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First, carefully read the Brightline case. Then, fully answer all four questions presented in the case. Make sure to use competitive analysis as the framework ‘lense’ as you answer each question. There is not a page maximum, but each answer should at least be one full page in length. No supporting scholarly sources are required, but may be used (please include reference page if sources cited). All work should comply with APA 7th edition guidelines and represent quality collegiate writing and critical thought.

DUE 1/8/22

i Jessica Peters is a pseudonym.

case W28C67
October 20, 2020

Andrew Hoffman

Brightline: Targeting a Successful Future with
High-Speed Rail

Jessica Peters,i executive vice president of rail infrastructure for Brightline Trains, stared at the
bumper-to-bumper traffc in front of her along the I-95 route to her offce in Orlando. Despite this being a
regular sight on her daily drive from her home in Jupiter, Florida, it made the trip no less exhausting. She
contemplated what it would be like to avoid this odious journey each day, and how such a reality may be
feasible in the near future. Brightline’s successful implementation of Phase I of development—high-speed
passenger trains between Miami and West Palm Beach, with an intermediate stop at Fort Lauderdale—left
Peters optimistic about the company’s future, a future that could reduce such bumper-to-bumper traffc.
Now with the construction of Phase II, the extension connecting West Palm Beach and Orlando over one-
third of the way complete, Peters’ focus shifted toward determining how Brightline could ensure the launch
of this extension would be successful.

Despite the success of Phase I inspiring confdence for similar results in the future, Peters recognized
the company was at a critical point. With a limited budget, she must determine how to market and position
Brightline’s expansion to capture the attention and interest of potential riders, ensuring strong adoption
rates upon launching operations. With investors looking for returns, Phase II needed to have a successful
launch. Which segment—business or leisure travel—was more impacted by the congested routes and had a
higher likelihood to switch transportation modalities? To what extent should Brightline target both business
and leisure travelers for the new route? What were the risks and benefts of prioritizing a particular target
market? How should Brightline position itself to reach each target market? Was it possible to be sustainable
with private funding only?

Overview of High-Speed Rail

High-speed rail (HSR) aims to be time-competitive with both airplanes and automobiles. The U.S.
Department of Transportation’s Federal Railroad Administration (FRA) defned HSR as a form of travel whose

Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan.

© 2020 Kunaal Kapadia, Nisha Patel, Emma Phillipson and Serena Wang. This case was written by University of Michigan students
Kunaal Kapadia, Nisha Patel, Emma Phillipson and Serena Wang, under the supervision of Andrew Hoffman, Holcim (US) Professor of
Sustainable Enterprise, a position that holds joint appointments at the University of Michigan’s Ross School of Business and School
for Environment and Sustainability. The case was prepared as the basis for class discussion rather than to illustrate either effective or
ineffective handling of a situation. The case should not be considered criticism or endorsement and should not be used as a source
of primary data.

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

cruising speed ranges from 100 to 500 miles per hour (mph).1 The European Union defned it as capable of
reaching at least 150 mph on HSR-specifc rail lines or 125 mph on upgraded existing lines.2 Whether at
top speed or less, HSR trains shared one critical commonality: use of continuous welded rail. This feature
reduced vibrations and discrepancies that could occur between rail segments, allowing safe use above 120
mph.3 The FRA had a system of classifcation for railroad track quality ranging from 1 to 9 (see Appendix
A).4,5 Each classifcation defned the track’s tolerances for particular speeds, thus setting the speed limits
for freight and passenger trains.

