Asian Development Bank Institute High-Speed Rail (HSR) as a new mode of intercity passenger transportation Eugene Chao Wharton Department of Finance Tokyo, Japan Private Equity Infrastructure Investment Nov 13-14, 2018 Research Associate Outline Introduction of the WAII and the Team No. Theme Article focus Presentation focus 1. Overview of the U.S. High-Speed Rail 2. Performance Comparison between conventional rail, HSR, and air transport 3. Operational Dissection and Performance Measure of HSR 4. A case study: New York Penn Station* 5. Russia HSR Case Studies and Future Networks 6. Conclusion *The Northeast Corridor Gateway Tunnel Project – Penn Station existing challenges and corresponding engineering measures Latest Activities The Alternative Investments Initiative focuses on private equity, hedge funds, venture capital, and asset allocation. The Initiative is a global hub for the development of leading-edge research in alternative investments, which is integrated into the Wharton School’s curriculum, and presented in public forums. It is a center that furthers the exploration of the theory and practice of investing in this asset class bringing together practitioners, alumni, students, and academics. • Infrastructure Investments (FNCE 311/811) • The Finance of Buyouts and Acquisitions (FNCE 251/751) • Advanced Topics in Private Equity (FNCE884) • Advanced Private Equity Seminar (FNCE 395/895) • Corporate Restructuring (FNCE 391/891) • FinTech (FNCE885) • Hedge Funds (FNCE 386/886) • Energy Finance (FNCE756) • Business Strategy, Private Equity and Corporate Law (Penn Law 854) • Shareholder Activism and Corporate Governance (FNCE 387/887 in Spring 2017) WHARTON EXECUTIVE EDUCATION PROGRAMS IN PRIVATE EQUITY AND VENTURE CAPITAL The Wharton School offers an Executive Education weeklong program called Private Equity: Investing and Creating Value. This 5-day program is designed for institutional investors as well as investment professionals aspiring to be better private equity investors. Contact: Alan Chen, Regional Director, Asia ([email protected]) The Team Prof. Kevin Kaiser The 1st Private Equity Infrastructure Investments course The Wharton Business School The Team Emer. Professor Vukan R. Vuchic Jim Venturi Aleksandr Vashchukov University of Pennsylvania Founder & CEO Head of Investment Division, U.S. HSR Board Rethink Studio Moscow Metro and Ground APTA Lifetime Award Transport World Transport Convention, Beijing (June 2018) Literature Review Source: https://www.scribd.com/lists/21907475/2018-Research-and-Capacity-Development-for-Planning-Implementing-and-Operating-High-Speed-Rail-HSR-in-Asia 6 Literature Review (Con’t) 7 Our Article Abstract High-Speed Rail is a new mode of intercity passenger transportation. The article reviews the history of the U.S. HSR development and makes a comparison of peer countries’ HSR development. With the rapid progress of HSR and the successful competition with cars and air travel between medium to long distances (150 and 1,200 km), HSR has an increasing role in the intercity travel worldwide. The decision-makers, transportation planners, system designers and operators, as well as political leaders need to understand the HSR operational boundary as it to intercity travel in which HSR would outperform one and another under which condition. The analysis uses a simple time-distance factor to clarify the dominance. To validate the validity of HSR in the intercity passenger rail services, a comparison to the external competition of car and air travel is necessary. Meanwhile, an internal examination of operational performance under the overlay of sophisticate variables is an imperative step. The dissection, based on numerous HSR projects, selects four interrelated trade-off elements: passenger access time and travel time associated with the total on-line travel time, area coverage associated with station density, station density associated with speed, and transit unit (TU) size, frequency, and loading factor associated with an independent line capacity. After examining the interrelations and trade-offs, a practical case study represents one of the major U.S. economic corridors – the Northeast corridor. The case study explores the geospatial metadata and concludes three major system efficiency challenges; therefore, provides corresponding engineering measures to convert an independent dead-end terminal to an integrated through-running station, which are the priority of converting the Amtrak, the U.S. national rail, to an accelerated HSR service. It is time to renew the government’s interest in paying a systematic attention to the comprehensive effect of the HSR. 8 1. Overview of the U.S. HSR Amtrak - U.S. National Intercity Passenger Rail System was founded in 