China’s fastest bullet train to reduce domestic airlines’ earnings

Almaty. October 10. Silkroadnews - China’s fastest bullet train could lead to domestic airlines’ earnings reduction, the South China Morning Post reported.
“During the past week-long holiday between October 1 to 8, ticket bookings for the HSR lines that terminate at the eastern city of Hangzhou, a traditional tourist destination, had risen 140 per cent, compared to the same period last year,” the report said.
According to Morgan Stanley analysts, the development of high-speed rail would have a negative impact on passenger traffic and airline revenues in the next few years. In the next three years the airlines are projected to gradually lose the share of domestic market in favor of high-speed rail traffic from 13.4% in 2017 to 12.5% in 2019. This would mean a slowdown in the growth of domestic passenger traffic from 14.4% in 2017 to 8% in 2019.
To compete with lower fares for high-speed trains, airlines will have to operate at a reduced price. Thus, the growth of airline revenues on domestic routes will slow from 16.2% in 2017 to 9.6% in 2018 and 9.4% in 2019.
However, raising domestic competition may prompt Chinese airlines to shift their focus to overseas markets seeing for new opportunities there.
It is reported that the number of Chinese traveling abroad will reach 197 million in 2020, which is 14% of China’s population. This is comparable to 13% of Japan’s population outbound travelers, though still below the US’s rate of 23% recorded in 2015.
It is assumed that in 2020 the number of China’s citizens visiting the countries of the Asia-Pacific region, North America and Europe will reach 66 million, 7 million and 10 million respectively, stimulating demand for the transport services.