With the opening of the high-speed rail service, other public transportation operators are seeking niches and diversifying their products.
One man's necessity is another man's luxury. While the Taiwan High Speed Rail Corp.'s (THSRC) trains whisk businesspeople between Taichung and Taipei at speeds up to 300 kilometers per hour, some travelers still prefer the slower way.
Joseph Chien, for example, is doing his compulsory military service in Taichung. Twice a month he makes the 150-kilometer journey to the capital to see his girlfriend. But he eschews the high-speed train in favor of the old-fashioned highway bus. The reason? "It's much cheaper," he says. A one-way trip on King Bus, a major passenger bus company in Taiwan, taking the national highway between the two cities, costs NT$260 (US$7.80); THSRC's fare for the intercity journey is NT$700 (US$21). In addition, bus companies usually offer a discount on round-trip fares whereas THSRC does not, and as a soldier, Chien is also entitled to concessionary bus fares. All in all, by taking the bus, Chien estimates that he saves some NT$2,000 (US$61) a month.
And cost isn't the only factor. While the bus might take two hours, in comparison to the train's one hour at most, he can catch it from just outside where he lives. The station for the high-speed train, on the other hand, is located in Wurih, more than 10 kilometers--and a 20-minute bus ride--from his home.
Chien's case illustrates why the emergence of the newest competitor in Taiwan's public transportation sector has had little impact on road passenger transportation. Because of the big difference in fares between the high-speed railway and the buses, the latter has been the least affected part of the island's transport network. "We and the high-speed railway target different kinds of passengers," says Shen Cheng-chi, chairman of King Bus. "Ours are mainly students, soldiers and people earning a lower income. You have to be crazy if you are only earning NT$40,000 (US$1,200) a month and travel on the high-speed train a lot." Actually, thanks to measures taken to enhance its competitiveness such as the replacement of old buses running on long-distance trips, which started last December, to upgrade the standard of his fleet, Shen says the impact on his company's revenue has been minimal.
The Taiwan Railway Administration (TRA), a branch of the Ministry of Transportation and Communications (MOTC), which operates nearly all the island's trains apart from the high-speed rail system, has a different story. "For trips over 200 kilometers, we lose out heavily to the high-speed trains," says Jang Ying-huei, chief secretary of the TRA. Having operated for 120 years in Taiwan, the TRA is now facing a major challenge in the wake of the opening of the high speed railway in January, possibly even more serious than the one it faced after the lifting of the ban on domestic air travel in 1987.
Revenue Falling
TRA revenues between March 1 and May 31, this year from short-distance (less than 50-kilometer) and medium-distance (between 50- and 200-kilometer) rides on the west coast line, which competes directly with the high-speed railway, dropped by 1 percent and 3 percent respectively compared with the same period a year earlier. Long-distance journeys (those over 200 kilometers), however, suffered a 13- percent drop.
Their large number of conveniently located pick-up spots help bus companies retain their competitiveness. (Photo by Chang Su-ching)
According to Jang, the revenues from the west coast line have traditionally accounted for 85 percent of the TRA's total income, while the remaining 15 percent comes from the east coast line. The 372-kilometer, four-hour trip on the TRA's expresses between Taipei and Kaohsiung has been a very significant source of revenue, but now the high-speed railway duplicates the route, this former cash cow is drying up faster than any other TRA route. A Taipei-Kaohsiung ticket on a TRA express costs NT$845 (US$25) compared with THSRC's NT$1,490 (US$45), and it remains to be seen how many cost-conscious passengers this differential can retain (a King Bus ticket on the same route costs between NT$400 and NT$500 (US$12-15) but the journey time is more than five hours).
For the TRA the worst is probably yet to come since the high-speed railway is only just starting to win approval and loyalty from passengers. But the TRA's woes are liable to pale beside the pain caused to domestic airlines. After all, the TRA can still rely on its medium- and short-distance routes to survive. But domestic airlines are feeling huge pressure. The experience of Japan and South Korea shows that for routes under 500 kilometers in length, airlines simply cannot compete with high-speed trains. With the opening of THSRC's service, occupancy on domestic west coast routes could drop more than 50 percent.
The Japanese experience is salutary. Feng Cheng-min, a professor at National Chiao Tung University's Institute of Traffic and Transportation, points out that there used to be many passenger planes flying between Tokyo and Nagoya, a route roughly as long as that between Taipei and Kaohsiung. "But after the bullet train connected these two cities, few scheduled flights on this route survived," Feng says.
Already airline woes have been made manifest by the axing of flights. All four players in the domestic market have reduced the number of flights since April. Mandarin Airlines, the only airline that flew between Taipei and Taichung, canceled the route for good on May 1 while the cancellation of the service between Taipei and the southern city of Chiayi--about 260 kilometers from the capital--operated only by one carrier, Uni Air, is expected at any time.
