Question

Question 1

In general, the threat of high-speed rail as a substitute to airline service is medium. Applying what you have learned in the class of air travel demand, please discuss the relationship between airlines and HSR and explain in which cases high-speed rail can be a strong rival of airlines.

Question 2

When using Porter’s Five Forces paradigm to analyse the profitability of airline industry, we mentioned that incumbent airline is less likely to have cost advantage over new entrant. Please explain this statement by applying what we have learned in non-price determinants of airline unit costs.

Question 3 (5 marks + 5 marks)

Full-service carriers use hub-and-spoke network to achieve a large network coverage.

1. Please explain why hub-and-spoke network is better than point-to-point network in terms of providing a large network coverage.
2. Please elaborate how the hub-and-spoke network is coherent with full-service carriers’ market scope and service-price offer.

Answer 1

Question 1

Ans.

High speed rail has been major success in countries like Japan, Germany, China , Korea, Spain etc., and many countries like UK and US are looking at options of this alternative to airline.
High speed rail required are very capital intensive projects and required a very long gestation period of planning , designing , land acquisition , management etc., however its benefits are also equally important in terms of saving on fare for commuters (fare goes down almost 6 to 70 for end users, generates employment, economic development, improves mobility, energy use and it supports promotion of green technology. Also railway stations are within cities then airports which are built mainly in the outskirts so it improves the convenience for commuters
According to some studies in China for the commuting range of 100 to 1100 Km , high speed rail were found to be more beneficial e.g. between Beijing and Shanghai. Similar may studies have shown the same results in other countries like in Asia and Europe.
These studies show that the competition has increased between High Speed rail and airline mainly because of comfort it provides to commuters, low cost of fare to commuters, high economic development for the country and improve the mobility.