26-Jul-2011 10:28 AM

Chinese airlines regains market share from rail amid safety concerns

China Eastern Airlines board secretary Luo Zhuping stated: "China Eastern was most affected when the Shanghai-Beijing high-speed railway opened, so it rebounded most when investors became concerned about the safety of bullet trains" (Shanghai Daily/Bloomberg, 26-Jul-2011). Domestic airlines are expected to regain their market shares from rail competition as air is seen as a safer option in the aftermath of a devastating train accident at Wenzhou City on 23-Jul-2011. However, Mr Lu said passengers in the long term will ultimately choose the means of travel with which they are most familiar. The incident is likely to have a short-term impact enabling airlines to regain market share lost to high-speed rail. The incident will also likely mean that, in the medium term, high-speed railways are unlikely to increase their operating speed. However, in the longer-term, the competitive balance will likely resume, once the safety issues are resolved. Meanwhile, China's government has ordered a two-month inspection of rail safety and fired three officials after 39 people were killed in the high-speed train crash. “We should have a thorough inspection and rectify any possible safety issues,” Rail Minister Sheng Guangzu said.