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Alaska’s Cuba pullout signals death of US-Cuba air transport market

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Alaska Airlines pulling out of Cuba signals the effective death of the market for US airlines, at least for the foreseeable future.

Alaska’s Los Angeles-Havana daily flight was a good litmus test for the viability of the US-Cuba air transport market. There will always be demand of some sort between Miami and Cuba (and, to a lesser extent, from Washington DC and New York to Havana). But if a daily Boeing 737-900 flight between the US west coast’s biggest market and the Cuban capital is not viable, then the US-Cuba market is not really viable. 

Even before the Trump administration rescinded “people-to-people” travel—which allowed individual US citizens to go to Cuba on an approved trip (there had to be some reason for the trip beyond sitting on the beach, some sort of planned educational interaction with Cubans)—the market was already proving a tough go for US airlines. Too much capacity flooded the market too quickly; the aviation infrastructure in Cuba, particularly outside Havana, needs improvement; and, yes, people-to-people trips were allowed, but no pure vacation traveling was permitted, placing an artificial ceiling on demand. Airlines’ hope had been that the restrictions would be loosened.

But instead the opposite has happened. The US government last week officially disallowed people-to-people trips. As Alaska pointed out, 80% of its passengers traveling from LAX to Havana were traveling on people-to-people trips. Alaska decided flying a mostly empty plane to Cuba made no sense. A 737-900 is too expensive an asset to be wasted.

Alaska follows US carriers Silver Airways, Spirit Airlines and Frontier Airlines in pulling out of Cuba. Another carrier, Minneapolis/St. Paul-based Sun Country Airlines, has relinquished its Department of Transportation-granted Cuba rights before even starting service to the island nation.

That leaves American Airlines, Delta Air Lines, Southwest Airlines, JetBlue Airways and United Airlines serving Cuba. They have a tough choice to make. Follow Alaska in pulling out, or continue to serve Cuba with reduced capacity to keep a foot in the market and retain flying rights? That probably means taking losses on Cuba service in the hope that, eventually, a new administration will change the rules again and the market will one day pay off.

JetBlue, in different circumstances, is taking such an approach with Puerto Rico. It had the largest presence of any airline in pre-hurricane ravaged Puerto Rico, having spent years building up a strong business there, and it does not want to give that up. It has slashed capacity to San Juan, but will keep flying to Puerto Rico so that when the island “opens for business” again, the airline will reap the rewards.

Sticking with Cuba will mean airlines slogging through the rest of the Trump years, at least, in the hope that the 2020s bring a renewed opening that allows for people-to-people trips again and ultimately pure tourism/vacation travel. My view is that American and JetBlue are the least likely to leave, Southwest is the most likely to cut the cord (the airline’s executives can’t stand flying money-losing routes for very long), and Delta and United are somewhere in between.

But the grand hopes US airlines had when they started flying to Cuba in 2016 have been dashed. The US-Cuba air transport market is simply not viable under the current circumstances.

Aaron Karp aaron.karp@penton.com

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