Competition Analysis Madrid-Barcelona Corridor
Competition Analysis Madrid-Barcelona Corridor
Words: 2755
Contents
1. Introduction............................................................................................................... 3
Research Problem............................................................................................................. 3
State of the art.................................................................................................................. 3
2. Research Scope ......................................................................................................... 5
Aim of the Research ......................................................................................................... 5
Research Question............................................................................................................ 5
3. Research Design ........................................................................................................ 5
Research Objectives ......................................................................................................... 5
Theoretical Framework .................................................................................................... 5
Methodological Approach ................................................................................................ 7
4. Data Analysis ............................................................................................................. 8
Data Description ............................................................................................................... 8
Summary of the Analysis .................................................................................................. 9
5. Conclusions.............................................................................................................. 13
6. Recommendations .................................................................................................. 14
7. References ............................................................................................................... 15
ANNEX OF DATA ............................................................................................................. 16
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
List of Figures
Figure 1. Number of passengers carried by each mode of transport. ............................. 9
Figure 2. Evolution of Rail & air market share in terms of passengers .......................... 10
Figure 3. Regression of the comparison between air pax & rail pax.............................. 10
Figure 4. Evolution of the average load factor and the number of seats of air transport
in the corridor ................................................................................................................. 12
List of Tables
Table 1. List of the busiest corridors by passengers in Europe in 2012 & 2016 .............. 6
Table 2. Variables identification and description. ............................................................ 8
Table 3. Regression Statistics for Air vs Rail Regression................................................. 11
Table 4. ANOVA results for the simple regression ......................................................... 11
Table 5. Air Service seats & frequencies ........................................................................ 12
Table 6. Price comparison between both modes of transport in February 2019 .......... 13
Table 7. Rail service passenger numbers ....................................................................... 17
Table 8. Air vs Rail passenger numbers comparison ...................................................... 18
Table 9. Air transport statistics....................................................................................... 19
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
1. Introduction
Research Problem
The development of high-speed rail (HSR) services throughout the last decades
and the increasing demand and supply in high-speed rail have gradually blurred the
concept of competition and cooperation with air transportation. One of the main
impacts has been the replacement of demand for other modes, most notably air
transportation, high-speed rail’s main competitor, owing that replacement to the
characteristics of the two services and their respective generalized costs.
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
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MSc Air Transport Management
According to Daniel Albalate (2015) the coefficient associated with the distance
variable, when undertaking an statistical analysis of distance and seats & frequencies
offered, is positive and statistically significant in both regressions, what means a high
interdependence. Also, the positive effect of the distance variable when undertaking a
frequency analysis suggests that the increase in demand for air services on longer routes
overrides the effect of competition from HSR and cars. (Albalate, Bel and Fageda, 2015)
There have also been major findings for the Madrid – Barcelona corridor, where
Pagliara and Román (2012) describe the demand response to different policy scenarios
considering improvements in the level of transport services. From this corridor, prices
and frequency of high-speed rail service were found to be among the most important
variables in competing with the other mode. In addition, Pagliara and Román (2012)
state that check-in and security controls at the airport are a crucial variable for users in
making their modal choices. Other policies, such as the improvement of parking facilities
at train stations, play a secondary role.
When discussing the competition and complementarity of the two modes, the
last aspect to study is the high-speed rail – air service integration. According to
Dobruszkes (2014) the integration is not significant, mainly because there is a spatial
overlap with the airline hub effect. Most airports directly served by high-speed rail
services are also airline hubs (Amsterdam, Paris CDG, Frankfort…). In this context,
Dobruszkes (2014) states that in some airports high-speed rail – air service integration
has low effect, because the difference in range on the routes is more considerable to
make HSR less attractive to passengers. For example, in 2012, Paris Charles de Gaulle
airport had connections to 234 other destinations by air compared to 73 by high-speed
rail service, numerous of which with unattractive travel times. (Dobruszkes, Dehon and
Givoni, 2014)
Following the previous approach, there’s been recently identified room for
integrated mobility, but mainly outside of the sphere of high-speed rail with LCC
connections. As a matter of fact, high-speed rail connections can decongest busy
airports that can then be used for long haul flights and also enabling better connections
of regional airports with high-speed rail services would increase their catchment area
and enable more point-to-point traffic. (Finger, Bert and Kupfer, 2014)
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
2. Research Scope
Research Question
Are air services and high-speed rail services in the Madrid – Barcelona corridor
competitive or are they complementary modes of transport for the strong links between
the two cities?
