Chinese Airlines Resent High-Speed Rail

Chinese Airlines Resent High-Speed Rail

Airlines in China are unhappy with the Chinese government for heavily funding the high-speed rail system, especially because the rail network is siphoning off customers who once used the airlines. The profits the airlines are making have dwindled in the last year; China Southern Airlines saw its net profit drop 24% and its operating profit plummet 70%; Air China’s net profit dropped 32%, and China Eastern Airlines watched its net profit plunge 25%.

One of the ostensible reasons for the paucity of profit among Chinese Airlines is the high cost of oil, but the rail system is eyed with distrust by the airlines for its seduction of the airlines’ customers.

Quartz reported last year that the rail system was part of the Chinese government’s plan for economic growth.  There were good reasons for the government to favor the rail system; the military delays clearances for the airlines for flight paths; Chinese airports are famous for their long delays; the rail system doesn’t delay its passengers, and the trains run nearly 200 miles per hour. 2 million passengers travel on the rail system each day, and the rail system will virtually double its size by 2015.

China Eastern’s chief executive said last year, “In China, the government has also invested heavily in high-speed rail–far more than in the airlines in fact–so it’s not a case of nationalized carriers being better off, because they also have many challenges to face.”

The Chinese government does face a dilemma: because the government holds a major stake in the airline companies, its support of the rail system may mean it is stealing money from itself.