This paper examines the efficiency of a high speed rail system relative to the air system over distances where rail offers a competitive transit time. As an example we consider the corridor between Toronto and Montreal. The basic result is that high speed rail is the low cost technology over relatively low demand levels.
The profitability of a HSR investment is evaluated using the criterion of Net Present Value. Given the structure of our analysis, the Net Present Value is very sensitive to the revenue assumption. This suggests a role for public sector financial involvement.