3. Research Design
Research Objectives
The objectives of this research are the following:
• Determine the current situation of the share by transport mode in the Madrid –
Barcelona corridor.
• Determine the level of competitiveness or complementarity analysing the
frequencies of both types of service.
• Determine the average price competitiveness of both services.
• Determine the loss of market share by the air transport service in favour of the
high-speed rail service.
Theoretical Framework
After the liberalization of the European air market, low-cost air carriers took over
most of the short-haul and medium length routes in Europe. Consequently, rail services
lost a big portion of their share in the passenger transport in those routes. The
introduction of the high-speed rail was the response of rail services to win back a lot of
ground on many routes and that win back remains dominant especially on city
connection as in the Rome – Milan, Paris – London and Madrid – Barcelona corridor. The
development of high-speed rail services has been one of the central features of the
recent European Union transport infrastructure policy and is taking place against the
background of an ongoing liberalization process in the rail market, which has an
important effect on innovation in the sector as well as in the change in business model.
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
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MSc Air Transport Management
High-speed trains can be used to solve two different accessibility problems: the
rail service can serve as a link between cities and central business districts, creating new
regions with a common labor market, or be point-to-point link, where each train is a
potential substitute for an air connection. The Madrid – Barcelona HSR link belongs to
the second case.
At the beginning of the 2000s decade the HSR services gained popularity as
technology improved, permitting the train to compete with the plane in medium
distances. (Adler, Nash and Pels, 2008) Spain moved quickly to get HSR into operation.
The first prestigious Alta Velocidad Española (AVE), used to denote long-distance HSR
services, linked Madrid with the country’s fourth largest city in Spain, Seville, but it was
not until 2008 that the Madrid - Barcelona corridor would gain the AVE service. (Pagliara,
Vassallo and Román, 2012)
Table 1. List of the busiest corridors by passengers in Europe in 2012 & 2016 (Wikipedia, 2019)
Before the introduction of the HSR service, this route was the busiest air route in
Europe, with about 4.8 million trips in 2007 or 2.5 m in 2012 (see Table 1). Iberia was the
major carrier on this route, and continues dominating the market, particularly because
of its air shuttle service “Puente Aéreo” (PA), which moved 3 million passengers before
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
the opening of the HSR service – PA is to Iberia what Heathrow–New York is to British
Airways – where this air shuttle was conceived as a commuter service.
After the liberalization of the Single European Sky, other LCCs such as Spanair,
Air Europa, and Vueling entered the Madrid– Barcelona market, making the competition
fiercer and also beneficial for the passenger. (Pagliara, Vassallo and Román, 2012)
Data that show the fierce competition in the market is that, air transport demand
in the EU grew at an average annual rate of 5% over the last decade while high-speed
rail passenger demand grew by 16% over the same timeframe. (Adler, Nash and Pels,
2008)
Methodological Approach
The approach for the data analysis has been set in the comparison of the
evolution of the air and rail transport modes. The analysis has been done comparing the
evolution of the rail and air transport passengers in the corridor, the frequencies of each
mode of transport, the correlation in the air transport sector between seats, frequencies
and load factor, and the market share obtained by both modes. Graphics of relations
between the variables mentioned have been elaborated in order to see tendencies and
a regression analysis by both graphic and data analysis have been done in order to see
how strong the relation between air passenger demand varies with the change of rail
passenger demand.
