Effect of high-speed rail competition on airlines’ intertemporal price strategies

Abstract In China, serious development of high-speed rail (HSR) is expected to affect airlines' intertemporal price strategies, which are important means for airlines to optimize revenue. We present the impact using a panel dataset of 22 city pairs. We found that HSR competition makes the airlines' intertemporal price curve steeper, meaning that the price strategy for leisure and business travelers has changed. Additionally, the increase in leisure demand increases airlines' average price (especially along HSR competition routes), while the airlines' average price is relatively low on the routes with high business demand. Notably, with HSR competition, a different pricing strategy is presented, wherein airlines’ average price is higher on the routes with higher business demand.