American trims daily flight schedule to Cuba, citing weak demand

American trims daily flight schedule to Cuba, citing weak demand
BY JACK KASKEY AND MARY SCHLANGENSTEIN
Bloomberg

U.S. airlines were ecstatic earlier this year when it was announced that
commercial flights would resume to Cuba after more than 50 years, with
one executive at a major carrier calling it almost a "once-in-a-lifetime
opportunity."

Yet as U.S. airlines began flights this week to Havana, the long-awaited
travel surge to Cuba is already in doubt.

Citing weak demand, American Airlines trimmed plans for almost a quarter
of its flights to Cuba early next year. And in a potentially crippling
blow, President-elect Donald Trump is threatening to rescind new relaxed
policies with the island nation, leaving the future of travel there in
limbo. Already, Trump's comments have prompted some travelers to
accelerate plans to visit Cuba before his inauguration or to delay them
until he makes his policies clear.

"People are afraid Trump is going to close the border again, and then it
will be impossible to go there," said Alexandre Chemla, founder of
Altour, the largest independently owned U.S. travel agency. "It's a
wait-and-see situation because of Trump and everything he said."

American's decision isn't related to Trump's potential pullback from
Cuba, said Matt Miller, an American Airlines spokesman, noting the
carrier implemented its cut the weekend before the presidential election.

The uncertainty represents a stark turnaround from March when U.S.
airlines sought permission to fly almost 60 daily round trips to Havana,
triple the 20 daily frequencies authorized under the agreement between
the U.S. and Cuba. They also applied for 10 daily round trips to each of
nine other destinations on the island.

That followed President Barack Obama's executive orders last year
clearing the way for travel agents and the public to book direct flights
to the communist nation as long as travelers qualify under 12 accepted
reasons for a visit, such as educational activities or visiting family.
A U.S. trade embargo continues to impose conditions on travel and commerce.

Eight airlines, including American, began initiating service to Havana
this week, with a total of 500 flights to the city expected to have been
completed by year end, according to the U.S. Department of
Transportation. Flights to smaller Cuban cities began earlier this year.
Any cutback to Cuba flights isn't likely to hurt the airlines' business
in a material way.

When U.S. carriers sought permission earlier this year to offer flights
to Cuba, Southwest Airlines' chief commercial officer, Bob Jordan, said,
"the pent-up desire to be able to travel to Cuba is tremendous" after
decades without commercial service.

"I wouldn't call this a once-in-a-lifetime opportunity, but it's pretty
close," he said at the time.

In American's application for flights, Chief Executive Officer Doug
Parker boasted that his airline had flown more U.S.-Cuban charter
flights than any other carrier over the last 25 years. That means that
American "is ready on day one to offer the benefit of a full schedule of
reliable frequencies to Cuba," Parker said.

Now, his airline is the first to backtrack. It will cut daily round-trip
flights between the U.S. and Cuba to 10, from 13, starting in
mid-February because of lower than expected demand, Miller said. The
company also will fly smaller jets on two routes, he said.

Other carriers, including Delta and Spirit, said bookings so far are in
line with expectations. Southwest declined to comment. But airlines have
kept fares low to fill seats, said Paul Berry, spokesman for Spirit,
known as an ultra-discount carrier.

"When fares are as low as ours, that means there's a lot of capacity,"
Berry said.

Olga Ramudo, owner of Express Travel in Coral Gables, said she expects
other airlines to follow American's lead and reduce service. There's too
much seat capacity, she said, particularly since Cuba lacks the kind of
hotel and transportation infrastructure that U.S. travelers generally
expect.

On Monday, days after the death of former Cuban President Fidel Castro,
Trump reiterated on Twitter a campaign pledge that he will "terminate"
Obama's new trade policies with the island nation unless it agrees to "a
better deal."

Some investors speculated that Castro's death could pave the way for
improved relations with the U.S. The $37 million Herzfeld Caribbean
Basin Fund, which holds stock in airlines, cruise lines, builders and
other companies that could gain if the U.S. lifts trade restrictions,
climbed 9.4 percent Monday, the biggest increase in nine months.

But that is wishful thinking if Trump rescinds Obama's policies, said
Erika Richter, spokeswoman for the American Society of Travel Agents.
She said tighter restrictions could hurt a range of business interests
in addition to airlines.

"We are trying to keep things as they are, where Americans have a right
to travel anywhere on the globe," she said.

BLOOMBERG'S MICHAEL SASSO CONTRIBUTED TO THIS REPORT.

Source: American trims daily flight schedule to Cuba, citing weak demand
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