Saturday, April 23, 2011

Reasonableness of high CA HSR ridership projections

Those opposed to high speed rail projects in America, especially that of California, frequently deride the ridership and revenue projections for high speed rail projects, proclaiming that people will not abandon cars or planes for rail trips that are, respectively, more expensive and lengthier (in terms of pure transit time). As a result, the high speed rail system will turn out to be nothing more than an expensive boondoggle.

The reality, however, is quite different. Let's take just a single corridor for comparison, Los Angeles to San Francisco, without considering intermediate destinations. As such, we can refer to this as the California Express service. The primary market which will be attracted to switching over to rail travel from their current journeys is the air market. This is the market that already places a premium on speed of travel and has the disposable income to purchase a ticket. While automobile travel between the regions is equal to the air travel (Innovative Approaches to Addressing Aviation Capacity Issues in Coastal Mega-regions, page 37), we can assume that the increased marginal costs of travel by air or rail are sufficient to dissuade them from traveling on these modes, especially if they are doing so by group. The current rate of increase for gasoline prices, however, may change this situation by the projected opening of the CAHSR system in 2020.

Utilizing the Los Angeles World Airports flight schedule, we can see the daily flights between LAX, Burbank, Ontario, and Long Beach airports and the San Francisco and Oakland airports. For purposes of this post, we will assume that 70% of the seats are filled, on average, and that there are an equal number of flights departing San Francisco and Oakland to return to these airports. On Sunday, April 24th, there are 168 flights leaving the Los Angeles area for the Bay Area, 120 such on Monday, 184 on Tuesday, 70 on Wednesday, 100 on Thursday, 191 on Friday, and Saturday the 30th completes our examination with 60 such flights. A cursory examination of the information indicates the large majority of the flights to be Boeing 757s and 737s, which we will use as representative of the flights. Examination of a few selected flights at SeatGuru shows airplane capacities between 137 and 184 passengers, so we will use 160 as our average representative aircraft.

We have therefore, an assumption of 100,016 weekly and 5,200,832 annual passengers from Los Angeles to the Bay Area, or a total round-trip of 10,401,664 passengers (this is a simplistic analysis, however, and more professional ones indicate around 8 million such trips). How many might we expect to divert to rail from the air market? The experience of European high speed rail systems indicates that, should the California system successfully attain its mandated transit time of two hours and forty minutes, it's air-rail market share should for 60-85% of the joint market.

However, even within the context of America, we find plenty of support for the belief that such a high percentage of the market can be obtained by rail in competition with air. In the Northeast Corridor, Amtrak holds 49% of the Boston-New York air-rail market and 63% of the New York-Washington, D.C. market (ibid., page 43). In the case of Boston, this is with the fastest trains taking 3:35 to complete the journey and most trains over four hours while air travel along the route averages 1:15-1:30 minutes. Nor is Amtrak significantly cheaper if the journey is pre-purchased, with numerous flights two months in advance being available for $69 one way while the four hour trains start at $49 and Acela trains starting at $99 (however, all Acela seats are at least business class). Similarly, in the case of Washington, the Amtrak journey times range from 2:45 to 3:30 with prices starting at $49 and $139 while the air journey times are 60-90 minutes, however with prices starting at $79 and only a few in that range; most air fares are approximately $119.

Given that flight and rail times are directly comparable for Washington to New York, it seems evident that the California high speed rail system should attain at least that 63% share and quite possibly higher. In such a case, we would see 6.5 million passengers along solely the California Express service. With airline fares averaging $99 between LAX and SFO for a two month advance purchase ticket, not counting various fees and surcharges, annual revenues could easily equate to some $650 million dollars if the high speed rail system chose to charge a direct equivalent to airline fares. As airlines continue to raise fares in the face of oil price increases, the room for higher rail ridership and revenue marches steadily higher as well, raising the specter of a billion dollar per year revenue line simply from the express trains. Indeed, that may be the more reasonable assumption for 2020 given oil and population growth trends.

Even should fares be discounted compared to airline fares, it seems evident that, based upon comparisons with rail operations in Europe and elsewhere in America, the first phase of the high speed rail project should easily maintain sufficient ridership to generate an operating surplus.