Potential for modal shift from air to rail for UK aviation

Transcription

1 Potential for modal shift from air to rail for UK aviation Final report Report September 2009 Prepared for: Prepared by: Committee on Climate Change 4th Floor, Manning House 22 Carlisle Place London, SW1P 1JA Steer Davies Gleave Upper Ground London SE1 9PD +44 (0)

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3 Contents Contents 1 EXECUTVE SUMMARY 1 Objectives of the study 1 The air and rail markets 2 Model results 4 Estimate of total CO 2 savings 11 Summary of key conclusions 14 2 NTRODUCTON 17 Background 17 Purpose of this study 17 Status of this report 18 Structure of this report 18 3 THE UK AR TRAVEL MARKET 19 ntroduction 19 Passenger volumes 19 Number of flights 26 Transfer passengers 28 Other characteristics of air passengers 30 4 THE HGH SPEED RAL MARKET 33 ntroduction 33 Market most suitable for high speed rail 33 Market shares 34 The European high speed rail network 38 Analysis of demand by rail journey time 41 5 FUTURE DEVELOPMENT OF HGH SPEED RAL N THE UK 45 ntroduction 45 UK domestic services 45 nternational services 50 6 DRVERS OF DEMAND AND MARKET SHARE 57 ntroduction 57 Drivers of demand 57 Drivers of market share 58 Route substitution 64 Conclusions 65 Contents

4 Executive Summary 7 MODEL OVERVEW 67 ntroduction 67 Model structure 67 Market share model 69 Price module 72 Underlying growth module 78 Trip generation/destruction module 78 Route substitution module 79 Calculation of emissions 79 Allocation of emission to States 81 8 MODEL RESULTS 83 ntroduction 83 Supply responses 84 Block of analysis 1 84 Block of analysis 2 91 Block of analysis ESTMATE OF TOTAL CO 2 SAVNGS 101 ntroduction 101 Scaling of demand 101 Total CO 2 emissions results 102 Conclusion 106 Figures Figure 1.1 Breakdown of UK air passengers demand by Region & Figure 1.2 Figure 1.3 Figure 1.4 Figure 1.5 Figure 1.6 Breakdown of Air transport demand, by rail journey time for equivalent route - aggregated into 5 minute bands 3 Block of analysis 1A (no new UK high speed line) - Rail market share in 2025 of point-to-point market (%) 6 Block of analysis 1B (new UK high speed line) - Rail market share in 2025 of point-to-point market (%) 7 Block of analysis 2A & 2B (London-Europe) Rail market share in 2025 of point-to-point market (%) 9 London-Amsterdam improvement in rail service offer and effect on rail market share - % 10 Figure 1.7 Heathrow-Manchester passenger demand (000s) 11 Figure 1.8 Total air-rail CO 2 emissions (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 13 Contents

5 Figure 1.9 Contents central scenario air and rail CO 2 emissions: causes of change between 2008 and 2050 (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 13 Figure 1.10 CO 2 savings FROM AR AND RAL due to switch from air to rail in 2050 (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 14 Figure 3.1 Breakdown of UK Air Passengers Demand by Region 2005 & Figure 3.2 Air Passengers to/from n-scope Countries 2005 & 2008 Millions 23 Figure 3.3 Categorisation of air routes by size air passengers (000s) 25 Figure 3.4 Breakdown of Number of daily Flights to, from or within the UK 26 Figure 3.5 Connecting passenger to mainland UK destinations from Heathrow 29 Figure 3.6 Connecting passengers from Heathrow To European Hubs 30 Figure 3.7 Figure 3.8 Journey Purpose Split for Key Markets (business, Leisure and visiting friends and relatives) 31 Journey Purpose Split For Travel betwen London and European Cities (business, Leisure and visiting friends and relatives) 32 Figure 4.1 Number of trains per day on high speed lines 34 Figure 4.2 Air-Rail market share on key UK domestic routes (2008) 35 Figure 4.3 Rail Market Share between 2000 and 2008 for key UK markets 35 Figure 4.4 Rail market share for London-Paris and London-Brussels to Figure 4.5 Rail market share for rail (other routes between the UK and Europe) N 2008 (%) 38 Figure 4.6 High speed line KM in Europe 39 Figure 4.7 The rail routes between the UK and European cities 40 Figure 4.8 Current rail journey times of key routes aggregated into 5 minute bands 43 Figure 4.9 Future rail journey times of key routes aggregated into 5 minute bands (assuming no new direct trains) 43 Figure 5.1 High speed line route network 46 Figure 5.2 Comparison of nfrastructure costs per route KM 48 Figure 6.1 Passenger transport growth relative to GDP growth 58 Figure 6.2 Relationship between rail journey time and market share 59 Figure 6.3 Rail market share by distance from airport and rail station Figure 6.4 Air and rail fares on London-Paris, Brussels and Amsterdam Routes 62 Figure 6.5 Air and rail fares on domestic routes 63 Figure 7.1 Overview of the Market Share Model structure 68 Figure 7.2 Simple logit model calibration 71 Figure 7.3 logit model with small flows model 72 Figure 7.4 Air and rail operating costs per seat (2009) 74 Contents

6 Executive Summary Figure 7.5 Air and rail operating costs per seat (2050) 75 Figure 7.6 Figure 8.1 Figure 8.2 Figure 8.3 Figure 8.4 Figure 8.5 Figure 8.6 Figure 8.7 Figure 8.8 Figure 8.9 Figure 8.10 Figure 8.11 Comparison between growth module and DfT air passenger demand forecasts - percentage change between 2005 and Block of analysis 1A (no new UK high speed line) - Rail market share in 2025 of point-to-point market (%) 84 Block of analysis 1B (new UK high speed line) - Rail market share in 2025 of point-to-point market (%) 85 London-Manchester passenger demand with and without high speed line in 2025 Passenger Journeys (000s) 87 London-Edinburgh passenger demand with and without high speed line in 2025 Passenger Journeys (000s) 88 Block of analysis 2A (London-Europe) Rail market share in 2025 of pointto-point market (%) 91 Block of analysis 2B (Other UK-Europe) Rail market share in 2025 of point-to-point market (%) 92 London-Paris passenger demand in each scenario Air-Rail Total market in 2025 (Passenger journeys 000s) 93 London-Amsterdam passenger demand in each scenario Air-Rail Total market in 2025 (Passenger journeys 000s) 94 Manchester-Paris passenger demand in each scenario Air-Rail Total market in 2025 (Passenger journeys 000s) 95 London-Amsterdam improvement in rail service offer and effect on rail market share - % 96 Block of analysis 3 (Heathrow spur) - Rail market share in 2025 of total air-rail market (%) 98 Figure 8.12 Passenger demand between Heathrow and Manchester in passenger journeys (000s) 99 Figure 9.1 Figure 9.2 Figure 9.3 Total air and rail CO 2 emissions for 2008, 2020, 2035 and 2050 (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 102 Total air and rail CO 2 emissions for 2050 broken down by source (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 103 central scenario s air and rail s CO 2 emissions- causes of change between 2008 and 2050 (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 103 Figure 9.4 CO2 savings from air and rail due to switch from air to rail in 2050 (50% of UK-Europe rail emission allocated to the UK) - 000s tonnes 104 Figure 9.5 Figure 9.6 Total air and rail CO 2 emissions for 2008, 2020, 2035 and 2050 (with the UK segment of the rail journey allocated to the UK) 000s tonnes 105 Total air and rail CO 2 emission saving from mode shift in 2050 (the UK segment of the rail journey allocated to the UK) 000s tonnes 106 Contents

7 Tables Contents Table 1.1 Blocks of analysis 5 Table 1.2 Definition of pricing scenarios 5 Table 1.3 Table 1.4 Estimated air plus rail transport Emissions on modelled domestic routes, 2025 and 2050: CO 2 tonnes (Thousands) 7 UK air and rail CO 2 emissions in 2025 with a new UK high speed line (additional sensitivity tests) 000s tonnes 9 Table 3.1 Top 10 British mainland air routes 2008 Passenger 000s 21 Table 3.2 Top 20 air routes between British mainland & n-scope Countries 2008 Passengers 000s 24 Table 3.3 Top 10 non-london air routes between British mainland & n-scope Countries 2008 Passenger 000s 25 Table 3.4 Mainland UK Capacity top 10 routes by number of flights 27 Table 3.5 Capacity between Mainland UK and in-scope countries top 10 routes by number of flights 28 Table 3.6 Transfer and terminating passenger at London s airports (2008) 29 Table 4.1 ndicative Journey times from London to other European cities 41 Table 5.1 Journey times for a high speed line 47 Table 5.2 nfrastructure costs ( billions) 47 Table 7.1 Key model elements/modules 67 Table 7.2 Modelled Routes 69 Table 7.3 Relationship between fares and cost changes 76 Table 7.4 Base Year one-way fare by mode and route ( s) 77 Table 8.1 Blocks of analysis 83 Table 8.2 Definition of pricing scenarios 83 Table 8.3 Estimated CO 2 Emissions for 2025 and 2005: tonnes (000s) 89 Table 8.4 Table 8.5 Table 8.6 UK air and rail CO 2 emissions in 2025 with a new UK high speed line (additional sensitivity tests) 000s tonnes 90 CO 2 emissions from air and rail for block of analysis 2a - UK allocation in 2025 (000s tonnes) 97 CO2 emissions from air and rail for block of analysis 2a - UK allocation (000s tonnes) 97 Contents

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9 Executive Summary 1 Executive summary 1.1 As part of a statement on Britain s Transport nfrastructure, on 15 January 2009, the Secretary of State for Transport announced a new target of getting aviation emissions below 2005 levels by This is in addition to an overall objective of reducing the UK s total greenhouse gas emissions to 80% below the 1990 level. The Secretaries of State for Transport and Energy and Climate Change requested that the Committee on Climate Change (CCC) advise on how this target could be met. 1.2 The CCC intends to report back by December on the measures required to contain aviation emissions within the limit set by the Government. n order to address this issue, the CCC has commissioned three studies: An assessment of the overall demand for UK aviation; An assessment of the potential for modal shift from air to rail; and An assessment of the potential of biofuels to reduce life-cycle CO 2 emissions from UK aviation. 1.3 Steer Davies Gleave was commissioned by the Committee to undertake the work for the second study and this is the final report of this study. The CCC is intending to use these results to inform their analysis of the 2050 target, but scenarios and assumptions are subject to change. As such these results represent preliminary results in the overall CCC work. Please see the final CCC report in December for the final analysis, results and recommendations. Objectives of the study 1.4 The key objective of this study is to undertake a detailed evaluation of the potential for modal shift from aviation to rail, and the consequent impact on CO 2 emissions. n order to obtain a full assessment of the potential of model shift from air to rail, we have evaluated the following markets: Air travel within the UK (block of analysis 1); Air travel between the UK and continental Europe (block of analysis 2); and Short haul air travel in order to connect to other flights (block of analysis 3). 1.5 The study assesses the main policy options available in order to promote air-rail modal shift. These include the construction of new infrastructure, including carbon pricing, and other measures to make rail travel more attractive. 1.6 However, the study does not seek to be a full cost benefit analysis of the case for modal shift or for investment in a new UK high speed rail line. To do this, it would also be necessary to: evaluate modal shift from other modes (i.e. car); evaluate emissions other than CO 2 ; separate tradeable and non-tradeable CO 2 emissions; assess the impact of competition between conventional and high speed rail if they operated on parallel routes; 1

10 Air Passengers (000s) Executive Summary evaluate the emissions that would be generated during the construction of a high speed rail line; and evaluate wider potential benefits from construction of a high speed rail line, such as journey time savings, capacity benefits, and avoidance of capital costs of expanding the conventional rail network or other modes. 1.7 We have also not attempted to model in detail the underlying growth in the air-rail market. The forecast of underlying growth is based on the current Department for Transport (DfT) projections of the UK air market. The air and rail markets 1.8 n 2008 there were approximately 215 million air passengers using flights to, from and within the UK. Figure 1.1 shows the breakdown of this demand by destination region. FGURE 1.1 BREAKDOWN OF UK AR PASSENGERS DEMAND BY REGON & , ,000 80,000 60,000 40,000 20,000 0 Western Europe Western Europe Other Domestic North America Middle East & Asia Eastern Europe Africa Other Latin America 1.9 Of these passengers, the passengers who could in principle switch to rail are: domestic passengers (11% of the total or 22 million passengers in 2008); passengers travelling between the UK and mainland western Europe (46% of the total or 100 million air passengers in 2008); and passengers travelling between the UK and mainland central/eastern Europe (6% of the total or 4 million air passengers in 2008) However, it is unlikely that rail could offer a competitive service for all of these journeys. For example, 40% of domestic passengers in 2008 used flights which involved a sea crossing (to/from Northern reland, the Channel slands or the sle of Mann); these passengers are unlikely to switch to rail. For travel between the UK 2

11 01:55 02:15 02:35 02:55 03:15 03:35 03:55 04:15 04:35 04:55 05:15 05:35 05:55 06:15 06:35 06:55 07:15 07:35 07:55 08:15 08:35 08:55 09:15 09:35 09:55 10:15 10:35 10:55 11:15 11:35 11:55 12:15 12:35 12:55 13:15 13:35 13:55 Air Passengers (000s) Executive Summary and continental Europe, rail can compete on journey time with air travel for shorter distance trips (up to about 4 hours rail journey time), but on longer trips, rail can only attract passengers if it offers other advantage such as a lower price Therefore, we have evaluated the distribution of current air transport demand within the UK and between the UK and Europe (for routes with over 60,000 passenger journeys per annum), by the journey time if the journey was to be undertaken by rail. This is shown in Figure 1.2 below, which plots the rail journey time and for each point aggregates the number of domestic UK, and UK to mainland Europe, air passengers. The x-axis plots the rail journey time in 5 minute intervals and the y-axis presents the total air passengers at the 5 minute intervals. The project assumes completion of various high speed rail projects in continental Europe which are already under construction or have been committed, but does not include a potential UK high speed rail line, as this is not a committed scheme. FGURE 1.2 BREAKDOWN OF AR TRANSPORT DEMAND, BY RAL JOURNEY TME FOR EQUVALENT ROUTE - AGGREGATED NTO 5 MNUTE BANDS 7,000 LON-Edinburgh & LON-Glasgow 6,000 5,000 LON-Amsterdam LON-Barcelona, & LON-Nice 4,000 LON-Zurich & LON-Munich LON-Madrid LON-Malaga 3,000 2,000 LON-Manchester & LON-Paris LON-Frankfurt LON-Geneva LON-Milan LON-Rome 1,000 LON-Brussels LON-Berlin The analysis shows that there are relatively few air passengers on routes where rail is or will be competitive on journey time with air. After London-Manchester and London-Paris, the next significant route is London-Amsterdam. However, although the journey time to Amsterdam will improve significantly when the Brussels- Amsterdam high speed line is completed, unless direct London-Amsterdam trains are operated, the journey time will still be over four hours. After this, the London- Edinburgh and London-Glasgow routes are by far the largest markets with obvious potential to shift to rail. 1 For example, the journey time on the Madrid-Barcelona route was reduced in several stages from 7 hours to 2 hours 40 minutes with the construction of the high speed line. There was no significant impact on the number of air passengers until the journey time fell below 4 hours. 3

12 Executive Summary 1.13 As a result of the completion of high speed rail schemes elsewhere in Europe, rail journey times are expected to improve significantly on a number of longer routes with significant volumes of air passengers, such as London-Barcelona. However, the rail journey times will still be well over four hours. Route substitution 1.14 n addition, there is potential for passengers to switch modes as a result of changing the destinations for their journeys. f air travel becomes more expensive and/or rail travel becomes more attractive, some passengers could decide to take holidays in nearby European destination travelling by train, as a substitute for travelling to more distant destination by air Therefore, improvements to rail services to near European destinations could have a greater effect on emissions than that caused by modal switching on the specific routes served. Research undertaken by the CAA shows a change to the relative price of leisure travel can cause significant switching in demand between routes. We have built on this research to evaluate the potential for route substitution as a result of changes to the relative attractiveness of air and rail travel. Model results 1.16 The model estimates the effect on demand, and hence modal share, of: Changes in journey time and other journey time related factors: These could be either small changes such as those expected to result from the deployment of ntercity Express Programme (EP) trains on the East Coast Main Line, or step changes as a results of the construction of a new high speed line covering certain city pairs. Changes in the price of either mode: These could be due to possible carbon pricing, changes in air passenger duty, or other revision to fares The main component of the demand model is the market share module. The market share module is based around a logit model city pairs are modelled explicitly. The routes have been selected from the blocks of analysis detailed in the table below. 4

13 TABLE 1.1 BLOCKS OF ANALYSS Executive Summary Block of Analysis 1A 1B 2A 2B Description The effect on domestic mode share of expected changes to rail journey times and fares The effect of a new UK north-south high speed line Rail travel from London to mainland Europe Rail travel from other UK cities to mainland Europe 3 The effect of a Heathrow spur off the new UK high speed line Total air passenger journeys in block (000s) Total air passenger journeys modelled (000s) 24,343 8,911 24,343 8,911 69,095 17,736 42,624 2,545 3,593* 2,961 *The definition of the market here is the number of UK passengers connecting at Heathrow. Scenarios modelled 1.19 We have undertaken three main pricing scenarios agreed with CCC. These scenarios differ in the assumptions made on the future increases of oil and CO 2 prices. n all these scenarios we assume that improvements to, and integration of, European rail ticketing is introduced, resulting in a slight reduction in rail fares on longer distance routes. Table 8.2 details the assumptions on oil and CO 2 prices for each scenario for 2008, 2025, and TABLE 1.2 DEFNTON OF PRCNG SCENAROS Scenario Price of High Oil ( /barrel) CO 2 ( /tonne) Central Oil ( /barrel) CO 2 ( /tonne) Low Oil ( /barrel) CO 2 ( /tonne) Note: Oil price scenarios under the high, central and low scenarios correspond to scenarios 4, 2 and 1 in DECC s Communication on fossil fuel price assumptions, May As DECC s scenarios stopped at 2030, values to 2050 in each scenario have been extrapolated based on pre-2030 trends. Carbon prices are the CCC s carbon price scenarios n addition to these scenarios we have developed a high rail demand scenario. This scenario assumes that the rail service between the UK and continental Europe is significantly improved, partly through addressing technical, legal and commercial constraints to the development of new services. A full discussion of the constraints is provided in chapter 4. n particular it is assumed that: Competing rail operators are allowed to enter the market, reducing any producer surplus over operating costs; 5

14 Direct rail services are introduced on all the modelled flows; Executive Summary The current check-in time is reduced from 30 minutes to 15 minutes, due to reduced or more efficient security and/or immigration checks; Rail access charges applied for the use of rail infrastructure including the Channel Tunnel are reduced by 50% for all UK to Europe flows except London- Paris and London-Brussels. The rationale for this is that, without this reduction, there would be no longer distance rail traffic and therefore the price reduction still increases the revenue of the infrastructure managers The high rail demand scenario uses the same assumptions on oil and CO 2 prices as the central scenario. Block of analysis 1 Domestic 1.22 Rail market share will increase slightly on domestic routes even without a high speed line (Figure 8.1), due to committed schemes such as the completion of the West Coast Route Modernisation and the introduction of faster EP trains, and increases in air fares due to CO 2 pricing and higher oil prices. However, the impact is limited, partly because rail fares are assumed to continue to increase above RP. FGURE 1.3 BLOCK OF ANALYSS 1A (NO NEW UK HGH SPEED LNE) - RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) Birmingham-Glasgow Birmingham-Edinburgh London-Newcastle London-Glasgow 2008 Low (2025) Central (2025) High (2025) London-Edinburgh London-Manchester 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) 1.23 The development of a high speed line would cause a much greater switch from air to rail particularly on Anglo-Scottish routes (Figure 1.4). The impact is limited on the London-Manchester route as most London-Manchester passengers (other than those using the route in order to connect onto other flights in London) already travel by rail. 6

