What are the considerations for high-speed rail price adjustment? Will it be expanded to more lines in the future?

"This high-speed rail is not a simple price increase, but a more flexible pricing with an increase and a decrease, which can improve railway revenue to a certain extent."

"The high-speed rail price adjustment may have a certain experimental color, and the scope of the price adjustment line may be expanded in the future according to the operating income of the price adjustment line."

From June 15, a number of high-speed rail lines will be adjusted, with higher ceiling fares and lower discounted fares. A number of experts further pointed out to The Paper that the market-based pricing of high-speed rail is expected to continue to expand to other lines.

Recently, the official website of Railway 12306 issued four price adjustment announcements. The announcement pointed out that in order to further improve the operation quality of high-speed rail and meet the different travel needs of passengers, it was decided that from June 15, 2024, the announced fares of EMU trains with a speed of 300 kilometers per hour and above running on the Wuhan-Guangzhou section of the Beijing-Guangzhou high-speed railway, the Shanghai-Kunming high-speed railway, the Shanghai-Kunming high-speed railway, and the Hangzhou-Ningbo section of the Hangzhou-Shenzhen railway will be optimized and adjusted.

This is not the first time that high-speed rail has been adjusted

According to the comparison of the surging news reporters, on the whole, the adjusted fare caps (i.e., "published fares") of the four routes have increased compared with the current fares, and some of them have increased by about 20%. However, the announcement also cites a number of examples of minimum fare reductions, with some stations having minimum fares about 34% lower than current fares.

The above four announcements all point out that the implementation of fares between stations will be based on the published fare as the upper limit and 5.5% off as the lower limit to implement a multi-grade and flexible discount floating fare system.

This is not the first time that high-speed rail has been adjusted. In 2015, the National Development and Reform Commission (NDRC) issued the Notice on Reforming and Improving the Passenger Fare Policy for High-Speed Rail EMUs, which liberalized the fares of high-speed rail EMUs and changed them to be set by China Railway Corporation from January 2016. It means that at this point, the fare of high-speed rail will gradually move towards market regulation and will no longer be "set in stone".

According to the above-mentioned notice, the first- and second-class passenger fares for high-speed rail EMU trains with a design speed of more than 200 kilometers per hour on railways wholly owned and controlled by central management enterprises shall be independently formulated by railway transport enterprises in accordance with price laws and regulations; The fares of business seats, special seats, moving sleepers, etc., as well as the passenger fares of new railway passenger dedicated lines with social capital investment and holding, will continue to be regulated by the market, and shall be independently formulated by railway transport enterprises according to factors such as market supply and demand and competition.

Since then, some high-speed rail lines have started to adjust prices, taking the Beijing-Shanghai high-speed railway as an example, after the listing at the end of 2020, the Beijing-Shanghai high-speed railway has carried out some market-oriented explorations in terms of fares, taking the lead in implementing floating fares for high-speed rail EMU trains with a speed of 300 to 350 kilometers per hour.

According to the surging news reporter, it has been a year since the last high-speed rail price adjustment. Previously, from May 30, 2023, the published fares of EMU trains running on the Liunan, Jiaoji and Nanguang high-speed railways will be optimized and adjusted, as well as the published fares of EMU trains running on the Nanjing-Hangzhou high-speed railway and Shanghai-Nanjing intercity trains with a speed of 300 kilometers per hour and above will be optimized and adjusted. The implementation of the fare between the stations will be the upper limit of the published fare, with a lower limit of 6.6% off, according to the calculation of the surging news reporter, the announced fare price increase at that time was about 10% to 20%.

What are the considerations behind the high-speed rail price adjustment?

For the optimization and adjustment of EMU train fares, Zeng Gang, dean of the Urban Development Research Institute of East China Normal University, said in an interview with The Paper that the price increase of high-speed rail lines can further increase the income of railway companies and contribute to the sustainable development of high-speed rail assets. On the other hand, it will also help to continue to invest in the construction of high-speed rail and reduce financial pressure to a certain extent.

Zhao Jian, a professor at the School of Economics and Management of Beijing Jiaotong University, mentioned in a recent interview with the media that the marketization of high-speed rail is a guided price adjustment, and the price adjustment of the four railways is part of the market-oriented pricing of the overall high-speed railway, and the high-speed rail is a commercial project, which is built by the China Railway Group and local government loans. This time, the high-speed rail is not simply raising prices, but more flexible pricing is carried out with both rises and falls, which can improve railway revenue to a certain extent.

