How to make a billion dollars a day

Now about 2 thousand kilometers from Beijing to Hong Kong can be covered in less than 9 hours for about $ 150 in economy class. Trip from Hong Kong to Guangzhou after opening of new S-Bahn section takes 47 minutes.
https://vz.ru/news/2018/9/23/942961.html

1.1 How to apply it in Russia

Apparently, this is the technology that can be applied for construction of Vyborg-Blagoveshchensk high-speed railway, through Moscow, Kazan, Yekaterinburg, Novosibirsk, Krasnoyarsk, Chita, with length of about 8 thousand km that can be covered at of 400 km/h (regular speed for modern high-speed railway) without stops possibly in 20 hours and for $ 600 in economy class, accordingly, which is quite competitive in price and time with the flight Beijing - Helsinki.

From economic point of view, it is possible to create pan-Eurasian passenger overpass, allowing European tourists (Germany, France, England, Italy, etc.) to visit Asia, and Asian tourists (China, Japan, Korea, etc.) to visit Europe.

2. Comparison with existing projects in Russia

Existing St. Petersburg - Moscow – Kazan HSR projects were contemned to commercial failure from beginning, designated for approximately 30 mln people of population and shoulder of approximately 1,400 km only. The proposed HSR Europe-Asia project, with shoulder of about 12 thousand km, is targeting population of up to 3 billion people, which increases overall efficiency of the project by 10 times. It is also necessary to consider that the HSR Europe-Asia project is based not only on domestic demand, but is 90% foreign demand i.e. export service oriented.

Route	Length (km)	Total population along the route in two-hour proximity (million people)	Solvent population along the route in two-hour proximity (million people)	Ratio of solvent demand to the length of the route (thousand people / km)	Ratio of the total population to the length of the route (thousand people / km)
All-Japanese Sinkasen	2 000	120	100	50	60
Beijing - Hong Kong	2 000	700	100	50	350
St. Petersburg - Moscow - Kazan	1 400	30	15	10	21
Berlin (Europe) - Beijing (Asia)	12 000	3 000	1 000	83	250

3. Grounds for political independence of the route

Initially, it is necessary to establish ridge-axis of the project from Vyborg to Blagoveshchensk that is politically independent from other countries, possibly giving way to politically dependent on other sovereignties, such as Belarus, Poland, Germany, Kazakhstan, China, North and South Korea branches.

For instance, construction of the HSR to China through Kazakhstan has serious political flaws:

Uncertainty in political affiliation of Kazakhstan in long term represents risks that fully implemented when Russia-Europe gas pipeline followed through Ukraine. To mitigate these risks, Russia was forced to implement “Nord Stream”, “Nord Stream-2”, “South Stream”, “Turkish Stream”, “Power of Siberia” projects that resulted in enormous economic, political and time costs with negative exposure to political and economic development of Russia. Idea of high-speed railway passing through Kazakhstan will be rather inherent to second “falling into the same trap” for authors of the project.
Infrastructural development of another state (Kazakhstan) instead of its Trans-Ural regions, mainly Kurgan, Omsk, Novosibirsk, Barnaul, Chita and Blagoveshchensk, will be considered as a refuse to unite the largest industrial agglomerations of the Trans-Urals, and will raise political questions to the government of Russia not only between elites and residents of these regions, but also between all nationals of Russia.
History of CER construction with the cost of 190 million Tsar rubles in 1903, equating to 280 tons of gold at that time, is quite recent, yet very significant, not only in the sense monetary loss, but also as resulting in building of belt road for enemy, for the Japanese.
In addition refuse to ensure infrastructural integration of the territory of Russia in accordance with the National Security Strategy will face quite negatively perception from the “power” elite.

Proposition of such political risks to the country's leadership will become more than an unreasonable step.

4. Throughput

Key parameter is time of emergency break application for a train following at 400 km/h speed in case of emergency, such as track destruction. It is this time period that will determine maximum movement rate for. In the calculation below, this time is taken as 7 minutes.

