Planes versus fast trains

Rail fans will have to go back to the 1990s if they want to take a fast train up the east coast.

Back then, it was a private group – not government – that was leading the push to establish a commercially viable alternative to air travel.

In 1998, the Speedrail consortium was proposing a Melbourne-Sydney fast train taking three hours from CBD to CBD for a predicted cost of just $3.5 billion. But in 2013, it has become a commercially unviable government project with an astronomical price tag of $50 billion. It has now been extended from Sydney to Brisbane for another $64 billion with a total project price tag of $114 billion – and that doesn’t include an extra $10 billion for the trains themselves.

And, being a government project, it contains the usual warning: “The key risks to the HSR program and its successful performance are common to all major greenfield infrastructure projects; most notably, a lack of certainty about future demand and revenues, and the potential for cost over-runs during construction.”

And almost all of that money would have to come out of our pockets because the project doesn’t stack up commercially.

“If potential commercial funding were maximised, a funding gap in the order of $98 billion, or 86 per cent of the up-front capital cost of the HSR program, would remain,” says the high-speed rail (HSR) report released last week.

In other words, if the entire 1748-kilometre dual track railway from Melbourne to Brisbane via Sydney can’t be built for $16 billion, it isn’t a goer commercially.

In the 1990s, it was a goer because the competition was a bloated two-airline system that looked like it would go on forever. A business class Melbourne-Sydney air ticket was around $400 one way and the cheapest economy seat was $120 if you were prepared to book weeks ahead.

But the industry began fracturing in 2000 when regional airline Impulse bought some big jets and Virgin Blue backed by Richard Branson took to the skies, precipitating the Ansett collapse in 2001.

Fares went south with $50-$100 interstate specials available regularly for the first time. Jetstar’s invention by Qantas in 2004 and Tiger’s arrival in 2007 introduced crazy specials of $39, $19 and even $1 to get many people flying for the first time.

Even with two airline groups divided into four brands – as now looks likely depending on the deliberations of the Australian Competition and Consumer Commission in the next few weeks – sub-$50 fares on most intercapital routes will stay in the market, meaning the best the fast train can do is match the total city-to-city travel time, probably with better comfort, but losing its price-competitiveness.

Envisaging up to three trains an hour in each direction, last week’s HSR report projects that the system, once it was built, would pay its own way with a spread of fares like Brisbane-Sydney for $83, Brisbane-Melbourne $169, Newcastle-Sydney $31, Sydney-Canberra $42, Albury-Melbourne $42 and Sydney-Melbourne $86, with business class fares pitched around 50 per cent higher.

That’s enough to take about half of its business from the airlines. “It is not expected that airlines could, or would, respond to HSR competition by reducing their fares on a sustained basis,” the report says. “Rather, it has been assumed that airlines would quickly reduce capacity, either by reducing frequencies or aircraft sizes, to locations within the HSR corridor where there is significant passenger diversion to HSR.”

You can imagine the impact on regional cities like Newcastle, Goulburn, and Albury-Wodonga if they were less than an hour from their capital cities by train. There would be a regional real estate boom that not only would entice home-buyers out into sticks to grab an affordable country base; it could also help pay for the project itself.

Even Victoria’s (slow) fast trains connecting Melbourne with regional centres like Geelong, Ballarat and Bendigo have caused a boom in commuter travel from the bush.

Which raises the question: why not take the gold-plated commercial lemon that was wheeled out last week and break it down into bite-sized modular chunks like Sydney-Newcastle or Sydney-Canberra?

If it’s not a viable alternative to the airlines with zero subsidy, why should it try to be? Why not make it a 200 km/h fast train that retains all the regional benefits, but doesn’t require $33 billion worth of tunnelling – 29 per cent of the total construction cost?

In any case, we’re told, it would take 50 years to build because of all the environmental impacts. It’s like the second Sydney airport saga where resident pressure groups have frightened politicians into an endless dither. We live in the age of the NIMBY (Not In My Backyard).

Do you still think it's worth pursuing the fast train dream? How much are you prepared to pay to see it happen? Should there be a Plan B?