According to the Shenyin Wanguo Research Report, the marketization of high-speed rail fares, on the one hand, can effectively use the leverage of "price" to achieve the effective division of labor between a variety of modes of transportation, on the other hand, combined with the relevant policies of the state to encourage social capital to invest in railways and promote the diversification of railway investment subjects, market-oriented pricing is an important measure to improve the railway investment and financing system. The market-oriented mechanism of high-speed rail fares has been gradually improved, which is beneficial to high-speed rail operators and high-speed rail line asset owners.

According to CCTV News on May 7, citing the statement of the person in charge of the relevant railway transport enterprise, the area where the high-speed rail line involved in the fare optimization and adjustment is located, various modes of transportation are fully competitive, and the EMU train fare is still more cost-effective than other modes of transportation after the optimization and adjustment. Railway transport enterprises will comprehensively consider the changes in passenger flow, market demand and passenger acceptance, and make good use of the flexible discount, high-speed rail EMU train fare mechanism with ups and downs, so as to meet the diversified travel needs of passengers to the greatest extent.

According to CCTV news reports, one is that these high-speed rail lines were opened for operation between 2009 and 2014, and for more than 10 years, the EMU trains running on the line with a speed of 300 kilometers per hour and above have been implementing a single fare mechanism, and the operating costs of line maintenance, vehicle purchase, equipment renewal, labor and employment have changed greatly, and the existing single fare mechanism has obviously not adapted to the market-oriented business situation, and it is urgent to establish a market-oriented fare mechanism to improve the market-oriented operation level of railway transport enterprises.

Second, these high-speed rail lines running at a speed of 300 kilometers per hour and above EMU trains generally have different seasons, dates, periods of unbalanced passenger flow, in the peak hours of passenger travel, even if a large number of additional EMU trains are still difficult to meet the needs of passengers to concentrate on travel, the implementation of flexible discounts, there are ups and downs of the market-oriented fare mechanism, is conducive to the reasonable matching of capacity and demand through price leverage, promote the balance of passenger flow, so that limited capacity resources to serve more passengers, It also allows some passengers who have relatively low requirements for train operation schedules to enjoy more preferential fares.

Third, these parallel high-speed rail lines have general-speed passenger trains running, and the implementation of a market-oriented fare mechanism with flexible discounts, rises and falls, will further enrich the high-speed rail and ordinary rail passenger product system, and provide more choices for passengers.

Fourth, the fare level of EMU trains running on these high-speed railways with a speed of 300 kilometers per hour and above is obviously unbalanced with the fares of similar EMU trains running on other high-speed rail lines in the region.

The railway price adjustment will further increase the income of the China Railway Group, with the recovery of the domestic passenger transport market situation, the China Railway Group's operating efficiency last year has increased significantly. According to the recent disclosure of China Railway Group, in 2023, China Railway Group will achieve operating income of 1,245.4 billion yuan, a year-on-year increase of 10.5%, and a net profit of 3.3 billion yuan; In the first quarter of 2024, China Railway Group achieved operating income of 283.3 billion yuan, a year-on-year increase of 4.2%.

According to the person in charge of the Finance Department of China Railway Group, railway passenger traffic will reach the best level in history in 2023, with the national railway completing the dispatch of 3.68 billion passengers, and the number of passengers sent on peak days exceeding 20 million, and the annual and peak day passenger dispatch volume will reach a record high. In the first quarter of 2024, a number of passenger transport indicators hit the best level in history, and the national railway sent 966 million passengers, a year-on-year increase of 27.9%. At the end of 2023, the asset-liability ratio of China Railway Group was 65.54%, a decrease of 0.84 percentage points from the end of the previous year, and new achievements were made in the high-quality development of railways.

The person in charge also said that in the next step, China Railway Group will accelerate the construction of a modern railway operation and management system, adhere to the direction of marketization, rule of law and internationalization, deepen railway reform and innovation, promote the increase in passenger and freight transportation, comprehensively strengthen budget management, promote the integrated operation of transportation industry and non-transportation industry, continue to do a good job in saving expenditure and reducing consumption, and continuously improve the quality and efficiency of national railway enterprises.

Will other high-speed rail lines follow suit with price adjustments?