15 FGURE 1.4 Executive Summary BLOCK OF ANALYSS 1B (NEW UK HGH SPEED LNE) - RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) Birmingham-Glasgow Birmingham-Edinburgh London-Newcastle London-Glasgow 2008 Low (2025) Central (2025) High (2025) London-Edinburgh London-Manchester 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) 1.24 t is possible that the switch from air to rail could be even greater than this, if airlines withdraw some of their flights on domestic routes. The likelihood of this increases as the capacity constraints on air travel become increasingly important Table 8.3 presents projected UK CO 2 emissions from air and rail transport for the six modelled domestic routes in 2025 and n 2025 the CO 2 emissions with a new domestic high speed line are similar to the CO 2 emissions without a high speed line. This is because the impact of mode switch is offset by the effect of additional generated traffic, plus higher emissions from high speed rail compared to the conventional rail services it replaces. However, by 2050 a new UK high speed rail line achieves a 31% reduction in emissions. The change in results between 2025 and 2050 is due to the significant reduction assumed in marginal carbon intensity of electricity generation 2. TABLE 1.3 ESTMATED AR PLUS RAL TRANSPORT EMSSONS ON MODELLED DOMESTC ROUTES, 2025 AND 2050: CO 2 TONNES (THOUSANDS) Year Base scenario With high speed line mpact of high speed line ,008 +3% , % 2 marginal carbon intensity of electricity generation is provided by DECC from the New Carbon Finance model of the EU electricity generation sector 7

16 Executive Summary Sensitivity tests 1.26 The forecasts presented above are based on a number of assumptions agreed with CCC, in particular: The use of a marginal rather than average carbon intensity for electricity generation, in order to calculate CO 2 emissions from rail (marginal carbon intensity here reflects the intensity of the plant that is most likely to be operating at the margin in any given year); and The exclusion of non CO 2 effects of air transport t was also necessary to make an assumption on the level of CO 2 emissions from high speed rail relative to conventional rail. We assumed that high speed rail s energy consumption and hence CO 2 emissions are 100% higher than conventional rail per passenger kilometre. This is consistent with the majority of other studies but is not a universally accepted assumption These assumptions all reduce the projected emissions benefit of air to rail modal shift. n order to understand the effect of these assumption we have undertaken the following sensitivity tests Removal of the 100% uplift to conventional rail CO 2 emissions in order to calculate CO 2 emissions from high speed rail The use of average carbon intensity instead of marginal carbon intensity 1.29 We have undertaken these sensitivity tests in particular because, whilst we believe that the base assumptions are the most reasonable, there are legitimate arguments for the use of alternatives: Most studies do show high speed rail as being more energy intensive per passenger than conventional rail, but this depends on the assumptions made on for load factors, the number of seats, and the relative energy efficiency of high speed trains. The net effect of these factors is uncertain. The 100% uplift we have applied is consistent with most other studies we have reviewed, but it has recently been argued that taking all of the above factors into account the emissions from high speed rail per passenger kilometre would be similar to conventional rail 3. The rationale for the sensitivity test in which average rather than marginal carbon intensities are used is that, if a new UK high speed line was constructed, there would be considerable time for the electricity generation industry to include this in its forward planning, and provide sufficient capacity. Therefore it could be more appropriate to treat a new high speed rail line as a typical consumer of electricity and hence to use average carbon intensity of electricity generation Table 8.4 details the results from the sensitivity test for the six UK modelled routes with a new UK high speed line. n both sensitivity tests a new UK high speed line 3 ATOC analysis for Greengauge 21 on the CO2 impacts of High Speed Rail 8

17 Executive Summary provides significant CO 2 emissions savings both over 2008 and the scenario in which there is no high speed line. n both sensitivity scenarios, the development of a high speed line significantly reduces CO 2 emissions even in The impact of the sensitivity tests is less in 2050 as, by this point, even in the base scenario there is a stronger emissions case for high speed rail due to the assumed reduction in the carbon intensity of electricity generation. TABLE 1.4 UK AR AND RAL CO 2 EMSSONS N 2025 WTH A NEW UK HGH SPEED LNE (ADDTONAL SENSTVTY TESTS) 000S TONNES Scenario No high speed line With high speed line mpact of high speed line Base scenario (2025) 976 1,008 +3% No energy consumption uplift for high speed rail Use of average rather than marginal carbon intensity % % Block of analysis 2 UK to Europe 1.31 Figure 8.5 presents the projected rail share of the point-to-point market in 2025 for travel between London and mainland Europe (block of analysis 1A) and between other UK cities and mainland Europe (block of analysis 1B). FGURE 1.5 BLOCK OF ANALYSS 2A & 2B (LONDON-EUROPE) RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) Edinburgh - Amsterdam Birmingham - Amsterdam Manchester - Amsterdam Manchester - Paris Manchester - Malaga London - Prague London - Paris London - Milan London - Madrid London - Geneva London - Frankfurt London - Dusseldorf London - Brussels London - Bordeaux London - Berlin London - Amsterdam London - Malaga 2008 Low (2025) Central (2025) High (2025) High rail (2025) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) 1.32 The analysis shows that limited modal shift is achieved in the base scenarios, despite higher oil and CO 2 prices, and journey time improvements on certain routes 9

18 Rail's Market Share (%) Executive Summary due to the completion of high speed rail schemes in continental Europe. This is because oil prices and CO 2 costs account for a small percentage of the air fare on the type of route we have modelled, and therefore the change in average air fares is modest (for example, by 2050 even in the high scenario CO 2 and fuel costs account for only 29 per passenger on the London-Amsterdam route). n addition, we assume that the rail service continues to be provided by a monopoly operator, with no fares regulation, and therefore it responds to higher air fares partly by increasing its own fares t is possible that airlines will reduce frequency further on short haul routes such as those we have modelled, and if this occurred, the switch to rail would be greater A much more significant modal shift is achieved in the high rail scenario, where there would be a significantly improved (and lower priced) rail service offer. However, even in this scenario, limited modal shift occurs on the longer distance routes such as London-Malaga, London-Madrid, and Manchester-Amsterdam The significant modal shift achieved in the high rail scenario is a result of a combination of several factors which improve rail s service offer and hence market share. Due to the nature of the air-rail market share relationship, a combination of several factors is required for rail s market share to be increased significantly. Figure 1.6 illustrates the contribution that each factor has on one route (London- Amsterdam). n 2008 the rail offer is significantly worse that air (i.e. the difference in Generalised Journey Cost (GJC) is positive), achieving a mode share that we estimate to be in the region of 4%. The improvements to journey time through the introduction of the high speed line improves rail s offer but not sufficiently to achieve significant modal shift. t takes a combination of all of factors to make the journey time and price of rail transport competitive with air transport on the route a direct London-Amsterdam rail service, introduction of on-rail competition, reduction of check-in time etc. FGURE 1.6 LONDON-AMSTERDAM MPROVEMENT N RAL SERVCE OFFER AND EFFECT ON RAL MARKET SHARE - % 80% 70% 60% 50% 40% 30% 20% 10% Reduction in access charges Reduction in check-in time Direct rail service introduction of on-rail competition ncrease in air costs mprovement in JT '08 Difference in GJC 0% Difference in Generalised Journey Cost (GJC) (Rail GJC - Air GJC) 10

19 Passenger Journeys (000s) Executive Summary 1.36 n practice, rail might in any case be able to attract a higher proportion of passengers travelling between London and the Netherlands, because some passengers travel to cities other than Amsterdam for which rail is more competitive because of a better relative journey time. This is beyond the scope of our model. Block of analysis 3 Connecting rail 1.37 Figure 1.7 presents projected air and rail passenger journeys between Heathrow and Manchester in 2025 for three scenarios: No new domestic North-South high speed line A new domestic North-South high speed line but without a Heathrow spur; and A new domestic North-South high speed line but with a Heathrow spur All three scenarios use the central oil and CO 2 pricing assumptions. FGURE 1.7 HEATHROW-MANCHESTER PASSENGER DEMAND (000S) 1,200 1,000 0% 1% 800 0% 38% % 99% Rail Air % 62% Central (No HSR) UK HSR 300 km/h UK HSR with Heathrow Spur 1.39 The analysis shows that, in order to achieve significant modal shift of connecting passengers, it would be necessary to construct a direct high speed spur line to Heathrow. n the scenario presented in Figure 1.7, rail still only achieves a market share of 38%. This result is very sensitive to the assumed price of the connecting domestic trip and whether a guaranteed connection is provided to rail passengers. f we were to assume that rail is priced at the same level as connecting air trips and a guaranteed connection is provided, rail mode share would significantly increase The addition of a Heathrow spur would increase the likelihood that airlines would withdraw services from this route, which would further improve the competitive position of rail. Complete withdrawal of all air services is possible in this scenario. However, the impact of this might be that some passengers divert to other short haul connecting air routes (e.g. Manchester-Charles de Gaulle). Estimate of total CO 2 savings 1.41 As part of this study we have estimated the total CO 2 emissions from air and rail travel within the UK and between the UK and other parts of Europe. To produce an 11

20 Executive Summary estimate of the total CO 2 emissions, it is necessary to scale up from the 23 modelled routes to a total Europe level. To do this we have mapped each flow to one of the modelled routes. We have then assumed that the same proportionate air-rail mode shift and route substitution will occur on these flows. For some flow, for example where a new sea crossing would need to be constructed, we have assumed that no modal shift could occur The CO 2 emissions numbers presented in this section include: CO 2 emissions from air travel within the UK; The UK allocation of CO 2 emissions from air travel between the UK and other parts of Europe; CO 2 emissions from long distance rail travel within the UK where rail is competing with air (e.g. short distance commuting trips are excluded); and The UK allocation CO 2 emissions from rail travel between the UK and the rest of Europe (assumed to be 50%) The figures include air and rail CO 2 emissions within the UK and between the UK and 36 Western European and Eastern European countries. These include countries as far east as Turkey, and as far north east as Lithuania All the figures presented assume the (higher) marginal CO 2 intensity of electricity generation, through to This significantly reduces CO 2 savings in the short term, but by 2050 makes limited difference as electricity generation is assumed to be largely decarbonised Figure 1.8 presents the total CO 2 emissions for each scenario. n order to enable an estimate of the maximum CO 2 saving possible from modal shift we also present the high rail scenario with and without a new UK high speed line. The increase in CO 2 emissions between 2008 and 2050 is driven by the assumed increase in background growth, from increases in population and disposable income n 2008 approximately 45 million tonnes of CO 2 were generated by all UK air and rail transport. As shown by Figure 1.8 domestic air and rail trips and UK-Europe air and rail trips account for about million tonnes of CO The estimated CO 2 emissions in the high scenario are the lowest in each forecast year. This is mostly due to reduction in air demand, relative to the central scenario, as a result of the increase in air costs rather than air-rail modal shift. 4 n million tonnes of CO 2 emissions were generated by domestic air, 9.79 millions tonnes of CO 2 emissions were generated by air travel between the UK and Europe, 0.26 million tonnes of CO 2 emissions were generated by domestic rail on route where rail is competing with air, and 0.16 million tonnes of CO 2 emissions were generated by rail trips between the UK and Europe 12

21 2008 CO CO2 Efficiencies Exogenous growth Trip Generation or Destruction Mode Shift Route Substitution 2050 CO2 CO2 emissions (000s tonnes) CO2 emissions (000s tonnes) FGURE 1.8 Executive Summary TOTAL AR-RAL CO 2 EMSSONS (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 30,000 25,000 20,000 15,000 10,000 5, Low Central High High rail High Rail + New UK HSL 1.48 n order to put the level of modal shift and route substitution in context Figure 1.9 presents the drivers of changes of air and rail domestic CO 2 emissions and air and rail CO 2 emission between the UK and Europe between 2008 and The chart shows that the main driver behind the growth in CO 2 emissions is the assumed level of background growth. The trip destruction presented in the figure is due to CO 2 pricing and fuel price increases. FGURE 1.9 CENTRAL SCENARO AR AND RAL CO 2 EMSSONS: CAUSES OF CHANGE BETWEEN 2008 AND 2050 (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 35,000 30,000 25, ,106 20,000 19, ,000 10,000 12, ,

22 CO2 saving (000 tonnes) Executive Summary 1.49 Figure 1.10 presents the CO 2 savings in 2050 from mode shift from aviation to rail and route substitution relative to the case where there are no price or journey time changes from The largest amount of CO 2 savings are achieved in the high rail scenario with a new UK high speed line. FGURE 1.10 CO 2 SAVNGS FROM AR AND RAL DUE TO SWTCH FROM AR TO RAL N 2050 (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 3,000 2,500 2,000 1,500 1,000 Route Substitution Mode Shift Low (2050) Central (2050) High (2050) High rail (2050) High Rail with New UK HSL (2050) Summary of key conclusions 1.50 The key findings relating to reducing CO 2 emissions through modal shift from aviation to rail are: To meet the government s target the UK s total greenhouse gas emissions need to reduce by 2050 to 80% below the 1990 level. n the most optimistic scenario air-rail mode shift reduces CO 2 emissions in 2050 by approximately 2.4 million tonnes. Without any increase in air fares, domestic and UK-Europe rail and air CO 2 emissions are projected to increase by approximately 16 million tonnes between 2008 and Air to rail modal shift could reduce this by 15% in the highest scenario. A small proportion of air passenger demand and CO 2 emissions can be affected by air-rail mode shift ncreased oil prices and charges to recover CO 2 costs do increase air fares, but the effect is relatively small on the shorter routes which have been modelled in this study. The main effect of higher air fares on CO 2 emissions arises because the total amount of travel would be reduced, rather than from modal shift to rail. The introduction of a high speed line is forecast to significantly increase rail modal share on Anglo-Scottish routes. The short term effect on CO 2 emissions 14

23 Executive Summary depends on the emissions assumptions used, although in the longer term (2050) there is a stronger reduction in emissions in all scenarios, as the marginal carbon intensity of electricity generation is projected to fall significantly. A combination of significant improvement to the rail service offer (such as direct trains) and reductions in price could achieve significant modal shift, especially on routes such as London-Amsterdam ncreased air fares could result in a further reduction in emissions if passengers decide to substitute longer distance trips by air with shorter distance trips by rail. This requires there to be an attractive (and reasonably priced) rail service offer available. 15

24

25 Draft final report 2 ntroduction Background 2.1 As part of a statement on Britain s Transport nfrastructure, on 15 January 2009 the Secretary of State for Transport announced a new target of getting aviation emissions below 2005 levels by This is in addition to an overall objective of reducing the UK s total greenhouse gas emissions to 80% below the 1990 level. The Secretaries of State for Transport and Energy and Climate Change requested that the Committee on Climate Change (CCC) advise on how this target could be met 2.2 The CCC intends to report back by December on the measures required to contain aviation emissions within the limit set by the Government. n order to look in more detail at this area, the CCC has commissioned three studies: An assessment of the overall demand for UK aviation; An assessment of the potential for modal shift from air to rail; and An assessment of the potential of biofuels to reduce life-cycle CO 2 emissions from UK aviation. 2.3 Steer Davies Gleave was commissioned by the Committee to undertake the work for the second study. The CCC is intending to use these results to inform their analysis of the 2050 target, but scenarios and assumptions are subject to change. As such these results represent preliminary results in the overall CCC work. Please see the final CCC report in December for the final analysis, results and recommendations. Purpose of this study 2.4 n order to inform the Committee s assessment of the potential for mode shift from air to rail transport, the objectives of this study are: Assess the shift between air and rail transport for travel within the UK and between the UK and continental Europe that may occur in the future, taking into account likely changes in taxation, pricing, operating costs, and service quality attributes such as journey time, even without the construction of a UK domestic high speed rail line Evaluate the case for construction of a high speed line from London to the north of the UK, in terms of the rail journey time savings that would be achieved, the potential switch from air to rail transport, and the reduction in emissions that this might generate Evaluate the case for construction of a spur from the main UK high speed line to serve Heathrow airport, in particular to assess whether short distance feeder flights to destinations such as Manchester could be replaced with direct rail services Undertake a high-level assessment of the capital and operating costs of a high speed line 2.5 The analysis will allow CCC to assess whether policy measures such as development of a high speed line offers the potential of reducing the UK s greenhouse gas emissions. 17

26 Status of this report Draft final report 2.6 This is the final report for this study. This version of the report as been edited to redact any passenger data provided to us by Eurostar. This is in consistent with the agreement between Steer Davies Gleave and Eurostar. Structure of this report 2.7 The remainder of this document is structured as follows: Section 3 describes the market for air travel to, from and within the UK, and identifies the part of the market that could potentially switch to rail travel in the future Section 4 describes the European high speed rail network, the journey times that could be achieved by train on routes to the UK Section 5 discusses the possible future development to high speed rail, including a possible new UK high speed line and constraints to development of new high speed rail services between the UK and Europe Section 6 outlines the factors which drive increased rail and air demand, and which determine market share Section 7 provides an overview of the demand model developed for this study Section 8 presents the result for the modelled routes from the demand model Section 9 presents the results for total CO 2 emissions. 18

27 Draft final report 3 The UK air travel market ntroduction 3.1 This section outlines the market for air travel to, from and within the UK. The purpose of this analysis is to identify what traffic might switch to rail in a future scenario where the relative strengths of the two modes were changed. This could include improvements to the rail offer, such as construction of a high speed rail line, or air travel becoming less attractive or more expensive, for example due to carbon pricing. 3.2 Air passengers might switch to rail travel if: rail travel becomes a more attractive mode than air for travel to their destinations; or because of changes in the relative cost or convenience of air travel, passengers decide to change their destinations to ones which can be accessed by rail. 3.3 This section focuses on identifying the passengers that might switch to rail whilst still travelling to the same destinations that they would otherwise have done by air. At the end of the section, we analyse the possibility of some passengers changing their destinations in response to changes in the cost or convenience of air travel. Passenger volumes 3.4 n 2008 there were approximately 215 million passengers using flights to, from and within the UK, an increase of 3.3% on Figure 3.1 shows the breakdown of this demand by destination region. Most of the increase in demand between 2005 and 2008 was driven by increased travel to Western Europe, Eastern Europe and the Middle East, partly offset by a 2 million reduction in UK domestic passengers. 3.6 n the figure below, Western Europe Other includes parts of western Europe that are not in scope for the analysis of modal switch because they could not be accessed by rail without a new sea crossing being constructed (such as reland, and islands including the Canaries and Balearics). 19

28 Air Passengers (000s) Draft final report FGURE 3.1 BREAKDOWN OF UK AR PASSENGERS DEMAND BY REGON 2005 & , ,000 80,000 60,000 40,000 20,000 0 Western Europe Western Europe Other Domestic North America Middle East & Asia Eastern Europe Africa Other Latin America Source: SDG analysis of CAA data 3.7 Of these passengers, the passengers who could in principle switch to rail are domestic passengers (11% of the total); passengers travelling between the UK and mainland western Europe (46%); and passengers travelling between the UK and mainland central/eastern Europe (6%). UK domestic air market 3.8 n 2008 there were 24 million domestic UK air journeys, accounting for 11% of the total UK air passenger journeys. However, only the journeys within the British mainland could realistically switch to rail transport. These account for 60% of UK domestic air journeys; the remaining 40% were to/from Northern reland, the Channel slands, the sle of Mann or the Scottish slands. Table 3.1 details the top ten air routes within the British mainland. 20

29 TABLE 3.1 TOP 10 BRTSH MANLAND AR ROUTES 2008 PASSENGER 000S Draft final report Route No. Passengers (000s) Cumulative % London-Edinburgh 3,157 20% London-Glasgow 2,892 39% London-Manchester 1,360 48% London-Aberdeen % London-Newcastle % Birmingham-Edinburgh % London-nverness % Birmingham-Glasgow % Bristol-Edinburgh % Edinburgh-Manchester % Source: SDG analysis of CAA data 3.9 The largest domestic air transport market is the market for travel between London and Scotland, accounting for over half of mainland domestic journeys. The routes from London to Edinburgh and Glasgow each account for a fifth of the market. As discussed below, a new UK high speed network would significantly improve the rail journey time for the majority of these routes. The market for travel between the UK and mainland Europe 3.10 As discussed above, journeys between the UK and mainland Europe account for almost half of the UK air transport market. n order to focus the study, we need to identify which parts of this market might feasibly switch to rail in the future Rail already competes with air travel for part of this market, although at present it only has a significant market share for journeys up to 3 hours (northern France and Belgium). However, the purpose of this study is to evaluate the potential for switch from air to rail transport in a future scenario when rail travel might be more attractive, due to carbon pricing or other measures which increase the cost of air transport, and/or measures to make rail travel more attractive, such as construction of new high speed rail infrastructure. Therefore, we also need to evaluate the market for travel to more distant destinations High speed rail currently has the potential to offer journey times that are competitive with air travel for journeys up to approximately 800km. This includes parts or all of the following States: France; Belgium; Netherlands; Luxembourg; and Germany. 21