For all the high-speed railway's speed, planes still remain faster than any land-based transportation; it takes about 50 minutes to travel from Taipei to Kaohsiung by air, compared with between 90 and 120 minutes on the high-speed train--depending on the number of stations at which the train stops. But many passengers think such a time difference to be of little significance, especially considering the trouble of checking in at often inconveniently located airports. However, with Taipei-Kaohsiung fares at between NT$1,650 and 1,750 (US$50-53) weekdays and NT$1,500 (US$45) at weekends, planes can compete on price. And THSRC's stations are often not centrally located either. "There is yet no sweeping victory for the high speed railway, mainly because many of its stations are located far from city centers and still lack a convenient transportation system," Feng says. The MOTC is, however, now planning to build rapid transit rail links between high-speed rail stations and some city centers. Two are now under construction in Hsinchu and Tainan.
Future for the Airlines
The four domestic airlines have started to improve their service through ticketing reform since mid-May, allowing passengers to buy tickets for the Taipei-Kaohsiung trip, the busiest of all domestic routes, and fly on any plane. Far more effective in winning back customers, however, has been price cuts which have severely eroded THSRC's price advantage. But Hanson Chang, a senior manager in Far Eastern Air Transport's public relations office, emphasizes that the policy can only cushion the impact of the high-speed train to some degree. "It's not a cure for the difficult situation we face," he says.
With faster tilting trains, introduced in Taiwan in May, the Taiwan Railway Administration (TRA) is trying to improve its services in the face of competition from the high-speed railway. (Photo by Chang Su-ching)
Taiwan's domestic airlines were, in fact, facing a cash crunch before the high-speed rail service opened. Expecting the rapid opening of direct flights between Taiwan and China, they have in recent years made considerable investments in new planes. Direct flights have, however, yet to materialize, and this preparedness has turned into a major financial burden. Soaring oil prices, industrial migration out of Taiwan and lackluster economic development on the island have also combined to reduce revenues. As a result, Chang says, the domestic air travel market has shrunk by 10 percent annually over the last three years. The high-speed train is just another blow.
"All four domestic airlines still hold on and refuse to pull out just because we're waiting for cross-strait direct flights," says Chang. Far Eastern Air Transport has tried to improve its situation by nurturing products, such as flights to South Korea's Jeju Island, from which passengers can travel on to Beijing and other cities in China. Launched four years ago, the route has proved well worth opening as more and more passengers traveling to China choose the Korean island over Hong Kong as a transit spot to save time. Currently there are seven such flights a week, up from three prior to September 2006. "This route is expected to replace the Taipei-Kaohsiung line as the airline's largest source of revenue," Chang says.
Similarly, the TRA plans to develop more services to cope with the challenge posed by the high-speed railway. Not surprisingly it intends to focus on providing better services for commuters and passengers traveling on short-distance routes. New stops are being added to its existing lines and the vast majority of new rolling stock purchased is intended for commuter services. Tilting trains were introduced to Taiwan in May, running on the Taipei-Hualien route. Featuring a mechanism that serves to counteract the centrifugal force generated on curved parts of the track, the tilting train travels at a higher speed than a normal express, reducing the travel time between Taipei and the east coast city from three to two hours. The TRA's Jang says that tilting trains will be used on more routes connecting the east coast line and the west coast line. "Our advantage over the high-speed railway is that we have a complete rail network circling the whole island," he says.
The TRA is also devoted to developing tourism-oriented services and is talking with travel companies about developing package tours combining sightseeing with rail trips. It will also further develop branch lines already popular with sightseers as tourist railroads by renovating stations and allowing passengers to travel from the main line to the branch without having to change trains. A section of railway in central Taiwan that has long been closed will be re-opened next year because of its historical and tourist value.
Diversification is Essential
"If you want sustainable development in the face of new challenges, you have to diversify services," says Shen Cheng-chi. Although road transport operators are the least affected by the high-speed railway, King Bus has not been tardy in seeking new opportunities. It is now developing home delivery and car rental services, which will be available at new transit stations around the island the company is now starting to build. "Few tourists use passenger buses as transport because they find it inconvenient to finish the remaining part of the trip after the bus ride. But soon they'll be more willing to, if they can rent and return the cars at the bus stations," he says. The home delivery service aims to allow passengers to get large or heavy objects--such as boxes of fruit--home without struggling with them themselves.
This kind of innovation and improvement of services, created in response to competition from the high-speed railway, can only be good for Taiwan's society as a whole. "The entry of new public transportation tools into the equation will certainly trigger market share reallocation, but the new challenge is also likely to make the pie bigger," says Wang Mu-han, chief of the Transportation Operation and Management division of the MOTC's Institute of Transportation.
Wang expects the public transportation market to expand due to the opening of the high-speed railway, which has stimulated railway and road transport operators to develop new products and win over travelers that are used to traveling by car and motorcycle. "In an era where energy saving and environmental protection are the new catchphrases, all governments are encouraging people to reduce their use of private transport," Wang says. The high-speed train might be causing pain for its competitors, but the competition is also beginning to have a positive effect on the island.
Write to Oscar Chung at oscar@mail.gio.gov.tw