Effects of Air and High-Speed Rail Transport Integration on Profits and Welfare : The Case of Air-Rail Connecting Time

Air-rail integration has become a popular idea to relieve airport congestion and environmental impact of transport industry, especially amid the fast expansion of high-speed rail network around the world. This study examines the circumstances under which air-rail integration can be better justified, by focusing on the effects of reducing air-rail connecting time on transport operators' profits, consumer surplus, and social welfare. We show that while consumers always benefit from less air-rail connecting time (an integrated hub with seamless transfer between air and rail services is always preferred by passengers), operators of the two modes, air transport and high-speed rail, won't have an incentive to integrate unless the cost of integration is sufficiently low. Nonetheless, reducing air-rail connecting time enhances total surplus when the hub airport suffers from a certain degree of capacity constraint and the cost of air-rail integration is not too high