30 Draft final report 3.13 n the future, due to price changes and infrastructure enhancements, the distance over which rail can be competitive may increase. At most, we think rail might start to attract passengers to/from the following countries: Spain; Switzerland; taly; Austria; Denmark; Poland; and Czech Republic These countries all have major destinations which are no more than 2,000km from London, which is at the upper limit of distances over which any modal shift from air to rail could be expected under any foreseeable circumstances. These countries also do not require a new sea crossing to be constructed in order for them to be connected to the UK rail network For journeys to countries further away than this, rail travel would still take at least 12 hours even if the route was mostly or entirely high speed line, which it will not be within the foreseeable future. We think it is unlikely that there could be significant switch to rail under any imaginable circumstances for these journeys. n circumstance where air travel became so expensive that it was unattractive for these long distance journeys, the main effect would be a reduction in the overall size of the travel market and substitution of travel to nearer destinations, rather than a switch to rail The total number of air passengers to and from these countries was 80 million in This accounted for 72% of the total mainland Western and Eastern European air market. Figure 3.2 detail the number of air passenger between the UK and each of the in-scope countries for 2005 and The largest market, with a third of the total air passengers, is between the UK and Spain with 21 million air passengers in 2008 (excluding air traffic to the Canaries and Balearics) Even though from the UK it is possible to access a number of destinations in France by high speed rail, albeit with an interchange in Paris or Lille, France is the second largest air market of the in-scope countries with 11.7 million air passenger in

31 Spain France Germany taly Netherlands Switzerland Poland Denmark Czech Republic Austria Belgium Air Passengers (000s) FGURE 3.2 Draft final report AR PASSENGERS TO/FROM N-SCOPE COUNTRES 2005 & 2008 MLLONS 25,000 20,000 15,000 10,000 5, Source: SDG analysis of CAA data 3.18 The air market between the UK and the in-scope countries is quite mature, growing in-line with GDP. The main exception is the market for travel to Poland, which has increased by over 200% since 2005, driven by migration to UK Please note that the figure for Spain quoted above excludes passengers to the Canaries and Balearics as rail is not an alternative for these passengers. Key routes 3.20 High speed rail has the capability of transporting very large numbers of people: a single Eurostar train has 750 seats, equivalent to five Airbus A319s. Therefore high speed rail is most likely to be suited to routes on which there are large numbers of passengers, which are likely to be routes between large urban centres. Table 3.2 details the top 20 air flows between cities in the UK and the in-scope countries. All of the top 20 air flows are to/from the London airports. The top 20 flows account for 35% of the air passenger demand to the in-scope countries. 23

32 TABLE 3.2 Draft final report TOP 20 AR ROUTES BETWEEN BRTSH MANLAND & N-SCOPE COUNTRES 2008 PASSENGERS 000S Route Distance* (kilometres) Passengers in 2008 (000s) Cumulative % London Amsterdam 540 3,156 4% London Madrid 1,700 2,086 6% London Geneva 990 1,995 8% London Rome 1,900 1,984 11% London Paris 460 1,950 13% London Malaga 2,300 1,887 15% London Barcelona 1,500 1,758 17% London Zurich 1,000 1,581 19% London Copenhagen 1,300 1,471 21% London Frankfurt 770 1,457 22% London Milan 1,300 1,416 24% London Alicante 2,000 1,374 26% London Munich 1,150 1,337 28% London Nice 1,400 1,280 29% London Berlin 1,100 1,189 31% London Prague 1, % London Vienna 1, % London Warsaw % London Dusseldorf % London Brussels % *Road distance has been used as a approximation to rail distance Source: SDG analysis of CAA data 3.21 Of the top 20 routes, the routes to Paris and Brussels already have significant high speed rail competition, and four others are within 1,000km of London (Amsterdam, Geneva, Frankfurt and Dusseldorf) London-Amsterdam is the largest single air route between the UK and mainland Europe, with over 3 million passengers per year. Amsterdam is 540km away from London by rail, which suggest that high speed rail could be competitive with air. The second largest route is London-Madrid with 2 million air passengers Table 3.3 below identifies the top 10 non-london routes. The top two routes are leisure routes between Manchester and the south of Spain. However, there are also significant passenger volumes on the shorter routes between Manchester/Birmingham and Amsterdam/Paris, on which switch to rail is more realistic. 24

33 Air Passengers (000s) TABLE 3.3 Draft final report TOP 10 NON-LONDON AR ROUTES BETWEEN BRTSH MANLAND & N-SCOPE COUNTRES 2008 PASSENGER 000S Route Distance* (kilometres) Passengers in 2008 (000s) Manchester-Malaga 2, Manchester-Alicante 2, Birmingham-Amsterdam Edinburgh-Amsterdam 1, Manchester-Paris Manchester-Amsterdam Manchester-Frankfurt 1, Birmingham-Paris Glasgow-Amsterdam 1, Nottingham-Alicante 2, *Road distance has been used as a approximation to rail distance Source: SDG analysis of CAA data 3.24 Figure 3.3 looks at the distribution of air passenger demand on different sizes of air route. The larger the route the mores suitable it is to the development of a high speed rail line. The figure classifies each city pair on the basis of the number of air passengers per year. The chart shows, for example, that approximately 18 million air passenger fly on routes with demand equal to or greater than 1.5 million air passengers per year. Rail travel is more likely to be a realistic alternative on these larger routes, due to the volumes of passengers rail can transport. The chart also shows that 51 million air passenger or 60% of the total demand is on routes with annual demand less than 0.5 million air passenger per year. FGURE 3.3 CATEGORSATON OF AR ROUTES BY SZE AR PASSENGERS (000S) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 >1.5 million 1 to 1.5 million 500k to 1 million 250k to 500k 100k to 250k Air Route Category 50k to 100k 10k to 50k 5k to 10k <5k Source: SDG analysis of CAA data 25

34 Number of flights Draft final report 3.25 We have also evaluated the number of flights operated on each route from the UK, based on flight schedule information provided in the OAG (Official Airline Guide), the standard industry source for flight schedule information. The data within the OAG is for scheduled flights and therefore does not include data for charter flights As with the air passenger data, the largest market in term of number of scheduled flight is mainland Western Europe, which account for 45% of the daily flights to and from the UK. Domestic flights account for 30% of the total daily flights recorded in the OAG, a significantly higher proportion than the number of passengers, reflecting that a number of domestic flights use quite small aircraft. FGURE 3.4 BREAKDOWN OF NUMBER OF DALY FLGHTS TO, FROM OR WTHN THE UK Other, 497 Eastern Europe, 242 Domestic, 1,353 Western Europe Other, 438 Mainland Western Europe, 2,052 Source: SDG analysis of OAG data 3.27 Table 3.4 shows the number of flight and number of seats flown on the top ten mainland UK routes by number of flights. The list in Table 3.4 is almost exactly the same as the top ten flights by number of air passengers (Table 3.1), apart from the inclusion of Manchester-Glasgow and Newcastle-Southampton at the expense of London-nverness and Bristol-Edinburgh. The reason behind this difference will be as a result of the load factors achieved and the size of aircraft used on these routes As with the air passenger analysis the largest market is between London and Scotland with 203 flights per day. 26

35 Draft final report TABLE 3.4 MANLAND UK CAPACTY TOP 10 ROUTES BY NUMBER OF FLGHTS Flights per day Seats per day Cumulative % Flights Seats London-Edinburgh 95 12,122 13% 18% London-Glasgow 74 10,529 23% 34% London-Manchester 53 5,412 30% 42% London-Aberdeen 34 3,764 35% 48% Edinburgh-Manchester 27 1,280 39% 50% London-Newcastle 23 3,307 42% 55% Birmingham-Glasgow 18 1,730 44% 58% Birmingham-Edinburgh 18 1,718 47% 60% Manchester-Glasgow % 62% Newcastle-Southampton % 63% Source: SDG analysis of OAG data 3.29 Table 3.5 details the top 20 city routes between the British mainland and the inscope countries by the number of daily flights. The top 20 account for approximately 40% of the flight and seats flown between the British mainland and the in-scope countries. Again, the top 20 routes by capacity are very similar to the top routes by passenger numbers. 27

36 Draft final report TABLE 3.5 CAPACTY BETWEEN MANLAND UK AND N-SCOPE COUNTRES TOP 10 ROUTES BY NUMBER OF FLGHTS Flights per day Seats per day Flights Cumulative % Seats London-Amsterdam ,098 6% 5% London-Zurich 63 7,728 9% 7% London-Geneva 57 7,084 11% 10% London-Paris 56 7,748 14% 13% London-Madrid 50 7,596 16% 15% London-Frankfurt 49 7,062 19% 18% London-Milan 48 7,603 21% 20% London-Barcelona 43 6,454 23% 23% London-Munich 37 4,889 25% 24% London-Rome 36 6,247 26% 27% London-Copenhagen 36 5,063 28% 28% London-Berlin 35 5,018 30% 30% London-Malaga % 32% London-Nice % 34% London-Dusseldorf % 35% London-Brussels % 36% London-Warsaw % 37% London-Prague % 39% London-Hamburg 22 2,744 38% 40% Birmingham-Paris 20 1,630 39% 40% Total for n-scope countries* 2, , % 100% *n-scope countries defined in paragraph 2.12 and 2.13 Source: SDG analysis of OAG data Transfer passengers 3.30 One of the key objectives of this study is to evaluate the case for constructing a spur from a potential UK high speed line to serve Heathrow. n particular, this study is required to assess whether shorter distance feeder flights to destinations such as Manchester could be replaced with direct rail services. Therefore, we have started by identifying how many of these connecting (transfer) passengers there currently are. Table 3.6 details the connecting and terminating passenger at the four London airports. 28

37 Draft final report TABLE 3.6 TRANSFER AND TERMNATNG PASSENGER AT LONDON S ARPORTS (2008) Transfer proportion (%) Transfer passengers (millions) Terminating passengers (millions) Total (millions) Heathrow 34% Gatwick 12% Stansted 8% Luton 4% Source: SDG analysis of CAA survey data 3.31 Heathrow handles 78% of the transfer passenger passing through the London airports. Of these, 76% are making international to international connections and 24% international to domestic connections. This means that 12% of the transfer passenger departures are on domestic flights. Figure 3.5 details the eight mainland UK airports used to access connections at Heathrow. The Heathrow to Manchester route is the largest with 715,000 connecting passenger, which account for 74% of the total number of passengers travelling on this route. FGURE 3.5 CONNECTNG PASSENGER TO MANLAND UK DESTNATONS FROM HEATHROW Edinburgh 49% Glasgow 41% Manchester 74% Aberdeen 47% Newcastle 56% Leeds Tees-Side 51% 61% nverness 48% ,000 1,200 1,400 1,600 Air Passengers (000s) Transfer Terminating Source: SDG analysis of CAA survey data 3.32 n addition, many passengers on routes to/from the UK connect to or via European hub airports. Some of these European hubs could conceivably be accessed by a high speed rail link. Figure 3.6 details the level of connecting passenger from Heathrow to other European hub airports. 29

38 FGURE 3.6 CONNECTNG PASSENGERS FROM HEATHROW TO EUROPEAN HUBS Draft final report Amsterdam-Schiphol Paris - Charles De Gaulle Frankfurt Madrid (Barajas) Brussels ,000 1,200 1,400 1,600 1,800 2,000 Air Passengers (000s) Connecting LHR Connecting at Both Connecting at Foreign Hub Point to Point Source: SDG analysis of CAA survey data 3.33 This analysis shows that transfer passengers account for around half of passengers on some of these routes, and that many of the connections are at the other European hub rather than Heathrow. n absolute terms the route to Paris CDG has the largest number of connecting passengers: approximately 890,000 passengers travelling to CDG are connecting passengers (50% of the total market), and the proportion of passengers connecting at CDG and LHR is similar. Nearly 50% of the air passengers travelling from Heathrow to Brussels are connecting passengers. Other characteristics of air passengers 3.34 The potential for passengers to switch between air and rail transport will also depend on the motive for the journey. Business passengers are likely to select modes based primarily on the journey time and convenience offered. Leisure passengers are more likely to be influenced by the price of each mode. Amongst leisure passengers, it is also important to distinguish between passengers travelling to visit friends or relatives, and holiday passengers: Holiday travel is entirely discretionary as well as deciding which mode to travel by, passengers can decide not to travel, or (importantly) can change the destination of their trip on the basis of the cost or convenience of travel Passengers travelling to visit friends and relatives also have to decide which mode to travel by, and can decide not to travel or to travel less frequently. n the medium term they have no flexibility about their destination, as it is determined by where their friends/family live, but in the longer term this is also partly linked to the cost of travel in particular low cost air travel has made purchase of second homes more attractive, and this in turn drives higher demand Data on the characteristics of air passengers can be obtained from the regular surveys undertaken by the CAA. Figure 3.7 shows the journey purpose split (business, leisure and visiting friends and family) for UK domestic air passengers and air passengers travelling between UK and the in-scope countries. 30

39 Draft final report 3.36 The market for travel between the UK and Spain has the lowest proportion of business travellers with only 9% of business travellers. Flights to Belgium have the highest proportion of business travellers (approximately 60%). 46% of domestic UK air passengers are travelling for business purposes t is interesting to note that over 60% of the air passenger between the UK and Poland are visiting friends and relatives FGURE 3.7 JOURNEY PURPOSE SPLT FOR KEY MARKETS (BUSNESS, LESURE AND VSTNG FRENDS AND RELATVES) Belgium Luxembourg United Kingdom Netherlands Germany Denmark Switzerland France Austria Czech Republic taly Poland Spain 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Business, Leisure and VFR Business Leisure Visiting friends and relatives Source: SDG analysis of CAA survey data 3.38 The analysis above suggests that leisure travel accounts for the largest proportion of the air markets that are being examined as part of this study. Only for the UK- Belgium and UK-Luxembourg markets do business traveller account for more than half of the market. However, business travel may account for a larger proportion of the market between large urban centres, which are most suitable for high speed rail Figure 3.8 shows the journey purpose split for air passengers between London and a range of European cities for which rail travel may be an alternative to air travel. Malaga has been included primarily for illustrative purposes as it is not expected that there would be significant modal switch for this market. The analysis shows that, in almost all cases, the market for travel from London to these cities has a higher proportion of business travellers than the overall market for travel between the UK and these countries. n many cases, this difference is significant: for example, 30% of the air passenger between London and Madrid are business travellers, but only 9% of the total number of passengers between the UK and Spain are business travellers. 31

40 FGURE 3.8 Draft final report JOURNEY PURPOSE SPLT FOR TRAVEL BETWEN LONDON AND EUROPEAN CTES (BUSNESS, LESURE AND VSTNG FRENDS AND RELATVES) Brussels Frankfurt Main Glasgow Amsterdam Edinburgh Zurich Paris Milan Madrid Malaga 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Business, Leisure and VFR Business Leisure Visiting friends and relatives Source: SDG analysis of CAA survey data 32

41 Draft final report 4 The high speed rail market ntroduction 4.1 This section describes the market for high speed rail travel. We describe the existing European high speed rail network, assess the market that this serves, and describe the market share that high speed rail currently obtains. Market most suitable for high speed rail 4.2 Rail is most suited for carrying a large number of passengers over medium distances. The competitive advantage of rail will vary depending on a number of factors including the access and egress time from stations and airports, check in times, and the reliability of different modes. These factors are discussed in chapter 6 below. Distances over which rail is competitive 4.3 Generally the competitive position of rail will vary as follows: For journeys of less than 400km, under most circumstances conventional rail travel will be faster than air travel for point-to-point journeys, once the time for access to terminals and check-in is included. High speed rail will make that competitive advantage more robust and also attract passengers from other surface modes. For journeys between 400km and 800km, rail will usually only be faster than air travel if the service is high speed. Over these distances, development of high speed rail infrastructure is likely to cause significant modal switch from air travel to rail travel. For journeys of more than 800km, even with high speed rail available for the entire journey, air travel is likely to be faster. For these journeys, rail will only be able to attract passengers from air if it offers other advantages such as a lower price. Capacity 4.4 High speed rail offers very high passenger capacity, particularly if compared to air transport. Signalling systems can handle a train every 4-5 minutes, and some high speed trains have up to 1,000 seats (a double length TGV Duplex unit). This means that a high speed rail line can carry the same number of passengers as a Boeing 737 or Airbus 319 operating every 45 seconds. 4.5 Within Europe, the full theoretical capacity of high speed rail lines, which is typically trains per direction per day, is never used although capacity is often full utilised during peak periods. However, the viability of a high-speed rail route is clearly dependent on there being sufficient demand to use a significant proportion of the available capacity. 4.6 Figure 4.1 shows the number of trains per day operated on a number of European high speed rail lines. The analysis shows that some TGV lines carry over 100 trains per direction per day. The Channel Tunnel Rail Link (HS1) carries the lowest number of trains of any of the high speed lines, but this will increase significantly when domestic trains start operation in December

42 TGV Sud-Est TGV Nord TGV Atlantique TGV Med Frankfurt - Cologne Brussels - Liege Madrid - Sevilla Madrid - Barcelona Hannover - Berlin UK CTRL Trains per day per direction FGURE 4.1 NUMBER OF TRANS PER DAY ON HGH SPEED LNES Draft final report Source: SDG analysis of Thomas Cook European Rail Timetable Construction of new high speed rail lines requires incurring substantial capital costs for construction of fixed infrastructure. Delivering new air capacity also requires constructing a significant amount of fixed infrastructure, however overall air capacity is much more flexible than rail. This flexibility of supply means that air capacity can be delivered on both thick routes transporting a large number of passengers between large urban centres, and also on thin routes transporting a limited number of passengers to or between smaller cities. Rail requires very thick routes for construction of new infrastructure to be commercially or economically viable. However, thin routes can also be served via infrastructure constructed primarily for serving main routes: for example, TGV Sud Est was primarily built for thick routes such as Paris-Lyon/Marseille, but it also provides a significant benefit for routes such as Paris-Geneva with only a few trains per day. Market shares 4.8 This section identifies the current air-rail mode share for UK domestic routes and routes between the UK and continental Europe. UK Modal Split 4.9 Figure 4.2 shows the current market share for eight key domestic routes. On the London-Manchester and London-Newcastle route rail has over 70% of the market. On all the other routes air has the largest share of the air-rail market, although only marginally for the Edinburgh-Manchester and Glasgow-Manchester. 34

43 Rail' Market Share (Percentage) FGURE 4.2 AR-RAL MARKET SHARE ON KEY UK DOMESTC ROUTES (2008) Draft final report Edinburgh-Manchester Glasgow-Manchester Birmingham-Glasgow Birmingham-Edinburgh London-Newcastle Rail Air London-Manchester London-Edinburgh London-Glasgow 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Market Share (Percentage) Source: LENNON and CAA Data 4.10 With the introduction of the December 2008 timetable on the west coast main line and the completion of the modernisation work on this line, the competitive position of rail is set to further improve. n particular further significant modal shift should be expected in the London-Manchester market and between Birmingham, Manchester and Scotland. Trends in market share 4.11 Figure 4.3 graphs the rail market share for the three largest domestic markets (London-Scotland, London-northern England, and other English cities-scotland) between 2000 and FGURE 4.3 RAL MARKET SHARE BETWEEN 2000 AND 2008 FOR KEY UK MARKETS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% London-Scotland London-North England Non-London-Scotland Average Source: LENNON and CAA Data 4.12 n all three markets there was a decline in rail market share after There are a number of factors that are likely to have been behind this decline: 35

