Which Airlines Will Benefit Most From Cuba Deal?

by Josh Lew
Last updated: 1:00 PM ET, Mon January 18, 2016

Photo by David Cogswell

U.S. airlines have had their eyes on Cuba for the past month since the announcement of an agreement between Washington and Havana to resume commercial flights. The process that will eventually lead to the first flights taking off from the U.S. and landing on Cuba is a slow one. Though the agreement was inked a month ago, the documents are still being translated and certified.

A long process

It will be a few more weeks before the the official agreement is released. Once that happens, the U.S. Department of Transportation will tell airlines how they can apply for the limited number of routes to Cuba. The agreement will allow for up to 20 flights per day to Havana and 10 flights per day to nine other airports in Cuba.

Once they are approved in the U.S., carriers will still have to apply with Cuba's aviation department. No one is quite certain how long this part of the process will take.

Competition about to heat up

Demand will probably be very high for the Havana routes. Even with the higher number of daily services, a bidding war is expected. The remaining 90 daily routes could be ideal for low cost carriers. These services would fit with their usual strategy of flying to secondary airports and underserved destinations in order to save money. For the first wave of Cuba visitors, fares to these secondary airports could be much cheaper than tickets to Havana.

Southwest and JetBlue have expressed interest in flying to Cuba. JetBlue has a strong presence in Florida, so it seems to be in a good position to bid on routes. Southwest has made a major push into the Caribbean and Latin America recently, so it would not be a stretch for it to snare a few of the more-coveted slots.

Some airlines already have their feet in the door

American Airlines, which uses Miami International Airport as its main hub for service to the Caribbean and Latin America, is in the best position of any airline to take advantage of Cuba's opening. AA has been working with charter companies who fly to Cuba for years. Last year, it leased its planes to several charter firms and, through them, operated 1,200 flights to Cuba.

Though it does not come anywhere close to American's numbers, JetBlue has a similar arrangement with charter companies. It flies from both New York and Florida to Cuba. These already-established connections could be useful when it comes time to bid for routes and to apply for approval from Cuban authorities.

Other airlines have also used the charter strategy to gain a foothold in Cuba. However, a lot of the initial demand for flights could come from Florida. That puts both American, which dominates Miami International, and JetBlue, with focus cities in Fort Lauderdale and Orlando, in good position to take the most advantage of the new openings in Cuba.

Final steps for normalization

The elephant in the room is that Washington has not lifted all travel restrictions to Cuba. It is now easier for Americans to travel there, but congress would have to approve a complete lifting of restrictions. This will probably be debated in the upcoming sessions, but there is a chance that the House and Senate will wait until after the November elections before taking any major steps.

In the meantime, airlines will start applying for approval from Washington and Cuba. The hope is that the first flights will take off by June.

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