High-Speed rail versus Air Competition in Spain

AVE Train SpainBy Juan Luis Jiménez and Ofelia Betancor

High-speed railway lines (HSR) in Spain have gradually increased during the last twenty years. At the beginning of 2010, four HSR lines were operating on routes where air transport used to be the dominant mode of transportation, connecting Madrid with other mainland cities in short-haul routes. In this article, we examine the air carriers’ reaction to these HSR entries into the market by using data at the route level from two perspectives: firstly, we test whether the high-speed rail links have changed the frequency that airlines offer; and secondly, we analyze how the market share of airlines in the total market (air plus rail) have changed. Results shows that intermodal competition in Spain ends up with trains as relative winners, leading to a reduction in the level of air frequencies to consumers and stimulating demand.
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