44 Draft final report The Hatfield rail crash in October 2000 and the subsequent speed restriction which were imposed on most of the rail network; Disruption to services on the west coast mainline due to the modernisation programme being undertaken on this line; and ncreased competition from low cost carriers After 2004 there has been a steady modal shift to rail on all three route types and by 2008 rail market share in the London-Scotland and London-North East market was higher than in For the non-london-scotland market rail market share in 2008 was only marginally below The main drivers of this improvement since 2004 are likely to be: mproved rail punctuality and reliability after recovery from the post-hatfield disruption; mprovement in rail journey time from infrastructure upgrades; ncreased security checks at UK airports from August 2006; Higher air passenger duty; and ncreased use of yield management techniques by rail operators n the short term, the completion of the West Coast upgrade and associated major engineering works should result in some further mode switch, but in the longer term it is unlikely that there will be any further journey time or capacity improvements from the conventional rail network to drive further modal shift. The existing rail network, especially in to London, is at or approaching full capacity. European Modal split 4.15 Figure 4.4 details rail s market shares between London and Paris and London and Brussels. t shows that for both routes in 2008 rail has over 70% of the market. Rail s market share for both routes has grown steadily since

45 Rail Market Share (%) FGURE 4.4 Draft final report RAL MARKET SHARE FOR LONDON-PARS AND LONDON-BRUSSELS TO % 70% 60% 50% 40% 30% 20% 10% 0% London-Paris London-Brussels Source: Eurostar 4.16 We received from Eurostar passenger survey data that identifies by region the ultimate origin and destination of Eurostar s passengers. Except for the UK and France, these regions equate to countries so, for example, we have figures for the number of passengers travelling between London and all of the Netherlands, but not specifically for London to Amsterdam. Based on this data, we have estimated rail market share on each city pair, but this required us to make a number of assumptions about the distribution of demand, and there is inevitably some uncertainty about this. Our estimate of rail s market share by city pair is presented in Figure

46 FGURE 4.5 Draft final report RAL MARKET SHARE FOR RAL (OTHER ROUTES BETWEEN THE UK AND EUROPE) N 2008 (%) London-Bordeaux Manchester-Paris London-Amsterdam London-Frankfurt London-Dusseldorf London-Geneva London-Madrid Birmingham-Amsterdam Manchester-Amsterdam 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Rail mode share of point-to-point market (%) Source: SDG analysis of Eurostar passenger catchment data 4.17 As presented in Figure 4.5, rail has a small mode share on routes beyond London- Paris and London-Brussels. This will be partly driven by the requirement to interchange, while air provides a direct service, and the journey time difference. The European high speed rail network Overview of the network 4.18 By 2008, the length of the European high speed rail network was 5,764km, more than double the size of the network in 1998 (Figure 4.6). France still operates the largest high speed rail network in Europe, but it will be overtaken by Spain in when the Madrid-Valencia high speed line opens. Spain now has Europe s most ambitious high speed rail programme, with the stated objective of bringing all regional capitals within 4 hours of Madrid by train. n contrast to the other large EU Member States, which all have significant high speed rail networks, there is only 113km of high speed rail line in the UK. 38

47 High speed line km Draft final report FGURE 4.6 HGH SPEED LNE KM N EUROPE 2,000 1,800 1,600 1,400 1,200 1, Belgium Germany Spain France taly UK Source: European Commission Statistical Handbook 4.19 Significant construction of new high speed lines is underway. Several of these projects connect to the rail routes to the UK and therefore offer the potential for faster rail journeys between cities in the UK and other European cities There are also a large number of other high speed rail projects which are at different stages of the planning process but are not as yet under construction. n order to make long term demand projections for high speed rail traffic to/from the UK, we need to make an estimate as to which of these projects will ultimately be constructed. Figure 4.7 shows the European high speed rail connections to/from the UK, and shows where high speed lines are under construction or planned. Routes that do not provide useful connections to/from the UK are not shown on this figure. 39

48 FGURE 4.7 THE RAL ROUTES BETWEEN THE UK AND EUROPEAN CTES Draft final report London Amsterdam Copenhagen Hamburg Berlin Hannover Warsaw Lille Brussels Cologne Frankfurt Prague Paris Stuttgart Strasbourg Basel Munich Vienna Bordeaux Lyon Geneva Zurich Milan Bilbao Valladolid Turin Marseille Nice Florence Madrid Malaga, Seville Valencia, Alicante Barcelona Valencia, Alicante High speed line High speed under construction High speed planned Other routes Rome Naples Source: SDG analysis Journey times from London 4.21 Table 4.1 shows current journey times by train from London to key European cities with significant volumes of air traffic from London. t also shows the approximate journey times that should be achievable in 2020 if all of the planned new high speed lines shown above are constructed. Significant further time savings would be achievable if direct trains were operated from London, and therefore the journey times that would be achievable with direct trains are also shown. 40

49 TABLE 4.1 Draft final report NDCATVE JOURNEY TMES FROM LONDON TO OTHER EUROPEAN CTES Destination city Current typical journey time (hours) Journey time in 2020 (hours) No new direct trains With direct trains from London Amsterdam 5:10 4:00 3:40 Madrid 17:00 9:40 8:20 Geneva 7:00 6:30 5:40 Rome 18:30 12:00 10:50 Paris 2:20 2:20 2:20 Malaga 20:10 12:50 12:00 Barcelona 15:00 9:00 7:50 Zurich 9:00 8:10 7:00 Frankfurt 6:45 5:45 5:00 Milan 11:50 7:45 6:50 Munich 11:00 8:10 7:30 Nice 9:10 9:00 7:50 Berlin 10:20 7:20 6:30 Cologne 5:20 4:30 3:40 Brussels 2:00 2:00 2:00 Source: SDG analysis of Thomas Cook European Rail Timetable 2008 and SDG research Analysis of demand by rail journey time 4.22 At present, rail only obtains significant market share when the journey time is less than 3-4 hours, but, as discussed above, this threshold may increase in the future. Therefore, in order to identify the market that might potentially switch to rail if this threshold increases, we have assessed the current and future journey times for travel by rail for a large set routes on which passengers currently travel by air, both domestic and between the UK and the in-scope countries. We have then identified the number of passengers currently travelling on these routes. This enables a quick identification of how many passengers could potentially switch to rail travel if the journey time threshold over which rail is competitive increases n order to estimate future rail journey times, we have had to make an assessment of which new high speed rail schemes will be completed by There are a large number of proposed schemes, some with a higher probability of being constructed than others. Where high speed lines are already under construction, we have assumed that they will be complete by 2020, but forming a view on which other schemes will be completed by 2020 necessarily requires a certain amount of judgement. We have assumed that the network in 2020 is as shown in Figure 4.7 above. 41

50 Draft final report 4.24 Figure 4.9 presents our analysis of current and future rail journey times, and the corresponding number of passengers currently travelling by air The figures plot the rail journey time and for each point aggregates the number of domestic UK and UK to mainland Europe air passengers. The x-axis plots the rail journey time in 5 minute intervals and the y-axis presents the total air passengers at that 5 minutes interval. For example, Figure 4.9 shows that for journeys where the rail alternative is between 8 hours 10 minutes and 8 hours 14 minutes there are currently 3.2 million air passengers, mostly accounted for by 1.6 million air passenger between London and Zurich and 1.3 million air passengers between London and Munich The key conclusion from the figures are as follows: After London-Manchester and London-Paris, the next closest significant route is Amsterdam. Although the journey time to Amsterdam will improve significantly when the Brussels-Amsterdam high speed line is completed, unless direct trains are operated, the journey time will still be over 4 hours; The London-Edinburgh and London-Glasgow routes are by far the largest markets with obvious potential to shift to rail. However, the rail journey times between these cities is not expected to improve significantly before 2020; and The rail journey time on a number of longer routes with significant volumes of air passengers are expected to improve significantly by 2020 e.g. London- Barcelona, London-Madrid, London-Rome, London-Milan and London-Malaga. 42

51 01:55 02:15 02:35 02:55 03:15 03:35 03:55 04:15 04:35 04:55 05:15 05:35 05:55 06:15 06:35 06:55 07:15 07:35 07:55 08:15 08:35 08:55 09:15 09:35 09:55 10:15 10:35 10:55 11:15 11:35 11:55 12:15 12:35 12:55 13:15 13:35 13:55 Air Passengers (000s) 01:55 02:15 02:35 02:55 03:15 03:35 03:55 04:15 04:35 04:55 05:15 05:35 05:55 06:15 06:35 06:55 07:15 07:35 07:55 08:15 08:35 08:55 09:15 09:35 09:55 10:15 10:35 10:55 11:15 11:35 11:55 12:15 12:35 12:55 13:15 13:35 13:55 Air Passengers (000s) Draft final report FGURE 4.8 CURRENT RAL JOURNEY TMES OF KEY ROUTES AGGREGATED NTO 5 MNUTE BANDS 7,000 LON-Edinburgh & LON-Glasgow 6,000 5,000 LON-Amsterdam 4,000 3,000 LON-Manchester & LON-Paris LON-Geneva LON- Zurich LON-Nice LON-Berlin LON-Munich LON-Milan 2,000 LON-Frankfurt 1,000 LON-Brussels 0 Source: CAA data and SDG analysis of public rail timetables FGURE 4.9 FUTURE RAL JOURNEY TMES OF KEY ROUTES AGGREGATED NTO 5 MNUTE BANDS (ASSUMNG NO NEW DRECT TRANS) 7,000 LON-Edinburgh & LON-Glasgow 6,000 5,000 LON-Amsterdam LON-Barcelona, & LON-Nice 4,000 LON-Zurich & LON-Munich LON-Madrid LON-Malaga 3,000 2,000 LON-Manchester & LON-Paris LON-Frankfurt LON-Geneva LON-Milan LON-Rome 1,000 LON-Brussels LON-Berlin 0 Source: CAA data and SDG analysis 4.27 t should be noted that this analysis assumes that no new direct rail services are operated. Connection times are a significant element of total journey time: for example, we have assumed an average connection time in Paris of 50 minutes, as a change of station would usually be required. Therefore, significant further improvement in journey times could be achieved if new direct trains were operated. 43

52

53 Draft final report 5 Future development of high speed rail in the UK ntroduction 5.1 This section outlines some of the issues that would need to be addressed if high speed rail services to/from and within the UK were to be expanded. n order to project how market share might change over time, we need to assess how these could be addressed. The issues are different for international and domestic services: for domestic services, a new high speed rail line would need to be constructed; for international services, the infrastructure has been constructed but other issues would need to be addressed if more use of this infrastructure was to be made. UK domestic services 5.2 This section outlines the project for a high speed rail line between London and Scotland/the north of England, and the assumptions made about this for this study. t describes the following: the potential route of a high speed line; the journey times that could be achieved; the possible capital costs; and the possible operating costs. 5.3 The analysis in this section is intended to provide an initial view of the costs and benefits of such a project. The numbers provided within this section are indicative. 5.4 This analysis draws on published analysis of the case for a high speed line, in particular: the high speed rail study undertaken by Atkins in 2002 on behalf of the Strategic Rail Authority (SRA); and the New Line Capacity Study undertaken in 2007 on behalf of the DfT, in particular the cost estimate study. 5.5 Network Rail has recently commissioned a new evaluation of the case for a high speed line, but this has not been finalised and was not available for this study. Potential route 5.6 t is expected that if a high speed line was built, it would run from London to cities in the north of England and possibly on to Scotland. The 2002 SRA study evaluated a large number of possible routes and combinations of routes. The two main options which were presented were: Option 1: A route from London to northwest England, which would then connect to the existing West Coast Main Line to serve Birmingham, Manchester, Liverpool and destinations to the north; to Option 8: A route from London to Scotland via Nottingham, Leeds and Newcastle, with a branch diverging in the Midlands to serve Birmingham and 45

54 Draft final report Manchester and connecting to the existing West Coast Main Line to serve Liverpool and other destinations. 5.7 The new lines study undertaken for DfT in 2007 also considered a number of routes. Cost estimates are provided for two networks: a core network of 853km of new high speed line; and a full network of 1,240km. 5.8 Unfortunately, the detail of the routes has been redacted from the published version of the report, on the basis that it might cause planning blight. However, from the limited information provided in the reports, and by comparing the total reported network sizes with actual distances between cities via the existing rail network, we infer that the two proposed networks would probably as shown in Figure 5.1 below. The report does confirm that the branch to Heathrow is part of the core route. For the purposes of the market share modelling undertaken for this study, we have assumed that the core route would be constructed only. FGURE 5.1 HGH SPEED LNE ROUTE NETWORK Glasgow Edinburgh Manchester Leeds York Birmingham Core route (assumed) Full network Heathrow London Euston Source: SDG analysis 5.9 There are a number of similarities between the routes which were developed for the two studies. Both had a core section between London and northwest England with a branch to serve Birmingham, and had a branch diverging from the main line in the Midlands to serve Leeds. The key difference between the routes is that the 2007 study proposed a line which continued north to Scotland from Manchester via the west coast, whereas the 2002 SRA study assumed a route to Scotland via the East Coast. Journey times 5.10 Table 5.1 shows the estimated journey times that could be achieved with a new high speed line on the route network described in Figure 5.1 above, and compares these to the current best timetabled journey times. t should be noted that these 46

55 Draft final report best journey times are usually only achieved by a small number of trains each day, and that typical journey times are longer on some flows. TABLE 5.1 JOURNEY TMES FOR A HGH SPEED LNE London to Current best journey time New high speed line (300km/h) New conventional line (240km/h) Birmingham 1:22 0:47 0:54 Manchester 2:07 1:22 1:31 Glasgow 4:10 2:40 3:04 Edinburgh 4:13 2:41 3:05 Leeds 2:11 1:36 1:44 York 1:44 1:40 1:48 Source: National rail timetable; DfT New Line Capacity Study Journey Time Run Comparisons 5.11 Due to the western alignment proposed, significant journey time savings are achieved on routes to Birmingham and Manchester, even if a new line was not built to high speed specification (300km/h). n contrast, the proposed route offers little reduction in journey times to York, or destinations which would be reached via York, such as Durham and Newcastle. This demonstrates that a single high speed route from London to the north of England and Scotland is unlikely to offer a significant benefit to all major northern cities The report does not provide information on journey times that could be achieved to/from Heathrow. However, given the distance would be similar to that to/from central London, we would expect the journey time to be similar. Capital costs 5.13 The capital costs of construction of a new high speed line would be significant. Table 5.2 below shows the estimated infrastructure costs. TABLE 5.2 NFRASTRUCTURE COSTS ( BLLONS) New high speed line (300km/h) New conventional line Core route (853km) nfrastructure Risk/optimism Total Full network (1,240km) nfrastructure Risk/optimism Source: DfT New line capacity study cost estimate Total The total cost estimates include an allowance for risk and optimism bias, in accordance with Treasury appraisal guidance. This reflects the tendency of major rail projects in the UK (and abroad) to suffer from outturn costs being higher than original estimates These estimated costs are lower than those reported in the 2002 SRA study on a new line. This is achieved due to changes in the alignment in order to achieve a shorter 47

56 Draft final report route, and to use of upgraded existing rail routes and disused alignments where possible These cost estimates do not include the capital costs of new rolling stock, which are estimated as 2-3 billion. However, since this would be, at least in part, an alternative to provision of new rolling stock for long distance services on the existing rail network, this cost is not fully incremental. Comparison to projects in other countries 5.17 The 2003 study that we undertook for the Commission for ntegrated Transport 5 identified that the costs of construction of high speed rail in the UK appeared to be significantly higher than the costs of construction of high speed rail in other comparable European countries. We identified that the Channel Tunnel Rail Link (HS1) was, per kilometre, the most expensive major high speed rail project in the world, even after making allowances for the higher proportion of tunnelling (which is much more expensive than surface construction) required for this route The DfT New Lines study makes some allowance for reductions in capital costs relative to HS1, as it assumes the UK rail industry will have learnt lessons from best practice elsewhere. The studies estimate of capital costs, and the capital costs of other projects, are shown in Figure 5.2 below. FGURE 5.2 COMPARSON OF NFRASTRUCTURE COSTS PER ROUTE KM 6 UK new high speed line (est.) High Speed 1 Risk allowance Netherlands: HSL Zuid Belgium: Antwerp-Dutch border taly: Rome-Naples Spain: Vitoria-Bilbao/San Sebastian France: TGV Med Germany: Nuremburg-Munich France: Perpignan-Figueras Spain: Madrid-Valladolid Spain: Madrid-Barcelona France: TGV Est nfrastructure cost million/kilometre Source: DfT New line capacity study cost estimate 5.19 Excluding the risk allowance, the estimated capital costs of a UK high speed line are comparable to the costs in other densely populated northern European countries. However, if the risk allowance is included, the capital cost is significantly higher. This does raise the issue of whether it is reasonable to include such a high risk 5 High speed rail: nternational comparisons 6 Note: This figure excludes non-european projects and European projects with exceptionally high levels of tunnelling and technical complexity such as the Florence-Bologna high speed line. 48

57 Draft final report allowance for a project of this nature: the basic cost estimate is already comparable to other projects including any overruns. Operating costs 5.20 The 2007 DfT New Lines study estimated an operating cost of 20 billion over 30 years. This included operating and maintenance costs for the rolling stock and the infrastructure, and major one-off costs such as mid-life refurbishment of the trains. Unfortunately, the published elements of this study do not include any estimates of the revenue a high speed operator might be able to obtain, and therefore this study does not indicate whether there would be a net increase in the subsidy required for the national rail network The 2002 SRA study estimated that the operating costs per passenger kilometre of a new high speed line would be approximately equal to the costs of an existing train operator on the classic network in the UK. Overall, it estimated that the revenue of the high speed train operator would be significantly higher than its operating costs, excluding any payments required to recover the capital costs of the construction of the line However, it also estimated that much of the revenue of the high speed rail operator would be abstracted from other train operating companies. Therefore, although the train operating company on the high speed line would be able to pay a premium to the DfT, this was likely to be less than the reduction in premium (or increase in subsidy) for other rail operators. The incremental rail industry revenue was estimated to be around 77% of the incremental operating costs Since 2002, there has been a significant increase in rail industry revenue. Demand and revenue growth has outstripped projections made at the time, and this has resulted in recent rail franchise bids including significant premium payments to DfT. This increase in rail demand has been attributed to a number of factors including: better rail punctuality and reliability; the impact of increased road congestion; planning changes which have resulted in more new developments being located close to public transport links rather than at green field locations that are easier accessed by car; higher fuel costs; and greater environmental awareness n the future, carbon pricing or other environmental measures which increased the price of the two modes which primarily compete with high speed rail (car and air), might lead to further increases in rail demand Given these factors, and the relatively small difference estimated in 2002 between incremental rail operating costs and incremental revenue, it now seems possible that incremental rail revenue might be close to or exceed incremental rail operating costs. t is not within the scope of this study to produce financial projections for a high speed line, but in our view it is reasonable to adopt a working assumption that: a high speed line would not require incremental subsidy to cover operating costs; but 49

58 Draft final report it would be unlikely to generate enough incremental revenue to allow recovery of a significant proportion of the costs of the capital investment required to construct the line. Maglev 5.26 The DfT New Lines study also evaluated the costs of a Maglev route. t found that the capital costs of Maglev would be 260% higher than the costs of a high speed rail network built using existing technology ( billion for the full 1,240km network). Part of the difference was due to use of a higher risk allowance for Maglev, but even excluding risk, the capital costs of Maglev were estimated as 189% higher than the costs of high speed rail The operating costs of Maglev were however estimated as being significantly lower than the operating costs of high speed rail. Nonetheless the total cost over 30 years of Maglev (operating plus capital costs) was estimated as 136% higher than high speed rail The published elements of the report did not include a specific statement of what journey times could be achieved with Maglev. However, UK Ultraspeed, which promotes Maglev development, states that with Maglev operating at 500km/h it would be possible to achieve the following journey times: 30 minutes for London-Birmingham; and 50 minutes for London-Manchester. nternational services 5.29 The infrastructure to provide direct high speed rail services between London and continental Europe already exists, but the only regular passenger rail services are the Eurostar services to Paris and Brussels. There are a number of constraints which limit the development of rail travel between the UK and continental Europe beyond the core London-Paris/Brussels service. This section sets out a high-level examination of these constraints to see whether there is the potential to overcome these in the future. These constraints are very important in evaluating the potential for rail/air competition on these longer routes. The issues we discuss are: safety regulation; security requirements; and fares structures and ticketing A further constraint is that, any new rail services would (unless subsidised) need to generate sufficient revenue to offset their operating costs. We discuss how we have modelled rail and air operating costs in section 6 below t is possible that in the longer term some of these constraints could be addressed. However, the fact that they have not been addressed in the first 15 years of operation of the Channel Tunnel shows that it cannot be assumed that this would happen. Safety requirements 5.32 The safety requirements for passenger trains operating through the Channel Tunnel are particularly onerous and mean that European high speed trains other than the Eurostar units are not permitted to operate through the tunnel. The requirements 50

