Friendly Skies over Cuba?

On the heels of President Obama’s groundbreaking visit to Cuba,  U.S. airlines are competing for the chance to provide direct service to the island.

In March, the Department of Transportation (DOT) asked for bids from airlines to make 20 daily round-trip flights to Havana, and 10 flights to nine smaller airports on the island. It prompted  a quick response from the nation’s largest carriers, including Delta, United Airlines,  Southwest and American Airlines, and smaller companies including JetBlue, Spirit and Seattle-based Alaska Airlines. The DOT expects to make a decision on who will have those routes this summer, and airlines hope to begin service by the end of the year.

The competition has become vicious. But it’s not clear how lucrative the new business will be, especially until the embargo is lifted and with that the remaining restrictions on U.S. travelers.“For U.S. airlines this will be completely incremental business,” said Henry Harteveldt, a travel industry analyst with the Atmosphere Research Group.

One reason the opening to Cuba may not be a huge boon to carriers is that, while President Obama has allowed more Americans to travel to the island, tourism is still prohibited. The vast majority of travelers continue to be Cuban Americans, who can travel freely to visit family.

Making it easier for U.S. travelers to visit Cuba is also expected to hurt vacation spots in the Caribbean and Mexico that are big money makers for U.S. airlines.“Cuba will pose an enormous challenge to other destinations in the Caribbean,” Harteveldt said. “It may be a case of robbing Peter to pay Paul.”

American Airlines provides many of the airplanes used by charter companies that currently provide the only flights from the United States to Cuba. Spokesman Matt Miller said that business “certainly will be impacted” if airlines compete for their business, reducing a stream of revenue for his company.

Unrestricted travel between Cuba and the U.S. may have to wait for an end to the embargo and for political changes in Havana, yet U.S.airlines are determined to stake their claims and have flooded the DOT with criticism of their rivals. New York-based JetBlue Airways, said “JetBlue, not Delta, is the leading domestic airline at JFK” airport in New York. Delta responded that “JetBlue’s claim that it offered more seats and flights from JFK than any other airline in 2015 is demonstrably false.”

One competitor  complained that, “American’s request for ten (10!) of the 20 flights is also out of proportion to its existing service to other Caribbean destinations. While American may wish to corner the market of Cuba frequency allocations, its levels of existing service to points in the Caribbean demonstrates American’s attempted overreach in this proceeding.”

American shot back that it is the “undisputed leader” flying out of Miami and the heart of the Cuban-American community in the United States, and said that JetBlue seeks to fly out of cities that “simply will not generate demand to Havana in the foreseeable future,” and Southwest’s application uses a “self-serving traffic forecast” that is “seriously flawed.”

John Kavulich, president of the U.S.– Cuba Trade and Economic Council, said the fight airlines is not just about new Cuba routes, but making sure the DOT decision does not result in regulations that could hurt other parts of their businesses. “Nobody wants to ceded any ground to anybody on this,” Kavulich said.

Airports, lawmakers, and local officials are also lobbying the DOT. The New York Yankees, for instance, have gone to bat for Delta and the U.S. Chamber of Commerce has promoted the application of American. The airlines also tapped Latino leaders for help. Former Commerce Secretary Carlos Gutierrez, now the chairman of the U.S.-Cuba Business Council, lobbied on behalf of American while Juan Andrade Jr. president of the U.S. Hispanic Leadership Institute, threw his support to Southwest.

The establishment of regular U.S. airline service to the island has been long sought by the U.S. government, which argued it is necessary to reestablish regular postal service to Cuba, which insisted it would only agree if the service was reciprocal – allowing the Cuban state airline, Cubana de Aviación, to fly into American cities. The standoff ended when Cuba accepted, for the time being at least, that Cuban airlines will not be able fly to the U.S. One problem is the concern that Cuban planes will be seized to satisfy millions of dollars in civil judgments against the Cuban government.

Since the revolution, there have been a number of multi-million-dollar judgments against the Cuban government, the result of lawsuits in U.S. courts by U.S. citizens, including family members of the “Brothers to the Rescue” pilots who were shot down by the Cubans in 1996. “The civil actions means that if the [plaintiffs] can find a judge or find a sheriff who can put a lien on a [Cuban asset] they can do so,” Kavulich said.

By Ana Radelat