There are 24 hours in a day, 60 minutes in an hour, respectively 1,440 minutes in a day. 7 minutes break may allow for over 200 trains (routes) passage per day.

If each railroad engine (or coupling) pulls 40 cars, then throughput will compile 8,000 cars per day for one direction.

As the HSR, like all roads, will be double-tracked, the number of cars should be multiplied by two. Equates to 16,000 wagons.

This number of cars is calculated for the period of 7 minutes. If the period changes, the throughput will also change.

4.1 Throughput functionality check

Currently, the official throughput of the Trans-Siberian Railway is 100 million tons per year.

With above it takes only 6 days i.e 144 hours for express train to cover 7 thousand kilometers distance, meaning average speed of just below 50 km/h.

Construction of high-speed highway for a speed of 400 km/h will increase the throughput by 8 (eight) times, and value up to 800 million tons per year, or for about 2.2 million tons per day.

Even considering the weight of one car with 100 passengers with wide margin of 50 tons, we will get result of 44,000 cars per day, which is more than double of the previous calculation.

4.2 Throughput functionality check using current Tokyo-Osaka high-speed railway (Shinkasen Tokaido)

Shinkasen Tokaido carries over 450,000 passengers per day on trains of 16 wagons, with 1,323 comfortable passenger seats in each train.
https://global.jr-central.co.jp/en/company/about_shinkansen/

There are couplings of two trains, evidencing strong possibility of transporting 900,000 passengers per day with available speed of about 300 km/h.

Accordingly, with the speed of 400 km/h transportation of 1,000,000 passengers per day with two-train couplings is even more possible.

5. Ticket price substantination

Usually cost of a ticket on the SCM is higher air ticket price. For example:

Moscow - St. Petersburg air ticket can be easily purchased for $ 50, while Sapsan is $ 100.
Beijing - Hong Kong air ticket can be easily purchased for $ 100, while HSR is $ 150.
Tokyo - Osaka air ticket can be easily purchased for $ 100, while HSR is $ 170.

Thus, based on actual ticket prices for HSR, we receive the following table.

Route	Length (km)	One-way ticket price (USD)	One-way ticket price 1,000 (USD)	One-way ticket price 8,000 km One-way ticket (USD)
Moscow - St. Petersburg	650	100	153	1 230
Beijing - Hong Kong	2 000	150	75	600
Tokyo - Osaka	400	170	425	3 400

Consideration of above items allows for quite accurate assumption of reasonable price for one-way HSR economy-class ticket in the beginning of operation of USD 600, business class of USD 1,500, with high probability of price increase even in short prospective.

6. Revenue

6.1 Revenues with the assumption of 100% economy class passenger traffic

There are 54 seats in regular reserved seat car.
As double-decker trains become common, our calculation uses standard double-decker car with 100 seats reservation.
Accordingly, with ticket price of $ 600 revenue per wagon will compile $ 60,000.
With 16,000 wagons, revenue will compile $ 960,000,000 per day.
Almost a billion dollars a day.
1,600,000 people a day.

6.2 Revenues with the assumption of 100% business class passenger traffic

36 seats in ordinary compartment car.
As double-decker trains become common, our calculation uses standard double-decker car with 60 roomette seats.
Accordingly, with ticket price of $ 1,500, revenue per wagon will compile $ 90,000.
With 16,000 wagons - $ 1,440,000,000 per day.
Almost one and a half billion dollars a day.
960,000 people a day.

6.3 Revenues with an assumption of 30% of business class passenger traffic and 70% for economy class

30% * 1,440,000,000 = 432,000,000
70% * 960,000,000 = 672,000,000
Total 1,104,000
Quite real billion Dollars a day.
288,000 roomette passengers and 1,008,000 reserved seat passengers. Total 1,296,000 people a day.

