The future relations between air and rail transport in an island country

• We propose a bi-level transport model considering competition between rail and air.
• Relation between connectivity of rail–air and market share is discussed.
• Connectivity of rail–air affects the efficiency of rail–air cooperation.
• By cooperation of rail and rail, international PAX’s welfare is sometimes improved.

This paper proposes a bi-level passenger transport market model taking into account competition between air and high-speed rail (HSR) in a domestic market. The paper discusses the characteristics of the relationship between market share and connectivity in domestic and international markets. The result suggests that because of the dominance of HSR in the domestic market, when connectivity between air and HSR is good, international passenger’s welfare can be improved. Finally, when considering profitability of the players, there is an incentive for airlines to cooperate with HSR, but there is no incentive for HSR to cooperate with airlines.