Airlines Fight to Be Able to Lose Money in Cuba

It’s been a long time coming, but the thawing relations between the US and Cuba have finally borne fruit for the airline industry. Every US carrier that’s interested has now submitted an application to fly to Cuba, and some of these requests are pretty nuts. For a market that may not pay off for a long time, everyone sure is excited.

The deal between the US and Cuba allows US carriers to operate 20 daily roundtrips between the US and Havana. In addition, they can operate 10 daily roundtrips between the US and EACH of 9 other cities in the country. (Presumably Cuban airlines can do the same into the US, but we’re a long away from a Cuban airline being certified to fly here.) Applications were due last week, and here’s what’s been requested.

Alaska
Los Angeles – Havana (2x daily)

American
Miami – Havana (10x daily)
Miami – Santa Clara, Holguin, and Varadero (2x daily)
Charlotte and Dallas/Ft Worth – Havana (1x daily)
Miami – Camaguey and Cienfuegos (1x daily)
Los Angeles and Chicago/O’Hare – Havana (1x weekly)

Delta
Miami – Havana (2x daily)
Atlanta, New York/JFK, and Orlando – Havana (1x daily)

Dynamic
Chicago/O’Hare and Los Angeles – Havana (4x weekly)
New York/JFK – Havana (3x weekly)

Eastern
Miami – Havana (1x daily)
Miami – Camaguey and Holguin (3x weekly)

FedEx
Miami – Havana – Merida – Miami (5x weekly)

Frontier
Miami – Havana (3x daily)
Denver – Havana (1x daily)
Miami – Santiago de Cuba (1x daily)
Miami – Camaguey (4x weekly)
Miami – Santa Clara (3x weekly)
Chicago/O’Hare and Philadelphia – Varadero (1x weekly)

JetBlue
Ft Lauderdale – Havana (4x daily)
New York/JFK, Orlando, and Tampa – Havana (2x daily)
Ft Lauderdale – Camaguey, Holguin, and Santa Clara (1x daily)
Newark and Boston – Havana (1x daily)

Silver
West Palm Beach – Havana (2x daily)
Ft Lauderdale – Havana, Santa Clara, Holguin, and Santiago de Cuba (1x daily)
Ft Myers – Havana (1x daily)
Ft Lauderdale – Camaguey (5x weekly)
Key West – Havana (5x weekly)
Ft Lauderdale – Varadero (4x weekly)
Ft Lauderdale – Cayo Coco and Manzanillo (3x weekly)
Ft Lauderdale – Cienfuegos (2x weekly)
Jacksonville – Havana (2x weekly)
Ft Lauderdale – Cayo Largo (1x weekly)

Southwest
Ft Lauderdale – Havana (6x daily)
Tampa – Havana (2x weekly)
Ft Lauderdale – Varadero (2x daily)
Orlando – Havana (1x daily)
Ft Lauderdale – Santa Clara (1x daily)

Spirit
Ft Lauderdale – Havana (2x daily)

Sun Country
Ft Myers – Havana (2x weekly)
Minneapolis – Havana (2x weekly)
Minneapolis – Varadero and Santa Clara (1x weekly, seasonal)

United
Newark – Havana (8x weekly)
Houston/Intercontinental, Chicago/O’Hare, and Washington/Dulles – Havana (1x weekly)

This ranges from the completely reasonable (FedEx and Spirit come to mind) to the insane (Frontier and Alaska). This is especially true considering that Cuba is not going to behave like any other Caribbean destination.

See, while Cuba has been a tourism destination for those in Europe and Canada for years, it’s not going to be one from the US for a long time. In fact, it’s still illegal for Americans to travel to Cuba for tourism. That will, of course, eventually change, but there isn’t the kind of infrastructure needed to support a massive influx of tourism from the US. It’s going to take a really long time.

For that reason, the real value here is going to be those who cater to VFR traffic, people who are Visiting Friends and Relatives. With half of the Cuban Americans living in the US residing in the Miami area (and most of the rest in other parts of Florida), it seems obvious that the bulk of service should go to that region. American certainly agrees.

Is it crazy that American wants ten daily flights from Miami to Havana? Sure. But I can only assume American is using the same bargaining strategy I used with my mom as a 2 year old.

