Do Tiger Airway’s woes mean we need HSR?

Alta Velocidad Española (AVE) High Speed Rail network, Spain

I guess it was only a matter of time before someone would see Tiger Airway’s current troubles as evidence Australia needs High Speed Rail (HSR) between Sydney and Melbourne.

That someone is a Mr Peter Appleton of Brown Hill, who wrote to The Age saying “with the halt of flights, we are back to Third World trains service – Sydney to Melbourne, 800 kilometres in 11 hours. French, German, Japanese and Chinese trains would cover the same distance in 2½ hours”.

It’s evidently escaped Mr Appleton’s attention that there are three other airlines still flying between Sydney and Melbourne – Qantas, Virgin Australia and Jetstar. Mr Appleton doesn’t need to use the train. It’s puzzling why The Age even published this letter given there’s no logical connection between Tiger Airways current troubles and the “Third World” train service between the two cities.

Indeed, another interpretation is that Tiger’s troubles are evidence of effective competition in domestic aviation, leading to lower prices for consumers. Tiger’s particular mix of price and service evidently isn’t proving attractive to enough travellers (big surprise!), but even if the company withdraws permanently from the market, we still have three operators. History suggests the possibility of another entrant to the market can’t be discounted.

Of course three operators isn’t as good as four (and Qantas and Jetstar are related), but any High Speed Rail service on the Sydney-Canberra-Melbourne route would almost certainly be provided by a single (i.e. monopoly) operator, as is the case elsewhere.

The first stage of the Federal Government’s HSR study is due this month so there are likely to be more tall stories as the lobbying intensifies. The Age ran what was in effect an advertorial on June 24 for French electricity and transport company Alstom. Just what disinterested contribution the paper expected would be provided by a company that claims to have built 650 high speed trains over the last four decades is anyone’s guess.

The Age was happy to run with the line of Alstom’s Australian chief executive, Chris Raine, that “events such as the volcanic ash cloud from Chile (have) made it all too clear Australia could not rely on aviation alone to meet its transport needs”. Unless Mr Raine has evidence that global warming is somehow leading to more volcanic eruptions, he should acknowledge that the number of flying hours lost to volcanoes in Australian aviation history is miniscule. This reminds me of those who imply earthquakes are caused by global warming!

Unsurprisingly, Mr Raine said Sydney-to-Newcastle and Melbourne-to-Sydney would both be viable HSR routes running at a peak speed of 350 kph. In evidence, he offered the argument that “the populations and distances between Melbourne, Canberra and Sydney (are) similar to the Spanish cities of Barcelona, Madrid and Seville — which are linked by fast rail”.

In an environment where all rail projects are subsidised, that doesn’t necessarily say a lot about whether or not HSR is a good idea in other places (he should take note of the Alice Springs to Darwin rail line — getting built didn’t turn it into a sensible idea!). I’ve looked at the Barcelona-Madrid-Sevilla AVE HSR route before and noted then it’s not comparable with the Sydney-Canberra-Melbourne route.

The Barcelona-Madrid-Sevilla line is really two services radiating from Madrid – a line traversing the 506 km from Madrid to Barcelona, and another covering the 391 km from Madrid to Sevilla. The key point is that Madrid, located between Barcelona and Sevilla, is a very big city – it has a population of 6.5 million. Canberra is 240 km from Sydney and 470 km from Melbourne, but has a population of just 0.35 million. That is a rather large difference.

Mr Raine also failed to note that the AVE system runs at a maximum speed of 300 kph (not the 350 kph peak speed he says is necessary on the Sydney-Canberra-Melbourne route) and takes almost three hours to cover the 506 km from Barcelona to Madrid. The corresponding distance between Sydney and Melbourne via Canberra is over 700 km.

As an aside, Mr Appleton might care to note that the maximum speed permitted on all HSR services in China, including the new Beijing-Shanghai express, is now 300 kph due to safety concerns arising, allegedly, from corrupt construction practices. That’s well below the 320 kph average speed Mr Appleton assumes for Sydney to Melbourne HSR and well below the 350 kph peak speed Mr Raine says is required for HSR in Australia.

I’ve written extensively on HSR before – see Categories list in sidepane. In a nutshell, I don’t see the merit in replacing one form of public transport with another that, moreover, will reduce competition and require a huge subsidy compared to planes. I’d prefer to see attention given to the public transport needs of our cities.