6.4 Inexpedience of goods flow

Railcar with passengers will bring revenue from USD 60,000 to 90,000 per trip. Delivery of non-perishable goods on this route by sea now costs up to USD3,000 per container, nominally equal to the railcar. Accordingly, profitability of transportation of non-perishable goods is 20-30 times lower passenger transportation, showing poor economy of goods flow compared to passenger flow.

Perhaps delivery of mail, Internet orders or very expensive goods will be exception from this premise. But it seems too optimistic to rely on significant share in revenue of this commodity flow.

7. Occupancy

1,296,000 people a day with 365 days a year means 473,000,000 passengers a year.

Will there be nearly half billion tourists a year?

If we assume that 70% will take return ticket, so it requires only finding about 300 million people.

7.1 Asian market

Over 150 million tourists a year goes from China alone to tourist trips.

The China International Tourism Research Institute predicts that over 400 million Chinese will travel by 2030. According to the Institute, this means that out of 600 million trips that will be added to today’s value by 2030 (1.2 billion people traveling today, their number will increase to 1.8 billion in 12 years), almost half will be Chinese. The Chinese international tourism market will account for nearly quarter of global.
https://china-outbound.com/

All Southeast Asia (China, Korea, Japan, partially Vietnam and Indonesia) is estimated as 400 million tourists a year. But not all of them go Europe and particularly by train.

It is realistic to accept market as 50 million tourists a year in short prospective (2035) with increase up to 200 million a year in long prospective (2050).

The total population of China, Korea, Japan, Vietnam compiles about 2 billion people.

7.2 European market

All Central Europe (Germany, France, Italy, partially United Kingdom, Spain, Poland) is estimated as 400 million tourists a year. But not all of them go Asia and use train.

It is realistic to accept a market of 50 million tourists a year in short prospective, with growth up to 100 million a year in long prospective.

7.3 Domestic market

If there are stops in St. Petersburg, Moscow, Kazan, Yekaterinburg, Chelyabinsk, Barnaul, Krasnoyarsk and Chita, we can assume the domestic Russian market for tourist travel and especially businessmen as 30 million per year in short prospective with an increase up to 100 million trips per year in long prospective.

Should it be possible to agree with major cargo carriers vitally interested in increasing goods flow via Trans-Siberian Railway, by passenger traffic transfer to HSR through by subsidizing tickets at their expense, then the Russian tourist travel market can be carefully estimated as 50 million trips a year in short prospective, with growth up to 150 million trips per year in long run.

7.4 Other markets

With availability of abundant and high-quality advertising, production of films like “Pan-Asian Express”, etc. You can create demand from the American market and the Middle East market.

It is quite real to accept all other markets of 50 million tourists a year in short prospective, with growth of up to 100 million a year in the long run.

Passenger traffic markets between Russia and Europe, as well as between Russia and China, are not considered due to their notorious insignificance. Mathematicians call such a parameter " the little-o notation - value that can be neglected."

But it is worth to consider the value of "domestic tourism" in China, that amounted 5 billion trips per year. Even redirection of just 10% of this flow outside through Russia will fully pay for the entire project.

7.5 Total Occupancy

Market (region)	Short-term (passengers per year)	Long-term (passengers per year)
Asia	50	200
Europe	50	100
Russia	30	100
Other markets	50	100
Total	180	500

The assumption of multiple growth, obviously, has prospect, as today passenger traffic of Sapsan Moscow - St. Petersburg almost tripled from 1.62 million to 5.47 million per year.

