Aviation, b-school, Barcelona, Business, Economics, MBA, Microeconomy, Spain

Reflections from a high-speed train (inbetween Madrid and Barcelona)

I often travel the route Barcelona Madrid (and backwards) for the day. By plane it’s rather tiresome and expensive: with an open fare you end up paying around 400€ for a 630 km flight (+ 630 km back).

Barcelona – Madrid is the world’s busiest route with 971 operations per week. The second one is Sao Paulo – Rio (894 per week) then Jeju/Seoul Gimpo (858 per week) and fourth is Melbourne/Sydney (851 per week).

In fact you have to go very low in the ranking to find another crowded European route. That would be Rome – Milan with less than 600 operations per week, which, by the way, is more than the most crowded North American continental route: Las Vegas – Los Angeles (553 per week)

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Source: www.oag.com, data from September 2007

But things change. And this milk cow for the airlines faces its first serious menace ever: the high speed Spanish train service, also called AVE.

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These brand new trains travel the distance of 630km (410 miles) in two hours and 35 minutes. Not too bad when it’s compared with the plane that takes roughly two and a half hours (not just flying but also spent in the check in and departure processes), and possibly more.

But, from an economic point of view, there are many hidden costs that must be taken into account. After all, what is it that you do in a plane? Well, you sit in a narrow seat, trying not to disjoint your legs, and pray that the person that will be sitting beside you is not extra overweight. In the train you have plenty of space. Being uncomfortable has a cost.

How much? Well, it depends on what you’re willing to pay to be more comfortable, of course, and how much your time costs.

How much are you willing to pay for that extra nap? Well, in a 45-minute-long flight, you’re going to have maximum thirty minutes of uninterrupted sleep. You won’t be able to sleep while you queue, while you’re being inspected at the burdensome security checks, while you wait your turn. But on a continuous 2 hours 35 minutes journey you’ll be able to.

As for opportunity costs, you won’t be able to do anything in the plane, apart from opening your laptop for half an hour. It’s completely wasted time. In the train you can use your computer as much as you want, use your phone, combine them and access the internet. Work, eat, talk, whatever you wish.

But externalities must also be taken into account. Environmental footprints can be four times higher for planes than for trains. That means that the train will always be more sustainable and, if we ever are to reflect the true external costs, energy efficiency will give the train an important lead over the plane.

Add those costs up: discomfort costs, opportunity costs, externalities and you will have a very competitive mean of transport. Which only means that competition has been increased, with a comparable service at a better price. In the end, consumers will be benefited from the additional choices, lower prices and the increased service levels that competition will bring.

That was what I was thinking when I decided to open the textbook I was carrying with me. The Managing Financial Resources module awaited me. Fortunately it was half way to Barcelona, 300 km per hour (186.41 mph), still an hour to go.

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2 thoughts on “Reflections from a high-speed train (inbetween Madrid and Barcelona)

  1. They knew beforehand that if the journey by train takes no more than three hours more than a half of the former air passangers will switch to the high-speed train. Furthermore, if prices are competitive maybe a majority of travellers will choose the high-speed train.

    But there is one problem that needs to be tackled: cell phones. In Japan, where almost everybody uses the Shinkansen, you have to keep your cell phone silent , and in case you need to answer a call, you’ll be asked to do it at the platform. I think similar arrangements have been implemented in France or Germany in order to ensure a certain degree of quietness.

  2. You’re right David. And it’s not only the cellphones but also too-loud mind-drilling headphones. Maybe it wouldn’t take a new set of rules or regulations but some politeness would be enough.

    We’ll see what happens in the future and how many people change… I agree that it will probably be a lot of people, a constant dropout that will amount for a high percentage. I’ll keep track of it.

    Thanks for the comment and best regards.

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