After the Chinese railway authority raised the train speed for the sixth time on April 18, 2007, the fastest trains only need a little under 10 hours to go between Beijing and Shanghai. With the speed and the fact that they are not influenced by bad weather, some air travelers have been diverted to the trains. "In routes of about 1,000 km, there is obvious competition between train and plane," Li said.

At present, a soft sleeper ticket for non-stop trains between Beijing and Shanghai costs 499 yuan, and a soft seat ticket for China Railway High-Speed (CRH), the most advanced and fastest train in China, costs 538 yuan. An air ticket of 50 percent discount costs 565 yuan, and coupled with the airport construction fee and fuel surcharge, climbs to 695 yuan.

"Compared with trains, the price gap is not marked, but planes gain obvious advantage in speed," Li said. "With the Beijing-Shanghai route, business travelers are the majority since they don't want to waste time."

But the argument of coping with faster trains is not accepted by China Eastern Airlines. The airline launched express flights between Beijing and Shanghai early in 2001 and made the express service its most important service brand. China Eastern Airlines has increased its flight density in this route, and there are flights every hour from 8 a.m. to 8 p.m. The 14 round trip flights make the route the most profitable one for the airline.

Stimulated by China Eastern Airlines, the Beijing-based Air China has also increased its flight density in this route by a large margin. Over the past several years, its flight number has been increased to nearly equal China Eastern Airlines. Later, Shanghai Airlines, Hainan Airlines and China Southern Airlines also joined the competition.

In fact, the express air service has not brought much competition to railways. In recent days, the occupancy rate of the CRH between Beijing and Shanghai has been over 95 percent and that of non-stop trains has been almost 100 percent.

Price fixing?

The express air service jointly launched by five airlines makes people worry about possible price alliances. On the first three days after the launch of the express air service, the ticket price increased nearly 20 percent, and the lowest discount was raised from 70 percent off to 30 percent off. The ticket price declined only after CAAC intervention.

Ma Hongman, doctor of economics and economic commentator for Shanghai TV, says that in order to protect the interests of large airlines, the CAAC has stipulated that only airlines based in Beijing, Shanghai and Guangzhou can operate air routes starting from the three cities. Enforced to the express air service between Beijing and Shanghai, this policy is likely to block competition. Newcomers not based in Beijing or Shanghai, especially some competitive private airlines, can't get into the game. Lacking external competition pressure, the five airlines are likely to maintain uniform high prices.

Liu Honglian, who is in charge of ticket business of ctrip.com, China's leading online seller of air tickets, explains that for a passenger buying tickets with discount but transferring to full priced flights with other airlines, the airline selling the cheaper ticket must pay for the gap. "Hence airlines who sell cheaper tickets have to raise the price," Liu said.

Such an internal settlement mechanism is likely to bring about such a result: The five airlines realize integrated interests, sharing high profits from high prices. That is a price alliance in disguise.

However, the CAAC said that the Beijing-Shanghai express air service would not become a price alliance, that competition would remain and that the sales policy of the airlines would not change.

More express services planned

According to the CAAC plan, the period up to October 27 will be the trial operation phase; the coming winter and spring will be the improvement stage; and the summer and fall of next year will be the promotion and expansion phase. The flight punctuality rates the airlines aim for in the three phases are 85 percent, 87 percent and 90 percent respectively.

At present, there are still details to be finalized. For example, since runways of the Capital Airport are very busy, without special runways and air routes, flights of the express air service will still come under air traffic control and may be delayed because of bad weather. On the first day of trial operation, 18 flights were delayed and two flights were cancelled because of a thunderstorm in Beijing.

If successful, the CAAC also plans to expand the express air service to four other routes, namely, Beijing-Guangzhou, Beijing-Shenzhen, Beijing-Chengdu and Shanghai-Shenzhen. These four routes also have concentrated business travelers and dense flights, suitable for opening express air service. Moreover, because of the long distance, trains do not have advantages in these four routes.

The four new express air routes may be launched in summer and fall 2008. China Southern Airlines has started more flights, aiming to provide a flight every half hour from Guangzhou or Shenzhen to Beijing from 8 a.m. to 8 p.m. Now, it has 16 flights from Guangzhou or Shenzhen to Beijing and 17 flights to Shanghai every day.