VZCZCXRO7814
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0715/01 3640954
ZNR UUUUU ZZH
R 300954Z DEC 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 1232
INFO RUEHOO/CHINA POSTS COLLECTIVE 0413
RUEHBJ/AMEMBASSY BEIJING 0993
RUEHGH/AMCONSUL SHANGHAI 0341
RUEHCN/AMCONSUL CHENGDU 0342
RUEHSH/AMCONSUL SHENYANG 0351
RUEHHK/AMCONSUL HONG KONG 0405
RUEHGP/AMEMBASSY SINGAPORE 0015
RUEHKO/AMEMBASSY TOKYO 0046
RUEHIN/AIT TAIPEI 0298
RUEAIIA/CIA WASHDC 0383
RUEKJCS/DIA WASHDC 0379
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC 0026
RHMFIUU/FAA NATIONAL HQ WASHINGTON DC 0006
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0225

UNCLAS SECTION 01 OF 02 GUANGZHOU 000715 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, INR/EAP, EEB/TRA/OTP AND EEB/TRA/AN 
DEPT OF TRANSPORTATION PASS TO SMCDERMOTT, JSZABAT, KGLATZ 
FEDERAL RAILWAY ADMINISTRATION PASS TO BPELLETIER 
FAA PASS TO RCICERO 
BEIJING, TOKYO AND SINGAPORE FOR FAA REP 
 
E.O. 12958: N/A 
TAGS: EAIR ELTN EIND ECON CH
SUBJECT: South China Airlines Battle New High-Speed Train 
 
GUANGZHOU 00000715  001.2 OF 002 
 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly.  Not for release outside U.S. government channels.  Not 
for internet publication. 
 
¶1. (SBU) Summary: The new high-speed train service between 
Guangzhou, Guangdong Province and Wuhan, Hubei Province debuted on 
December 26, 2009 as the world's fastest long-distance passenger 
train service.  Ticket prices for the new service, however, are 
beyond the grasp of most Chinese, according to online commentators. 
Nevertheless, the high-speed service's pricing scheme has led 
airlines in south China to slash airfares and launch new services in 
response to the increased competition.  End summary. 
 
A Record Breaker 
---------------- 
 
¶2. (SBU) South China is now home to the world's fastest 
long-distance passenger train service.  Debuting on December 26, 
2009, the Harmony Express travels between Guangzhou and Wuhan, 
covering a distance of 1,068km in three hours, which is seven hours 
less than traditional train services.  As part of a larger 
high-speed network that will link Guangzhou and Beijing, the 
Guangzhou-Wuhan route includes 15 stops with trains leaving every 
half hour.  A first-class ticket from Guangzhou to Wuhan costs 
RMB780 (US$115); a second-class ticket costs RMB490 (US$72).  The 
express line's construction took four and a half years, with total 
investment estimated at over RMB100 billion (US$14.7 billion), 
according to Chinese media reports. 
 
Prices Too High? 
---------------- 
 
¶3. (SBU) Some online commentators have argued that the ticket prices 
for the new high-speed train are too high for most Chinese to afford 
even a second-class ticket.  With average monthly income of migrant 
workers in Guangzhou ranging between RMB1,000 and RMB1,500 
(US$147-US$220), they speculated that the train would end up 
servicing only the "elite" like officials and businessmen.  Rumors 
circulating online and in the Chinese media also suggested that once 
the Guangzhou-Wuhan high-speed service is in place, traditional 
train services will be reduced, leaving few options for those 
traveling on this route.  A true test for the new service will be 
the upcoming Lunar New Year when millions of the migrant workers in 
the Pearl River Delta travel inland to be with family.  According to 
media reports, Guangzhou Railway Group, which operates the new 
service, does not rule out the possibility that there will be price 
adjustments in the near future. 
 
Airlines Cut Prices... 
---------------------- 
 
¶4. (SBU) In anticipation of increased competition from the 
Guangzhou-Wuhan high-speed service, airlines in south China began 
implementing new market strategies prior to the Harmony Express's 
debut.  Guangzhou-based China Southern Airlines led the way with 
cuts in airfare of up to 80% and the introduction of a new hourly 
shuttle service between Guangzhou, Changsha in Hunan Province, and 
Wuhan, according to information gathered from online travel 
agencies.  Other airlines that have reportedly entered the price war 
include Air China, China Eastern Airlines, and Shenzhen Airlines. 
Liao Weijia, director of China Southern's Foreign Affairs Office, 
told ConGenOffs that in the current pricing scheme, China Southern 
can still compete with the high-speed train on the Guangzhou-Wuhan 
route, but if train ticket prices drop below China Southern's 50% 
markdown for the route, then the airline will have to re-evaluate 
the market. 
 
And Enhance Services 
-------------------- 
 
 
GUANGZHOU 00000715  002.2 OF 002 
 
 
¶5. (SBU) China Southern cannot solely rely on price cuts, but must 
also enhance service and speed to maintain its advantage, said Liao. 
 Other elements of the airline's new strategy reportedly include no 
extra fees for changes between same-day shuttle flights; discounts 
for certain international bound tickets originating in Wuhan or 
Changsha and transiting Guangzhou; and improved in-flight food 
service.  China Southern has also worked closely with Guangzhou's 
Baiyun Airport to offer shuttle passengers shortened check-in times; 
multiple check-in methods; and designated shuttle service counters, 
security screening areas, boarding gates, and baggage carousels. 
 
 
JACOBSEN