A 2019 study of Italian HSR found there were three general sources of its riders. The frst was passengers
acquired from conventional rail, followed by those formerly using air transport, and then induced demand.
Induced demand was generated from people who would not have otherwise traveled or who were willing to
increase the frequency of their trips as a result of the introduction of HSR.6 In general, although induced
demand initially contributed little to the total HSR demand, within a few years of the rail’s opening it
accounted for approximately 10-20% of ridership.7

By increasing connectivity and reducing travel time between cities, HSR can bolster economic activity
within the area surrounding the rail’s tracks, either by catalyzing new growth or unlocking existing growth
potential.8 In cities with low economic growth, HSR can act as a catalyst by drawing in new activity that
spurs economic development. For cities with strong local economies and high economic potential, such as
metropolitan centers or capitals, the introduction of HSR facilitates development and may act as much-
needed infrastructure to support the city’s growth. HSR-linked areas were found to attract residents and
businesses due to HSR’s superior level of connectivity compared to non-linked areas. As a result, economic
growth and development were redistributed to HSR-linked areas.9

An example of such growth is Japan’s Shinkansen railway stations, which opened in 1964. Regions with
direct connection to the Shinkansen stations were found to have higher employment growth compared to
those without this accessibility.10 Additionally, the presence of these stations improved tourism, that rose
from 15% to 25% from 1964 to 1975. These areas became city centers, offering transit terminals, hotels,
offces, retail, dining and cultural facilities, and parking.11 Overall, the stations had an above-average
impact on redevelopment of the surrounding areas compared to existing stations, indicating further HSR
development might result in similar, positive economic development.12

Environmental Sustainability in High-Speed Rail

Transportation was a primary source of U.S. carbon dioxide emissions from fossil fuel combustion,
accounting for 36.3% of the country’s CO

2
emissions in 2018.13 Transporation via passenger automobiles,

commercial aircraft, and rail constituted 41.2%, 6.9%, and 2.3% respectively of the total U.S. transportation
CO2 emissions.14 Comparatively, HSR’s improved energy effciency made it much less of a polluter.

HSR’s lower emissions were attributed to reduced technology and operating costs achieved through
effcient route planning, superior aerodynamic design, and fewer stops. HSR’s design reduced aerodynamic
drag, which allowed faster acceleration.15 Fewer stops reduced the energy dissipated from acceleration
and brake activation. Finally, more direct routes decreased wasted travel miles experienced with other
transportation modalities such as hub-and-spoke air travel with connecting fights.16

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

HSR produced the least emissions per passenger kilometer (17g of CO
2
), followed by buses (30g),

automobiles (115g), and airplanes (153g) (see Appendix B). This suggested that shifting travel to HSR
could substantially reduce the negative environmental implications of the U.S. transportation sector.17

Inception of High-Speed Rail

Since its introduction in the mid-1960s, HSR came to serve (by 2020) 20 countries and 1.6 billion
passengers annually with 28,000 miles of track.18 This growth came primarily in Asian and European
countries, principally Japan, France, and China.19 The reasoning behind introducing HSR varied from
country to country, with some focused on reducing travel times, and others on offering an environmentally
sustainable alternative to air and road transport.20

Japan’s frst high-speed railway opened in 1964.21 The Tokaido bullet train line, connecting Tokyo and
Osaka, was built to meet transportation demand and serve as a preliminary step to revolutionize Japan’s
entire transport infrastructure to meet the needs of the country’s rapidly growing economy. Japan went on
to integrate nine more high-speed rail systems that reached speeds of approximately 200 mph.22 In 2018,
Japan’s high-speed network spanned 1,890 miles and served roughly 355 million passengers annually.23 The
network cost approximately $54 million per mile to implement.24 Travelers could take the three-hour train
ride from Tokyo to Osaka for roughly $125, compared to the approximately $110 plane ticket cost and two-
hour long fight.25

Seventeen years after Japan introduced high-speed rail, France opened Europe’s frst high-speed rail
between Paris and Lyon. France went on to deploy over 1,700 miles of high-speed rail lines throughout
the country, capable of speeds up to 200 mph.26 The cost for implementation was over $47 million per
mile.27 For a passenger, the Paris-Lyon trip was $75, compared to $115 via plane, with the travel times very
similar.28 Most of Europe adopted the same speed, voltage, and signaling in order to increase the feasibility
of inter-country rails. This allowed development of HSR in Spain, Germany, Belgium, and Britain, including
cross-border links between Italy and France, with stops in Switzerland, Austria, and Slovenia.