59 Draft final report are significantly more onerous than those applying to other long rail tunnels, for example (for comparison the Channel Tunnel is 50.5km long): the longest land tunnel in the world, the Lötschberg Base Tunnel in Switzerland, which opened in 2007, is 34.6km long but carries regular passenger trains; and the high speed rail link between France and Spain (Perpignan-Figueras) includes an 8km tunnel through the Pyrenees, but again this will carry regular passenger trains when it opens Some of the most important requirements relate to the length of the trains and the evacuation procedure. Trains have to be long enough to stop close to one of the regular exits into the third (service) tunnel, and the train has to have the capability to allow passengers to be evacuated into one half, which must then be able to separate from the rest of the train and leave the tunnel under its own power. This means that it is not possible to operate services through the tunnel except using very long trains of a specific design (which offer high capacity but are expensive) These requirements significantly increase the cost of rolling stock for Channel Tunnel operations and are a major constraint on the operation of new through rail services. They were recently described as mad, ridiculous and insane by one rail analyst 7. However there have also been reports that they would be amended to allow Deutsche Bahn to operate direct CE trains to London. Security requirements 5.35 The UK government currently requires advance security and immigration screening for Eurostar passengers. These checks have several implications: t is difficult or impossible for Eurostar trains to carry domestic passengers on either side of the Tunnel, because these passengers would also need screening. Therefore, if a train was to be operated on a route such as Birmingham-Paris, it would have to be filled with through passengers it could not set down passengers in London. t is necessary to use stations with segregated, secure platforms and waiting areas. This creates a significant capital cost in serving a new station, and as many railway stations do not have sufficient space, limits the stations that can be served There are no equivalent security checks for passengers using rail services through other long tunnels such as the Lötschberg tunnel and no equivalent checks on passengers using car shuttle services through the Channel Tunnel. The only remotely similar security checks in Europe are in Spain, where passengers luggage is passed through a screening device before boarding a high speed train (to search for explosive devices). This is much faster and less onerous than the checks required for Eurostar, as there is no screening of passengers for metal objects; passengers only need to arrive at the station 5 minutes in advance, compared to 30 minutes for Eurostar. t is unclear why there are higher security requirements for Eurostar trains than other high speed trains or other trains passing through the Channel Tunnel. 7 Christian Wolmar, Rail 579: Who is going to use the new high speed line? 51

60 Draft final report 5.37 n 2004, the UK government agreed with Belgium and France to introduce immigration screening checks at Paris Gare du Nord, Brussels Midi and the other stations served by Eurostar. As part of the agreement, French immigration officials also operate at Eurostar stations in the UK. This agreement was made in response to a rising number of asylum seekers and illegal migrants seeking to enter the UK via Eurostar. Before this, it was reported that up to 400 asylum claims were made at Waterloo station each month. Unlike the security checks, it is clear what the purpose of these checks is, but they do represent a further constraint to operating through rail services Press reports indicate that, in 2001, the British government proposed that all illegal migrants or asylum seekers entering the UK via the Channel Tunnel would be automatically returned to France, but this proposal was rejected by France 8. Such an arrangement would allow significantly more flexibility in operation of long distance trains as it would eliminate the need for UK immigration officers to be located at all stations in continental Europe served by trains to the UK. t would also allow trains operating through to the UK to pick up and set down passengers in continental Europe without these passengers having to pass through UK immigration prior to boarding the train The combination of these security requirements and the safety requirements discussed above significantly reduces the potential for through rail services beyond the core London-Paris/Brussels route, because: only high capacity trains could be used: the standard Eurostar sets have 18 coaches and the regional Eurostar trains which were purchased but never used on regional services have 14 (approximately 600 seats); due to the requirement for screening at stations, the number of stations served would be low, and in particular the trains could not make multiple stops in continental Europe therefore many passengers would still need to interchange; and it would be necessary to fill all of this capacity with passengers making through journeys, as the train would not be able to pick up and set down passengers en route At present, therefore, if a train was to be operated (for example) between London and Cologne, it would need to be a very high capacity specialised train due to the Channel Tunnel train length requirements, and the 600+ seats on the train would need to be entirely filled with London-Cologne passengers. Fares structures and ticketing 5.41 Due to the safety, security and immigration requirements described above, it is likely that in the medium term passengers wishing to make rail journeys between the UK and continental Europe will have to use the London-Paris/Brussels Eurostar service and change trains where necessary to make longer distance journeys. Therefore, any passengers wishing to make through journeys by rail will need to either: 8 See for example Daily Telegraph report 19 June

61 buy through tickets from Eurostar, where these are available; or buy separate tickets for each leg of the journey. Draft final report 5.42 This means that it is important for through tickets to be attractively priced and readily available. Ease of purchasing tickets 5.43 Although some through tickets are made available by Eurostar, and it advertises that low fares and convenient connections exist for through journeys, in practice we have found it difficult to locate any on some routes. When we have undertaken benchmarking for this study we have found that for the London-Amsterdam route, the through fares quoted on the Eurostar website were consistently more expensive than buying separate tickets for each leg, often by a factor of over 100%; and for the London-Cologne route, the only fares we could obtain via the Eurostar website were for journeys via Paris, with a journey time of 7-8 hours, instead of the more direct route via Brussels (journey time 5-6 hours) For example, for a journey from London to Amsterdam, we found that: the cheapest off-peak standard class return journey booked 4 weeks in advance was quoted as 308 on the Eurostar website; whereas buying the London-Brussels and Brussels-Amsterdam tickets for the same trains separately from the Eurostar and Thalys websites allowed a through fare of 150 ( 74 plus 86) still higher than air travel, but a much reduced differential, and reduced further if the costs of access to the airport are included n order to obtain the best fares and connections, knowledge of the European rail network and of the booking systems of different operators is currently required. This is a significant deterrent to purchasing tickets t might be assumed that, in the future, the rail operators would be able to improve the ticketing systems so that it is no more difficult to purchase tickets for connecting journeys than for the core London-Paris/Brussels journeys. Some efforts are being made to do this through initiatives such as the Railteam alliance. However, as yet, these measures do not seem to have been successful. Price of tickets 5.47 For through journeys beyond the London-Paris/Brussels core route, at present the best fare is likely to be close to the sum of the fares for the individual legs of the journey. Therefore, passengers will need to pay a total fare which is similar to the Eurostar fare plus the add-on ticket To date, Eurostar s pricing policy appears to have been to set fares comparable to those of the airlines operating on the London-Paris/Brussels route. This means that a passenger wishing to travel by rail to a more distant destination may have to pay a fare which is equivalent to an airline ticket to Paris/Brussels plus the cost of the onward ticket. Under these circumstances, it is unlikely that the total rail fare for the longer journey would be competitive For example, air fares from London to Amsterdam are currently similar to air fares to Brussels, because airline operating costs are similar on the two routes. Eurostar s 53

62 Draft final report fares to Brussels are competitive with the airlines on the Brussels route, but, for rail to be price competitive on the London-Amsterdam route, the train ticket for London-Amsterdam must cost no more than the train ticket for London-Brussels. ndeed, as rail s market position is weaker on the Amsterdam route (due to the longer journey time) the rail fare might have to be less on this route if rail was to attract significant market share This means that, unless there is a change to Eurostar s pricing policy, or a second rail operator enters the route, the fares for long distance rail journeys are likely to be significantly higher than the fares for air travel over equivalent distances n the absence of competition, this might continue to be the case even if carbon taxes or other environmental charges increase the price of air travel. As Eurostar is a monopoly rail operator, if the fares of its main competitors (British Airways and Air France) are increased due to environmental charges, the rational commercial strategy for Eurostar may be to increase its own prices. Eurostar s fares could only be expected to be kept at the same level in the event that: a competing rail operator were to start parallel services on the route; or some type of fares regulation or other restriction on Eurostar s fares was introduced. Conclusions 5.52 This section has identified that there are a number of practical problems which may constrain the growth of rail travel between the UK and continental Europe, for journeys beyond the existing London-Paris/Brussels routes. n particular, the current safety regulations for trains using the Channel Tunnel, and the security and immigration regulations for international trains, limit the potential for new direct services at present Some of these issues could be addressed. For example, it is not transparent why the safety and security regulations for cross-channel trains should be any stricter than those applying to other trains using very long tunnels. Other issues, in particular the immigration requirements, would be difficult to address The security and immigration regulations mean it is difficult for trains to make multiple stops or pick up and set down passengers en route, which would be required to make longer distance services commercially viable in the medium term. At present, only point-to-point services could operate (for example London- Amsterdam or Birmingham-Paris), but the practical problem is that on most such routes there would not be enough passenger demand for a service operating at reasonable frequency n the absence of new direct services, international rail passengers making journeys beyond the core London-Paris/Brussels route would need to use the existing Eurostar service and change trains. However, the level and structure of rail pricing at present is such that rail is not competitive on price for longer distance journeys. Although improvements to the existing ticketing system would help, radical changes to either the market structure or the current operators pricing strategy would be necessary for rail to be competitive on price with air travel for most journeys beyond the core London-Paris/Brussels route Carbon taxes or other environmental levies, or increased fuel costs, may increase the price of air travel in the future. n principle this might be expected to cause a 54

63 Draft final report switch to rail travel. However, as there is no competing rail operator or any fares regulation at present, it is possible that Eurostar would respond to this by increasing its own fares, in order to increase its profitability. Therefore, it cannot be assumed that such taxes or charges would lead to a change in market share. 55

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65 Draft final report 6 Drivers of demand and market share ntroduction 6.1 This chapter discusses the main drivers of air and rail demand, and the market share between air and rail. The conclusions from this section will inform the selection of routes to be modelled and the model specification. 6.2 This section focuses on the factors which prompt passengers to decide which mode to select once they have made their choice of route. However, this cannot be separated entirely from the overall level of demand on each route. Policy measures intended to cause modal switch may also cause changes in the overall volume of travel demand. Changes to the relative costs and convenience of different modes on different routes may also prompt some passengers to decide to travel to different destinations, and therefore this can also affect mode switch. This is discussed at the end of the section. Drivers of demand 6.3 The key factor driving higher levels of demand for travel is increased incomes. Higher incomes mean that people can afford to travel further and more often. They may decide to take more holidays or travel further when they do go on holiday, and to live further from their place of work, requiring commuting over longer distances. ncreased trade in goods and services creates a need for people to travel to meet clients, undertake site visits, and display products. 6.4 European policy on transport and sustainable development has been to seek to decouple transport growth from economic growth 9, but this has not succeeded to date (Figure 6.1 below). 9 See for example the White Paper European transport policy for 2010: time to decide 57

66 Volume and GDP (ndex 1995=100) Elasticity of demand growth to GDP growth FGURE 6.1 PASSENGER TRANSPORT GROWTH RELATVE TO GDP GROWTH Draft final report Source: SDG analysis of EU Statistical Pocketbook data Elasticity of passenger growth to GDP Passenger km (1995=100) GDP (at constant 1995 prices) 6.5 The second key factor which may prompt people to travel more is changes in the price of transport. Long term transport demand modelling is usually undertaken using incomes and price as the main demand drivers. 6.6 n addition, other factors can prompt changes in transport demand, including: Ease of travel: f travel becomes easier or faster, people will chose to travel further, unless there is an offsetting effect (such as increases in price). Social factors: Migration is likely to result in increased transport demand, as it prompts increased demand for trips to visit friends and relatives. Exchange rates: Exchange rate variations can increase travel between particular States. For example, historically there has been significant travel from the UK to France to take advantage of lower prices for alcohol and cigarettes, but this market is likely to have been eliminated by recent changes 6.7 For the purpose of this study, price and ease of travel are key factors, as we will need to understand the extent to which policy measures (such as carbon pricing and new high speed rail lines) will prompt changes in market share. However, it is important to understand that these measures will also cause changes in the overall volume of travel demand, which could be at least as significant as any change in market share. Drivers of market share Journey Time 6.8 The main factor which drives market share is the rail journey time. Figure 6.2 is taken from our 2006 study into Air and rail competition and complementarity, it shows that the correlation between rail journey time and market share is strong. We have updated this figure as a part of this study. 58

67 Rail market share (%) FGURE 6.2 RELATONSHP BETWEEN RAL JOURNEY TME AND MARKET SHARE Draft final report 100% FRA-CGN (2005) 90% FRA-CGN (2000) MAD-SVQ 80% LON-MAN (2008) LON-PAR (2008) 70% LON-BRU (2008) LON-NCL PAR-MRS (2004) 60% LON-PAR (2002) GLA-MAN 50% LON-MAN (2004) PAR-MRS (2000) LON-BRU (2002) 40% ROM-ML 30% LON-ED (1999) 20% LON-ED (2008) BH-ED BHM-GLA LON-GLA 10% MAD-BCN (2005) MAD-BCN (2002) 0% 00:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 Rail journey time Source: SDG analysis and research 6.9 Our 2006 study undertook case studies of eight European air/rail routes. They also had access to some time series data for rail market share, and where there had been a significant change (for example due to the opening of a high speed line), in the figure above they showed the market share both before and after the change t can be seen in Figure 6.2 that where rail journey times are between 2-3 hours high speed rail achieves a market share of between 60% and 90% (excluding London to Brussels). For journey times between 4 and 5 hours the market share achieved is much lower. However, it also clear that journey times is not the only factor, as there are signification variation in market share between routes with approximately the same journey time. There are three reasons for this variation: Other journey time factors; The relative price of air and rail; and Other factor, not related to journey time or price, which affects the attractiveness of the air and rail operators. Access and egress time and cost 6.11 Passengers will be interested in the total door to door journey time, so the journey time and cost of accessing each mode will be an important factor in determining mode share. Using CAA survey and LATS data we have investigated how mode share is influenced by access and egress times. This analysis has focused primarily on the London end because it is at this end where there will be the greatest difference n order to conduct this analysis we have allocated passengers to four surface origin bands: At airport passengers whose origin is the airport i.e. connecting passengers; Near Airport- passengers travelling from an origin that is 15 minutes closer to the airport; Near Station- passengers travelling from an origin that is 15 minutes closer to the train station; and 59

68 Rail Market Share (Percentage) Draft final report Near Both - passengers travelling from an origin that is within 15 minutes from both the airport and the train station n the analysis we have assumed that currently that no connecting passenger travel by rail and therefore that rail market share for at airport passengers is zero. Figure 6.3 details the market share of rail for each surface origin band and the overall market share. FGURE 6.3 RAL MARKET SHARE BY DSTANCE FROM ARPORT AND RAL STATON % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% London-Edinburgh London-Glasgow London-Newcastle London-Manchester Near Both Near Airport Near Station Overall market share (including air-air transfer passengers) Source: CAA survey data 6.14 The figure shows that, for all routes, the rail market share is higher for passengers travelling from origins closer to the train station than the airport. For example, the total rail market share for London-Edinburgh is 26%, however, for passengers who are starting their journeys in London significantly closer to the train station than an airport, market share increases to 41% We have undertaken similar analysis for the non-london end of the journey. However, this has shown no clear evidence of the final destination point influencing mode choice. We believe this is for several reasons: The journey time from the city centre to the airport is much lower in UK cities other than London The CAA survey data does not provide enough detail on the surface origin/destination point, outside London. For example, the whole of the city of Edinburgh is a single zone. This makes it difficult to distinguish journeys to destinations close to the station from journeys to destinations closer to the airport. Several non-london destinations have multiple rail stations served by long distance trains. For example, the catchment area for Manchester airport includes Stockport, Manchester Piccadilly, Macclesfield, Wilmslow and Crewe. Therefore, the city centre is not the only area for which a rail station is more convenient than the airport. 60

69 Other journey time factors Draft final report 6.16 As well as the headline journey time between two cities, a number of other factor will influence the total journey time experience by the passenger: The frequency is treated a being important in transport modelling, typically an improvement in frequency from every 2 hours to 1 hour is equivalent to a reduction in journey time of 20 minutes; Any interchange passenger will, all else held constant, prefer direct service over indirect services; and Check-in time in most cases rail passengers do not need to check-in in advance (although there is a 30 minute check-in for UK international rail passengers), whilst air passengers must check-in at least minutes before departure Within transport modelling in order to include all journey time related factors the concept of generalised journey time has been developed. This is essentially a weighted sum of all the journey time related factors. Our 2006 study found that using generalised journey time explained nearly 90% of the variation in market share across the routes we studied. Please note that it was found that the correlation between rail journey time and market share was improved if the excess journey time for rail travel was used (the difference between the rail journey time and the air journey time) not just the rail journey time While generalised journey time explains most of the observed variation, there is still some variation unexplained. For example, changes in relative generalised journey time cannot explain the decline in rail market share on the London-Edinburgh route between 1998 and Price 6.19 Price will be an important issue in both determining market share and the total size of the market. On some routes shown in Figure 6.2 above, on which rail fares are relatively low, rail obtained significant market share even with journey times that are significantly longer than air Within continental Europe rail travel is often cheaper than air travel over long distance journeys, but on routes to/from and within the UK, this is not the case. On the London-Paris route, for example, rail is often the more expensive mode especially when benchmarked against low cost airlines. When the rail operator does offer a superior product it may decide to realise this competitive advantage through a higher fare rather than a higher market share, especially when it is not constrained by fares regulation or a competing rail operator n order to compare air and rail fares we have collected data for a basket of fares (Figure 6.4 below). The basket is chosen to be reflective of the type of passengers travelling on the route although we do not have yield data from the operators so we cannot be sure that this is representative. The data was collected during May We have defined the basket of fares as follows: Typical business travelers: One weekday day return ticket, at business travel times i.e. out around 8am, back around 5pm, booked 7 days in advance; and 61

70 Average Fare ( ) Draft final report One midweek overnight return ticket also at typical business travel times e.g. Out 5pm back 5pm next day, booked 7 days in advance. Price sensitive business traveler: One midweek overnight return ticket also typically at business travel times e.g. out 5pm back 5pm next day, booked 21 days in advance. Single trip: One single ticket for shoulder travel times (e.g. midday Friday) booked 28 days in advance. Leisure passengers: One return ticket for 'shoulder' travel times e.g. out mid Friday back mid Sunday, booked 28 days in advance; and One return ticket for travel at off-peak times e.g. out Wednesday back the following Wednesday, booked 56 days in advance We have collected this basket of fares for both domestic and international routes Figure 6.4 presents the average of the fares basket for air and rail on the London- Paris, London-Brussels, and London-Amsterdam routes. n the figure we show the average air fare charged by all operators and the cheapest air fare available for each element of the basket. t can be seen that while rail is cheaper than the average of air operators, on the Paris route, it is significantly more expensive that the lowest fare operator We have also collected air fares for longer distance European routes. However due to the difficulty of collecting rail fare data for long distance European routes at present we only show this for the Amsterdam route. FGURE 6.4 AR AND RAL FARES ON LONDON-PARS, BRUSSELS AND AMSTERDAM ROUTES London-Paris London-Brussels London-Amsterdam Rail Air Minimum Air Fare Source: SDG calculation and research 6.25 Journey purpose will be an important factor in determining how sensitive passengers are to price. Business passengers will be relatively insensitive to price, given that their company may pay for the ticket, and their time may be constrained. Leisure passengers can be expected to be more price sensitive in selecting their mode of transport. 62

71 Average Fare ( ) Draft final report 6.26 Within the UK, rail operators are subject to fares regulation, limiting the increase on certain ticket type to 1% above inflation. However, most long distance fares are not regulated and the pricing strategy of rail operators has been to increase the price of flexible tickets significantly, and then to offer some cheaper non-flexible As can be seen in Figure 6.5 rail fares are typically similar to air fares on UK domestic routes. As with Figure 6.4 we show the average of the lowest fare available for each element of the basket. What this shows is that while air is the more expensive mode, it often possible to find an air fare that is cheaper to the corresponding rail fare. For most of the routes we have looked at there are three to four operators that are not only competing against air but also competing between themselves. FGURE 6.5 AR AND RAL FARES ON DOMESTC ROUTES London- Glasgow London- Edinburgh London- Newcastle London- Manchester Manchester- Edinburgh Manchester- Glasgow Birmingham- Glasgow Birmingham- Edinburgh Rail Air Minimum Air Fare Source: SDG calculation and research 6.28 There is little scope for rail operators to reduce fares unless the government changes its current policy on rail fares. Rail operators currently bid to operate routes on the basis of the lowest subsidy or highest premium payment, and this creates a pressure to increase fares as much as possible. t is therefore likely that, due to this pressure, rail operators could respond to any increase in the cost of air travel by further increasing fares. Other factors influencing market share 6.29 Other factors that will influence market share are: Reliability and punctuality; Service quality on-board and at terminals; and Availability of alternative (lower cost) modes n discussions we had with air and rail operators for our 2006 study, a number suggested that reliability and/or punctuality were very important in determining rail market share. Whether reliability and punctuality has a positive effect on rail market share is route specific. 63