Finally, a research and collection of prices in February 2019 has been conducted
in order to analyse how price-competitive are both transport modes
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
4. Data Analysis
Data Description
The data used to carry out the analysis is summarized in Table 2.
The data has been treated year by year in order to get the overall numbers of
passengers, seats and frequencies offered in air transport for the Madrid – Barcelona
corridor.
The years, comprising data from 2004 to 2016, haven been selected in the
following criteria:
• From 2004 to 2008, the 4 previous years to the beginning of the high-speed rail
service in the corridor. With the data of this range it can be seen the tendency of
the air transport in busy route without a serious competitor in terms of market
share.
• From 2009 to 2012, because are the 4 following years to the opening of the HSR
service between Madrid and Barcelona. This period is crucial to understand the
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
current status of the market share for both transport modes. Additionally, in that
period an economic recession occurred, so it is a determinant factor in modal
choice.
• The last period, from 2013 to 2016, in order to understand the recent tendency
of a mature market where both transport modes have reached the maturity of
the service.
For the data gathered from OAG in the specified period of years comprised a
dataset of 40,215 lines of information in excel, that’s been reduced to the information
in the ANNEX OF DATA.
Data from Eurostat and RENFE has only been organized in tables with the
information needed for the analysis, which are air transport passengers, rail passengers
and rail frequencies. It is also presented in the ANNEX OF DATA.
Finally, the pre-treatment of the data concludes with a comparison table for air
transport and rail passengers in the range of years specified before, with a regression
analysis to study if there is correlation between them.
In Figure 1 can also be seen how in 2012 HSR services surpassed air services in
number of passengers, what changed the market to what it is nowadays.
5.000.000
Air vs Rail PAX
4.000.000
Passengers
3.000.000
2.000.000
1.000.000
-
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Rail Air
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
Figure 2 disposes market shares in order to see how the market was growing
through the years along with the market share of the high-speed rail services.
6.000.000
Rail Air
4.500.000
4.000.000
3.500.000
3.000.000
2.500.000
2.000.000
1.500.000
1.000.000
500.000
0
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
3.500.000
4.000.000
4.500.000
500.000
-
Figure 3. Regression of the comparison between air pax & rail pax
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
The regression equation obtained with the coefficients obtained from the Data
Analysis is shown below:
𝑦 = −0.8102𝑥 + 5 · 106
The results of Data Analysis done with Excel are shown in Table 3 and Table 4.
Regression Statistics
Multiple Correlation Coefficient (R2) 0.97696084
R2 0.95445248
Standard error 225919.641
From the coefficients in Table 3, a strong relationship between the air passengers
and the rail passengers is identified, what demonstrate that a fluctuation or change in
the rail passengers has a strong influence in the numbers of air passengers. R2 is 0.95
what means that 95% of the values fit the regression analysis model or translated to the
case, 95% of the air passenger behaviour can be explained with the behaviour or trend
of the rail passengers.
df SS MS F
Regression 12 1.06954·1013 8.9128·10 11 209.550901
Residual 10 5.10397·1011 5.104·1010
Total 22 1.12058·1013
A good outcome of the regression is the low value of the residual SS compared
with the Total SS, what means a good fit of the values for the regression, as shown in
Table 4.
One important characteristic of this route is how air transport has maintained
almost constant through time the average load factor despite the decrease in seats
offered and in frequencies, as shown in Figure 4. This is one of the key elements to
understand why this transport service is still competitive in the corridor.
