bzcat’s comment was in the right direction, but the reason given is wrong. The financial incentives weren’t aligned because the holding company in charge of running THSR’s main shareholders were the very companies doing the construction. They didn’t care about bankrupting the company because they saw a safe bet with overcharging the holding company for construction, making their dough then, and then allowing the holding company to go into bankruptcy. In the accidental case the holding company could actually make money, they would make an even bigger profit.

But if we look at the total benefit to society:
Taiwan High Speed Rail is an amazing transportation system when you are moving long distances north-south through Taiwan. It makes Taiwan, already at a very high density and without US-style suburban sprawl, very competitive in Asia with transport from Taipei to Kaohsiung in only an hour and a half. Many of the stations in the middle are outside city centers and that is a very big drawback, but even in its form now, it is completely revolutionizing transportation in Taiwan. The domestic airliners are almost all gone with limited service only to areas without THSR. The reason for the loss is only that the ticket fares and the real estate development can’t capture the entirety of benefit of everyone that has done well because of THSR in terms of profit, but if you looked at it from a societal perspective, it is a total win.

The bankruptcy part sounds familiar too.

…that not only requires a majority public construction outlay but also an existing local/regional transit network financed by government…

Transit systems around the long distance train station are nice to have. No one worries about having mass transit to the airport. No one every says “we shouldn’t expand the airport until there’s light rail to the airport” or anything like that.
Wilmington has almost no mass transit other than what happens at the combined SEPTA-Amtrak station. Wilmington is Amtrak’s 11th busiest station. People manage to get to and from the station. The main complaint up here is that there’s no way to get to the Amtrak station in Rennselaer, other than to use a car. There are a few buses a day as there are in Wilmington, supposedly there’s a bus route that stops there once in the morning on an outbound trip from Albany but.never goes by inbound. Albany is Amtrak’s tenth busiest station. Both Wilmington and Albany have an advantage. It’s faster to take the train than it is to drive or fly. So people take the train even though it doesn’t have mass transit to the station.

By the way, that post brings me to another aspect that is not so off-topic. I wonder whether it’s really fair to have a private company “skim” some of the profit from HSR that not only requires a majority public construction outlay but also an existing local/regional transit network financed by government. Hmm.

The Taiwan HSR was constructed using build-operate-transfer model with a 35 year initial lease. What this means is that the Govt will end up owning the line regardless of what happens after 35 years of operation. However, the Taiwan High Speed Rail Corp (THSRC) was also granted 50 year exclusive rights to develop properties around the train stations… land that were given to it for free. So there was a huge financial incentive for THSRC to construct the line as fast as possible with sub prime loans because it will allow them to develop the properties sooner. Essentially, THSRC was really in it for the real estate speculation… the HSR line itself was a mean to the end, not the main financial interest of THSRC.

The financial incentive of the private company that constructed the line was not properly aligned with the long term viability of the line.

http://www.thsrc.com.tw/en/about/ab_comp.asp

Overall if the line were given a few more years to counteract negative public perception of the first year, on a less accelerated payment schedule, it would like still remain in private hands. For the government, it is a counterweight to freeway expansion. Traffic in both the big cities and the “suburbs” (which are nothing like the ones in the US or Canada) is atrocious at all hours of the day, and there is never any parking unless you go to a big box store. Most Taiwanese use scooters or motorcycles for day to day commuting, but keep a car for visiting the country or big errands. This will help quell the demand for more automobiles, which the island does not need.

I disagree with your postage example. Mail is a basic form of communications. I wouldn’t mind government subsidies to help the poor purchase computers and cell phones, either. However, the plane is an optional mode of travel, which the government should not subsidize any more than it pays people to buy cars.

Public transit and roads don’t lose money because they’re fair. They lose money because of overexpansion – commuter rail overexpanded in the 1920s and 30s, and roads overexpanded in the 1950s and 60s. In neither case did this expansion do much to serve the poor, who were cut off from commuter rail by high prices and were later evicted to make room for highways serving the rich. Modern-day urban transit loses money for completely different reasons, namely that it’s badly run and that the government subsidizes the competition.