Me: Can I have 100 cookies?
Mom: No, you can have 2.
Me: Great, thanks!

Should American get flights from Miami to Havana? Without question. Should it get 10? No way.

Outside of Havana, I think everyone here should get what they want. For Silver, this is good news (if the airline can find enough pilots). It is proposing to serve some pretty small places from Ft Lauderdale, but heck, with airplanes small enough, the airline might as well take a shot. But Southwest and Sun Country flying 737s to the resort town of Varadero? Ugh, that doesn’t seem like a good plan.

With no real competition for the country’s secondary airports, it’s Havana where airlines are sweating. All that being said, it’s really hard to see how many flights outside of Florida are going to work. Sure, maybe New York can support something (United and JetBlue maybe?) And Delta might be able to make Atlanta work just by aggregating connections. But Alaska flying two a day from LA? That’s a recipe for losing a ton of money. And Frontier’s attempt at a land grab is pretty crazy as well.

I expect the rationale here is that airlines are looking at this with a similar attitude as they look at Tokyo/Haneda. In Tokyo, they knew the flights wouldn’t do well with all the restrictions, but they wanted to get their foot in the door for when the regulations loosened down the line.

In Cuba, the airlines want to get their foot in the door because they know this will be a big market someday. It may not work right away, but it’s worth getting something. Some like Miami will be instantly successful (much to the detriment of the current burgeoning charter market, a good reason why Eastern wants to get in on this). But others are going to struggle mightily.

It’s safe to say that not all the flights that get awarded will still be operating a year from now. But some will work, and it’s worth it for most carriers to throw their hats into the ring. Cuba has tremendous potential; it’s just a matter of when that potential can be realized.

Brett

38 responses to “Airlines Fight to Be Able to Lose Money in Cuba”

MarylandDavid

Mar 7, 2016

That does seem like a lot of flights for a ‘new’ market. Potential travelers are going to have questions before booking a trip. Is the island safe? How is the medical care? And on and on. Sure, eventually I demand will be high, but I think it will take a while to build. Here at BWI, Swift Air was given one of the charter routes to Havana. I’d be curious to know how that flight is doing. My guess is not great or WN would’ve proposed a flight since this is one of it’s largest hubs.

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Oliver

Mar 7, 2016

So 75% of all flights from Miami are going to.be to Cuba going forward? ;)

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A

Mar 7, 2016

Several of the flights are 100% leisure travel, looking at you Sun Country. I’m not up to speed on the State Dept. rules for American’s traveling to Cuba but find it surprising the airlines would rush for these slots if they can’t fill the planes day 1. How long before any of this is implemented? If it’s 2-3 years out it makes sense, 6 months, no so much.

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1. Alex Hill
  
  Mar 7, 2016
  
  Much closer to 6 months than 2-3 years.
  
  Reply
2. james
  
  Mar 7, 2016
  
  Doesn’t a lot of Sun Country’s, Allegient’s, et al’s revenue come from partnering up with hotels, activities, events at the destination?
  
  Since tourism in Cuba is smaller scale still and more fragmented I don’t think there’s much opportunity for that yet, which makes it a perfect time to visit.
  
  Reply
3. crankyflier
  
  Mar 7, 2016
  
  A – They are expecting flights to begin before the end of the year.
  
  james – Yes on Allegiant. I’m not as clear on Sun Country. But either way there won’t be many options for that for awhile.
  
  Reply
DougYWG

Mar 7, 2016

“Is the island safe? How is the medical care?”

Well, one million Canadians go to Cuba every year. I have been twice myself. Indeed, if the fares were lower – doubtful – U.S. carriers could get a slice of that traffic.

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1. J
  
  Mar 7, 2016
  
  @Cranky, to this point, how do we look at this from an international connection standpoint? Whats the potential for some of the big carriers to transfer Canadians and some traffic from Europe?
  
  Reply
  1. crankyflier
    
    Mar 7, 2016
    
    J – I doubt the US carriers will see much of that. Connecting through the US for international travelers sucks. There are enough nonstop options from Europe and from Canada to satisfy the demand that’s there now. Unless the US carriers want to get really aggressive on price (not going to help profitability much), then this won’t work out very well.
    
