Airlines and High Speed Rail: Unholy Alliance or Blessed Partnership?
California High Speed Rail Authority Board chairman Dan Richard knows all too well about the airline industry. Serving as a Director on the Bay Area Rapid Transit District’s Board from 1996 to 2004, the East Bay resident and his colleagues clashed with United Airlines over the use of airport landing fees to build BART’s station at SFO. United, for its part, feared that BART’s plan would set a national precedent that would force the nation’s airlines to contribute to intermodal transportation improvements everywhere.
BART relented, and promised to make up the money elsewhere. However, that put strain the San Mateo Transit District’s finances. That, in turn, had disastrous consequences for Peninsula residents using other services like CalTrain.
Many, of course, allege that BART deliberately sought to undermine CalTrain with the arrangement. But it’s likely the opposite is true. Although BART collectively wants access to the Peninsula, it probably would have not traded a dynamic and new funding mechanism to do so.
So it’s no surprise that Richard finds himself supervising the one entity that has the airline industry in its cross-hairs: high speed rail. But it’s this history that increases the chance that the Authority’s Board will overlook the chance to make arguably its most important public-private partnership. One that involves, you guessed it, the airlines.
The 2011 Business Plan puts a premium on starting revenue service as soon as possible for California High Speed Rail. Critics, however, contend that there is no way ridership would make service break-even if only the Initial Construction Segment is built. So why then, would any private company, let alone an airline invest in the project?
In a word, profit.
Operating high speed rail on the Initial Construction Segment, will put a over three million people within one hour of Castle Air Force Base. That’s a larger population base than San Diego County, Portland, Vancouver, Las Vegas, or Denver. And compared to a 737 costing around $80 million, a high speed train set is a bargain. So too would HSR give an airline more positive cash flow, which in turn, would provide more predictable rates and service levels.
Perhaps the bigger question is what carrier would want to partner with the Authority. The obvious choice would be United, the largest tenant at San Francisco International Airport. But United’s competition is really international airlines who are part of Star Alliance. Conversely, these major carriers (including American and Delta) have continued to abandon domestic travel to “no-frills” airlines like Southwest and JetBlue. And it shows: Southwest is now the biggest airline in the country, and not exactly thrilled about the possibility of high speed rail in its biggest markets.
Then there’s Richard Branson. After starting Virgin Atlantic Airways in Britain, he expanded to domestic train service in Britain. Virgin Trains was one of the many contractors involved in the Authority’s recent RFP process, and no wonder: Branson based Virgin America (his US spinoff airline) at where else but SFO.
Virgin, though is heavily invested in Bay Area to Southern California traffic and routes between LA and Las Vegas with few transcontinental flights. Currently, Virgin would be unable to swallow revenue loses on these routes waiting for high speed rail ridership to increase with time. And that doesn’t even begin to address operational issues with SFO.
It’s a well known fact among Bay Area denizens that SFO’s design and location makes it a very challenging place to operate a world-class airport. However, because of the revenue and access it provides, San Francisco is not eager to elevate Oakland or San Jose to replace it. Especially after all that money it sunk into that BART station.
That leaves one unlikely suitor: Alaska Airlines. The company serves almost exclusively longer routes up and down the West Coast. It’s been aggressive in adding flights to Hawai’i from California destinations. Alaska’s route map neatly overlays CAHSR’s service area, even if the system is extended to Nevada and Arizona. And the carrier has had plenty of experience dealing with organized labor and cost reductions while still managing to have employees today that are amazingly happy.
But are other reasons too: Alaska has long sought to be an innovator and has done both on the operational side, and the consumer side. The airline also has sought to provide service levels that are more than bare-bones. That’s especially important considering the tastes of many Californians.
Not to mention that fact that they are headquartered not in Texas or Chicago, but Seattle. They understand the different mentality that exists in the West Coast as well as the benefits of large transportation infrastructure. So too will many of them have traveled on Amtrak’s Cascades, on the numerous bridges that connect the Emerald City, and even ferries along the Puget Sound. That stands in sharp contrast to their colleagues in Middle America.
Naturally, some will still question why airlines would want to embrace a technology that could be their undoing. The answer is pretty simple, every successful company has to embrace new technology. Southwestern Bell embraced cell phones faster than other phone companies and eventually bought AT&T itself. Barnes and Noble kept up with the transition to e-readers and is still in business while Borders is not. But even these comparisons pale to Dell Computer’s use of the Internet in the late 90s for sales or Sony’s development of the Walkman to foster blockbuster growth of cassette tapes.
Someone is going to succeed in merging air and HSR travel, and it might as well be California.
It’s already possible to land at Charles DeGaulle Airport outside Paris and connect on the TGV to the hinterlands. But what about the ability to send two executives from the same office in Fresno north to San Francisco and south to Los Angeles, each travelling halfway around the globe? One continues to Dubai and the second arrives in Buenos Aires, not for tourism, but to ensure that California exports gain the widest market exposure possible.
Conversely, passengers on Taiwan’s High Speed Rail system can check in and drop their bags directly at the rail station below Taiwan’s international airport. But what if you could do the same thing on the Las Vegas Strip with your final destination being Australia via LAX? And one ticket reservation to boot, allowing you to pass effortlessly from the reservations desk to baggage claim Down Under?
And last but not least is automatic rebooking, where airline passengers are automatically rebooked when there is a flight cancellation. But what if instead of simply being notified, your train went to the new location instead and dropped you off?
Cliche as it may sound, the sky really is the limit. For that reason it’s vitally important that all parties in the high speed rail project not overlook airlines as a viable dance partner. It’s crucial that Chariman Richard allows what’s past to be past and focus instead on the promise of the future.