Is high speed rail in Australia value for money?

The European experience with high speed rail suggests there are trade-offs with aviation depending on the routes.

There is no doubt that the creation of a 1748-kilometre high-speed rail network connecting Brisbane, Sydney, Canberra, and Melbourne is an exciting endeavour. But given the large capital costs - $114 billion - and impact on surrounding communities, as well as its potential positive impact on the economy, a national debate is urgently required.

The report on high-speed rail, launched by Transport Minister Anthony Albanese yesterday, hints at possible flow-on effects for the economy, suggesting that there will be an estimated $2.30 of benefits for each $1 spent.

The proposition of getting from the city centres of Sydney to Melbourne in less than three hours is likely to be an interesting one to business and leisure travellers. Given that the Sydney - Melbourne route is currently the fifth busiest route in the world with Sydney-Brisbane not far behind, there is certainly a lot of demand for travelling fast along the large centres of Australia’s east coast. But the process of implementing a high-speed rail network in Australia is no easy feat.

I am originally from Germany, where high-speed train connections between large cities are the norm. This is true for most West European cities, as is for China, Taiwan, Japan and Russia. But even German taxpayers — who are traditionally fascinated by high-tech engineering — often question the high cost involved with high speed rail and see conventional trains as better value for money. Given the distances involved (the proposed route is 1748 kilometres long), conventional trains are clearly not an option for Australia. Aviation might offer better value for money.

The proposed high speed rail route is interesting and, despite its complexities, I am sure it will be implemented eventually. That day might be quite some time in the future, so rail enthusiasts may have to curb their enthusiasm. The required tunnelling of some 144 kilometres around Sydney, as well as the rest of the fairly long route, will be subject to a lengthy consultation process with affected local communities.

Given the logistical challenges involved, the construction phase will be similarly lengthy. In fact, the first leg of the route (connecting Sydney and Canberra) is not to be expected to be in operation before 2035 — and that is if a government decision on this project would be made in the immediate future.

But Australian airlines should not be too afraid of losing some of their most important domestic routes. In the long run, the proposed high speed rail connection might be of some benefit to aviation. Given the amount of air travel between these cities with Sydney at the centre, high speed trains could actually help Sydney airport with their predicted capacity problem.

In Germany, the latest piece of high speed rail infrastructure built there was finished in 2002 at a cost of some 6 billion Euros. As a result of that high speed rail link, Lufthansa no longer flies the 150-kilometre route from Frankfurt to Cologne, but instead code-shares with the train operator and reserves an entire car on thirteen 300km/h high-speed trains a day. The experience in Europe has shown that airlines can use high speed rail to feed their hubs.

There are several assumptions in the report that need to be addressed. They assume that the train will run at 350km/h. The fastest trains in Europe run currently 320km/h and that is the maximum speed, rather than the average speed.

In order to be compatible with aviation, I believe that there need to be direct non stop connections between the city centres of Sydney, Melbourne, Brisbane and Canberra. That means the very fast trains would not stop anywhere else, which surely will create some opposition amongst communities that currently hope to benefit from a potential train connection in return for having a high speed rail in their backyard.

Finally, the report claims that the train operators would charge similar fares to the airlines that are currently operating the routes in question. By doing so, it is argued that the train operator would not require any subsidies. First of all, it is questionable whether the assumed 84 million train passengers will materialise.

When I mentioned SYD/MEL and SYD/BNE as some of the busiest airline routes in the world, then that translates into some 7 million passengers on the SYD/MEL route and not even 4 million passenger on the SYD/BNE route; in total, 11 million passengers on both routes in 2011. Even with the predicted strong growth in aviation, I have difficulties seeing where those 84 million train users will come from.

The evidence from Europe (particularly from Germany, where the high speed rail infrastructure is in many cases not even dedicated to high speed rail operation) points to the need for indirect subsidies of high speed rail operations.

And all that does not even consider the required $114 billion upfront infrastructure cost, which is likely to go up during the construction phase due to the huge amount of tunnelling required.

The Institute of Transport and Logistics Studies at the University of Sydney Business School will host “HSR in Australia forum – Is it value for money?” on 22 May 2013.