The New Rules on Cuba: How Will They Impact Air Travel?

by Josh Lew
Last updated: 10:30 AM ET, Thu January 28, 2016

Photo by David Cogswell

Though the power to completely do away with sanctions against Cuba lies with the U.S. Congress, the Obama administration took another step towards normalizing relations with the Caribbean nation this week. The President used so-called executive powers to legalize specific forms of commerce between U.S. and Cuban companies that are not explicitly outlawed under the current laws.

These changes took effect on Jan. 27, and as written it appears they will make it easier for airlines to start doing business in Cuba.

The much-talked-about air travel agreement was one of the first steps that Washington and Havana took towards normalized relations. Even though the agreement has already been signed, there is a lot of uncertainty about how and when it will be implemented. Airlines are pushing forward with plans to bid for slots for flights into Havana and the nine other international airports on the island. However, as of now, these are still only plans; they have not been put into action.

Unfortunately, for U.S. carriers, there is no roadmap for when and how things will progress. No one knows what to expect going forward. American Airlines is poised to gain a large share of this new market, both because it operates a large number of charter flights to Cuba already and because its hub in Miami will see a lion's share of the demand once flights finally start taking off. For the past six months, AA has said that it is ready to start scheduling flights right away.

Do Wednesday's new rules do anything to move the process forward?

Obama's newest executive moves do a couple of important things for U.S.-based airlines. First of all, they can now deal directly with Cuban airlines to lease space on the island. This means that American and its peers will be able to legally start negotiating directly with their Cuban counterparts. No one is quite sure how quickly this process will play out, so starting negotiations is an important step forward.

U.S. carriers will also be able to form code-sharing deals with Cuban airlines. Cuban carriers will want access to the U.S. as much as their counterparts from the States want access to Cuba (if not more). Forming alliances will help carriers in both countries maximize their profits.

The real windfall for airlines will come after Congress does away with the ban on regular tourism, which is still in place even though the new rules make it even easier for people who want to travel to Cuba to find a legal reason to do so. Everything that the airlines do now is building towards being in the best position possible if and when that finally happens.

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