Houston to Dallas High Speed Rail - The Numbers Don't Add Up

From: Austin Contrarian
August 4, 2009

Economist Ed Glaeser runs the numbers for a hypothetical high-speed rail line from Houston to Dallas and concludes they don't add up. I think it's a closer call.

Here's the crux of his estimate:

I estimate benefits by comparing rail to air. A train going from Dallas to Houston at 150 miles an hour would take 96 minutes. Southwest Airlines takes an hour for the same route, but the need to arrive early could add on an extra hour. I’ll add on an extra 36 minutes for the driving time to the airports, which means that the train saves an hour. The per-passenger benefit from the high-speed rail line is the saved cost of the Southwest ticket ($80) plus an hour’s worth of time (let’s say $40, which seems generous), plus any added benefits from the comfort of the train (let’s say $20 more). All told, benefits per trip are $140. Since the variable costs are $72 for the trip (30 cents a mile times 240 miles), benefits minus variable costs come to $68 a trip. If these numbers were right (and I think that they are very kind to rail), then the system should be able to run a healthy operating surplus.
. . .

Now it’s just down to multiplying: 1.5 million trips times $68 a trip means $102 million for benefits minus operating costs. Annual capital costs came in $648 million, more than six times that amount. If you think that the right number is three million trips, then the benefits rise to $200 million, and the ratio between the per rider net benefits and costs drops to one-to-three.
This is the cruel arithmetic faced by people, like myself, who would love to be pro-rail.

A couple of problems here. First, Glaeser underestimates the value of time for business travelers, who surely would be HSR's predominant users. I don't know where he got his estimate of $40 per hour, but it is belied by the air fares travelers already pay. The walk-up fare for a one-way trip from Houston to Dallas (the fare business travelers pay) is $140. From airport parking lot to airport parking lot, the flight from Houston to Dallas takes about two hours. Add an average of one hour for travel to and from the airport, for a total travel time of three hours. By contrast, it is a four-hour drive from Houston to Dallas. The plane beats the car by one hour, which means the business traveler values his time at least at $140/hour. Even if we are generous and assume the plane is one and one-half hours faster, business travelers are willing to pay almost $100 to save one hour.

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