Guess who's about to jump into the shallow end of the gene pool; Australia. They're looking at high-speed rail up the populated East Coast, where you will find Sydney, Canberra, Brisbane and Melbourne.
They're doing studies. They are even called "scoping comments." They already have numbers that are hard to believe. Boy, does all this sound familiar.
They are underestimating development costs. They are omitting cost elements to keep the numbers down. They are underestimating operating costs.
Second, the study concludes HSR will, based on a fare structure that mimics that of air travel, poach around half of air’s passengers on the intercity routes. On this basis, it concludes HSR would carry 54m passengers in its first full year of operation, 2036, and generate, depending on the mix of business, non-business and (on the Newcastle-Sydney line) commuter fares, $3-5 billion in revenue payment. On that basis, the network would cover its operating costs, although the study admits that capital costs will never be recovered.
You would think that they are discussing the California project. They are also comparing fares with air-fares and ignoring capital costs, the recovery of which the author dismisses as impossible. If ticket fares will be around $200. they are overestimating their ridership, just as our CHSRA is here in California. They will require the same operating subsidies in order to keep the system going. Theirs, like ours, won't pencil out.
All the same problems; all the same impossible to achieve solutions.
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HOT TOPICS
THE AUSTRALIAN ABC
Friday, 5 August 2011 /
High-speed rail: pulling a very fast one on capital
by Bernard Keane
I take it all back. I’ve been cynically antagonistic toward high speed rail before now. But the first stage of the government’s scoping study has convinced me?—?fast trains are viable, visionary, and nation-building.
Sorry, joking.
There are just three things you need to know about the HSR study.
First, the cost is way more than advertised in the media. The costing of $61 billion to $108 billion?—?that reflects confidence intervals from 90% chance the costs would blow out to 10%?—?has several major omissions. First “client planning and procurement management costs” of a further 10-15%, increasing the least-risk cost to $119 billion at a minimum. Then there are rolling stock lease costs of $1.7 billion for a fleet of 43 high speed train sets.
Then there are operating costs, which the study doesn’t itemise but which it does make an effort at determining. Between track maintenance, track replacement, rolling-stock maintenance, electricity, ticketing and staffing?—?and the staffing costs look woefully underfunded, as though the consultants left off overhead or superannuation?—?it would cost $1.1 billion a year to run the system. Over the 20 years covered by the study, that’s over $22 billion, not including wages growth.
So we’re really talking about $140 billion, according to the study, for the full network.
That’s still significantly cheaper than what it is expected to cost the UK government to build the now thoroughly hated London-Birmingham HSR (£17b) and even less than the extension of that line on a shorter route to Manchester (also £17 billion). On a per km basis, the London-Birmingham project suggests the cost of the HSR network here would be $250-300 billion, not $140 billion. Still, the consultants’ construction costing methodology appears reasonable, although some may quibble over the ease with which the study dismisses cost issues about tunnelling in Sydney, Melbourne and Brisbane, and how easily rail “stabling” facilities could be found in major cities.
Second, the study concludes HSR will, based on a fare structure that mimics that of air travel, poach around half of air’s passengers on the intercity routes. On this basis, it concludes HSR would carry 54m passengers in its first full year of operation, 2036, and generate, depending on the mix of business, non-business and (on the Newcastle-Sydney line) commuter fares, $3-5 billion in revenue pa. On that basis, the network would cover its operating costs, although the study admits that capital costs will never be recovered.
Its methodology for reaching its conclusion about switching air passengers to HSR, based on fares and travel times and elasticity of demand, is complicated, but crucially, “there is no assumption of a competitive reaction to HSR from the airlines”.
You can imagine that, can’t you?—?airlines, faced with losing half their passengers to a government-subsidised competitor, would do nothing.
Where the assumptions start to look implausible is in relation to modelling the impact of airlines actually responding to the competition by cutting fares. The study concludes that even if airlines slashed fares by 40%, it would only cut HSR passengers to 48 million a year. That’s despite the HSR taking three hours to get from Sydney to Melbourne and Sydney to Brisbane.
Third, the only faintly viable section of the project looks to be Newcastle-Sydney, which would draw heavily on commuter traffic, not merely business and non-business travel. That 120km route would cost just under $18 billion, offer cheap commuter fares and carry 15 million passengers a year including 5 million commuters?—?in contrast, say, to Melbourne, which would handle 7.6 million passengers a year coming and going, and Brisbane, which would be see under 5 million.
But the sleight of hand here ultimately is the abandonment of any idea that HSR could recoup its capital costs. Once you unburden the network from the requirement to pay for itself, you can set fares anywhere you like, as long as you can cover operating costs. That’s exactly what the consultants have done?—?assume they can simply match air fares, rather than use a price that would cover capital costs as well as operating costs. HSR fares that include a return on capital would be several hundred dollars.
The result is an existing private industry?—?the airlines?—?having to compete against a heavily-government subsidised competitor unfettered by the requirement to cover its cost of capital. If there was a massive market failure occurring in the interstate travel market?—?like there is in relation to broadband (and the NBN will provide a return on capital)?—?the merits of such an extraordinary intervention could be considered. But unlike broadband?—?currently the equivalent of travelling between Sydney and Melbourne in a Cobb and Co coach?—?the existing interstate travel market is functioning well.
Still, this study’s only costing $20 million. It’s not like there’s a tight budget or anything.
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