    Reply
    1. Nick Barnard
      
      Mar 7, 2016
      
      So a related question. CF, do you see US airlines lobbying anytime soon for a friendlier International-to-International connections in the US?
      
      Or is this more a nonstarter as a result of the Xenophobia coming out of the old party?
      
      Reply
      1. Eric
        
        Mar 7, 2016
        
        I am not CF, but I don’t see any changes in transit rules in US is a foreseeable future. Not in this political climate.
        
        On another hand, Canadians do not need US visa (and they don’t even need electronic authorization aka ESTA like EU citizens)
        On top of that, many Canadian airports have US Immigration pre-clearance facility which essentially make Canada>US>3rdCountry connection almost like a domestic one. The opposite is not true though, since Cuba doesn’t have US Immigration pre-clearance facility.
        As far as I know some Canadians are already using transit via US to get to other Caribbean destinations, so I don’t see why Cuba will be that different (save for the fact that there is already established network of flights to Cuba from almost any half-descent Canadian city)
        
        Reply
      2. CF
        
        Mar 7, 2016
        
        Nick – I’m with Eric that it’s not gonna change anytime soon. Nobody is interested in taking on this challenge right now. But Eric does have some interesting points about Canada to Cuba flying. It could create an opportunity for people to go via the US in theory. But Eric, do you know if that’ll be allowed? Canadians would have to clear US customs and immigration to do this. Can US carriers carry tourists to Cuba if they aren’t US citizens? I’m not sure.
        
        Reply
        
        Nick Barnard
        
        Mar 7, 2016
        
        I can’t see why the Feds would be against US carriers carrying passengers to a destination that they’re allowed to fly. Dunno why Cuba would ban it?
        
        Are there similar restrictions with other international routes?
        
        Sent from my computer that moonlights as a phone.
        
        CF
        
        Mar 7, 2016
        
        Nick – Not that I know of, but US citizens aren’t allowed to go to Cuba for tourism, so it wouldn’t shock me if the rules had some weird prohibition about US interests carrying non-US citizens for tourism. I just don’t know.
        
        Nick Barnard
        
        Mar 8, 2016
        
        Ah.. I was thinking after the ban against tourism was lifted..
        
        Alex Hill
        
        Mar 8, 2016
        
        Like Cranky, I don’t know, but I think the embargo prohibits any US entity (whether corporate or a citizen) from doing anything that provides commercial benefit to Cuba. So my guess is that providing tourism service to Canadians would be prohibited for US airlines under the embargo (just like Starbucks can’t open a store in Cuba even if they only serve non-Americans).
        
        But emphasis on “guess”.
        
        I’m pretty sure there are no other international routes to countries with a trade embargo, so there’s nothing to compare Cuba to.
        
        Nick Barnard
        
        Mar 8, 2016
        
        Ahhh. Good point.
        
        This’ll be fascinating to watch.
        
        Sent from my computer that moonlights as a phone.
David SF eastbay

Mar 7, 2016

I’m sure beyond HAV, those airlines didn’t even know those other secondary cities existed or what their local areas are even like. As you said, it’s just to get their foot in the door. i know there used to be nonstop charters from LAX to HAV, but I assume the airlines that want nonstop from LAX are hoping to get transpacific connections on that flight to fill up space.

Florida to Cuba is a logical choice for most of the service to be awarded but like anything else, members of congress will pressure to have routes awarded from the hubs in their home state even if they don’t make sense.

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1. crankyflier
  
  Mar 7, 2016
  
  David SF – Actually there are some charters even to some of those cities beyond Havana. If you look at American’s link in the post, they put a ton of info into that application. It’s incredibly long but interesting to read. Still, nearly all of that stuff is going from Miami. But places like Varadero are pretty much built for tourism. There won’t be much VFR traffic there.
  
  Reply
SEAN

Mar 7, 2016

Just outside the western portal of the Lincoln Tunnel, West New York, Weehawken, North Bergen & Union City New Jersey have among the highest concentrations of Cuban Americans outside Florida. Therefore the plan to serve both JFK & EWR with that aggressively isn’t as insane as it may first appear. Granted it still maybe too much for the moment.