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
70,00% 8000000,
60,00% 7000000,
6000000,
50,00%
Number of seats
5000000,
Load Factor
40,00%
4000000,
30,00% 62% 64% 63% 62% 58%
57% 60% 57% 58%
51% 53% 55% 55% 3000000,
20,00%
2000000,
10,00% 1000000,
0,00% ,
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
AVERAGE LF SEATS
Figure 4. Evolution of the average load factor and the number of seats of air transport in the corridor
In Table 5 is shown the number of frequencies per year of air services in the
corridor. From the data of the table it is observed how the frequencies of air services
decrease through the years, as HSR services were gaining passengers. HSR services have
the advantages of maintaining during the labour days the same frequencies and only
changing them on weekends. There has been only one major change in frequencies in
the HSR service in the corridor, that happened in 2011 when 4 frequencies where added
to the service in the peak hours on labour days.
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
Finally, for the price comparison in February 2019, as it can be seen in Table 6,
generally the prices are cheaper for air services than they are for high-speed rail services.
This comparison shows the price competitiveness for air transport, as it is in most of the
cases the best option for transport in the Madrid – Barcelona corridor.
Table 6. Price comparison between both modes of transport in February 2019. (SkyScanner, 2019) (GO EURO, 2018)
February 2019
Fr 1 Sa 2 Su 3
RAIL 50 € 60 € 54 €
AIRPLANE 41 € 42 € 38 €
Mo 4 Tu 5 We 6 Th 7 Fr 8 Sa 9 Su 10
42 € 41 € 42 € 41 € 50 € 60 € 32 €
37 € 31 € 30 € 30 € 41 € 41 € 41 €
Mo 11 Tu 12 We 13 Th 14 Fr 15 Sa 16 Su 17
41 € 32 € 42 € 44 € 45 € 50 € 53 €
44 € 33 € 29 € 26 € 32 € 32 € 39 €
Mo 18 Tu 19 We 20 Th 21 Fr 22 Sa 23 Su 24
39 € 41 € 50 € 41 € 50 € 53 € 40 €
39 € 38 € 30 € 36 € 32 € 32 € 41 €
Mo 25 Tu 26 We 27 Th 28
42 € 41 € 39 € 48 €
39 € 30 € 27 € 30 €
5. Conclusions
High-speed rail transport has been growing in a very fast pace the last decade
because of the advancements in technology and its convenience for the passenger in
terms of connectivity with other transport modes city-based, frequencies and reliability
of the service despite the weather. In the Madrid – Barcelona corridor, this growing
tendency has been translated into a decrease in air transport demand, reaching levels
of half the demand as it was before the introduction of the HSR service in the route.
The passenger behavior will never be the same in terms of modal choice, as there
are two competitive choices with both having its benefits. One crucial aspect to consider
when making statements about modal choice in busy corridors in Europe is the age of
the passenger as it will determine the buying behavior and the travel style. For
millennials air transport will still be better as they won’t waste that much time in an
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
airport, while for those that arrive earlier to an airport HSR will be more convenient to
save time. The same would happen with frequent travelers and occasional travelers, as
the travel habits differ in a very wide range of disposal to wait in an airport.
On the other hand, not everything is negative in the loss of share of both modes
when one of them gains share over the other. Where air transport and high-speed rail
services can benefit from one another is modal or service complementarity. There are
huge opportunities to increase transport services complementarity, but to do that,
options of multimodal booking must be heavily improved, to the point to be able to buy
different transport services in one ticket. This is the most desirable option from a
passenger’s perspective. However, it could be questioned whether, in a competitive
model, there is an incentive for operators to integrate information and ticketing with
their (potential) competitors. Another major obstacle is passenger rights in the transport
modes that make it hard to have single tickets for both modes.
Finally, as seen in the data analysis, air transport services after a period of
recession are recovering in the Madrid – Barcelona corridor. One of the key factors of
that recovering in passenger numbers is the settlement of the low-cost carriers in the
air transport industry and in the corridor. LCCs will play an important role on the modal
choice, through offering cheap-record fares, in the major and busiest routes between
cities in Europe and will dictate the future of the competition between the two modes
of transport.
6. Recommendations
Being aware of the difficulty of teaching statistics to a group of students such
divers in terms of academic and professional background, my recommendation for
future editions of this module would be to introduce more practice sessions to explain
the meaning of the statics coefficients and methods in different examples and topics, as
well as more sessions to teach how to interpret the results of data analysis.