10 Comments on “Do Tiger Airway’s woes mean we need HSR?”

  1. James says:

    You are mostly right Alan.

    The only thing I would question is the amount of subsidy that both rail and air receive, and the true cost of both types of service.
    Once you add the subsidy provided by taxpayers to air travel the playing field becomes much more level. For example it has been estimated that “we are subsidising air travel by over $1.1 billion per year in aviation fuel excise concession, zero customs tariffs for aircraft and depreciation concessions on aircraft”.
    See http://www.indymedia.org.au/2011/03/02/carbon-pollution-subsidies-outstrip-climate-change-funding quoting ACF figures.

    Those subsidies also relate to the negative externality of congestion, estimated to be in the billions of euros in Europe. For example see http://www.zinnov.com/presentation/Global_Aviation-Markets-An_Ananlysis.pdf

    Don’t forget the saving in not having to build another Sydney airport (discussed by you before and estimated to be between 10 to 20 billion dollars).

    And all this will be irrelevant when the price of jet fuel will drive the low cost airlines out of business, and some of the full service ones too. This is likely to happen sooner rather than later. Then we will need HSR.

    (Sorry don’t know how to use html tags to eliminate the URLs)

    • Alan Davies says:

      Yes, financial subsides to aviation are an important point. Of course, the Sydney-Melbourne route only accounts for a proportion of that $1billion p.a. and the rest of Australia the remainder. While it’s one of the busiest air routes in the world with 781,000 9.4 million seats flown in both directions in 2010, there were 52 million occupied domestic seats flown in Australia in 2009/10 (this doesn’t include the 26 million international revenue seats).

      It probably doesn’t matter much given how small the routes’s share of this concession seems to be, but The ACF’s claim about the excise fuel concession raises an interesting (philosophical) issue. My impression is the ACF may be calculating the concession as the difference between the rate of excise tax on avgas (3c/litre) and the rate on petrol and diesel (38c/litre).

      So the question is why they’re taxed at different rates. Remembering this is an excise tax, is there a compelling reason why they should be taxed at the same rate? Even if the relative economic and environmental impacts of avgas vs petrol/diesel were accepted as a fair basis for levying excise, does it follow that the impacts of aviation, on a per pax km basis, are equivalent to those of cars and vans?

      • Moss says:

        Sorry to be pedantic Alan, but I believe you mean 781,000 per MONTH between SYD and MEL, not per year. Works out to be 9.4 million or so per year. So nearly 20% of all domestic flights. Add in SYD – BNE and there is another 5.5 million. Not to be sniffled at necessarily, and I’m not sure about the cargo numbers, but a rapid priority rail service serving those cities would also cut into air/road freight subsidies.
        To be realistically competitive, the mode would likely have to maglev, which although marginally more expensive on an upfront construction basis, totally outclasses steel rail on ongoing maintenance costs, fleet size, reliability and speed (think top operating speeds of 500km/hr rather than 330km/hr).

        • Alan Davies says:

          Ach! Hits head! Well spotted – not pedantic, embarrassing! Not the first time I’ve been caught out with data being provided on a basis different to what I’m expecting. My only (feeble) excuse is that blogging leaves no time for checking.

          That makes it roughly $250 million p.a. of claimed “subsidy” to aviation. So, while that 9.4 million is probably fully neutralised by bringing international flights into the equation, my argument that the ACF is attributing a failure to tax as a subsidy nevertheless assumes more importance.

    • Sam says:

      This ‘not charging excise is a subsidy’ is a furphy.

      The fuel excise paid by heavy vehicles is a nominal road user charge, ie it, along with their registration charges, reflects the costs attributable to the vehicle using the road.

      Trains don’t pay fuel excise, but pay access charges to use the network.

      Aircraft don’t pay the fuel excise, but do pay access charges to use the airports.

      Mining vehicles don’t pay fuel excise, because they don’t use the roads.

      Private and commercial vehicles pay fuel excise as a tax – but are these really competing with air travel? Intercity buses and trains might be, but they aren’t paying the fuel excise as a tax.

  2. Natronomonas says:

    I’m not sure the ‘reduce competition’ or the fact the line is likely to be run as a single operator are valid arguments. The airlines are in competition with each other but also with other modes – rail (subsidised), private vehicles (subsidised) and buses (public or private) already.