China launched HSR before hosting the 2008 Beijing Olympics with a 75-mile, 217-mph track between
Beijing and Tianjin. The train featured magnetic levitation (maglev) and reached 268 mph between Shanghai
and Shanghai Pudong International Airport. Maglev trains use magnetic repulsion to levitate slightly above
the ground29 and can travel very fast, with lower maintenance costs as a result of less wear and tear due to
no contact between the train and the guideway.30 But maglev trains cannot use existing rail and, therefore,
require high upfront investment.31 China dramatically expanded its use of HSR, with over 21,000 miles of
track, accounting for nearly 70% of the HSR track in the world. In 2019, China’s HSR served over 2.29 billion
passenger trips, with ridership expected to grow 8% annually.32

The Beijing-Shanghai HSR journey cost passengers $85 and took about seven hours. The same route
cost airplane passengers $110 for a four-hour trip.33 (See Appendix C for rail/airline comparisons). The
Chinese government set train ticket prices substantially lower than airfare to dissuade domestic air travel
and recognized substantial growth in train ridership.34 By 2020, China had dedicated over $300 billion
toward building its internal high speed capabilities.35 The government said it spent approximately $30.4
million per mile to implement high speed track.36

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

High-Speed Rail in the United States

As HSR continued to improve transportation around the world, the U.S. Congress showed ongoing
interest in its potential benefts.37 In 1965, Congress initiated development of the Metroliner, a fast train
between Washington, D.C., and New York City.38 But, the United States had nothing comparable to the HSRs
Europe and Asia. By 2020, HSR plans existed for California, the greater Northeast area, Texas, and Florida
(see Appendix D for U.S. train lines that had some HSR features).

In 2008 California undertook planning for HSR development, and began construction in 2015.39 The aim
was to connect northern cities Sacramento and San Francisco with southern cities Los Angeles and San Diego
with trains that could reach up to 220 mph.40 However, development proved more costly than expected:
2008 projections estimated $45 billion in costs, while estimates in 2019 were closer to $80 billion.41

Construction costs rose to $89 million per mile of track for portions of the route, such as between Madera
and Shafter, California.42 Expectations for the most anticipated service—San Francisco to Los Angeles—
were that the HSR trip would take 2.5 hours and cost $90, compared to a $60 for a 1.5-hour fight.43 The
rail advantages included no air travel and arrival points closer to downtown.

The Northeast Corridor (NEC) plan followed California’s efforts as the second-biggest U.S. HSR project;
this multi-phase development, spanning from 2021 to 2040, would revamp the Acela Express’s aging
infrastructure, insuffcient capacity, sub-HSR track, and gaps in connectivity.44 The project, NEC Future,
aimed to improve connectivity and speed between Boston and Washington D.C., with stops in New York
and Philadelphia. It dedicated $2.45 billion to provide pockets of high-speed rail capabilities on the Acela
Express, with trains reaching 180 mph.45

Unlike the California and NEC projects, Texas Central Railway was a privately-owned HSR development
started in 2014 that aimed to connect Dallas and Houston in under 90 minutes, allowing travelers to avoid
a 3.5-hour drive.46 The $20-billion railway, that planned to cover over 240 miles, projected a cost per mile
of $83 million.47 (See Appendix E for cost comparisons for track implementation per mile). The project
planned for trains to leave every 30 minutes and reach speeds of 200 mph, using Japanese engines and
cars.48 Texas Central endured legal battles over acquiring property from owners along the route49 but hoped
to begin construction in 2020 and start operations in 2026.50