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Patrick

Mar 7, 2016

Why is DOT handling this like the Haneda slots? 20 daily round-trips seems like enough to let the free market allocate resources… auction or divvy up the slots, make each slot valid for any US airport, and let airlines trade them freely. Maybe keep the 90-day dormancy rule or put something else in place to try to prevent the worst squatting behavior… but having DOT pick winning and losing airlines and airports seems like a mess.

As it is, if carriers are awarded non-feasible routes, it seems likely that they’d try to schedule a pair of flights every 88 days to meet the letter of the requirements. But the DOT has already set the precedent with Haneda that they can strip away authority even when airlines are meeting the letter of the law this way. Seems like lots of opportunity for lawyers and bureaucrats.

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Jay Bee

Mar 7, 2016

Does American not including PHL in its plans say anything about future of International service from PHL?

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1. Alex Hill
  
  Mar 7, 2016
  
  No.
  
  Judging by the current number of charter flights (as detailed in AA’s 200 page document requesting the slots), 83% of the current HAV origin and destination demand is from MIA (possibly including FLL). So everything else is funneling connecting traffic. So all the inclusion of CLT and DFW (but not PHL) says is that CLT and DFW are geographically closer and serve essentially all the same cities as could be served via PHL.
  
  In fact, there were 7.3 daily MIA-HAV charter flights on average in 2015, which indicates to me that AA’s request for 10 daily MIA-HAV flights is not wildly out of line at all. And since AA requested 7 MIA-HAV flights before their first frequency to somewhere else (CLT-HAV is AA’s priority number 8), AA’s request exactly matches the current charter demand (which is largely provided by AA).
  
  The fact that AA is building a new Flagship Lounge in PHL says a lot more about PHL’s future as a long haul international service than an island in the Caribbean that Americans can’t visit for leisure and that would be served with narrowbodies.
  
  Reply
  1. TC99
    
    Mar 8, 2016
    
    Where do you get that American provides the greater amount of charter flights out of Miami?
    
    Currently World Atlantic, Aruba, Sun Country, Insel, Xtra, and Eastern provide more daily flights from Miami to Havana than American’s one flight. Eastern and Aruba also fly to Holquin along with American. Eastern flies to Santa Clara as well. These charters are booked through multiple travel agencies that specialize in this travel, mainly out of Miami.
    
    There are very few people who connect from other cities on this route, so some other cities in Florida, albeit few also have their own charters. JetBlue has one less than daily out of FLL and Orlando.
    
    Reply
    1. Alex Hill
      
      Mar 8, 2016
      
      Pages 143-146 of American’s filing: AA flew 1084 flights to Cuba in 2015, compared to about 400 for Sun Country (AA says 381 to HAV for SY but doesn’t split out their total number of flights to Cuba), 221 for jetBlue, 4 for DL, and zero for UA, WN, AS, and Spirit. But you’re right that that is only amongst airlines with foreign scheduled authority (which includes Sun Country but none of the others you list).
      
      There were 5036 total charter flights, according to AA, so AA only flew about 20% of all the chartered service in 2015. However, with scheduled service starting, I think it’s pretty reasonable to guess that AA could take a very large fraction of the current charter demand out of MIA, given that they flew the vast majority of the service provided by scheduled airlines.
      
      Reply
DesertGhost

Mar 7, 2016

The various regulatory filings and comments should be amusing.

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Ben

Mar 7, 2016

B6 from BOS and EWR have a good shot at working. There are tons of Cubans in both places. The E190 has the legs to do both nonstop so B6 wouldn’t have to fill an A320.

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1. crankyflier
  
  Mar 7, 2016
  
  Ben – Well let’s look at that. In the 2010 census there were just shy of 1.8 million Cubans in the US. Of those, 1.2 million live in Florida. New York and New Jersey had about 150,000 combined. And Massachusetts? 11,000. Throw in RI, ME, NH, and VT and that gets you to 15,000.
  
  Play for yourself here…
  http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=DEC_10_SF1_QTP10&prodType=table
  
  In short, Boston has very little. NY and NJ have a lot more but of course, it all pales in comparison to Florida.
  
