Competition and Quality: Evidence from High-Speed Railways and Airlines
The entry of High-Speed Railways (HSR) represents a disruptive competition to air-lines, particularly for short- to medium-distance journeys. Utilizing a unique dataset that contains the details of all ﬂights departing from Beijing to 113 domestic destinations in China since January 2009, we employ a diﬀerence-in-diﬀerences approach to examine the eﬀects of HSR entry on the quality of service provided by airlines as proxied by their on-time performance, and to identify the channels through which competition leads to quality improvement. We document two main ﬁndings. First, the competition from the entry of HSR leads to signiﬁcant reductions in the mean and variance of travel delays on the aﬀected airline routes. Second, the reductions in departure delays–which are controlled mostly by airlines, and the duration of taxi-in time–which are controlled mostly by destination airports, are identiﬁed as the main sources of the improvement in the airlines’ on-time performance.