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Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
7. References
Adler, N., Nash, C. and Pels, E. (2008) ‘High-Speed Rail & Air Transport Competition’,
Tinbergen Institute Discussion Papers, 08(3)
Albalate, D., Bel, G. and Fageda, X. (2015) ‘Competition and cooperation between high-
speed rail and air transportation services in Europe’, Journal of Transport Geography, 42
Elsevier Ltd, pp. 166–174.
Dobruszkes, F., Dehon, C. and Givoni, M. (2014) ‘Does European high-speed rail affect
the current level of air services? An EU-wide analysis’, Transportation Research Part A:
Policy and Practice, 69, pp. 461–475.
Finger, M., Bert, N. and Kupfer, D. (2014) ‘High-speed rail vs. low-cost air: competing or
complementary modes?’, 2nd European Intermodal Transport Regulation Summary,
(March), p. 12.
Pagliara, F., Vassallo, J. and Román, C. (2012) ‘High-Speed Rail Versus Air
Transportation’, Transportation Research Record: Journal of the Transportation
Research Board, 2289, pp. 10–17.
Wikipedia, 2019. List of busiest passenger air router. [Online] Available at:
https://en.wikipedia.org/wiki/List_of_busiest_passenger_air_routes
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ANNEX OF DATA
Dataset organized in tables by mode of transport.
January 75,000 188,800 196,700 177,300 185,800 190,500 240,000 253,100 263,300 295,200
Table 7. Rail service passenger numbers
February 78,100 199,000 211,600 202,000 230,200 243,100 261,800 271,900 310,300 321,800
March 163,800 217,200 224,000 232,900 254,000 273,700 307,000 318,800 318,500 366,300
April 186,900 220,600 235,800 215,500 234,600 276,700 304,700 319,800 331,100 357,100
May 203,400 239,900 276,300 248,000 257,000 305,700 318,300 351,700 375,000 406,600
June 217,200 227,600 224,800 241,800 249,700 308,400 320,400 344,100 360,300
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July 200,400 251,800 217,800 228,700 243,000 278,100 266,900 326,300 338,400
August 125,900 159,300 131,900 182,100 137,000 177,400 266,800 230,400 242,600
Setember 210,100 240,400 210,500 226,200 221,400 256,600 304,700 303,100 335,800
October 247,900 253,700 232,900 216,900 253,200 295,400 344,000 349,100 350,200
November 217,800 238,100 228,700 214,200 226,900 263,400 298,900 325,400 338,200
December 198,300 237,500 211,300 218,900 195,700 246,500 294,100 324,200 310,200
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TOTAL 448,000 621,342 689,644 756,900 2,049,800 2,673,900 2,602,300 2,604,500 2,688,600 3,117,400 3,527,700 3,717,900 3,874,900
Research Methods & Statistics
Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Rail 448,000 621,342 689,644 756,900 2,049,800 2,673,900 2,602,300 2,604,500 2,688,600 3,117,400 3,527,700 3,717,900 3,874,900
Air 4,470,959 4,733,971 4,744,620 4,697,775 3,497,696 2,942,406 3,084,048 3,102,436 2,550,462 2,213,182 2,204,737 2,251,699 2,328,056
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Total 4,918,959 5,355,313 5,434,264 5,454,675 5,547,496 5,616,306 5,686,348 5,706,936 5,239,062 5,330,582 5,732,437 5,969,599 6,202,956
% Rail 9% 12% 13% 14% 37% 48% 46% 46% 51% 58% 62% 62% 62%
% Air 91% 88% 87% 86% 63% 52% 54% 54% 49% 42% 38% 38% 38%
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Research Methods & Statistics
Competitiveness Analysis of High-Speed Rail vs LCCs in Madrid-Barcelona corridor
Research Methods & Statistics
MSc Air Transport Management
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