Monday, February 27, 2017

Many US airlines overestimated demand for Cuba travel

This article has been updated to include information received from Alaska Airlines

Five months after flights resumed from the U.S. to Cuba after a hiatus of more than a half century, several airlines have scaled back flights to the island nation because demand, particularly from the U.S. East Coast, has turned out to be dramatically lower than anticipated.

Over the past several weeks, American Airlines (NASDAQ:AAL), jetBlue (NASDAQ:JBLU) and Silver Airways have all pulled back from their initial service levels. American reduced its daily flights by 25 percent and switched to smaller planes on some routes while jetBlue switched to smaller planes and Silver Airways reduced its weekly flights to six Cuban cities.

jetBlue inaugural flight to Santa Clara
Photo provided by jetBlue
As previously reported by TheTravelPro, American was granted permission to fly from Miami International Airport (MIA) and Charlotte Douglas International Airport (CLT) while jetBlue was granted flights from Ft. Lauderdale-Hollywood International Airport (FLL), Orlando International (MCO) and John F. Kennedy International (JFK) in New York. Silver Airways operates flights from FLL.

Cuba traffic from the U.S. West Coast is reportedly closer to forecast levels.

"Our flight loads are in the ballpark of our expectations," a spokesperson for Seattle-headquartered Alaska Airlines (NYSE:ALK) told TheTravelPro in an email. "We’ve been flying into Havana for nearly a month, which is not enough time to draw any conclusions about the performance of a new route."

Normally, a new market takes up to three years to mature and leisure markets tend to take longer to mature than business markets, the spokesperson said, adding that, "[W]e know Havana will take time, but we’re in it for the long haul and there are no plans to adjust [service levels] at this time."

While the industry tries to understand why the traveling public apparently didn’t read the memo anointing Cuba the hot new travel destination, there are a several reasons for the lower-than-anticipated demand that should be obvious, even to the uninitiated.

First, straight-up tourism to Cuba is still prohibited by statute. Despite the easing of strained relations dating to the Kennedy administration, the embargo by the Department of Treasury's Office of Foreign Assets Control (OFAC) remains in place.

That embargo requires that travelers either obtain a license from the Department of Treasury or self-certify that their travel falls into one of 12 categories that are permitted to visit Cuba under the OFAC’s “general license.”

Passengers board an Alaska Airlines Boeing (NYSE:BA) 737 in Sacramento (SMF) California
Passengers board an Alaska Airlines 737
Those 12 categories are:
  • Family visits
  • Official business of the U.S. government, foreign governments, and certain intergovernmental organizations
  • Journalistic activity
  • Professional research and professional meetings
  • Educational activities
  • Religious activities
  • Public performances, clinics, workshops, athletic and other competitions, and exhibitions
  • Support for the Cuban people
  • Humanitarian projects
  • Activities of private foundations or research or educational institutes
  • Exportation, importation, or transmission of information or informational materials; and
  • Certain authorized export transactions
More information is available at the website of the U.S. Embassy in Havana. The bottom line is likely that many would-be travelers are unwilling to stretch the truth, especially where the government is concerned.

Second, the Cuban travel infrastructure isn’t particularly well-suited to U.S. visitors, as the U.S. State Department's web page on Cuban travel makes clear.

"U.S. credit and debit cards do not work in Cuba. Bring cash to cover your stay," it says in no uncertain terms. For visits of even modest duration, that can mean visitors must travel with rather large amounts of cash and, understandably, that makes many people uncomfortable.

Further complicating financial matters is that the Cuban government requires that travelers declare cash amounts over US$5,000 meaning extra red tape for longer trips. Finally, travelers should also note that the Government of Cuba charges a 10 percent fee for all U.S. dollar cash conversions, though it does not levy a similar charge for other currencies.

Third, the prices for what were in many cases very short flights seemed exorbitant to many, though that has begun to change. A search using sample travel dates in May shows that both jetBlue and Southwest Airlines (NYSE:LUV) have fares available in the low $200 range for round-trip travel from southern Florida.

For travel from the West Coast, Alaska is offering round trips from its home base at Seattle-Tacoma International Airport (SEA) through Los Angeles International (LAX) to Havana’s José Martí International (HAV) for approximately $350.

Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.



Photos by Carl Dombek unless otherwise noted
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1 comment:

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