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Wednesday, February 23, 2011

Rail Scandal Could Help Chinese Airlines

The prospective threat to Chinese airlines from fast trains may lessen substantially or at least slow down after the arrest of the railways minister on suspicion of corruption.
The arrest is a blow to the railways ministry’s political independence and therefore to its ability to propel its own massive programs with little restraint from other departments, above all the transport ministry, which represents airlines.
Chinese airlines are facing the greatest assault ever launched on commercial aviation by high-speed trains as the railways ministry builds a colossal system of 25,000 km (15,500 mi.) of super-fast passenger lines in direct competition with air carriers. The trains, most running at up to 350 kph (220 mph), are the fastest in the world and will blanket the most heavily populated parts of China. Moreover, they are being laid directly under trunk air routes.
The economic viability of this program has been questioned, but the railways ministry has been so powerful that it has been able to resist incorporation into the transport ministry and has therefore been free to plan, build, finance, operate and regulate its lines with minimal outside interference.
That status may come to and end now that the rail industry has been disgraced by the arrest of its minister, Liu Zhijun. Liu and his family are being investigated for corrupt behavior involving 12.2 billion yuan ($1.86 billion), says the Central Commission for Discipline Inspection, the body charged with keeping Communist Party members in line. Moreover, of 28 railways officials responsible for buying foreign equipment, 19 were found to have foreign bank accounts, 12 at Swiss banks, says the commission.
The degree to which the fast-rail expansion will slow will depend partly on how much of each line has already been built and its importance to the integrated network. Sections of most of the main lines are already under construction, and some are complete. The line that airline analysts are watching most closely — between Beijing and Shangha — will open this year, saddling China’s most heavily trafficked air route with competition from 380-kph trains. China Southern already lost half of its business to 350-kph trains on the shorter Wuhan-Guangzhou route.
Completion of other lines might be slowed, however, especially since the program was accelerated in 2009 to help ward off recession, whereas the economy now may be overheating in some places.

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