Funding was a primary constraint for HSR development in the United States.51 High upfront costs, long
periods before revenue was generated, and little evidence that HSR could be proftable led to skepticism from
potential investors.52 However, private investors recognized that HSR was a business model that disrupted
historical rail transportation, thus making it a potential worthwhile investment. Further, as concerns grew
over climate change and increased traffc congestion, HSR became part of the proposed Green New Deal,
a resolution offered within Congress.53 Several governments, at both the national and state level,54 have
chosen to implement Cap-and-Trade systems, utilizing proceeds from these programs to fund environmental
initiatives, such as HSR.55 Under Cap-and-Trade, businesses are given a credit that represents the amount of
CO

2]
they are allowed to emit and can buy and sell credits in a government-run auction setting. In California,

for example, 25% of the proceeds from the Cap-and-Trade system were then used to fund the California HSR
system, indicating such government initiatives can be utilized to fund HSR projects.56 The proceeds from
California’s program, however, ultimately provided insuffcient funding required for the HSR development.57

High-Speed Rail Funding

HSR systems were typically funded in one of three ways: publicly, privately, or through public-private
partnerships.

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

California’s HSR project was an example of a publicly-funded system and received money from both the
state and federal government. The frst funding came in 2009, with $2.5 billion in federal money allocated
through the American Recovery and Reinvestment Act.58 In 2010, the system received an additional $929
million through a Transportation, Housing and Urban Development grant.59 In 2014, the state Legislature
appropriated 25% of the annual proceeds from a carbon dioxide cap-and-trade program, but its revenues were
disappointing.60 Additionally, in 2019 the federal $929 million was revoked by the Trump administration,61

an example of how public fnancing can be unreliable or insuffcient to cover the extensive costs associated
with building HSR systems. Funding approval was often contingent upon external factors such as economic
conditions, political viewpoints, and other issues at the time.

Private funding was considered by some to be more viable. Texas Central’s funding came solely through
private investors and private loans.62 Privately-funded projects needed to meet an investor threshold for
likely profts that usually meant buy-in from the public to a greater extent than a government-funded
service project.

A third funding route was through a public-private partnership (P3). According to the World Bank, a
P3 “combines the strength of the public sector’s mandate to deliver services and its role as regulator and
coordinator of public functions with the private sector’s focus on proftability and, therefore, commercial
effciency.”63 As shown in Appendix F, the structure of P3s differed from traditional, publicly-funded
projects, which were solely government-run. With P3s, a project company received funding through both
the government and the private sector; control of the project was then allocated between each entity.
Proponents said P3s could be a more feasible funding structure for bringing HSR to the United States,
though it had not happened yet. P3s had been implemented in other countries for HSR, and for non-HSR
projects within the United States such as toll roads.64 Portugal fnanced its Porto-Lisbon HSR through P3s.65

Brightline Background

Brightline, headquartered in Miami, Florida, was the only privately-funded and operated passenger
railroad in the United States. It offered an alternative to driving on congested highways and taking on
the inconvenience and expense of short airline fights. Brightline also challenged the traditional image
of a train station as a stodgy single-story building with tracks below. Skidmore, Owings & Merrill LLP, the
designer of Brightline’s stations, “envisioned [the stations] not only as gateways to their respective cities,
but also as iconic destinations, … flled with spaces to shop, eat, and meet.”66 Brightline’s Miami station,
for example, contained two offce towers, retail space, a food hall, and 800 apartments.67 Moreover, by
creating development around the stations, Brightline initiated opportunities for economic activity which
was predicted to bring over $6 billion in investments to Florida’s economy by 2022.68 New offces and
apartment buildings opened near the Miami and West Palm Beach Brightline stations in 2018.69 The Miami
station connected to a 12-foor offce and retail building, with additional developments under way and
access to other forms of mass transit.70 Similarly, West Palm Beach saw infrastructure improvements to
improve pedestrian access to the Brightline station and surrounding areas with the building of a new road
with sidewalks that connected to the station’s entrance.71

Brightline’s journey began in 2007 when Florida East Coast Industries (FECI), the parent company
of Florida East Coast Railway, was sold to the Fortress Investment Group. In 2012, FECI announced its
intention to build a privately-owned and operated rail system that connected Miami and Orlando that would
leverage 200 miles of existing track in addition to building a new 40-mile corridor.72 Originally known as “All
Aboard Florida”, the project was rebranded “Brightline” in 2015.

