California's Bullet Train Might Be One of the Cheapest in the World

by | May 14, 2015

By Ralph Vartabedian and Dan Weikel

Riding California's bullet train from Los Angeles to San Francisco would cost "about $50 a person," supporters wrote in ballot arguments seven years ago when voters approved billions in funding for the project.

In the years since, the state high-speed rail agency has projected the fare would be $83, $105 and, most recently, $86.

The current estimate would be one of the world's cheapest high-speed rail trips on a per-mile basis, assuming that it reflects a typical fare between downtown stations in Los Angeles and San Francisco, a Los Angeles Times analysis found.

As a practical matter, no one can say how much an end-to-end ride on the bullet train would actually cost if and when the system becomes fully operational, a milestone the state expects to reach some time in 2028. At that point, ticket pricing will be set in consultation with a private company hired by the California High-Speed Rail Authority to operate the system, said rail agency Chief Executive Jeff Morales.

Fares will be one of the most important factors in the decisions that millions of travelers will make when choosing to fly, drive or ride the bullet train. And they are central to revenue calculations for a system that by state law must operate without a taxpayer subsidy.

Morales and other state officials say the system will quickly become profitable. But critics and some experts warn long-range financial and ridership forecasts can be unreliable, and the high-speed train could prove to be a financial yoke on the state.

"Any time you are trying to project more than five years out, you are just spitballing," said Lisa Schweitzer, a University of Southern California associate professor in transportation and urban planning. "So many things can change dramatically in five years."

According to official ridership estimates, between 18 million and 31 million passengers annually will board the train in its early years. And the project's most recent business plan predicts that by 2030, two years after L.A.-to-San Francisco service begins, ticket sales will hit $2 billion annually, or roughly $700 million a year more than operating expenses. Even at the low end of ridership projections, state officials say, revenues will more than cover operating costs.

The current $86 fare is calculated in 2013 dollars based on a formula that prices tickets at 83 percent of average airline fares to help attract riders. The rail fare is an average that includes economy and premium seats, nonstop and multi-stop trains, as well as last-minute and advance purchase tickets. A premium, same-day nonstop bullet train trip would cost more than $86.

But compared with current average prices on high-speed rail systems in Asia and Europe, $86 would be a bargain, equating to about 20 cents a mile or less, the Times review found. The analysis was based on a 438-mile route in the mid-range of what state officials expect the final alignment to measure.

The average fare on Italy's 434-mile bullet train from Milan to Salerno was 25 cents a mile. The fare on China's 809-mile line between Beijing and Shanghai was 22 cents per mile. China discloses little about its high-speed rail finances and many academic and transportation experts say it heavily subsidizes its fares, as do many other foreign operators.

The French bullet train from Paris to Lyon is often cited as a line that is profitable, but it has a fare of 52 cents a mile. The German bullet train from Hannover to Wurzburg charges 46 cents a mile. The price comparisons were based on tickets purchased at least one week in advance, averaged over various times of the day and classes of service.

On the East Coast, Amtrak's Acela system, the closest thing to high-speed rail now operating in the U.S., charges an average of about 50 cents a mile for the 454-mile trip between Washington and Boston.

Louis Thompson, chairman of a state-created review panel for the bullet train project, said California's projected fares are low by world standards. Thompson's panel is pressing the state to clarify how fares and other key business decisions will be made in the future.

The authority expects to generate additional revenue from leasing its right-of-way to utilities, advertising and concession fees at stations. But some outside experts questioned whether California's bullet train fares will be able to cover the system's full operating costs, as state officials maintain.

"The train will lose money and require a subsidy," said Joseph Vranich, former president of the national High-Speed Rail Association. "I have not seen a single number that has come out of the California high-speed rail organization that is credible. As a high-speed rail advocate, I am steamed."

William Grindley, a former World Bank executive and an opponent of the project, has warned the system will fail financially unless demand skyrockets and ticket prices increase sharply. "Can the proposed California bullet train break even? The answer is unequivocally no," he said.

With Stanford University management professor Alain Enthoven and Silicon Valley financier William Warren, Grindley wrote a 2012 report _ updated last year _ that concluded the system would require "a subsidy forever," in the range of $123 million to $1 billion or more annually.

Morales, the rail authority's chief executive, said past analyses by Grindley's group have been wrong and included errors in computing the operating costs of foreign systems. He declined to elaborate, but said his agency's ridership forecasts have been vetted and approved by a panel of outside experts, chaired by Frank Koppelman, an emeritus professor at Northwestern University. In a series of reports, the panel has praised the ridership estimates, calling them "commendably high quality" in one report, and urging improvements other times.

"When we say we can hit the break-even point, we have a lot of reliability in the statement," Morales said.

(c)2015 Los Angeles Times