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Airlines expect gradual payout from U.S.-Cuba flight deal

U.S. airlines, set to resume scheduled service to Cuba for the first time in decades, will be allowed just 20 round-trip flights a day to Havana.

That compares with some 15 flights by JetBlue Airways Corp (JBLU.O) alone to nearby Santo Domingo in the Dominican Republic. The carrier and larger rivals such as American Airlines Group Inc (AAL.O) are betting that the modest beginning in Cuba will let them gain traction in a market with potential far beyond the typical Caribbean vacation destination.

Strong demand is likely to come from Cuban-Americans visiting relatives, leisure travelers desiring an experience that was once off-limits for U.S. citizens, and executives paying for business class fares to evaluate commercial opportunities.

“That’s a huge difference from the Bahamas,” said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group.

A ban on tourism to Cuba remains part of U.S. law, although President Barack Obama has authorized new exceptions allowing special travel and business operations there since the Cold War foes agreed to restore diplomatic relations a year ago.

Even with the ban, Cuba is forecast to have the largest growth in worldwide visitors of any Caribbean state through 2024, according to David Goodger, a director at travel analysis firm Tourism Economics.

Cuba’s three million visitors in 2014 accounted for 13 percent of travel to the region, Goodger said. Removing the U.S. tourism embargo could raise that to more than 20 percent.

“Not going to Cuba is sort of like a grocery store that doesn’t sell milk,” Scott Laurence, JetBlue’s senior vice president for airline planning, said in an interview. “There’s this huge country right in the middle of our route map that we don’t serve.”

As the top U.S. carriers jostle for position in what amounts to one of the industry’s last frontiers, one challenge will be whether to fly smaller planes in a bid for higher ticket prices, or larger ones in a volume play.

In addition, Laurence called a lack of commercial data a “big concern” as airlines have no sense of what travelers are willing to pay. U.S. carriers are not privy to the economics and customer profiles of charter flights they operate to Cuba.

More immediately, airlines will need to propose the routes they wish to fly to the U.S. Department of Transportation, aiming for as big a chunk of the limited flight frequencies as possible. That process is expected to take place in early 2016 after the U.S.-Cuba deal is formally signed.

Claims for limited slots have sometimes turned belligerent, as with bickering between American and Delta Air Lines Inc (DAL.N) over the final U.S. landing slot at Tokyo’s Haneda Airport, preferred by business travelers because of its proximity to the city center. [nL1N0UK28T]

JetBlue and American are the biggest players in Fort Lauderdale and Miami airports, respectively, near where many Cuban-Americans live.

American, which operated about 1,200 charter flights to Cuba in 2015, hopes its scheduled service will take off in the second quarter, pending regulatory approval, Vice President of Regulatory Affairs Howard Kass said.

“We intend to continue to be the largest carrier between the United States and Cuba,” he later said.

Source: reuters.com

Dec 18, 2015

Category: DR News |

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Last updated December 8, 2016 at 12:39 AM
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