("Kommersant" newspaper №96 (https://kommersant.ru/daily/118140) dated 05/05/2019, p.1)

7.6 Additional arguments “against” air communication and “pro” HSR

Aerophobia. Large number of passengers are afraid to fly "just like that", at emotional level, for no particular reason.
Increased accident rate of man-caused disasters due to equipment failure.
Aircraft crashes occurring from time to time due to both terrorism and military operations.
Dehydration, pressure drop, oxygen starvation, increased doses of radiation, decreased immunity, general stress of the body and other harmful exposure on health of all passengers during flights.
Opportunity to visit a restaurant, shower, availability of playrooms for children on rail trip.
Ability to go to any intermediate station both for health reasons and simply out of a desire to travel.
Much more convenient service for disabled, elderly and small children.
Flying is often not advised by doctors For small children till they reach the age of one year, and sometimes even up to three years.
Older people and pregnant women often cannot fly on airplanes for health reasons, but travel with pleasure with a train.
There are special "tourist" railway routes. The luxury train in South Asia is very well known, the “Arctic” route St. Petersburg - Murmansk has appeared.

7.7 Occupancy Check

According to ICAO's latest long-term forecasts for air traffic, the number of passengers transported in 2017 (4.1 billion people) will increase to about 10 billion people by 2040.
https://www.icao.int/annual-report-2017/Pages/RU/the-world-of-air-transport-in-2017.aspx

Despite the fact that the airline market in Europe and Asia recently compiles 53% of global, by 2040 the number of passengers transported will reach at least 5.3 billion people, even assuming absence of growth in European and Asian share, which is unlikely.

Thus, full load of high-speed rail connecting Europe and Asia requires less than 10% of air passenger traffic, which is highly probable.

8. Comparison of CAPEX

According to the Airbus forecast, passenger transportation in 2033 will require 31,400 new passenger aircrafts (100 seats and above) with total cost of 4.6 trillion Dollars.
http://avia.pro/blog/prognoz-razvitiya-rynka-aviaperevozok-2014-2033-gg

Assuming that in 2033 the number of passengers carried will compile at least 8 billion, transportation of 500 million people will require about 2,000 new passenger aircrafts ( 100 seats and above) with total cost of $ 300 billion.

With the cost of high-speed rail connecting Europe and Asia of $ 250 billion (including stations, interchange stations and rolling stock), the transportation economy seems encouraging. Given much longer service life of the HSR compared to passenger aircraft, makes the economy even more impressive.

9. Value

Recent high-speed construction projects at 350 km/h in China show average construction cost of approximately $ 25 million for 1 kilometer.

	Length	Construction Cost
Route	(km)	(billion $)	(million $ / km)
Beijing - Xunan	92.40	5.32	57.58
Beijing - Shenyang	697.63	20.08	28.78
Beijing - Zhangjiakou	174.00	9.42	54.14
Zhengzhou - Xuzhou	361.93	7.50	20.72
Zhengzhou - Wanzhou	785.00	18.15	23.12
Zhengzhou - Fuyang	277.00	6.57	23.72
Wuhan - Shigao	399.50	8.24	20.63
Nanchang - Ganzhou	415.20	8.32	20.04
Shangqiu - Hangzhou	794.55	15.25	19.19
Jinan - Qingdao	307.90	9.52	30.92
Rizhao - Qufu	240.80	5.66	23.50
Chongqing - Guiyang	345.00	8.28	24.00
Total	4 890.91	122.31	25.01

According to the China Railways Corporation (CRC) in 2019, construction of one kilometer of high-speed rail with design train speed of 350 km/h averages 129 million yuan or $ 19 million 394 thousand.
The above amounts do not include costs of surveying. Also, during execution of contract for such projects outside of China, construction cost increases by Chinese side’s expenses on logistics of machinery and equipment, ITR trips and labor.
It is also important to understand that financing extension involves lending costs.

Thus, construction of the Vyborg-Blagoveshchensk high-speed rail with speed of 400 km/h and length of 8,000 km should cost about $ 200 billion. Considering unforeseen expenses, it’s reasonable to establish the estimate price of $ 250 billion, which is less than or comparable to annual revenue of the project with full loaded.