1971 to serve to megaregion https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/Maps/Natl -System-Timetable-0317.pdf Source: High-Speed Rail in America, Regional Planning Association, 2011 9 http://www.america2050.org/2011/01/high-speed-rail-in-america.html Historical U.S. fund distribution across common intercity modes Source: High-Speed Rail International Lessons for U.S. Policy Makers, Lincoln Institute of Land Policy, 2018 https://www.lincolninst.edu/sites/default/files/pubfiles/high-speed-rail-full_0.pdf 10 Historical U.S. rail fund distribution Source: High-Speed Rail International Lessons for U.S. Policy Makers, Lincoln Institute of Land Policy, 2018 https://www.lincolninst.edu/sites/default/files/pubfiles/high-speed-rail-full_0.pdf 11 The Vicious Circle of the underfunded U.S. HSR and negative effects Lack of legislative support Maximize revenue Astronomical fare Competing interest among Reduce O& M, states and political parties Insolvency training, services Self-liquidate & Lack of coordination at Underfunded situation Cut services / administrative levels Accumulated pension liability No expansion Special interest groups Reduce performance and low/ Less operating ability to and lobbyists aging asset utilization generate revenue Negative external effects Congestion on intercity Lobbyists More funding supports to highway and regional corridor Elastic demand to low- highway and airport expansion Low-cost airline demand cost operator (i.e. bus) increase with low quality services *Narrative, but not mutually exclusive 12 Reduce O& M, training, services due to under-funded led to massive catastrophe Philadelphia Amtrak Derailment, May 2015 South Carolina, Feb 2018 (8 were killed and over 200 injured, 11 critically) Seattle Derailment, Dec 2017 (3 were killed and over 62 injured) 13 2. Performance Comparison between conventional rail, HSR, and air transport - The role of high speed rail in intercity travel is increasing HSR TRANSPORTATION GROWTH bln passengers - km mln passengers +19% 716 +15% 2 070 514 1 470 366 1 185 248 895 2010 2012 2014 2016 2010 2012 2014 2016 HSR COMPETITIVE ADVANTAGES HSR vs Individual cars HSR vs Air transport HSR vs Bus travel • Privacy > 5 hours • HSR becomes a marginal • Low-cost service • Full door-to-door trip actor compared to air • Offers several stops within a city • Own choice of date and time • Flexible pricing • Own choice of the route 3.5 hours • Air is the dominant • No tickets - 5 hours mode • Car-pooling and car-sharing • Not efficient over long-distances < 2 hours • HSR dominates the market • Not efficient over long-distances • More inventive passenger services from • ground speed HSR 2 hours - • HSR is the dominant mode • access to city centers • On-demand trains 3.5 hours • more freedom and passenger • Fares based on the phone system • Access to city centers comfort on train board • Digital-oriented and multimodal market • Minimum access time Modal shares are driven by the relationship between the respective door-to-door travel times and level of passenger services available on board 14 Source: High Speed Rail Traffic 2017 - International Union of Railways https://data.worldbank.org/indicator/IS.AIR.PSGR?end=2017&start=2000 https://uic.org/IMG/pdf/high_speed_passenger-km_20171130_.pdf https://uic.org/IMG/pdf/uic_high_speed_2018_ph08_web.pdf Comparison of travel times Conventional Rail and Air in 1960 and HSR and Air in 2018 Distance (km) Source: High-Speed Rail International Lessons for U.S. Policy Makers Lincoln Institute of Land Policy, 2018 1400 E2 1200 1000 800 600 HSR 2018 Air 1960 Air 2018 400 E1 200 AIR CR 1960 Tac = 200 min Time 0 CR AIR ac= ac = (hrs) 0 T 60 min 1 2 T 160 min 3 4 5 Conventional Rail Air E – Equal time ac - Approach dp - Departure Door-to-door travel time estimation outlines HSR mode1 as the most convenient Transfer of Transfer to Final Starting Main means of main means of final destination Total cost Advantages of HSR location transport transport destination total time (HR) Conventional Minimum time of 5 min 25 min 5 min Rail 2h10 5 min 25 min 5 min 3h40 55 € access and egress Stations location in Bus 5 min 25 min 5 min 5h15 5 min 25 min 5 min 6h35 10 € the city center Convenient Automobile 7,5 min 0 min 0 min 5h15 0 min 0 min 7,5 min 3h30 65 € integration with city transport Intermediate stops Car-sharing / 7,5 min / 0 min / 15 min / 15 min / 0 min / 7,5 min / 3h15 4h00 / 25 € / connect smaller car-pooling 5 min 25 min 10 min 5 min 25 min 5 min 3h15 4h30 20 € cities Few and infrequent Airline 5 min 50 min 45 min 1h05 30 min 50 min 5 min 4h10 120 € stations reduce travel time More on board HSR 5 min 25 min 5 min 1h25 5 min 25 min 5 min 2h55 55 € passenger services and comfort The most important growth driver of HSR