Airlines' reaction to high speed rail entries: Empirical study of the Northeast Asian market
We investigate the impact of the commencement of high speed rail (HSR) services on airlines' domestic available seats on affected routes in China, Japan, and South Korea. The study is based on a dataset covering the 1994 2012 period. We use the propensity score matching method to pair HSR affected routes with routes without HSR services. The difference in difference approach is used to estimate the impact of HSR entry. We find that HSR entries may, on average, lead to a more significant drop in airlines' seat capacity in China than in Japan and Korea given similar HSR service speed. In China, HSR services with a maximum speed about 200km/h can produce strong negative impacts on medium haul air routes but induce more air seat capacity on long haul routes. HSR services with a maximum speed of 300km/h have little extra impact on medium haul routes but a strong negative impact on long haul routes. Finally, although HSR has a strong negative impact in Japan's short haul and medium haul air markets, little impact is observed in its long haul markets.