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

Despite the benefts Brightline’s development could bring to Florida communities, the frm faced some
scrutiny regarding its use of private activity bonds as a funding source. In 2015, Martin and Indian River
counties fled federal lawsuits against the U.S. Department of Transportation, challenging the legality of
All Aboard Florida’s use of $1.75 billion in tax-exempt bonds to fnance a signifcant portion of its private
passenger train service, in addition to questioning whether the FRA’s environmental impact statement was
adequate.73 The lawsuits were dismissed by a federal judge in 2017 after All Aboard Florida withdrew its
$1.75-billion bond request.74 (For a summary of Brightline’s ownership and fnances, see Appendix G.)

Brightline’s route development was divided into three phases. Phase I trains connected West Palm
Beach and Ft. Lauderdale in January 2018, and then Ft. Lauderdale and Miami in May 2018. This phase
utilized Class 4 tracks accommodating speeds up to 80 mph (see Appendix A).

In 2020, National Public Radio gave Brightline the title of the nation’s deadliest railroad after over 40
people were killed by Brightline trains.75 However, the majority of these deaths were ruled suicides, while
most of the others involved individuals impatiently seeking to cross the tracks and ignoring bells, gates,
or other warnings.76 Before Brightline had begun service, an FRA report by engineer Frank A. Frey said “the
company was not exercising appropriate safety practices and reasonable care when designing for high speed
passenger rail service.”77 This revelation resulted in growing pressure from groups such as the Alliance for
Safe Trains for more stringent safety regulations,78 and Brightline agreed to integrate more stringent safety
standards for the 170 miles of Phase II.79 This phase, which began construction in May 2019, would connect
West Palm Beach and Orlando with Class 7 tracks allowing travel up to 125 mph.80 Phase III, which was
still in the planning stage, was expected to cover 85 miles, also with speeds up to 125 mph, and connect
Orlando International Airport and Tampa.81

Go-to-Market Options

To successfully launch Phase II, Brightline recognized its go-to-market strategy must include both
business and leisure travelers. Given the frm’s limited marketing budget, Peters needed to evaluate the
opportunities, risks, and potential returns of targeting each of these segments. Then, she could determine
how to effectively market to each segment to ensure successful adoption rates. She also had to consider
Brightline’s long-term goals in conjunction with the size of each market segment and the costs to reach
them.

Comparisons between Brightline’s offerings along the Phase II route and other transportation modalities
could be based on several criteria. Brightline would be the second-fastest mode of travel between West Palm
Beach and Orlando International Airport, with airplanes frst, followed by buses, automobiles, and Amtrak
rails, respectively, with passenger costs as shown in Figure 1. However, if Brightline applied the same
Phase I rate of $0.30/mile to determine ticket prices for Phase II, HSR could be a more expensive travel
option when compared to Amtrak rail and automobile.82 Brightline could raise prices for specialty offerings
and ancillary services, such as business class tickets. Peters recognized the cost and time of travel could
infuence which market segment Brightline could most readily reach. But she wondered what characteristics
of the travel experience each market segment valued the most: time, cost, or convenience?

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

Figure 1
Travel Mode Comparisons: West Palm Beach to Orlando Airport

Car Bus Airplane Amtrak Rail Brightline

Travel Time 2.71 hours 2.83 hours 1.16 hours 3.56 hours 2 hours

Price
$94.22
($0.57/mile)

$25-$58 $45-$180 $19 $45*

*Assuming use of Brightline’s previous rate of $0.30 per mile83 covering 170 miles of track84

Source: Created by the case authors using data from Wanderu.com, Accessed 21 Aug. 2020; Brightline, gobrightline.com, Accessed 21 Aug. 2020; rome2rio.com, Accessed 21
Aug. 2020; Spear, Kevin. “Brightline Passenger Rail in Florida: Trains Whisper, Doors Swish, Bubbly Flows.” Orlando Sentinel. 14 Nov. 2018. www.orlandosentinel.com/news/
transportation/os-ne-brightline-orlando-preview-20181114-story.html. Accessed 21 Aug. 2020.