  Reply
  1. SEAN
    
    Mar 7, 2016
    
    Most of those 150,000 Cubans as I said above live just beyond the western portal of the Lincoln Tunnel in Hudson County from Weehawken to West New York.
    
    Reply
Ryan

Mar 7, 2016

Does anyone think Delta will get the Miami flights? Because it seems to me that the DOT might give Frontier, Delta and Eastern flights so that they can pat themselves on the back and say they prevented a monopoly.

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southbay flier

Mar 7, 2016

To me, AA has an advantage here because of MIA. I think DL could make ATL work with all the connections from throughout the country and NYC could work as well. But, there are some proposals that look crazy. MSP?? LAX?? BOS?? ORD??

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Those Silly Airlines

Mar 7, 2016

Say WHAT? I had to read the list twice and I still don’t believe it. The U.S. carriers cannot populate even 10% of the slots requested, even Miami-Havana. IMO, they are doing little more that Slot Shopping aka playing the lottery. To keep them honest, perhaps DOT should require a $10 million performance deposit Per and require a flight completion rate >90% for a year, or forfeit the money. What a joke!

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Andrew Dwyer

Mar 7, 2016

Would tourists from other States be able to book onto these flights?

I know Canada’s been mentioned but it’s worth considering travellers from Asia, Australia, NZ currently pay a tonne of money to get to Cuba. From what I recall when I was a travel agent, we would sometimes find it cheaper to fly from Australia to Europe and onto Havana, rather than via Mexico or Canada.

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1. CF
  
  Mar 7, 2016
  
  Andrew – The numbers just aren’t that big. Here’s the latest doc from the Cuban government documenting where visitors are coming from (last year is 2014) http://www.one.cu/aec2014/15%20Turismo.pdf
  
  Of the 3 million visitors in 2014, 2 million came from the Americans (nearly 1.2 million came from Canada, the rest from Latin America).
  Meanwhile Europe had nearly 900 million. So the rest is a rounding error.
  
  Reply
John G

Mar 8, 2016

One point of clarification.

While out-and-out tourism is not allowed for Americans traveling to Cuba, you can go for one of 12 accepted categories:

1) Family visits
2) Official government business
3) Journalistic activity
4) Professional research and professional meetings
5) Educational activities
6) Religious activities
7) Public performances, clinics, workshops, athletic and other competitions, and exhibitions
8) Support for the Cuban people
9) Humanitarian projects
10) Activities of private foundations or research or educational institutes
11) Exportation, importation, or transmission of information or information materials
12) Certain export transactions that may be considered for authorization under existing regulations and guidelines.

So you can’t just book up a week at the Melia Varedero, but realistically, anyone can go now. Make up a reason that fits in those categories.

Examples:..you are writing a blog about the Cuban people…you want to research how they lived under communism…you want to teach your kids about a different culture.

As far as I have been able to tell, no one is spending a lot of time scrutinizing the reasons to go. The bigger issue is the infrastructure for a big influx of Americans, and due to the embargo (still law) you have to go through hoops to get hotels.

Bottom line: if you really want to go for tourism, you can. Just have to be a bit creative about it.

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Scottrick

Mar 9, 2016

At least one flight from LAX seems sensible. Visiting the Caribbean is terribly inconvenient from the West Coast. It requires almost an entire day of travel, usually including a red-eye flight. And I’m rarely in the mood to transfer halfway there in Miami or New York. Imagine every East Coast traveler stopping in Los Angeles or San Francisco before going to Hawaii, with no non-stop service from New York, Atlanta, Dallas, or Chicago. If I can take a short flight to LAX and then make one long journey to Cuba, that’s far more appealing.

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cahilldot

Mar 21, 2016

nuts i would not give any $$$to communist cuba!!!

DOTTI

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Brett

Mar 22, 2016

Canada is famously similar to the US in broad ways, and currently there are seasonal flights to Cuba from Canadian cities as obscure as Windsor, North Bay, Sault Ste. Marie, and Kelowna (not to mention every major and semi-major Canadian city). I get that these are all beach tourists (that these flights go to Varadero and not Havana is the proof), and that such tourism is still illegal for Americans, but it shows me that the demand is there for broad-based North American flights to Cuba. As you say, US airlines are wise to get in on the ground floor, even if profitability is years away.

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