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Tuesday, March 12, 2013

Economic Analysis of Spanish High Speed Railway.


Economic Analysis of Spanish High Speed Railway (H.S.R.) System.


(Modification from http://www.adif.es)

I will focus the analysis in Spain. Today, the operating system can be separated into corridors:
1.       North East: Madrid-Barcelona-French Border
2.   East: Madrid-Valencia
3.   South: Madrid-Sevilla-Málaga
4.      North West: Madrid-Valladolid

Costs. The main Costs for High Speed Trains are three:
1.       Infrastructure. The average cost is  €12 Million/Km
2.      Maintenance Costs. About €150,000 / (Km*year)
3.      Operational cost. €26 /(Km*Train)

Incomes:
The incomes are derived from the sale of the tickets. The standard ticket price is
0.233 €/km, but there are multiples types of discounts. 99% of tickets have some kind of discount. Having a look on the statistics, the average ticket price is:

0.233€/(km*p)*(0.24*0.4+0.33*0.8+0.43*0.7 )=0.154 €/(km*p)

Hypothesis:
1.       At least, trains must cover operational costs. With the current prices policy, that means than the occupation of every train should be more than 56.3%. There can’t be levels of occupation lower than that.
2.      If we want to recover maintenance and operational costs:
In a corridor with trains at 100% of occupation from A to B, the number of passengers (Np) should be:

0,154€/(km*p)*Np=150,000€/km+26€/(km*Train)*Train/300p*Np
Np=2,227,000 passengers every year.

But for 80% of occupation, the number of passengers (Np) should be:

0,154€/(km*p)*Np=150,000€/km+26€/(km*Train)*Train/(300p*0.8)*Np
 Np=3,284,000 passengers every year, what means 18 trains from one city to the other every day.

With some intermediate stops, we can reduce the number of passengers needed to do a corridor profitable (we suppose 80% occupation)

i (Npi*Kmi)=K*kmc

where,
K=150,000(€/km)/(0.154€/(km*p)-26€/(km*300p*0.8))=3,284,000 (p)
K is a constant, but it depends on the % of occupation
Npi: Passengers between two stations
Kmi: Kilometres between two stations
Kmc: Total kilometres of corridor.

 Now, the equation depends on the km and passengers between stations.


I will study the North-East Corridor, which links Madrid and Barcelona:

((A)) Point To Point Passengers.
((B)) Incomes:  A regular ticket cost 0,233€/km. 33% of passengers bought a return ticket with a 20% disccount. 24% of passengers bought promotional tickets with 60%.disccount. 43% were pensioner or youth, and had 30% disccount.
((C)) Average seat occupancy of 78%. Each train has 300 seats available.
((D)) Total Maintenance Cost is 618km*150.000€/km=92,7 million €

With Madrid-Zaragoza-Barcelona, the line is almost profitable.


Conclusions:
1.       We need to assume that infrastructure investment will be never recovered.

2.      At least, trains must cover operational costs. With the current prices policy, that means than the occupation of the train should be 56,3%. There can’t be levels of occupation lower than that. Sometimes the authorities say that a line is profitable only because operational costs are covered.

3.      The average maintenance of the line is 150.000€/km. It is the same cost per km connecting Madrid and Barcelona than connecting two small towns. That means that we need big population in the end of the lines to have enough passengers to cover these high costs. But medium size cities between help a lot to cover costs of maintenance and operations.

4.      For a distance shorter than 100-150 km there is no such a big difference with the conventional train due to the periods of acceleration and braking. From 150 km to 350 km, HST is always better option. From 350 km to 650 – 700 km, HST has to compete fiercely with plane, and for longer than 700km, the plane is always best, except for train fans.

      >150km conventional train
      150-350km HST
      350km-700km HST or Plane (depending on many factors)
      >700k Plane
  
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