According to a Quartz article, the rail network in China is beginning to draw consumers away from other modes of transportation, specifically airlines. China Southern Airlines, one of the companies suffering from the newest railway expansion, reported terrible results for their 2013 year. According to the article, their net profit dropped 24% and their operating profit fell 70%. Alongside China Southern Airlines is Air China, whose net profit also dropped 32% in 2013.
China Southern had this to say after posting their results, “The rapid development of high-speed railway and the evolution of low-cost carriers on the mainland will further intensify competition on domestic routes.”
China’s Easter CEO also had this to say about government subsidies for the railways, “In China, the government has also invested heavily in high-speed rail—far more than in the airlines in fact—so it’s not a case of nationalized carriers being better off, because they also have many challenges to face.”
I don’t view the move towards the train system as a necessarily bad thing. If the new high speed train better serves customers and improves efficiency, then the gains outweigh the losses.