Target Market Segments

Leisure

Florida’s large and growing tourism market indicated Brightline could see long-term benefts from effectively
targeting domestic and foreign leisure travelers. The state accommodated 126 million visitors in 2018.85

Orlando and Miami were two top destinations.86 Tourism in Orlando hit new highs in 2018, with a record
number of U.S. visitors (68.55 million, +4.1%) and international visitors (6.48 million, +5.4%).87 The
Orlando International Airport maintained its ranking as Florida’s busiest airport, serving 47.7 million
passengers (+6.9%), including a record 6.6 million international passengers (+11.64%).88 Miami also saw a
high number of tourists in the same year, with 16.5 million overnight visitors and 6.8 million day-trippers
(23.3 million visitors in total).89 International visitors accounted for 35% of the overnight visits to Miami
and, with their longer stays, accounted for 54% of total visitor expenditures in the area.90 Likely due to the
kid-friendly attractions the state had to offer, Florida was the top travel destination for multi-generational
groups.91 Since Brightline’s Phase II Orlando-Miami route included the popular destinations Fort Lauderdale
and West Palm Beach, tourists could travel this route multiple times during their vacations in Florida. (For
Brightline’s Phase II route map, see Appendix H.)

When selecting a transportation modality, leisure travelers valued comfort and experience over travel
time. According to Berkshire Hathaway, families with children tended to travel with more luggage and had
more concerns about fying.92 HSR had the potential to provide a more comfortable and enjoyable experience.
It was also a viable option for those traveling without driver’s licenses, an essential consideration for
international travelers who may not be able to drive in the United States. Additionally, foreign leisure
travelers generally spent more per day and per person. Although foreign travelers made up less than 10% of
total visitors to Orlando, the average international traveler spent roughly $700 per day on transportation,
souvenirs, and other tourism-related expenses.93 For travelers accustomed to traveling via air, rail offered
many of the same conveniences without the additional stress and time of navigating the airport and airport
security. Given the data about leisure travelers, Brightline might experience fewer hurdles in acquiring
customers in this segment.

However, acquiring leisure travelers also might turn out to be a challenge for Brightline due to the
traveler’s cost of switching from one type of transportation to another. Many domestic leisure travelers came
to Florida via automobile and therefore were likely to use their vehicles for travel between Florida cities. In
2014, 56.3% of Florida’s domestic visitors traveled to the state by car, with the remaining 43.7% traveling
by air.94 Brightline’s marketing to this segment would have to clearly communicate how it was a safer, more
convenient, and more cost-effective form of transportation.

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Brightline: Targeting a Successful Future with High-Speed Rail W28C67

Brightline could tailor incentive programs to specifc needs and preferences that might include
developing partnerships with popular tourist destinations and brands, such as Walt Disney World, and/
or with hotel chains. To cater to larger families and touring groups, it could offer volume discounts.
If Brightline developed such offerings and effectively communicated them to leisure travelers, it could
capitalize on the strong growth of Florida’s tourism market.

Business

The business travel category included anyone that was traveling to, from, or for their jobs. In general,
business travelers valued time, convenience, and control over amenities, at a reasonable cost.95 Many were
willing to pay a premium for superior offerings.96 One study found that 30% of business travelers value
travel times that best accommodate their schedule as their highest priority when booking transport.97 The
study also found that 48% ranked controlling booking themselves as the most critical element of a corporate
travel program.98

In 2019, Miami ranked 9th and Orlando 31st as having the most congested highway traffc in …

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