10. Financing

The project will be financed not from single source, but by the “multi-layered cake” method. The “layers” of this pie will be as follows (ranking to reduce interest on our part):

As the Silk Road project has funding from the PRC budget https://www.cnbc.com/2017/05/14/china-pledges-more-than-100-billion-in-belt-and-road-projects.html , it seems necessary to attempt building at least part of the route at expense of China and the Silk Road Fund. For example, China offered financing construction of Moscow-Kazan high-speed railway for amount of Rubles 300 billion, of which about 50 billion of the indicated amount was proposed to be invested in special design company for implementation of the high-speed railway (HSR) project, and they offered to provide a loan for the remaining 250 billion for 20 years. https://www.gudok.ru/newspaper/?ID=1261731 The financial thickness of this layer can vary from $ 10 billion to $ 100 billion, based on the quality of negotiations described below. The value of this layer of cake is its irrevocability. ¹
The best is establish main financing according to the scheme “our gas-your pipes” used earlier in construction of the Yamal-Western Europe gas pipeline. In this case, with a group of equipment suppliers, construction investors from China, Korea and Europe, can be paid with tickets. This encourages them to invest in advertising and distribution of ticket sales. This “pie layer” is of strategic importance for the project, as it serves security against risk of absence of ticket sales due to possible political inconsistencies. It is important not to consent for a project not having value of at least 40% of the estimated cost ($ 100 billion). At the same time, loading guarantees for building under construction is a common condition for any concession. In this case, we cannot discuss direct concession, since Russia is not ready to grant strategic infrastructure management to another country or company that is not controlled by ultimate Russian beneficiaries. But considering certain model of “limited concession taking into account sovereignty of Russia” is possible, yet very carefully, and only with permission of law enforcement agencies. The financial value of this layer may vary from $ 100 billion to $ 200 billion, depending on the quality of negotiations.
Also revealed voluntary will to finance this project by group of large exporters of coal, ore, steel and other large-tonnage goods, especially in Yekaterinburg-Blagoveshchensk section. Commercial interest of these “sponsors” lies in their desire to unload Trans-Siberian Railway in this section as much as possible from passenger traffic, followed by increase in export flow associated with their commercial enterprises. The financial thickness of this layer is small and may vary from $ 5 billion to $ 20 billion, based on quality of negotiations. Yet, at the same time, value of this layer of the pie is its irrevocability. The financial thickness of this layer is small and may vary from $ 5 billion to $ 20 billion, based on quality of negotiations. But at the same time, the value of this layer of the pie is its irrevocability.
Borrowed finance from large semi-state institutions. The options for banks involvement, development institutions and funds is considered: RDIF, BRICS Bank, EDB, the Russian-Chinese Fund (PWC report “HSR Project Eurasia” dated November 15, 2017). The financial thickness of this layer may vary from $ 20 billion to $ 70 billion, based on quality of negotiations.
Borrowed financing through issuance of bonds for individuals and legal entities. Very simple, clear and powerful tool. It is even possible to issue “convertible” bonds, redemption of which may bring not money, but tickets for travel on Vyborg-Blagoveshchensk high-speed rail. In case of issuing international bonds in bearer cash, and even with an “amnesty of origin”, the financial value of this layer, may be up to $ 100 billion. Disadvantage of this “layer of cake” is its high cost both in terms of issuance and circulation costs, and in coupon payouts.
6. Significant assistance in payback of the project is expected to remove VAT on tickets and baggage of passengers of HSR. The financial value of this layer will compile up to $ 60 billion per year. The disadvantage of this "layer of the pie" is its inapplicability before start of operation.

Quality of negotiations will depend on coordination of all types of negotiators, considering together values of all layers of financing and consisting of:

Finance professionals and developers of this project,
Governmental officials,
Top political leadership of the countries.

It is extremely important not to involve officials from ministries and authorities to negotiations, as in strive to bribes they will considerably increase costs and timing of projects.

