Exploring the Airline-High Speed Rail Collaboration Model: Efficient Services and Mutual Benefits

Exploring the Airline-High Speed Rail Collaboration Model: Efficient Services and Mutual Benefits

Peggy Daniels Lee (Kelley School of Business, Indiana University, USA), George VandeWerken (Providence Bank, USA) and Raj Selladurai (Indiana University Northwest, USA)
DOI: 10.4018/978-1-5225-0102-2.ch007
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Abstract

Studies have shown that short-haul airline passenger traffic (less than 500 miles) is decreasing nationwide. This decline may be attributed to legacy airlines' rising costs (especially fuel), increased airport congestion, and increased travel time due to post-September 2001 TSA security screening. Previous studies tended to look at the substitution of high-speed rail and other transportation modes for air travel, especially as travel times shorten. Substitution usually takes the form of collaboration or competition between competing modes and competing carriers. This chapter presents an alternative view – with a discussion of the proposition that air carriers may benefit more from collaborative arrangements that allow them to “own” at least a portion of the intermodal passenger experience rather than shifting or transferring passengers to competing non-air modes. As we believe that this proposal has merit and is worth consideration, we conclude the chapter with a research agenda designed to empirically test the proposition.
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Introduction

Domestic airline travel distance is defined by flight time, which can be translated into distance. Domestic air carriers commonly define a short haul flight as one that takes less than one and a half hours to complete. This roughly translates into 500 miles or less. However, some authors use the 400-mile-or-less criterion. There has been significant anecdotal evidence that short haul air travel is declining nationwide. Murphy and Meilus (2012) empirically supported these assertions. They found that passengers traveling less than 400 miles decreased by 26 percent since the mid-1990’s. The number of air travel passengers flying distances between 1,000 and 2,500 miles increased by 50 percent during the same time period. Elking and Windle (2014) showed that the number of domestic US air passengers traveling less than 500 miles declined by 17 percent over the 1995-2010 time period.

At the same time, high-speed rail has increased as the travel time has decreased. For example, the two-hour rail trip between Paris and Lyon held a 60% share of the rail/air market when the trip took three hours. It is currently 90%. High-speed rail between Madrid and Seville captured 80% market share. Amtrak’s Acela increased its market share between New York and Washington, D.C. from 37% to 75% between 2000 and 2011, and between New York and Boston from 20% to 54% during the same time period (Nixon, 2012). Further, air quality measured in carbon dioxide (CO2) emissions rates improves with high-speed rail. Hu, et al. (2014) showed that high-speed rail emissions rates in the Northeast Corridor of the US (the Boston to New York route) are 23% of emission rates from regional jets and 41% of emission rates from automobiles. These few examples suggest that high-speed rail is a viable substitute for short haul air travelers.

Airlines can approach this trend by shifting their focus and investment to longer hauls, by trying to improve the short haul travel experience to avoid passenger attrition, by working to reduce costs, or by some combination of these and other factors. Clearly, as can be seen in the Amtrak Acela example, air-carrier passenger traffic and revenue have declined as passengers have shifted to rail. Therefore, the question deserves to be asked whether there may be another financially attractive alternative for the airlines to pursue that allows them to maintain short haul passengers and increase their revenues. Could airlines alter their business model to integrate the use of other modes to move passengers and baggage in ways that would provide benefits for both the airline industry and the passengers? In particular, could some form of passenger rail service operated in part by the airlines be used as a tool to integrate the movement of passengers over some short-haul airport routes such as Chicago and Indianapolis for example? And could this integration model generate significant additional profits for the airlines if it were done properly?

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