Demand Shocks, Airline Pricing,and High-speed Rail Substitution




Feng Wei; Jihui Chen; Lan Zhang


We study the high-speed rail (HSR) substitution for air travel through the demand shocks triggered by two events: the launch of Beijing–Shanghai high-speed railways (the ‘Jing-hu’ HSRs) and the Wenzhou train accident. Using a difference-in-difference approach, we find that, compared to those in the control group, mean airfares for routes along the Jing-hu HSRs decline by 30.6 per cent upon the launch, but rebound by 27.6 per cent following the accident. Furthermore, the two events have a larger impact on low-cost carriers and regional airlines, on tourism routes, and on flights that depart during evening hours than their counterparts.

Supported by the 111 Project B16040