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Opinion: Did US Airlines Jump Into The Cuba Market Too Quickly?
American Airlines announced Thursday they would be cutting three of their Miami to Cuba frequencies on Feb. 16, 2017. The announcement of these cuts comes just days after the airline announced they would be cutting capacity on three other routes from Miami to the island nation.
The airline said they will be cutting one of their daily frequencies to Holguín, Santa Clara, and Varadero. American, however, will still operate a daily flight to each of the three cities. This is, of course, all in addition to the capacity cuts on flights from Miami to Cienfuegos and Camagüey. The latter two flights are being downgraded from Airbus A319s to Embraer E175s operated by Republic Airways, which represents a loss of 52 seats daily.
The Fort Worth, Texas-based airline still operates five daily flights to various cities throughout Cuba from Miami on top of four daily flights to Havana, one of which began last Monday. The airline has also been granted the right to fly from Charlotte to Havana once daily. This is only a small portion, however, of the over 30 daily flights to Cuba that are either already flying or are set to begin soon.
Did US Airlines Go Into Cuba Too Quickly?
When the DOT opened the 15-day window for airlines to apply for flights to Cuba, the responses were overwhelming. While some slots to smaller Cuban airports were filled, airlines requested nearly 50 daily flights to Havana. This included American’s outlandish proposal for 10 daily flights between the Cuban capital and their Miami hub. In the end, the DOT narrowed down the proposals and awarded eight airlines the right to fly to Cuba’s biggest population center.
The routes that American is canceling and cutting capacity on, however, are to the various smaller Cuban cities airlines were given the opportunity to apply for as well. These routes were uncontested, which basically meant that every airline that was hoping to fly to one of these cities received the routes that they requested. As a result, American cutting these flights will not necessarily cause other carriers to quickly jump in to fill the now empty slots.
Right now, people want to visit Cuba simply because they can. It was essentially off limits for so long that it had become a hermit kingdom that only a lucky few had the privilege of visiting. Now, however, the floodgates have been opened. Even though restrictions still remain on who can travel to Cuba, people are finding reasons to visit the nation before it becomes increasingly developed by corporations. American’s failure to keep their routes from being grounded so quickly is representative of a trend I think we will all see quickly as the U.S.-Cuba market becomes “regular” in terms of daily demand. Recently, airline executives, like American’s CEO Doug Parker, have said Cuba is more of an investment in the distant future, rather than the present.
“We’re in it for the long haul,” Parker said on his company’s quarterly earnings call. “This is really a new market. We’re excited to be the largest carrier there. We’re committed to Cuba and making it work.”
I’m not sure about this, at least for a vast majority of airlines. American is in a great position with some of their flights, most notably their four daily flights from Miami to Havana. The flight is relatively short, which in many cases facilitates turning a profit. That is not to even mention the fact that Miami and the area surrounding it have a Cuban-American population totaling nearly 1 million people, according to the 2010 census.
Some routes, however, will likely have a much rockier road ahead. The area surrounding Charlotte has only about half the population of Miami, but the real kicker is that Charlotte only has about 1,500 Cuban-Americans within its city limits, according to the Charlotte Observer. While some restrictions regarding business relations have been weakened in recent months, it seems as though much of the long-term demand will be Cubans and Cuban-Americans going back and forth to visit family members with more ease than in years past by utilizing Charlotte as a connection point. That will be the biggest problem with American’s route; it is by no means only American that will have this problem. Other airlines jumped on the “Cuba Train” too fast, as well, and they couldn’t get off before they were committed to flights that may or may not be a good idea in the short term or even in the long term.
If airlines, for whatever reason, choose to cancel flights to Havana, there will likely be a little more of a fight to take over that slot. The methodology here may be that one airline can succeed where another failed, which seemed to be the idea when airlines proposed routes with numerous daily frequencies. While that might be the case, we don’t know how long it is going to take before airlines work out a true business model for flying to Cuba, as there are many more uncertainties now than what they would want in a stable market. Hidden in all these uncertainties for the airlines, however, is one true certainty and the biggest benefit for consumers: if you want to visit Cuba, you have plenty of options, and each and every airline would all be happy to have you fly with them.
- American Airlines, Southwest Airlines Report $2.1 Billion, $915 Million Losses - July 23, 2020
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- Delta Reports Massive $7 Billion Loss in Second Quarter - July 14, 2020
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