When trains go faster than planes: the strategic reaction of airlines in Spain

Abstract

Plans for the development of high speed railway lines (HSR) in Spain were recently realised. At the beginning of 2010, four HSR lines were operating along routes where air transport was previously dominant. In this paper, we examine through econometric means the air carriers' reaction to these HSR entrances into the transport market with data at the route level. We test whether the HSR lines have affected the airlines' travel frequencies and market shares. Our results show that on average, HSR has reduced the number of air transport operations by 17 per cent. At the same time, travel demand has increased substantially, though the share of air transport in the total market has declined, as has the share of the dominant Spanish air carrier, Iberia.