72 Draft final report 6.31 f service quality was discernible superior on one mode without a commensurate increase in price it is like to affect mode share. However, on most routes in Europe there is no significant difference in the on-board service quality provided by air and rail operators. Therefore service quality appears to have little effect on air-rail mode share. Route substitution 6.32 Holiday travel is largely discretionary. Therefore, measures which affect the relative attractiveness of different modes may also affect the relative attractiveness of travel to different destinations, and the overall volume of travel. For example, if rail travel from London to Amsterdam became easier and cheaper due to launch of a direct rail service, this would have a number of effects: rail would gain market share from air on this route; the overall volume of travel would increase (some passengers would make journeys that they would not otherwise have made); and some passengers would decide to take holidays in Amsterdam or Paris travelling by rail, rather than (for example) Prague or Barcelona travelling by air Research undertaken by the CAA shows that this is an important factor for holiday travel 10. Overall, outbound leisure air travel was found to be moderately price inelastic (elasticities were estimated as being in the range -0.7 to -0.8). The reason for this is that travel, particularly for short haul journeys, accounts for only around one third of the cost of the trip the remainder is accounted for by other costs such as hotels and entertainment. Therefore, a 3% increase in the price of an air ticket only increases the cost of a holiday by 1% on average However, the research also shows that route-specific price elasticities are higher, because passengers may choose to switch between routes. On average, it found that route-specific price elasticities for short haul routes were around This implies that a route-specific price change will cause switching in demand between routes which is of a similar magnitude to the impact of the overall change in demand This study only analysed the price of travel, not other attributes such as convenience or journey time, which might arise from the extension of high speed rail services. However, it would be reasonable to expect a similar effect, as reductions in journey time on these routes will result in a reduction in the generalised cost (time plus cost) of travel This implies that improvement in rail services to near European destinations could have a greater effect on emissions than that caused by modal switching on the specific routes served, because it will cause some passengers to take their holidays in nearby European destinations travelling by train, as a substitute for travelling to more distant destinations by air. Therefore, even if it is very unlikely that rail would gain a significant market share on long distance European routes (such as London to the south of Spain), the number of air passengers on these routes could still be reduced by improvements to high speed rail services to closer destinations. 10 Demand for outbound leisure travel and its key drivers, CAA December

73 Draft final report 6.37 n the short term, this effect will only apply to holiday travel. n the longer term, it may also apply to travel for the purposes of visiting friends/relatives as well. The boom in low cost air travel in recent years, as well as the EU Single Market, has caused many British citizens to buy second homes abroad. The number of UK households with a second home abroad has almost doubled since 2000, and over half of these second homes are in France or Spain 11. f high speed rail travel to France became easier and cheaper, and air travel became more expensive, purchase of second homes in France would become more attractive relative to purchase of second homes in Spain which could only be accessed by air. Conclusions 6.38 n the absence of policy measures or other factors which make travel less attractive, demand for all types of travel is likely to continue to increase, as a result of higher incomes Rail journey time is by far the most important factor determining the mode share between air and rail. The correlation between journey time and mode share is further improved if all the factors that effect the door-to door journey time are included. At present, for rail to achieve significant mode share it must be able to offer journey time comparable to that achieved by air; typically, it will obtain a market share of around 50% if the rail journey time is 3 hours For journeys longer than 3 hours, rail can only obtain significant market share if it offers some other benefit over air travel. The only benefit which is likely to have a significant impact on market share is price: rail must offer a lower price than air transport if it is to obtain significant market share on these longer distance routes. 11 nternational Relations: The growth in air travel to visit friends or relatives (CAA 2009) 65

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75 Draft final report 7 Model overview ntroduction 7.1 The main purpose of the model developed as part of this study is to estimate the potential for modal shift between UK aviation and rail. n particular, the model developed needs to estimate the effect on modal share between air and rail as a result of Changes in journey time and other journey time related factors: These could be either small changes such as those which are expected to result from the deployment of EP on the East Coast Main Line, or step changes as a results of the construction of a new high speed line covering certain city pairs Changes in the price of either mode: These could be due to possible carbon pricing, changes in air passenger duty, or other revision to fares. Model structure 7.2 The model developed covers five key elements, each of which is a separate module of the demand model (shown in Table 7.1 below). The outputs of the demand model will be based on the outputs of the five modules. TABLE 7.1 Module KEY MODEL ELEMENTS/MODULES Purpose Market share Price Module Underlying growth Trip generation/ destruction Route substitution This is the extent to which air and rail market share on the routes modelled may change, as a result of changes to journey time, price or other factors. This is the most important and most complex element of the model. The price module calculates the operating costs for air and rail operators and translates them into the fare charged by the rail and air operator for each modelled route. Economic and population growth will lead to some underlying growth in demand, which we will need to estimate in order to quantify the size of any emissions impacts and to estimate. Trip generation or reduction will also be a significant consequence of (for example) construction of a high speed line or introduction of carbon pricing for air transport. The market analysis identified that an important effect of journey time and cost changes could be leisure passengers choosing short distance rail trip rather than longer distance air trips. This module estimates this effect. 67

76 Draft final report 7.3 The figure below shows the overall structure of the demand model developed for this study. FGURE 7.1 OVERVEW OF THE MARKET SHARE MODEL STRUCTURE 7.4 n the demand model only 23 city pairs are modelled. Subsequent to our proposal the Committee on Climate Change (CCC) requested that as a part of this study we provide an evaluation of the total air demand that may switch from air to rail. To do this we map each UK air route, where there could be some modal switching, to one of the modelled routes. The model then assumes that the mode switch on the non-modelled routes will be the same as the modelled routes. The route substitution calculation is conducted on the full list of UK routes. 7.5 Table 7.2 presents the routes that are modelled directly in the demand model. The routes have been selected from four blocks: Domestic routes; London to mainland Europe; Other UK cities to mainland Europe; and Direct routes to Heathrow. 7.6 We have chosen 12 routes from London to mainland Europe, five routes from other UK cities to mainland Europe, six domestic routes, and three routes to Heathrow. The number and type of routes chosen is consistent with our proposal. 68

77 TABLE 7.2 MODELLED ROUTES Draft final report Block of analysis Routes Domestic routes London-Glasgow London-Newcastle London-Edinburgh London-Manchester Birmingham-Edinburgh Birmingham-Glasgow London to mainland Europe London-Paris London-Madrid London-Brussels London-Amsterdam London-Frankfurt London-Dusseldorf London-Malaga London-Milan London-Geneva London-Bordeaux London-Berlin London-Prague Other UK city to mainland Europe Manchester-Malaga Birmingham-Amsterdam Manchester-Paris Edinburgh-Amsterdam Manchester-Amsterdam Direct route to Heathrow London-Glasgow London-Manchester London-Edinburgh 7.7 The routes selected account for 29.9 million air passengers in 2008 or 14% of the total UK air passengers. The routes include both predominately business and leisure routes. 7.8 For the domestic routes we analyse the air-rail modal shift with and without a new UK high speed rail route. Market share model 7.9 The main component of the demand model is the market share module. The output from this module will be the forecast mode switch between air and rail on each route as a result of changes to journey time and cost. The market share module is based around a logit model. Logit models are particularly appropriate when modelling the impact of large changes in journey time or price of the type we are looking at in this study The logit model calculates market share on each route on the basis of the generalised cost of each mode. This cost reflects two elements, the generalised journey time and the price, and is defined as follows: Where: GJC VoT * GJT Cost GJC is generalised journey cost; GJT is the generalised journey time; VoT is the value of time, which is used to convert generalised journey time into a monetary cost; and 69

78 Draft final report Cost is the total cost of the journey including the cost accessing and egressing the airport or station Generalised journey time is essentially a weighted sum of all the journey time related factors. Where the journey time actual spent in the main mode of transport is given a weight of one and all other journey time factors are weighted in respect to this. The main journey time factors are: n-vehicle time: This is the journey time on the main mode of transport (air or rail). Frequency: Passengers will prefer a frequent service to a less frequent service, and therefore the calculated generalised journey time includes a frequency penalty. The frequency penalty is not directly proportional to the time gap between services, but uses an inverse power rule so the impact on market share of an improvement from a frequency of one train every 60 minutes to one every 30 is greater than the impact on an improvement from once every 120 minutes to once every 90. nterchanges: As well as the additional journey time that result from making an interchange, passengers will also put a valuation on the inconvenience of having to make an interchange and the risk of missed connections. n order to capture this we have applied an interchange penalty which is on top of the actual interchange time. Access and egress time: Passengers will select their mode on the basis of the total door-to-door journey time, not just the journey time in the main mode of transport. Therefore, the access and egress time needs to be added. Check in time: n most cases rail passengers do not need to check-in advance, whilst air passengers must check in at least 45 minutes before departure. Eurostar passengers also have to check in at least 30 minutes before departure. Passengers will dislike checking in both because of the additional journey time and the additional inconvenience n order to estimate the mode share the logit model establishes a relationship between the relative generalised journey cost of each mode and the mode share. n order to do this logit model converts the generalised journey cost into an estimate of the disutility of travelling by each mode. The logit model used in the market share model is applied incrementally, which means it takes into account any variation between the actual market share on each route and the modelled market share We have calibrated the logit model against observed market share data for the 23 selected routes. As can be seen in Figure 7.1 the logit model calibrates well for the majority of flows. Figure 7.1 shows the market share of rail against the difference between the generalised journey cost of air and rail. Where the difference is positive the generalised journey cost of rail is greater than air. 70

79 Rail's Market Share FGURE 7.2 SMPLE LOGT MODEL CALBRATON Draft final report 100% 90% 80% 70% 60% 50% Actual Logit 40% 30% 20% 10% 0% Source: SDG calculation Small flows Difference in GJC (Rail GJC - Air GJC) 7.14 For small flows where the difference in generalised cost is greater than 100 the logit model consistently under predicts the market share of rail. This is a result of the fact that the logit curve is, by definition, symmetrical, whereas at the extremes (where rail or air market share is very high), observed market share is asymmetric On routes where air transport is not competitive enough to be commercially viable, airlines will withdraw the service even if there is some residual demand. This has recently been observed on the Leeds/Bradford-Heathrow route, on which BM has withdrawn all services However, on routes where there is not enough demand to justify a dedicated rail service (or even for operators to offer an attractive indirect product), it may still be possible to travel by rail between the two points. For example, there is not currently sufficient rail demand between London and Madrid to justify a direct service, but it is still possible to make this journey by train interchanging in Paris, because there is sufficient rail demand between London and Paris and between Paris and Madrid to justify provision of services. Therefore there may still be some rail demand on the London-Madrid route, despite very long rail journey times and uncompetitive fares. Passengers might chose to travel by train on this route if they have a strong preference for rail travel over air travel, for example due to: environmental concerns; fear of flying; or availability of free or discounted rail travel due to frequent traveller programmes or having worked in the industry. 71

80 Rail's Market Share Draft final report 7.17 t is likely that there would also be some passengers who would prefer to travel by air on routes for which air travel appears unattractive, but as airlines do not offer any service on these routes, we will not observe any air demand This means that the observed air/rail mode share relationship will be asymmetric. Rail mode share will be 100% where the rail generalised journey cost is significantly less that the air generalised journey cost, but there will be a long tail of small rail flows with low market share. This creates an issue when attempting to model this with a symmetrical logit curve, and is particularly important for this study, as a number of the routes we are modelling currently have very long rail journey times and hence very low market share Therefore we have calibrated an additional model for the very small flows. This is partly a linear model, with rail market share eventually reaching zero. n order to ensure that there is no discontinuity as a flow moves between the linear model and the logit model, and to reflect observed market share, the market share module phases the introduction of the linear model. When using this model to forecast future mode share it is applied incrementally to the observed demand. Figure 7.3 shows that this approach calibrates well against actual data FGURE 7.3 LOGT MODEL WTH SMALL FLOWS MODEL 100% 90% 80% 70% 60% 50% 40% Actual Logit Small flows 30% 20% 10% 0% Source: SDG calculation Price module Difference in GJC (Rail GJC - Air GJC) 7.20 Demand for rail and air travel on each route will be a function partly of the price charged for each mode. The price reflects two elements: the operating costs of each mode, including emissions costs; and any margin above or below the operating costs that is levied by the operator This section describes how the operating costs for air and rail operators are calculated, and how the model translates these into prices. 72

81 Airline operating costs Draft final report 7.22 Airline operating costs are modelled for a flight operated by a typical short haul aircraft (an Airbus 319). The following cost components are modelled: fuel, based on actual fuel consumption for the modelled aircraft on each route; airport charges; costs for CO2 and other GHG emissions (it is assumed that due to emissions trading or some other levy, these costs are incurred by the carriers in future); taxes, such as air passenger duty in the UK, and any taxes levied by other governments; and other direct airline operating costs, such as aircraft leases, sales and marketing, staff etc t is assumed that fuel and carbon prices increase over time, in accordance with the CCC base projections. Data for airport charges and taxes are taken from the ATA Airport Charges Guide. The model of other direct airline operating costs is calibrated using CAA airline finance data, and assumes a mix of airlines following low cost and legacy business models The calculation of carbon costs is described below. Rail operating costs 7.25 Rail operating costs are calculated on the basis of a rate per passenger kilometre using data from various high speed and other long distance rail operators in the UK and elsewhere in Europe. An additional cost is included for routes between the UK and continental Europe, reflecting the high access charges levied for use of the Channel Tunnel. n addition, we assume that rail operators would ultimately have to pay for the CO2 emissions that they generate nfrastructure charges account for a significant proportion of rail operating costs. European rail infrastructure managers (such as Network Rail) typically receive significant subsidies; without these subsidies, infrastructure charges might be higher. We assume that subsidies to infrastructure managers continue at the current levels. Comparison of air and rail operating costs 7.27 The model calculates operating costs per passenger on each flow, for both air and rail transport. These are affected by a number of route-specific factors, such as differences in taxes, airport charges and (for rail) the difference between the direct route length and the route length by rail. The model that we have developed takes into account these route-specific characteristics, and therefore the costs of each mode vary by route, but Figure 7.4 shows the general nature of the relationship between air and rail operating costs. On typical routes, rail operating costs are lower than air for routes up to 500km (domestic) and 300km (international). 73

82 Fare per passenger ( ) FGURE 7.4 AR AND RAL OPERATNG COSTS PER SEAT (2009) Draft final report Air Rail domestic Rail international Great circle distance (km) Source: SDG calculation 7.28 Both air and rail operating costs are projected to increase, as carbon pricing and higher energy costs offset gains from improved efficiency. Air operating costs will increase by more than rail operating costs, as emissions per passenger and hence carbon charges will be higher. Figure 7.5 shows the equivalent results for 2050, using the Central case scenario for fuel and carbon prices. By this point, rail operating costs will be lower than air for all domestic routes and for international routes up to around 700km. 74

83 Fare per passenger ( ) FGURE 7.5 AR AND RAL OPERATNG COSTS PER SEAT (2050) Draft final report Air Rail domestic Rail international Source: SDG calculation Conversion of operating costs into price Great circle distance (km) 7.29 The model calculates air and rail operating costs per passenger, but these will not necessarily map directly into the fares charged to the passenger. The operators need to make a profit margin, and in addition: may charge higher prices, for example due to monopoly power or other routespecific factors; and in the UK, may either pay a premium or receive a subsidy from government On UK domestic routes and London-Paris/Brussels, the initial fare for both rail and air has been based on the benchmarking undertaken as part of the market analysis. The benchmarking showed that, for UK domestic routes, there was no consistent differential in air and rail fares and therefore the fare has been set as equivalent. On the longer distance routes for which it has not been practical to undertake benchmarking: air fares are based directly on the calculation of operating costs rail fares are based on the benchmarked London-Paris/Brussels fare plus a fare for the onward journey based on the operating cost model 7.31 The air market is assumed to be competitive, and therefore any changes in airline operating costs, for example due to carbon pricing, are assumed to be directly reflected in air fares. However, where fares are currently higher than the operating cost model would indicate, it is assumed that this uplift remains. For example, air fares are higher than the cost model would indicate on London-Brussels, reflecting the fact that there is no competition from low cost airlines, and this situation is assumed to continue The model allows the user to select different options for how rail fares change in the future, shown in Table 7.3 below. 75

84 TABLE 7.3 RELATONSHP BETWEEN FARES AND COST CHANGES Draft final report Scenario Scenario represents Basis for rail fare changes Competition Regulated monopoly Unregulated monopoly No rail routes at present, but possible future option UK domestic rail routes London-Paris/Brussels Rail fares are set to be the rail operating cost plus a profit margin. Rail fares increase by RP+1, but constrained not to exceed air fares, as it is assumed that operators would not price above airlines. f air fares increase, it is still assumed that rail fares cannot increase by more than RP+1 Rail fare increases in proportion to air fares (as air is the main competition) 7.33 For longer distance routes beyond Paris and Brussels, the fare is based partly on the London-Paris/Brussels fare, but the model allows the user to select whether there is an integrated ticketing system or not. This has a significant impact on how the rail fare is set: f there is no integrated ticketing system (as now on most routes), the rail fare equals the fare for London-Paris/Brussels plus the fare for the onward journey (which for modelling purposes is based on operating costs). This means that the rail fare may be quite high and may be well above both the air fare and the operating costs of the rail operator. f there is an integrated ticketing system, the operator is assumed to price the longer distance routes as competitively as it can, to win traffic on these long distance routes for which, in terms of journey time, rail is not competitive. The fare is therefore set based on operating costs plus margin, but is constrained not to undercut the rail London-Paris/Brussels fare nitial prices are shown below. 76

85 TABLE 7.4 BASE YEAR ONE-WAY FARE BY MODE AND ROUTE ( S) Draft final report Route type Route Rail fare ( ) Air fare ( ) Domestic Routes London-Manchester London-Edinburgh London-Glasgow London-Newcastle Birmingham-Edinburgh Birmingham-Glasgow London to Mainland Europe London-Malaga London-Amsterdam London-Berlin London-Bordeaux London-Brussels London-Dusseldorf London-Frankfurt London-Geneva London-Madrid London-Milan London-Paris London-Prague Other UK to mainland Europe Manchester-Malaga Manchester-Paris Manchester-Amsterdam Birmingham-Amsterdam Edinburgh-Amsterdam Source: SDG calculation 7.35 As discussed above, the domestic rail fare is based on the fares benchmarking work undertaken as part of the market analysis. This showed that, for UK domestic routes, there was no consistent differential in air and rail fares. Therefore we have set the rail fare equal to the air fare in the demand model. 77

86 Annual Growth (%) Underlying growth module Draft final report 7.36 The underlying growth module forecasts future growth in the total air and rail market for: Domestic routes; London to mainland Europe; and Other UK to mainland Europe This enables an estimate of the total impact on passengers and emissions from modal shift from air to rail to be provided t should be emphasised that as part of this study we have not undertaken a detailed demand forecasting exercise of the growth in the underlying market the focus has been on estimating the modal shift. We have however included this module in order to provide an indication within the demand model developed for this study of the total impact of any modal shift This module forecasts future growth by applying elasticities to increases in population and GDP, which are commonly accepted as the main drivers of long run increases in transport demand. n order to ensure that the forecast produced are consistent with other government air passenger demand forecasts we have benchmarked the forecast produced with the latest DfT forecast. The results from this exercise are shown in Figure 7.6. FGURE 7.6 COMPARSON BETWEEN GROWTH MODULE AND DFT AR PASSENGER DEMAND FORECASTS - PERCENTAGE CHANGE BETWEEN 2005 AND % 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Domestic Routes London to mainland Europe Other UK city to mainland Europe DfT Growth Module Source: SDG calculation and the DfT Trip generation/destruction module 7.40 A key modelling issue is that the factors which are to be assessed - such as construction of a new high speed line - may have a significant impact on market size, as well as on modal shares. This module estimates this effect by calculating the percentage increase in demand as a result of changes to generalised cost The trip generation /destruction module models the changes in market size by applying an elasticity to changes in the minimum generalised cost of travel on a 78

