China Southern Airlines Co., the nation’s largest carrier, and Air China Ltd. are slashing prices to compete with the country’s new high-speed trains in a battle that Europe’s airlines have largely already ceded.

Competition from trains that can travel at 350 kilometers per hour (217 miles per hour) is forcing the carriers to cut prices as much as 80 percent at a time when they are already in a round of mergers to lower costs. Passengers choosing railways over airlines will also erode a market that Boeing Co. and Airbus SAS are banking on to provide about 13 percent of plane sales over the next 20 years.

“There’s no doubt that high-speed rail will defeat airlines on all the routes of less than 800 kilometers,” said Citigroup Inc. analyst Ally Ma. “The airlines must get themselves in shape, increase their profitability and improve the network.”

China Southern cut economy-class tickets to 140 yuan ($21) from 700 yuan on flights between Guangzhou and Changsha after a high-speed train started on the route in December. The trip now takes 2 1/2 hours by train instead of 9.

“The high-speed train is invincible on this route,” said Tom Lin, 30, a civil servant in Guangzhou, who opted to travel by rail.

“There’s no doubt it’s more convenient for trips to the cities along the line. Airlines can’t compete with trains for the spacious seats.”

Nationwide, China’s railways will likely handle 210 million journeys during the on-going 40-day spring festival travel period, as migrant workers head home for the Lunar New Year holidays, according to the official People’s Daily.

High-speed railways will connect all of China’s provincial capitals and cities with more than 500,000 citizens by 2020, serving more than 90 percent of the population, the Ministry of Railways said.

A third high-speed line from Zhengzhou to Xi’an started operation on Feb. 6. Other lines will follow including a link from Beijing to Shanghai that may undercut one of Air China and China Eastern Airlines Corp.’s most profitable routes. The ministry aims to spend 700 billion yuan on rail this year and add more than 18,000 kilometers (11,185 miles) of high-speed track by 2020 -- enough to go almost halfway round the world.

“I dream of China running high-speed lines,” said Philippe Mellier, president of trainmaker Alstom SA’s transport sector.

“The ministry won’t stop.”

China’s 8.7 percent economic growth last year is fuelling an expansion of airports even as trains gain customers. Investment in airport and aviation facilities will rise 50 percent to 90 billion yuan this year, according to the aviation regulator. A total 25 airports, including a second one in Beijing, will start construction this year.

The airports will handle more planes. China ordered 160 Airbus aircraft worth $17 billion in November 2007. Boeing has a 2005 deal for as much as $9 billion of planes.

Domestic passenger traffic on airlines grew 22 percent last year, said Laurence Barron, head of Airbus China.

“With this kind of growth; the planes are full,” said Barron. “I expect in future the planes will remain full and the trains will be full and the roads will be full and the ships will be full. This country needs transport.”

Chinese airlines may need 3,770 new aircraft worth of $400 billion in the 20 years from 2009, according to Boeing. Airbus forecasts a need for 3,272 new planes in that time. (Bloomberg)