Passengers would also save time on pre-boarding security checks required for flights and travel to and from airports.

  With 11 of Cathay’s more than 20 China destinations overlapping with high-speed rail, the Hong Kong marquee carrier stands to be the biggest casualty.

  PASSENGERS

  Cathay, already under pressure from mainland carriers that are widening their networks and offering cheaper tickets, is set to lose passengers on flights of less than three hours, said Corrine Png (方華婷), founder of Singapore-based Asia transport research firm Crucial Perspective.

  For many passengers, the train’s wider seats, increased legroom and freedom to move around translate to greater comfort. Airlines have the advantage of loyalty from customers who collect frequent flyer miles, but even that might not be a big incentive, said Ivan Zhou (周一帆), an analyst with BOC International Holdings in Hong Kong.

  “You could possibly get more miles by paying your restaurant bills with a credit card than by flying short haul,” Zhou said.

  Cathay did not respond to requests for comment on competition from the new rail link.

  Airlines have focused on longer domestic routes where flying has a clear advantage in time, often reducing or canceling services that compete directly with bullet trains. In December last year, the start of high-speed train services between western China’s Chengdu and Xian led carriers to cut daily flights between the two cities to about three from several dozens before.

  MODIFYING

  Cathay and its regional airline, Cathay Dragon, which flies most of the group’s mainland routes as well as to nearby destinations such as Japan and Southeast Asia, might have to modify their networks as the group works toward a profit this year after two straight annual losses.

  “There is a lot of room for maneuvering” of Cathay Dragon’s network, Zhou said.

  As well as the air advantage over longer distances, planes and trains continue to compete on popular routes such as Beijing-Shanghai, and flights maintain an advantage to cities not connected directly by a high-speed rail service.

  The extended rail service is another sign of China’s efforts to integrate Hong Kong with the mainland even though the former British colony is governed separately. Earlier this year, state-controlled Cosco Shipping Holdings Co completed a US$6.3 billion acquisition of Orient Overseas International Ltd, Hong Kong’s largest container-shipping firm.

  “The high-speed rail strengthens the economic ties between mainland China and Hong Kong,” Yu said. “For a lot of Chinese cities, this is a big breakthrough because it is the first time they have a direct link with Hong Kong, the most important hub in southern China.”

  Rail also has an advantage for a city where the typhoon season can play havoc with flight schedules. When Typhoon Mangkhut plowed through the city this month, more than 1,400 flights had to be canceled across the region, according to Flight Aware.

  Joyce Leung, a Shanghai-based marketing professional, is willing to give the new high-speed connection from Hong Kong a try, after experiencing first-hand how trains can be a lifesaver when torrential rains led to multiple flight delays during a recent work trip to Beijing.

  “I won’t hesitate to book the bullet train during the rainy season,” Leung said before the storm. “While a plane ride is still faster for traveling from Hong Kong to Shanghai, the train is a more predictable choice compared to massive flight delays.”
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