Air transport and high-speed rail competition: Environmental implications and mitigation strategies

The authors build a duopoly model to shed light on the environmental impact of high speed rail (HSR)-air transport competition, capturing the effects of induced demand, schedule frequency and HSR speed. The net environmental effect can be negative since there is a the trade-off between the substitution effect – how many passengers using the HSR are shifted from air transport – and the traffic generation effect – how much new demand is generated by the HSR. The authors conduct a simulation study based on the London-Paris market where HSR has served 70% of the market. The introduction of HSR is detrimental to LAP, while it is beneficial to greenhouse gas (GHG) emissions. HSR entry increases neither local air pollution (LAP) nor GHG emissions when the ratio between HSR and air transport emissions is relatively low. Moreover, competition is more likely to be detrimental to the environment when the weight of the social welfare in HSR objective function is high. Since the magnitude of the environmental friendliness of HSR compared to air transport hinges on the mix of energy sources used to generate the electricity (which is heavily constrained by the country in which HSR operates), regulators should assess the implications of HSR entry taking into account the energy policy and mitigation strategies available to transport modes

Would competition between air transport and high-speed rail benefit environment and social welfare?

We develop a duopoly model to analyze the impact of air transport and high-speed rail (HSR) competition on the environment and social welfare. We show that the introduction of HSR may have a net negative effect on the environment, since it may result in additional demand, i.e., there is a trade-off between the substitution effect and the traffic generation effect. Furthermore, if environmental externalities are taken into account when assessing social welfare, the surplus measure may be higher when only air transport serves the market than when the two modes compete. When the airline and the HSR operator decide frequencies, the airline reduces the aircraft size in order to keep load factors high while offering lower frequency and carrying fewer passengers. In these circumstances, the introduction of HSR may be beneficial to the environment on a per seat basis only if the market size is large enough. When the HSR operator decides speed, it has incentive to keep it at the maximum level in order to reduce travel time. When the increase in the emissions of HSR due to the increase in the speed of the train is sufficiently high, the overall level of emissions grows after the introduction of HSR. Therefore, there can be a trade-off between the attractiveness of the service due to reduced travel time and the effects on the environment

Strategic formation and welfare effects of airline-high speed rail agreements

Policy makers encourage airline-high speed rail (HSR) cooperation to promote intermodal passenger transport. We study the strategic formation of airline-HSR partnerships (depending on sunk costs and firms’ bargaining power) and their effects on consumer surplus and social welfare. We assume that airline-HSR agreements serve to offer a bundle of domestic HSR and international air services. In a capacity purchase (CP) agreement, the airline buys train seats to sell the bundle, whereas in a joint venture (JV) agreement firms create a distinct business unit. We find that both agreements increase traffic in the network, and thereby may not reduce congestion at hub airports. We provide antitrust authorities with a simple two-tier test for the CP agreement to improve consumer surplus. Contrary to airline-HSR mergers, the JV agreement benefits consumers independent of hub congestion and mode substitution. Simulation results show that, in case of cooperation, public agencies should prefer firms to create a JV, unless the related sunk costs are far greater than the costs of the CP agreement

Strategic Behavior of Multiproduct Airports and Air-Rail Intermodality

This dissertation studies two major topics in air transportation. The first topic is related to the strategic behavior of multiproduct airports. Indeed, airports have been evolving into multiproduct firms that, on the one hand, offer aviation services to airlines and, on the other hand, offer commercial (non-aviation) services to passengers. In fact, commercial activities have turned out to be an important tool for airports to self-finance their business, as they tend to be more profitable than aeronautical activities. The two sides of airport business have complementary demands, in the sense that an increase in the demand for aviation services will increase the demand for commercial services at the airport and the consumption of commercial services may stimulate aviation demand. Though complementarity between aviation and commercial services of airports has been receiving increasing attention in the literature, investigations abstracted away from airport competition and non-passenger demand for commercial services. In this thesis, the effects that multiproduct airport competition and the supply of airport services to non-passengers have on the performance and the pricing structure of airports, as well as the implications these produce on passengers and social welfare, are studied analytically. Furthermore airport incentives to disclose (and discount) the price of commercial services online before departure are investigated. The aim is to build a better understanding of the impact of the commercial business on airport incentive to exploit market power, in order to extract lessons for the design of regulatory regimes for airports. \par The second topic is related to intermodal competition between air transport and high-speed rail (HSR). In fact, substitution of air transport by HSR has been supported by policy makers for environmental reasons, on the ground of the greenness of HSR on a per-seat basis. Nevertheless, the supply of HSR services does not necessarily benefit the environment, as it may result in higher level of traffic and lower load factors. The literature analyzed air-HSR substitution either from an empirical perspective or - if an analytical angle was adopted - within the scope of integration of the two modes. This thesis studies air transport-HSR competition analytically and incorporates speed and frequency of service as decision variables. The aim is to shed light on the basic mechanisms that regulate the impact of air transport and HSR competition on the environment and social welfare in order to extract insights for public policy

Impact of network configuration on high-speed rail development and adoption

1. Description of the purpose of the research (20~40 words) We develop an analytical framework to study the impact of High Speed Rail (HSR) network configuration on incentives for capacity investments and social welfare. We focus on two alternative models for HSR development: isolated corridors and axial network structure. (39 words) 2. Introduction of your research design, methodology or approach (35~70 words) We consider a setting where a welfare-maximizing HSR operator decides lines’ capacity and quantities to supply in each market, subject to the capacity constraint. We also consider a two stage game: in the first stage, a welfare-maximizing infrastructure developer decides lines’ capacity and the charge for infrastructure use; in the second stage, a profit-maximizing HSR operator decides quantities to supply in each market, subject to the capacity constraint. (70 words) 3. Description of your (expected) research findings (35~70 words) We aim at providing guidance to shape future investments in HSR infrastructure by identifying the relevant factors for the success of alternative topologies: economies of density, market size and the opportunity cost of capital. In particular, we are able to isolate relevant constellations of parameters where a given network topology performs better in bringing higher capacity investments, ridership and social welfare. (61 words) 4. A short summary of the originality/contribution of your research paper (35~70 words) Our paper is the first attempt in the literature to provide an analytical framework to study the performance of alternative topologies of HSR networks, in terms of profitability, i.e., return on investment, and social welfare. In particular, the one-stage and the two-stage game may be relevant, respectively, in the Chinese and the European case study. (57 words) 5. A list of references that are most pertinent to your research (2~5 references). Campos, J., & De Rus, G. (2009). Some stylized facts about high-speed rail: A review of HSR experiences around the world. Transport policy, 16(1), 19-28. Givoni, M. (2006). Development and Impact of the Modern High‐speed Train: A Review. Transport reviews, 26(5), 593-611. Perl, A. D., & Goetz, A. R. (2015). Corridors, hybrids and networks: three global development strategies for high speed rail. Journal of Transport Geography, 42, 134-144. Wang, K., Xia, W., & Zhang, A. (2017). Should China further expand its high-speed network? Consider the low-cost carrier factor. Transportation Research Part A: Policy and Practice, 100, 105-120. Xia, W., & Zhang, A., (2016). High-speed rail and air transport competition and cooperation: A vertical differentiation approach. Transportation Research Part B: Methodological, 94, 456-481