87 Draft final report route. The elasticities chosen are based on the standard GJT elasticities used in air and rail demand forecasting, converted so they could be applied to generalised journey cost. Route substitution module 7.42 This module estimates the route substitution effect, discussed in paragraphs 6.32 to As there is no evidence to support applying this effect to long haul air demand, it is only applied to short haul journeys. The effect is only applied to leisure passengers as it will not affect trips for the purposes of business or visiting friends and relatives, at least in the short term To estimate this effect, the module compares the generalised cost of a route to a weighted average generalised cost for all UK short haul flights. t then applies and elasticity to the difference in generalised journey costs Route substitution will change where passengers travel to, however the overall size of the short haul travel market between the UK and Europe will remain unchanged. The module ensures that there is no net change from route substitution. Calculation of emissions 7.45 While the main purpose of the demand model is to evaluate the model shift from air to rail, in the demand model we also provide an assessment of the impact of mode shift on emissions. This section describes our approach to calculating this. Air transport 7.46 Carbon costs for air transport are calculated as follows: we calculate actual fuel consumption on each route, based on the fuel used by an Airbus 319 for a route length equivalent to the great circle distance, uplifted by a factor to reflect the fact that most routes are indirect; this is converted to CO2 emissions using a factor of 3.1, based on the European Environment Agency (EEA) Emissions nventory Guidebook; and 7.47 CCC has primarily asked us to look at CO 2 emissions from aviation and rail. Therefore we have not converted CO 2 estimates into CO 2 equivalent emissions (i.e. including other greenhouse gases, and other impacts such as contrails) by applying a factor of We have adopted this approach because emissions per passenger kilometre are significantly different on different short haul routes. As so much fuel is used for the takeoff and landing cycle, emissions per kilometre are more than twice as high for the shortest route (London-Manchester) than the longest route in the sample (Manchester-Malaga). This is slightly more complex than the approach suggested by DEFRA, which uses standard values for emissions per passenger kilometre for short haul air travel. The DEFRA approach is reasonable for calculating short haul air emissions in aggregate but our model requires a route-specific analysis for which it is not appropriate. Rail transport 7.49 To calculate the CO2 emissions per passenger km for rail we conduct a bottom up calculation based on: The actual electricity consumption for a Virgin Trains Pendolino; and 79

88 Draft final report Kilograms of CO2 per KWh from the national power grid, values supplied by CCC. As directed by CCC we use the marginal carbon intensity of the energy sector. Marginal carbon intensity here reflects the intensity of the plant that is most likely to be operating at the margin in any given year. We have assumed that there are 447 seats on a train and that the average load factor achieved is 60% High speed trains consume more energy than conventional trains. Although different studies use different values for high speed train CO 2 emissions per passenger kilometre, the figures are generally about 100% higher than conventional long distance train per passenger kilometre. Therefore for legs which are travelled on high speed rail we have uplifted the CO2 emissions per passenger kilometre by 100%. Some new high speed trains are more efficient and it has suggested that they can achieve the same energy consumption per seat kilometre as conventional trains, therefore we have also undertaken a sensitivity test in which this is not used The emissions per KWh of electricity will vary by the method by which the electricity is generated. Countries using a larger proportion of nuclear or renewable energy will have lower CO2 emissions per KWh. n order to allow for this we undertake the rail emissions calculation for each of our in-scope countries. This enables a separate CO2 emissions per km to be applied to rail for each of the modelled routes. Using a weighted average of the individual country CO2 emissions per km. Where the weighting used is the distance travelled in each country. Air and rail distances 7.52 We have calculated the emissions from each of air and rail transport per passenger on each route A critical factor is the distance by each mode. For air transport, we assume that the typical route is 15% longer than the great circle distance, to reflect indirect routings. This is higher than the DEFRA guidance (9%) but this guidance applies to all flights; route extension will typically be higher in percentage terms for short flights such as those modelled here because much of the route extension is due to the approaches to airports. For rail transport, we use the actual distances via the existing rail network. t is possible that future high speed lines will have slightly different route lengths, but this is unlikely to be material. n some cases the rail distances are significantly longer than the air distances: for example, London-Madrid is 1,942km by rail compared to a great circle distance of 1,262km. Change in Supply 7.54 To calculate CO 2 emissions due to modal shift it has been assumed that a fall in air/rail demand will be followed by a proportional fall in air/rail supply and therefore a proportional fall in CO 2 emissions. For example, if air demand falls by 5%, then the numbers of air seats will fall by 5% and so will CO 2 emissions t is our view that this assumption is reasonable for air as airlines can, over the medium term, respond to a fall in demand by using smaller aircraft, which produce lower emissions. Rail supply is more fixed in the short term but over the medium to long term it is also likely that rail operators can vary supply in order to achieve a target load factor. 80

89 Allocation of emissions to States Draft final report 7.56 To calculate the UK allocation of CO 2 we used the following approach: All CO 2 emissions for domestic air and rail services are allocated to the UK. 50% of CO 2 emissions from other air services are allocated to the UK. The model provides two alternative approaches for allocating CO 2 emissions from international rail trips: Option 1: 50% allocated to the UK (as for air transport); and Option 2: CO 2 for the UK segment of the journey and half of the Channel Tunnel CO 2 are allocated to the UK. 81

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91 Draft final report 8 Model results ntroduction 8.1 For this study we have conducted five blocks of analysis. These are detailed in Table 8.1. TABLE 8.1 BLOCKS OF ANALYSS Block of Analysis Description Total air passenger journeys in block (000s) Total air passenger journeys modelled (000s) 1A 1B 2A 2B The effect on domestic mode share of expected changes to rail journey times and fares The effect of a new UK north-south high speed line Rail travel from London to mainland Europe Rail travel from other UK cities to mainland Europe 24,343 8,911 24,343 8,911 69,095 17,736 42,624 2,545 3 The effect of a Heathrow spur off the new UK high speed line 3,593* 2,961 *The definition of the market here is the number of UK passengers connecting at Heathrow. Source: CAA 8.2 As agreed with the CCC we have undertaken three main pricing scenarios. These scenarios differ in the assumptions made on the future increases of oil and CO2 prices. n all these scenarios we assume that integrated European rail ticketing is introduced resulting in a slight reduction in fares on longer distance routes. Table 8.2 details the assumptions on oil and CO2 prices for each scenario for 2008, 2025, and TABLE 8.2 DEFNTON OF PRCNG SCENAROS High Oil prices CO 2 prices Central Oil prices CO 2 prices Low Oil prices CO 2 prices Note: Oil price scenarios under the high, central and low scenarios correspond to scenarios 4, 2 and 1 in DECC s Communication on fossil fuel price assumptions, May As DECC s scenarios stopped at 2030, values to 2050 in each scenario have been extrapolated based on pre-2030 trends. Carbon prices are the CCC s carbon price scenarios

92 Draft final report 8.3 n addition to these scenarios we have developed a high rail demand scenario. This scenario assumes that many of the constraints to rail travel between the UK and Europe, identified in chapter 4.27, are reduced or removed. n particular it is assumed that: Competing rail operators are allowed to enter the market, reducing any producer surplus over operating costs Direct rail services are introduced on all the modelled flows The check-in time is reduced from 30 minutes to 15 minutes, due to reduced or more efficient security and/or immigration checks. Rail access charges applied for the use of infrastructure are reduced by 50% for all UK to Europe flows except London-Paris and London-Brussels. The rationale for this is that, without this reduction, there would be no longer distance rail traffic and therefore the price reduction still increases the revenue of the infrastructure manager. 8.4 The high rail demand scenario uses the same assumptions on oil and CO 2 prices as the Central scenario. 8.5 The rest of this chapter details the results from each block of analysis. Supply responses 8.6 As rail increases its share of the market, we have assumed that airlines will respond by reducing the size of the aircraft operated on the route, thus maintaining the average load factor and the frequency. t is also possible that there would be some reduction in air frequencies on routes as rail market share increase, which would further improve rail s competitive position and hence market share. We would not expect load factors to fall in the medium term, as airlines can quite easily respond by reducing the size of the aircraft. We also assume that rail operators increase supply to accommodate additional demand and therefore there is no impact on rail load factor. Block of analysis 1 Market share analysis block of analysis Figure 8.1 and Figure 8.2 presents projected rail mode share for UK domestic routes in 2025 for block of analysis 1A and 1B for the three pricing scenarios. n this analysis we assume that a UK high speed line would be delivered by While it is technically feasible for it to be delivered before this, 2025 was judged to be a realistic date. 8.8 To facilitate comparison, the figure also presents the current rail mode share for each route. n Figure 8.1 and Figure 8.2 the rail market share presented is for the point-to-point market (i.e. excluding connecting passengers). All other market share charts presented in this section, unless otherwise stated, are also on this basis. FGURE 8.1 BLOCK OF ANALYSS 1A (NO NEW UK HGH SPEED LNE) - RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) 84

93 Draft final report Birmingham-Glasgow Birmingham-Edinburgh London-Newcastle London-Glasgow 2008 Low (2025) Central (2025) High (2025) London-Edinburgh London-Manchester 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) Source: SDG calculation FGURE 8.2 BLOCK OF ANALYSS 1B (NEW UK HGH SPEED LNE) - RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) Birmingham-Glasgow Birmingham-Edinburgh London-Newcastle London-Glasgow 2008 Low (2025) Central (2025) High (2025) London-Edinburgh London-Manchester 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) Source: SDG calculation 8.9 There is forecasted to be limited modal switch as a result of planned enhancements to the UK rail network such as the introduction of new EP trains (Figure 8.2). This conclusion in consistent in all three pricing scenarios. A new north-south high speed line is projected to generate much greater modal switch, particularly on the Anglo- Scottish routes. Rail mode share of the point-to-point market on the London- Edinburgh route would increase from 34% to 79-83% in the three scenarios in 2025, and on the Birmingham-Glasgow route from 22% to 87-90% The introduction of high speed rail on the London-Manchester corridor is projected to have less of an impact on mode share, which would increase from 88% to 96%. The impact is relatively small because of the dominant competitive position rail 85

94 Draft final report already has in this market. n practice, it is possible that there would be some reduction in air frequencies on the route if the high speed line was introduced, perhaps including some withdrawal of routes, and therefore rail market share might increase by more than this projection The projections assume that domestic rail fares increase by RP+1% in line with government policy. n the forecast for a new UK high speed line, we assume that there would be no further increase in rail fares beyond this annual increase. However, the results are nonetheless consistent with significantly higher average yields on the longer routes such as London-Scotland, on which most current rail passengers will be leisure passengers who would usually buy discounted tickets. With lower journey times as a result of completion of a high speed line, a higher proportion of rail passengers would be business passengers who would purchase higher yielding flexible and peak period tickets, and therefore revenue per passenger would increase even without any change to fares As part of the introduction of the high speed domestic service, the DfT has allowed Southeastern to increase regulated fares by RP+3%, to help fund the increase in capacity. The requirement to increase fares by RP+3% also partly reflects the historically low level of fares charged on these routes However, rail s competitive position on inter-urban routes is much less strong than on London commuter routes. Even with the introduction of a new UK high speed line, there will still be a competitive air service on most routes. From the fares analysis, we found that on UK domestic inter-urban routes, rail fares are already similar to air fares. n our view, it would probably not be in the interests of the rail operator to price consistently above the airlines, as the gains from increased yields could be offset by significantly reduced passenger numbers. The key constraint to increasing rail fares on long routes is not regulation, but the price of air tickets n the demand model we have assumed that, as long as it is consistent with fares regulation, the rail operator would not increase its fares above the airlines. This assumption means that increasing the cap on regulated fares has limited effect on the results. Route analysis block Below we look at the forecast of total passenger demand on a number of selected modelled routes. As mentioned in paragraph 7.38 as part of this study we have not undertaken a detailed demand forecasting exercise of the growth in the underlying market the focus has been on estimating the modal shift. We have included background growth in order to provide an indication, within the demand model developed for this study, of the total impact of any modal shift. n order to do this we have used exogenous growth assumptions that are consistent with the DfT s UK air forecasts t is our view that these forecasts are high, and that the intra-eu air passenger market may be maturing: this is supported by the fact that growth has been relatively slow for journeys to Western Europe in recent years, but overall this has been offset by development of new markets for travel to central/eastern Europe. n the longer term this implies that the intra-eu market would experience growth rates more consistent with the US air passenger market (1%-2% per annum) Figure 8.3 shows total passenger demand on the London-Manchester route by 2025, in the Central pricing scenario with and without a new high speed line. n the 86

95 Passenger Journeys (000s) Draft final report scenario with no new UK high speed line, the total air and rail market for travel between London and Manchester increases to 8.7 million passengers per year. n this scenario air s mode share is essentially unchanged at 23%, as the increase in air fares due to carbon pricing and higher oil prices is offset by the increase in rail fares due to continuation of the current RP+1 fares policy. The introduction of a new high speed line both increases the rail mode share but also increases the total size of the market, to 10.1 million passengers per year. The number of air passengers is forecasted to be marginally higher than 2008 levels. FGURE 8.3 LONDON-MANCHESTER PASSENGER DEMAND WTH AND WTHOUT HGH SPEED LNE N 2025 PASSENGER JOURNEYS (000S) 12,000 10,000 8,000 6,000 4,000 78% 86% Rail Air 77% 2, % 22% 14% Central (No HSR) UK HSR 300 km/h Source: SDG calculation 8.18 Figure 8.4 shows projected demand and mode share on the London-Edinburgh route. Even without a high speed line, some mode shift is achieved, due to the introduction of faster EP trains. n this scenario, the number of air passengers in 2025 is projected to be 32% greater than in 2008, but a significant reduction is achieved in the high speed line scenario, with 2.5 million air passengers in 2025, compared to 3.2 million in

96 Passenger Journeys (000s) FGURE 8.4 Draft final report LONDON-EDNBURGH PASSENGER DEMAND WTH AND WTHOUT HGH SPEED LNE N 2025 PASSENGER JOURNEYS (000S) 7,000 6,000 5,000 34% 4,000 26% 62% 3,000 Rail Air 2,000 1,000 74% 66% 38% Central (No HSR) UK HSR 300 km/h Source: SDG calculation Estimate of CO 2 emissions for block of analysis This section summarises projected CO 2 emissions from air and rail transport on the modelled routes in the various scenarios, including development of a high speed line. This would have a number of different effects on emissions: there would be modal switch from air transport to rail transport, which reduces emissions; passengers that would otherwise have used conventional rail switch to high speed rail, which increases emissions; and the total volume of travel increases, which also increases emissions The net effect could be either an increase or a reduction in emissions, depending on the magnitude of the different effects Table 8.3 presents projected UK CO 2 emissions from air and rail for modelled domestic routes in 2025 and n 2025 a new domestic high speed line increases CO 2 emissions. By 2050 a new UK high speed achieves a 30% reduction in emissions over the non-high speed rail scenarios. The change in results between 2025 and 2050 is due to the significant reduction assumed in marginal carbon intensity of electricity generation t should be noted that a calculation of the total impact of a high speed rail line on emissions should also take into account other factors which are not within the scope of this study: emissions generated in the construction of the new line; and emissions generated or avoided by modal switch to/from road transport. 88

97 TABLE 8.3 ESTMATED CO 2 EMSSONS FOR 2025 AND 2005: TONNES (000S) Draft final report without with without with high speed 300km/h high speed 300km/h rail HSL rail HSL London-Manchester London-Edinburgh London-Glasgow London-Newcastle Birmingham-Edinburgh Birmingham-Glasgow Total ,008 1, Source: SDG calculation 8.23 The forecasts presented above are based on a number of assumptions agreed with CCC, in particular: The use of a marginal rather than average carbon intensity for electricity generation, in order to calculate CO 2 emissions from rail; Application of a 100% uplift to conventional rail CO 2 emissions in order to calculate CO 2 emissions from high speed rail; and No adjustment is made to the emissions from air transport to take into account other emissions, or effects such as radiative forcing These assumptions all reduce the projected emissions benefit of air to rail modal shift, and therefore we have undertaken a number of sensitivity tests t could be argued that rail would not be a marginal consumer of electricity (because a similar number of trains would operate throughout the day) and therefore it would be more appropriate to use the average carbon intensity of the energy sector. n particular, if a new UK high speed line was constructed there would be considerable time for the electricity generation industry to include this in its forward planning, and provide sufficient capacity. Therefore, we have undertaken a sensitivity test using the average carbon intensity to calculate CO 2 emissions from rail n addition, whilst most studies do show high speed rail as being more energy intensive per passenger than conventional rail, this depends on the assumptions made: Whether the load factors achieved by high speed trains are different to conventional trains: it could be argued that they would be higher on average The number of seats on high speed trains: these might also be higher than conventional trains on average 89

98 The relative energy efficiency of high speed trains Draft final report 8.27 The net effect of these factors is uncertain. The 100% uplift we have applied is consistent with most other studies we have reviewed, but it has recently been argued that taking all of the above factors into account the emissions from high speed rail per passenger kilometre would be similar to conventional rail 12 ; therefore, as a sensitivity we have removed this uplift Table 8.4 details the results from the sensitivity test for the six UK modelled routes with a new UK high speed line. t can be seen that these sensitivities significantly reduce the estimated CO 2 emissions from a new high speed line. n both sensitivity tests a new UK high speed line provides significant CO 2 emissions savings both over 2008 and the scenario without a new high speed line. n both sensitivity scenarios, for all routes the CO 2 emissions are less that the 2008 CO 2 emissions and the scenario without a new high speed line. TABLE 8.4 UK AR AND RAL CO 2 EMSSONS N 2025 WTH A NEW UK HGH SPEED LNE (ADDTONAL SENSTVTY TESTS) 000S TONNES , without high speed rail 2025, new UK HSL with base assumptions 2025, new UK HSL no HSL energy consumption uplift 2025, new UK HSL, using average carbon intensity London-Manchester London-Edinburgh London-Glasgow London Newcastle Birmingham-Edinburgh Birmingham-Glasgow Total , Source: SDG calculation Conclusions from block of analysis The analysis shows that planned improvements to UK rail services, such as the introduction of EP and completion of the West Coast Route Modernisation, will generate some modal switch from air to rail transport. The construction of a UK high speed line could also achieve a significant modal shift from air to rail. Modal shift would be greater on longer routes on which rail currently has a low market share, such as London-Edinburgh, than on routes such as London-Manchester on which rail market share is already high and most of the remaining air passengers are connecting with other flights Modal shift would result in some decrease in CO 2 emissions. However, the impact is relatively modest, and for the London-Manchester route, a high speed line could 12 ATOC analysis for Greengauge 21 on the CO2 impacts of High Speed Rail 90

99 Draft final report increase emissions. The reason for this is that in the base scenario we assume that high speed rail emissions are significantly higher than conventional rail emissions, and this effect, and the additional traffic that a high speed rail line would generate, offsets the reduction in emissions from modal switch. We set out below a scenario in which it is assumed that emissions from high speed rail are no higher than conventional rail. Block of analysis This section presents result from Block of analysis 2A future rail travel between London and mainland Europe; and Block of analysis 2B future rail travel between other UK cities to mainland Europe As discussed in section 3, rail s mode share on the modelled city pairs has been estimated from passenger survey data provided by Eurostar. As this data is provided at a regional/country level, some estimates have had to be made. Market share analysis block of analysis Figure 8.5 and Figure 8.6 presents the forecasted rail market share of the point-topoint market in 2025 for each block of analysis for each scenario. FGURE 8.5 BLOCK OF ANALYSS 2A (LONDON-EUROPE) RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) London - Prague London - Paris London - Milan London - Madrid London - Geneva London - Frankfurt London - Dusseldorf London - Brussels London - Bordeaux 2008 Low (2025) Central (2025) High (2025) High rail (2025) London - Berlin London - Amsterdam London - Malaga 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) Source: SDG calculation 91