"From a single fare to market-based flexible pricing, the price adjustment of high-speed rail lines may become the only way for development in the future." Zeng Gang told the surging news reporter that from a global point of view, the peak and trough of the year are the same fare of the railway pricing strategy is not much, developed economies and countries basically have different fares during the peak and trough periods, so as to encourage off-peak travel, "now the domestic high-speed rail lines to achieve price adjustment, are the first to consider the larger passenger flow of the line, of which the Yangtze River Delta region and the Guangzhou-Shenzhen region is the focus of price adjustment." ”

"The price adjustment may have a certain experimental color, and the scope of the price adjustment line may be expanded in the future according to the operating income of the price adjustment line." Zeng Gang further said that in addition to the lines with high passenger flow and passenger load rate, there are also some high-speed rail tickets without particularly tight station lines, such as from Hangzhou to Nanchang and Changsha. If the income of the price adjustment line is in line with expectations, the scope of price adjustment may continue to be expanded to the Pearl River Delta and the Beijing-Tianjin-Hebei vicinity in the future.

Zhao Jian told the surging news reporter that at present, Beijing-Shanghai, Shanghai-Nanjing and other high-speed railways have established a flexible market-oriented pricing mechanism, and the four lines that will be adjusted are just a continuation of the price adjustment range, which is expected to be expanded to more high-speed rail lines in the future.

Recently, some media quoted the Beijing-Shanghai high-speed rail investor hotline as saying that the Beijing-Shanghai high-speed rail section has not participated in the price adjustment of the above four lines, and there is no price adjustment arrangement at present.

As for whether the price will be raised year by year in the future, the management of the Beijing-Shanghai high-speed railway pointed out at the investor interaction event in April 2022 that the Beijing-Shanghai high-speed railway is located in the eastern region with abundant passenger flow, and it also has the basis for fare increases, and the ability of passengers to pay and the level of regional economic development can be supported. The adjustment of the fare mechanism is still in the exploratory stage, and there is no fixed frequency, and it is more to refer to the competing modes of transportation to make some adjustments.

Will the Midwest Railroad be adjusted? A person from the Central and Western Railway Company told The Paper that at present, the pricing of ordinary passenger railways (ordinary speed trains) has hardly been adjusted, which is regarded as a public undertaking for people's livelihood and bears a part of its social responsibility, not market-based pricing. After the construction of high-speed rail, some lines have started market-oriented pricing, mainly depending on supply and demand, there will be demand for price adjustment. Many high-speed railways and buses in the central and western regions are more expensive to build than the Beijing-Shanghai high-speed railway due to the topography, but the passenger flow is definitely not as good as the Beijing-Shanghai line, so the possibility of adjusting the price of the line in the central and western regions is not high, and the seat rate and the number of running logarithms do not have the basis for the fare to rise.

A number of railway experts also pointed out that price adjustment is needed for market development, but the simultaneous improvement of service quality cannot be ignored.

"For the public, the price increase should correspond to the further improvement of the quality of service perceived by passengers, so that the public can enjoy better services." Zeng Gang also told the surging news reporter that the current proportion of high-speed railway lines and trains is increasing, with the increase in the price of high-speed rail lines, the proportion of general passenger trains in the future may also be adjusted, but the speed of the reduction will be reduced, giving passengers more diversified travel options.

Zhao Jian also pointed out that the current national railway group is the main body of the market, and the relationship with the local railway bureau is unified dispatching and command, unified liquidation, the railway bureau can not directly obtain income from the market, but the railway bureau is the main body of the operation of passenger and freight transport, there is no motivation to improve efficiency and improve service quality, so it is necessary to solve it through competition, through deepening reform, at least in the field of railways to form a comparative competition, in order to help improve the quality of service.

It is reported that high-speed rail competitors are mainly from other transportation industries, including highways, civil aviation, etc. According to the characteristics of different modes of transportation, railways, highways, civil aviation, etc. meet different types of transportation needs. In the medium and long-distance passenger transport market of 100 km to 1,000 km, high-speed rail has the advantages of high punctuality, large passenger capacity, economic comfort, and low impact by natural climate, and has a great competitive advantage; In the long-distance passenger transport market of 1,000 km to 1,500 km, high-speed rail and civil aviation compete fiercely with their respective advantages.

Although many airlines have turned losses into profits or increased their profitability significantly in the first quarter of this year, none of them has exceeded the profitability of the listed company Beijing-Shanghai high-speed railway. Beijing-Shanghai High-speed Railway (601816. SH) achieved a new high in the first quarter of this year. In 2023, the revenue will be 40.683 billion yuan, a year-on-year increase of 110.40%; The net profit attributable to the parent company was 11.546 billion yuan, with a net loss of 576 million yuan in the same period last year, turning losses into profits year-on-year, a year-on-year increase of 2103.63%. In the first quarter of 2024, the Beijing-Shanghai high-speed railway achieved revenue of 10.106 billion yuan, a year-on-year increase of 13.06%; The net profit attributable to the parent company was 2.963 billion yuan, a year-on-year increase of 33.11%.

Source: The Paper