`Invincible' High-Speed Trains Undercut China Southern Airlines to Snare Travelers

[marmar]

‘Invincible’ High-Speed Trains Steal China Southern’s Customers
By Bloomberg News


Feb. 10 (Bloomberg) -- China Southern Airlines Co., the nation’s largest carrier, and Air China Ltd. are slashing prices to compete with the country’s new high-speed trains in a battle that Europe’s airlines have largely already ceded.

Competition from trains that can travel at 350 kilometers per hour (217 miles per hour) is forcing the carriers to cut prices as much as 80 percent at a time when they are already in a round of mergers to lower costs. Passengers choosing railways over airlines will also erode a market that Boeing Co. and Airbus SAS are banking on to provide about 13 percent of plane sales over the next 20 years.

“There’s no doubt that high-speed rail will defeat airlines on all the routes of less than 800 kilometers,” said Citigroup Inc. analyst Ally Ma. “The airlines must get themselves in shape, increase their profitability and improve the network.”

China Southern cut economy-class tickets to 140 yuan ($21) from 700 yuan on flights between Guangzhou and Changsha after a high-speed train started on the route in December. The trip now takes 2 1/2 hours by train instead of 9.

“The high-speed train is invincible on this route,” said Tom Lin, 30, a civil servant in Guangzhou, who opted to travel by rail. “There’s no doubt it’s more convenient for trips to the cities along the line. Airlines can’t compete with trains for the spacious seats.” .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601109&sid=a0puaHvHyteA&pos=12