100 FGURE 8.6 Draft final report BLOCK OF ANALYSS 2B (OTHER UK-EUROPE) RAL MARKET SHARE N 2025 OF PONT-TO-PONT MARKET (%) Edinburgh - Amsterdam Birmingham - Amsterdam Manchester - Amsterdam Manchester - Paris 2008 Low (2025) Central (2025) High (2025) High rail (2025) Manchester - Malaga 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of point-to-point(%) Source: SDG calculation 8.34 The analysis shows that relatively limited modal shift is achieved through higher oil and CO 2 prices. Oil prices and CO 2 costs account for a small percentage of the overall air cost on short routes such as those modelled here and therefore only translate into a relative small increase in the air fare charged to passengers. While rail costs increase at a lower rate, in these scenarios air continues to be the cheaper and quicker mode on international journeys other than London-Paris/Brussels A much more significant modal shift is achieved in the high rail scenario, especially on routes such as: London-Amsterdam; London-Dusseldorf; London-Frankfurt; London-Bordeaux; and Manchester-Paris n this scenario the rail service offer is significantly improved in terms of price, convenience of use, and total journey time. Route analysis block This section provides more explanation and analysis of the modelled trends in air and rail market share on three sample routes: London-Paris; London-Amsterdam; and Manchester-Paris Figure 8.7 shows projected trends in rail passenger numbers and market shares on the London-Paris route. The air-rail mode share shown is for the total market 92

101 Passenger Journeys (000s) Draft final report (including connecting air passengers). As air carries almost all of the connecting passengers of these routes the rail market shares presented in these figures are lower than those presented in Figure 8.5 and Figure 8.6 above. FGURE 8.7 LONDON-PARS PASSENGER DEMAND N EACH SCENARO AR-RAL TOTAL MARKET N 2025 (PASSENGER JOURNEYS 000S) 16,000 14,000 12,000 10,000 8,000 6,000 76% 76% 78% 87% Rail Air 4,000 75% 2, % 24% 24% 22% 13% CCC Low CCC Central CCC High High Rail Source: SDG calculation 8.39 Rail is the dominant mode on the London-Paris route with 75% of the total market in n the High scenarios rail mode share only rises marginally to 78%. This is because, except in the high rail scenario, there is assumed to continue to be one monopoly rail operator (currently Eurostar). This operator is assumed to take advantage of any improvement in its competitive position relative, arising from higher oil and CO2 prices, partly by increasing its fares and hence its profitability, rather than by maintaining fares and increasing its mode share This is illustrative of a key pricing issue the profit-maximising pricing strategy for the rail operator on the London-Paris/Brussels routes may well be different to the profit-maximising strategy on other routes where rail s competitive position is weaker. As discussed in chapter 4, rail fares for journey beyond London- Paris/Brussels cannot undercut the London-Paris/Brussels fares, even if this would improve the competitive position of rail transport on these longer routes. This means that there is an inter-relationship between the pricing strategy on Eurostar s core routes (London-Paris/Brussels) and routes beyond these cities n the high rail scenarios on the London-Paris route rail increases it mode share from 76% in the Central scenario to 87%. This increase is driven by: The reduction in rail check-in time; and The introduction of competing rail operators The introduction of rail competition is forecasted to results in a significant decrease in fares between London and Paris, as monopoly profit is competed away. t also breaks the link between increases in air operating costs, from higher oil and CO2 93

102 Passenger Journeys (000s) Draft final report prices, and rail fares, as in a competitive market the rail operator should price at its own marginal cost Figure 8.8 and Figure 8.9 presents the forecasted total passenger journeys on the London-Amsterdam and Manchester-Paris in On the London-Amsterdam route by 2025 there is a significant improvement in the journey time but, despite this, in 2025 rail is still only projected to achieve a market share of 6%. There is little difference in the air-rail mode share between the different pricing scenarios, although the total size of the market does vary. n the High scenario, the total size of the market decreases significantly from the central scenario. FGURE 8.8 LONDON-AMSTERDAM PASSENGER DEMAND N EACH SCENARO AR-RAL TOTAL MARKET N 2025 (PASSENGER JOURNEYS 000S) 6,000 5,000 6% 6% 6% 4,000 4% 35% 3,000 2,000 96% 94% 94% 94% 65% Rail Air 1, CCC Low CCC Central CCC High High Rail Source: SDG calculation 94

103 Passenger journeys (000s) FGURE 8.9 Draft final report MANCHESTER-PARS PASSENGER DEMAND N EACH SCENARO AR-RAL TOTAL MARKET N 2025 (PASSENGER JOURNEYS 000S) % 6% 6% % 500 5% % 94% 94% 49% Rail Air % CCC Low CCC Central CCC High High Rail Source: SDG calculation 8.44 Rail market share on these routes remains low in the base scenarios, despite the acceleration of the London-Amsterdam service due to completion of the Brussels- Amsterdam high speed line. This result reflects the nature of the air-rail market share relationship: in the base scenarios, air travel continues to offer lower fares and lower journey times than rail, and therefore limited increase in market share is obtained However, on both routes, a significant modal shift is projected in the high rail scenario. The London-Amsterdam rail share increases from 4% in 2008 to 35% in 2025 and the Manchester-Paris rail share increase from 5% in 2008 to 51% in The increase in rail mode share can be explained by the significant improvement to rail service offer and reduction in price in this scenario Figure 8.10 illustrates the contribution that each factor has on improving the rail service offer between London-Amsterdam. The major contributions are made by improvements to journey time through the introduction of the high speed line and removing the connection in Brussels. However, individually, none of these factors is sufficient to enable a large mode shift between air and rail. t takes a combination of all of these factors to make the journey time and price of rail transport competitive with air transport on the route. 95

104 Rail's Market Share (%) Draft final report FGURE 8.10 LONDON-AMSTERDAM MPROVEMENT N RAL SERVCE OFFER AND EFFECT ON RAL MARKET SHARE - % 80% 70% 60% 50% 40% 30% 20% Reduction in access charges Reduction in check-in time Direct rail service ntroduction of on-rail competition ncrease in air costs 10% mprovement in JT '08 Difference in GJC 0% Source: SDG calculation Difference in GJC (Rail GJC - Air GJC) Estimate of CO 2 emissions for block of analysis Below we present the forecasted effect on CO 2 emissions on the modelled routes of each scenario. As discussed in paragraph 7.56 there are two approaches to allocating rail CO 2 emissions between the UK and mainland Europe to the UK: Allocating 50% of the emissions to the UK; or Allocating to the UK the CO 2 emissions from the UK segment of the journey and half of the Channel Tunnel CO 2 emissions n the figures and table below we present the CO 2 emissions using the 50% allocation method As detailed in Table 8.5 and Table 8.6 the High scenario produces the lowest CO 2 emissions. This is mainly through reduction in market size due to increased fares, rather than modal shift The CO 2 emissions in the high rail scenario for the modelled routes are only marginally lower than the Central and Low scenarios. The actual CO 2 saving of the high rail scenario is much greater than this, as some of the increase in CO 2 emission on these flows are due to route substitution from longer routes resulting in an overall saving of CO 2 emissions. 96

105 TABLE 8.5 Draft final report CO 2 EMSSONS FROM AR AND RAL FOR BLOCK OF ANALYSS 2A - UK ALLOCATON N 2025 (000S TONNES) 000s tonnes 2008 High Central Low High rail (2025) (2025) (2025) (2025) London Malaga London Amsterdam London Berlin London Bordeaux London Brussels London Dusseldorf London Frankfurt London Geneva London Madrid London Milan London Paris London Prague Total 1,056 1,257 1,339 1,353 1,321 Source: SDG calculation TABLE 8.6 CO2 EMSSONS FROM AR AND RAL FOR BLOCK OF ANALYSS 2A - UK ALLOCATON (000S TONNES) 000s tonnes 2008 High Central Low High rail (2025) (2025) (2025) (2025) Manchester Malaga Manchester Paris Manchester Amsterdam Birmingham Amsterdam Edinburgh Amsterdam Total Source: SDG calculation Block of analysis The final block of analysis forecasts the effect on connecting air passengers of a Heathrow spur off the new UK high speed line. 97

106 Market share analysis block of analysis 3 Draft final report 8.52 Figure 8.11 presents the forecasted rail market share in 2025 between Heathrow, Glasgow, Edinburgh and Manchester. With a Heathrow spur rail s mode share is forecast to increase to 10% between Heathrow and Glasgow and to approximately 12% between Heathrow and Edinburgh. t is assumed that there is no reduction in air services; if there was, the increase in rail market share would be significantly higher Note in 2008 rail has a mode share of 0% on these routes. FGURE 8.11 BLOCK OF ANALYSS 3 (HEATHROW SPUR) - RAL MARKET SHARE N 2025 OF TOTAL AR-RAL MARKET (%) Heathrow-Glasgow Heathrow-Edinburgh 2008 Low (2025) Central (2025) High (2025) Heathrow-Manchester 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rail mode share of total market (%) Source: SDG calculation 8.54 Figure 8.12 presents the projected air and rail passenger journeys between Heathrow and Manchester in 2025 for three scenarios: No new domestic North-South high speed line A new domestic North-South high speed line but without a Heathrow spur; and A new domestic North-South high speed line but with a Heathrow spur All three scenarios use the Central oil and CO 2 pricing assumptions The analysis shows that, in order to achieve significant modal shift of connecting passenger, it is necessary to construct a Heathrow spur. n the event of construction of a new high speed line without a Heathrow spur, rail is forecast to obtain a 1% of the Heathrow-Manchester market, but with a Heathrow spur, it obtains a share of 38% As noted above, these figures do not take account of the possible response of airlines to the improved rail service. The addition of a Heathrow spur would further increase the likelihood that airlines would withdraw some services from this route. This would further improve the competitive position of rail, and hence its market share. 98

107 Passenger Journeys (000s) Draft final report FGURE 8.12 PASSENGER DEMAND BETWEEN HEATHROW AND MANCHESTER N PASSENGER JOURNEYS (000S) 1,200 1,000 0% 1% 800 0% 38% % 99% Rail Air % 62% Central (No HSR) UK HSR 300 km/h UK HSR with Heathrow Spur Source: SDG calculation 8.58 The results are sensitive to the following assumptions: The price of the connecting domestic trip; Whether a guaranteed connection is provided to rail passengers; and The connection time between the rail station and the airport. 99

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109 Draft final report 9 Estimate of total CO 2 savings ntroduction 9.1 This section presents estimates of the effect that each scenario has on the total UK allocation of CO 2 emissions from air and rail journeys with the UK and between the UK and mainland Europe. 9.2 The CO 2 emissions numbers presented in this section include: CO 2 emissions from air travel within the UK; The UK allocation of CO 2 emissions from air travel between the UK and other parts of Europe; CO 2 emissions from long distance rail travel within the UK where rail is competing with air (e.g. short distance commuting trips are excluded); and The UK allocation CO 2 emissions from air travel between the UK and the rest of Europe. 9.3 n the figures and table below we present the CO 2 emissions allocation 50% of the rail emissions from journey between the UK and Europe to the UK. At the end of this chapter we present the CO 2 emissions results when only the emissions from the UK segment of the journey and half of the Channel Tunnel CO 2 emissions are allocated to the UK. Scaling of demand 9.4 To produce an estimate of the total CO 2 emissions, it was necessary to scale up from the 23 modelled routes to a total Europe level. To do this we have Mapped each domestic and UK-Europe air flow which in 2008 has more than 10k journeys per annum to one of the modelled routes. We have then assumed that the same proportionate mode shift, trip generation and exogenous growth will occur on these flows as is forecasted on the modelled routes. dentified flow where no mode shift could occur i.e. flow that would require a new sea crossing to be built in order to facilitate any air rail mode shift. For these flows we ensure that no mode shift occurs on these flows, however trip generation/destruction, exogenous growth and route substitution is allowed. For flows which have less than 10k air passengers per annum, we assume that the average percentage mode shift, trip generation and exogenous growth will occur. 9.5 The long list includes all domestic air flows and all air flow between the UK and Western Europe and most of the air-flows between the UK and Eastern Europe. The long list of flows accounted for 152 million air passengers in 2008, 70% of the total UK air passengers. 9.6 The approach employed to calculate the total CO 2 emissions is simplistic and does intend to provide a robust forecast of total CO 2 emissions. However, it does provide an indication of total potential air-rail modal shift to reduce CO 2 emissions. 101

110 CO2 emissions (000s tonnes) Total CO 2 emissions results Draft final report 9.7 Figure 9.1 presents the total CO 2 emissions for each scenario. n order to enable an estimate of the maximum CO 2 saving possible from modal shift we also analyse the high rail scenario with and without a new high speed line. 9.8 t should be emphasised that the increase in CO 2 emissions over this period is largely as a result of the considerable amount of background growth assumed in these forecasts, which offsets reductions in emissions per trip due to increased fuel efficiency. 9.9 The estimated CO 2 emissions in the High scenario are the lowest in each forecast year. As discussed above, this is mostly due to reduction in air demand, relative to the Central scenario, as a result of the increase in air costs rather than air-rail modal shift. FGURE 9.1 TOTAL AR AND RAL CO 2 EMSSONS FOR 2008, 2020, 2035 AND 2050 (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 30,000 25,000 20,000 15,000 10,000 5, Low Central High High rail High Rail + New UK HSL 9.10 Figure 9.3 presents the total CO 2 emissions in 2050 from air and rail for trips within the UK and between the UK and Europe broken down by source. For comparison purpose the chart also presents the 2008 CO 2 emissions numbers. t can be seen that the majority of emissions are generated by air travel between the UK and Europe. Rail travel produces a very small percentage of the total emissions. 102

111 2008 CO CO2 Efficiencies Exogenous growth Trip Generation or Destruction Mode Shift Route Substitution 2050 CO2 CO2 emissions (000s tonnes) CO2 emissions (000s tonnes) FGURE 9.2 Draft final report TOTAL AR AND RAL CO 2 EMSSONS FOR 2050 BROKEN DOWN BY SOURCE (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 30,000 25,000 20,000 15,000 Rail (UK - Europe) Rail (Domestic) Air (UK - Europe) Air (Domestic) 10,000 5, Base Low Central High High Rail Source: SDG calculation 9.11 n order to put the level of modal shift and route substitution in context Figure 9.3 presents the drivers of changes of air and rail domestic CO 2 emissions and air and rail CO 2 emissions between the UK and Europe between 2008 and The chart shows that the main driver behind the growth in CO 2 emissions is the assumed level of background growth. The trip destruction presented in the figure is mainly due to CO 2 pricing and fuel price increases. FGURE 9.3 CENTRAL SCENARO S AR AND RAL S CO 2 EMSSONS- CAUSES OF CHANGE BETWEEN 2008 AND 2050 (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 35,000 30,000 25, ,106 20,000 19, ,000 10,000 12, , Figure 9.4 presents the CO 2 saving that is forecasted to be achieved in 2050 by air to rail mode shift and route substitution. 103

112 CO2 saving (000 tonnes) Draft final report FGURE 9.4 CO2 SAVNGS FROM AR AND RAL DUE TO SWTCH FROM AR TO RAL N 2050 (50% OF UK-EUROPE RAL EMSSONS ALLOCATED TO THE UK) - 000S TONNES 3,000 2,500 2,000 1,500 1,000 Route Substitution Mode Shift Low (2050) Central (2050) High (2050) High rail (2050) High Rail with New UK HSL (2050) Source: SDG calculation 9.13 Modal shift accounts for the majority of CO 2 savings, however route substitution does make a significant contribution. n million tonnes of CO 2 emissions are saved from modal switch from air to rail in the high rail scenario. The forecasted CO 2 saving is even greater in the high rail scenario if a new UK high speed line is constructed with 1.9 million tonnes of CO 2 emissions saved in This analysis further emphasises that improvements to the rail service offer could result in significant CO 2 savings from air to rail modal shift Alternative approach to allocation of rail CO 2 emissions 9.15 n the analysis above, 50% of the CO 2 emissions from rail journeys between UK and continental Europe are allocated to the UK. n this section, we present the UK allocation of CO 2 emissions if the allocation is on the basis of the country within which the relevant part of the journey is, and emissions from the UK segment of the rail journey are allocated to the UK (and half of the emissions from transit through the Channel Tunnel) Figure 9.5 presents the estimate of total UK air and rail CO 2 emissions using this method. As most of the CO 2 emissions are generated from air, the different rail allocation method has little effect on the total estimate of emissions. 104

113 CO2 emissions (000s tonnes) FGURE 9.5 Draft final report TOTAL AR AND RAL CO 2 EMSSONS FOR 2008, 2020, 2035 AND 2050 (WTH THE UK SEGMENT OF THE RAL JOURNEY ALLOCATED TO THE UK) 000S TONNES 30,000 25,000 20,000 15,000 10,000 5, Low Central High High rail High Rail + New UK HSL Source: SDG calculation 9.17 Figure 9.6 presents the reduction in UK allocated CO 2 emissions from mode shift and route substitution based this approach. Using this allocation approach increases the forecasted UK CO 2 savings because, on most routes, allocating only the CO 2 from the UK section of the journey reduces the amount of rail CO 2 emissions allocated to the UK n 2050 after there has been significant de-carbonisation of the European power sector the difference between these two allocation approaches is insignificant. However, if the same chart were produced for earlier years then there is a significant difference between the allocation approaches for rail CO 2 emissions Therefore, this scenario increases the projected impact on UK allocated emissions of air to rail modal shift, because for most routes the UK is allocated a lower proportion emissions if the journey is made by rail t should be emphasised that that the allocation approach only changes the amount of CO 2 emissions allocated to the UK it does not change the estimated total CO 2 emissions produced by air and rail. The difference between the allocation approaches reduces as the carbon intensity of energy generation reduces and the effect of increasing rail emissions from higher rail demand reduces. 105

114 CO2 saving (000 tonnes) FGURE 9.6 Draft final report TOTAL AR AND RAL CO 2 EMSSONS SAVNG FROM MODE SHFT N 2050 (THE UK SEGMENT OF THE RAL JOURNEY ALLOCATED TO THE UK) 000S TONNES 3,000 2,500 2,000 1,500 1,000 Route Substitution Mode Shift Low (2050) Central (2050) High (2050) High rail (2050) High Rail with New UK HSL (2050) Source: SDG calculation Conclusion 9.21 The key findings from the analysis presented in this chapter and the previous chapter are To meet the government s target the UK s total greenhouse gas emissions need to reduce by 2050 to 80% below the 1990 level. n the most optimistic scenario air-rail mode shift reduces CO 2 emissions in 2050 by approximately 2.4 million tonnes. Without any increase in air fare prices Domestic and UK-Europe rail and air CO 2 emissions are forecasted to increase by approximately 16 million tonnes between 2008 and Air and rail mode shift could reduce this by 15%. ncreased oil prices and charges to recover CO2 costs do increase air fares, but the effect is relatively small on the shorter routes which have been modelled in this study. The main effect of higher air fares on CO2 emissions arises because the total amount of travel would be reduced, rather than from modal shift to rail The introduction of a high speed line is forecast to significantly increase rail modal share on Anglo-Scottish routes. The short term effect on CO 2 emissions is dependent on the emissions assumptions used, although in the longer term (2050) there is a stronger reduction in emissions, as the carbon intensity of electricity generation is projected to fall significantly. A combination of significant improvement to the rail service offer (such as direct trains) and reductions in price could achieve significant modal shift, especially on routes such as London-Amsterdam Significant air-rail modal shift on very long routes such as London-Milan, London- Madrid, and London-Malaga is difficult to achieve under any circumstances. 106

115 Draft final report ncreased air fares could result in a further reduction in emissions if passengers decide to substitute longer distance trips by air with shorter distance trips by rail. This requires there to be an attractive (and reasonably priced) rail service offer available. 107

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117 CONTROL SHEET Project/Proposal Name Potential for modal shift from air to rail for UK aviation Document Title Final report Client Contract/Project No. SDG Project/Proposal No SSUE HSTORY ssue No. Date Details /09/09 Final reports /09/09 Final report updated for minor comments REVEW Originator Philip Dobson Other Contributors Simon Smith, William Parker Review by Print Simon Smith Sign DSTRBUTON Clients Committee on Climate Change Steer Davies Gleave: Control Sheet