World’s fastest bullet train in China could threaten airline sales

A bullet train runs among fields in Rongjiang County in southwest China's Guizhou Province. Source: Xinhua

CHINA recently launched a high-speed bullet train service between Beijing and Shanghai, claimed to be the fastest in the world at 350km/h. The service cuts travel time between the two cities to four hours and 30 minutes, according to state media Xinhua.

While this is good news for locals and tourists traveling within China, analysts predict that this could potentially rattle domestic airline sales as the market opts for the rail service hereon.

According to South China Morning Post, the “intensified domestic competition” might also prompt Chinese air carriers to shift more capacity towards international routes and seek new opportunities from overseas markets, as China’s middle class grows.

China’s outbound market is expanding rapidly and one of the things and a report from CLSA in July estimated Chinese tourists would spend US$429 billion overseas by 2021.

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On top of the Beijing-Shanghai link, plans are also underway to increase the maximum speed of a third of the country’s high-speed rail lines to similar speeds, China Railway Corp special technical adviser He Huawu told Xinhua.

“In our view, this will effectively boost [the high-speed rail’s] existing capacity and increase its threat to airlines,” Morgan Stanley analysts Edward Xu, Penelope Butcher and Rajeev Lalwani said in a recent research report.

“In particular, more rampant flight delays at hub airports of Beijing and Shanghai are frustrating passengers, who are thus tempted to choose [high-speed rails] as an alternative.”