    Having HSR would simply be another competitor. As to the extent of any government subsidy, it’s not like these weren’t provided when the airports were privatised (a steal for the new owners) while of course airlines don’t currently pay for the negative externalities of their operations (particularly carbon and other airborne pollutants, but also noise, and typically, roadworks around airports). Generally, HSR would not create demand for new road space if terminals are located in the CBD (running on legacy tracks).

    However, agree with the rest of your post and other thoughts on HSR – difficult at present.

    Personally, I don’t see why we can’t aim for medium speed passenger and freight services (~200km/h) – much cheaper to build and operate. A non-stop would see Melb-Syd in something over 4 hours – fast enough for many trips, certainly fast freight, leisure travellers, but probably not the business market from which highest revenue could be extracted. However, great for the intermediate locations – but without any substantial population or industry centres inland, it would have to be a ‘build and they will come’ project. Which sometimes work, sometimes not – but a big gamble with the capital required, especially if you don’t have a value capture mechanism.

    • Alan Davies says:

      You might like to expand on the intermodal competition argument. It seems to me what we want is competition on the route irrespective of how it’s achieved. If we want more competition it would be easier to focus on aviation. What additional benefits does competition between modes bring (as distinct from within modes) that is worth billions in subsidy?

      I’ve looked at some of the external benefits of HSR vis a vis air travel before (see Categories list). Even on generous assumptions, HSR wouldn’t make a large contribution to GHG savings and would be a very expensive method of abatement. The $ value of aircraft noise impacts is not very large (and HSR has its own noise impacts).

      Agree an HSR terminal in the CBD would lessen the need for access travel via car/taxi but how significant will this saving be? There would also be at least one suburban terminal in each city. Given only 15% of jobs are within the extended CBD and only around 1% of residents live there, how many business and non-business travellers are going to drive/taxi to these suburban terminals?

      • Natronomonas says:

        Don’t get me wrong; I absolutely agree competition would be far more easily achieved through aviation competitors than subsidising HSR under current circumstances. When I read your article it just sounded like you were concerned that it would be an issue that any HSR entrant would probably be a monopoly, which I don’t think is very relevant as long as the airlines are still operating.

        With regard to the CBD access travel, I didn’t mean so much savings in travel time or numbers but actual land and roadworks for vehicular access to airports. Infrastructure upgrades of this sort are typically paid for by local or state governments, but the benefits flow through to the airport operator (now typcailly a private organisation) which generally doesn’t contribute to the cost of upgrading road infrastructure in its surrounds (eg recent Canberra, Melbourne airport access road upgrades). Small change in the grand scheme of things, but big dollars to your average taxpayer.

  3. Paul Grgurich says:

    Alan

    Tend to agree – there is no relationship between Tiger’s collapse and the viability of HSR. Also agree that there is no comparison b/n Spain and Australia.

    I work in Spain as part of my job so have caught the Madrid- Barca service 6-7 times this year. It takes about 2:45hrs on the express – and its top speed is 300km (not 350km – thats its design limit). The average speed is always much less because there are many tight curves – particularly when approaching Tarragona, the train slows down near the metropolitain rail networks and the express train still stops several times – so you end up averaging about 250km/hr.

    As you also correctly indicate the market capture is also far greater – Madrid-Barca is just over 600km compared to say 900km from Melb-Syd and whilst the combined population of the 2 cities at each end is not too dissimilar – the transit cities of Tarragona (500,000), Zaragoza (700,000) and Lleida (200,000) are much more significant.

    If HSR was ever to be built in Australia, the average speed – even with the most impressive rail – would struggle to exceed 250km/hr – so count on 4-5hr from Sydney to Melbourne. Oh and it costs more to travel by train than to fly in Spain anyway – but it is more comfortable

    Interestingly the argement that Spanish rail dominates at the expense of air is a myth as Madrid-Barca is the 11th most trafficed air route in the world – and I think the most trafficed in Europe!

    As for Tiger – be gone – there will be another player – they are already here and they are called Strategic Airlines – their focus is just elsewhere at this point – and they do make money!

    Cheers

  4. […] between those cities than cars and airplanes combined”, he says. I’ve pointed out before that AVE is a questionable analogy, at least for routes like Sydney-Melbourne  and Sydney-Brisbane – Madrid has a population of 6.5 […]


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