10.1 Types of financial pies

$Billion	Perfect	Worst	Real
1. The budget of the PRC	100	10	50
2. Our way - your tickets	200	100	150
3. Donations from exporters	20	5	10
4. Large financing	20	35	30
5. Bonded financing	10	100	20
Total	350	250	260

10.2 Additional benefits of this model are not considered only for model simplificaiton

At the same time, preliminary (forward) sale of rights on the following items may can provide good financing even at construction stage. After completion of construction, below stated incomes will strongly improve project payback.

Income from stops of transit tourists (mainly Chinese) in Russia in hotels, restaurants, shops, tourist excursions.
Income from foreign investments (mainly Chinese) in Russia in railway stations, hotels, service and maintenance enterprises, industry and transport.
Income from movement of perishable goods (fish and seafood, fruits and vegetables).

10.3 Benefits for the Russian economy can also be converted to sources of financing

Increase in exports by at least 100% (from 386 billion Dollars to at least 700 billion Dollars over the next 15 years (10 years of construction and 5 years of promotion).
Fundamental change in structure of exports in terms of absence of dependence on oil prices. "Dropping off an oil needle."
Increase in tourism to Russia for at least 5 (five) times.
Creation of at least 10 million jobs, not only in transport, but also in tourism services.
Foreign investment engagement in both infrastructure and services. at least of $ 200 billion.
Boost in economy caused by cheaper and faster movement of tourists, businessmen and number of perishable goods.
Exemption of existing low-speed rail lines to almost double export freight flow.

¹ There is also visible financial interest from South Korea and Germany. It is worth working out, but should not be given significant importance.

11. Timing

Considering that Trans-Siberian Railway from Chelyabinsk to Port Arthur with the length of 7.5 thousand km was built in 12 years from 1891 to 1903 (https://transsib.ru/history/history-review.htm#begin3), and that only China is engaged construction of 1 thousand km of HSR per year, the project can actually be accomplished in 10 years.

In just five years and with $ 3.5 billion, China built highway of 1,150 kilometers ($ 30 million / km each), connecting Tibet with main territory of the country. Works on alpine site before Lhasa were associated with engineering problems of particular complexity: construction workers had to work in permafrost, lack of oxygen and, soecifically in a unique Tibetan ecosystem, the preservation of which was declared matter of primary importance by the Chinese Party and Government.
https://masterok.livejournal.com/5421430.html

Furthermore, it is fundamentally important to exclude any budget financing, since it will attract huge number of “thieves from bureaucracy” and slow down the project for long time, or, as in case of the Moscow - St. Petersburg High-Speed Railway, destroy it.

12. Risks

Redemption of land from non-state owners.
Resettlement of number of villages and towns.
Ecologists, archaeologists, extortionists, disguised as “people's defenders”, “ecologists”, “archaeologists”, etc.
Confrontation of businesses losing revenue from very existence of such overpass, for example, airlines serving flights Europe - Asia.

13. Additional benefits

Income from stops of transit tourists (mainly Chinese) in Russian in hotels, restaurants, shops, tourist excursions.
Income from foreign investments (mainly Chinese) in Russian in railway stations, hotels, service and maintenance enterprises, industry and transport.
Income from the movement of perishable goods (fish and seafood, fruits and vegetables).

14. Further development

On the West, Moscow – Brest branch with further access to Berlin and the rest of Europe.

On the East, Blagoveshchensk-Vladivostok branch with further extension to Seoul.

15. Benefits for the Russian economy

Increase in exports by at least 100% (from 386 billion Dollars to at least 700 billion Dollars over the next 15 years (10 years of construction and 5 years of promotion).
Fundamental change in structure of exports in terms of absence of dependency on oil prices. “Dropping off an oil needle.”
Increase in tourism to Russia for at least 5 (five) times.
Creation of at least 10 million jobs, not only in transport, but also in tourism services.
Attracting foreign investment in both infrastructure and services for at least $ 200 billion
Boost in the economy caused by cheaper and faster movement of tourists, businessmen and number of perishable goods.
Exemption of existing low-speed rail lines to almost double export freight flow.

05.02.2019

Last revised 17.09.2019