Nowadays, high-speed rail is a serious alternative for air travel between certain city-pairs. Prime examples for Europe are London-Paris, Amsterdam-Paris, Frankfurt-Berlin and Barcelona-Madrid. The effects of introducing high-speed rail for the aviation sector operated in these travel markets are not entirely clear, both from a theoretical as well as from an empirical point of view. One important issue is the role high-speed rail can play in the network of airlines. In this theoretical paper we will analyze the competition between high-speed rail and airlines, furthermore we analyze under which circumstances it is profitable for airlines to use the high-speed rail as a feeder mode. We use a three node network setting, including both long-haul and short-haul markets, with two competing airlines and a high-speed rail alternative in the short-haul market. The New York – London – Paris network serves as an example of such a market. The analysis uses the theory of product differentiation and discrete choice analysis in order to analyze the behavior of passengers, airlines and the high-speed rail operator in this market. We derive optimal network design under different assumptions.
(Joint work with Mark Lijesen, VU University Amsterdam.)