Friday, August 26, 2016

More Information on Commercial Flights

Cuba Service Brings Big Questions
 by Joe Petrie On Aug 26, 2016    

With geopolitical relations quickly evolving in the western hemisphere, some U.S. airports will become beneficiaries to these changes.

U.S. to Cuba air service is set to begin again as the final relics of the Cold War start to come down.

Michael Boyd, president of Boyd Group International, said the present demand for Cuban travel is relatively unknown, but one thing is certain — in coming years it’s going to be “a whale of a destination.”

“We think Cuba could be a mini version of what happened in China where 30 years ago you couldn’t want down the street without getting shaken down by a red guard, but now today, you can’t walk down the street without getting hit by a BMW,” he said.

Airlines service from the U.S. to Cuba will start up by the end of the year due to an agreement signed by the federal governments of both countries in February. The agreement allows for up to 20 roundtrip flights per day between the U.S. and Havana, and up to 10 daily roundtrips between the U.S. and each of Cuba’s nine international airports.

In June, the U.S. Department of Transportation (DOT) approved the applications to provide service to Havana to Alaska Airlines, American Airlines, Delta Air Lines, Frontier Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines.

In July, DOT announced the services would originate from Hartsfield-Jackson Atlanta International Airport (ATL), Charlotte International Airport (CLT), Fort Lauderdale-Hollywood International Airport (FLL), Houston George Bush Intercontinental Airport (IAH), Los Angeles International Airport (LAX), Miami International Airport (MIA), Newark Liberty International Airport (EWR), John F. Kennedy International Airport (JFK), Orlando International Airport (MCO) and Tampa International Airport (TPA).

Destinations from the U.S. into Cuba include Jose Marti International Airport in Havana; Sierra Maestra Airport in Manzanillo; Frank Pais International Airport in Holguin; Santa Clara Abel Santamaria Airport in Santa Maria; Antonio Macoa Airport in Santiago de Cuba; Jamie Gonzalez Airport in Cienfuegos; Juan Gualberto Gomez Airport in Matazanas; and Ignacio Agramonte Airport in Camguey.

JetBlue announced it would sent its first flight to Cuba on Aug. 31 from FLL at a cost of $99.

When the company did an analysis about Cuban travel potential, Boyd said there’s a demand for travel.

A projection showed 850,000 potential passengers to Cuba on an annual basis, but he called it conservative due to the makeup of the country and the potential for tourism. However, until the nation has enough political changes to make drastic changes to the market, it’s unlikely the tourism demand will be immediate.

“There’s so much there that it’s a place that people are going to keep coming back to,” he said. “There’s a lot of stuff happening there.

“It’s also very close. You can practically see it from Key West, so it’s very easy for people to get to.”

Some people have stressed concerns about the infrastructure in Cuba to handle U.S. flights, but Boyd said it’s not necessarily a concern as airports have built out runways and many of them with modern terminals.

There have also been concerns about security issues, but Boyd said the rest of the world has continued traveling to Cuba despite the ban from the U.S. and they have not had any issues.

“The problem I have with people from Congress who oversee this that want to look at Cuba, I want to know why they didn’t go to Omaha first when they had the 96 percent failure rate,” he said.

Questions on Initial Demand

Boyd said the makeup of the initial travelers to Cuba are likely to be Cubans and those who are more adventure travelers. Despite media reports of people wanting to build factories in the country, he said there will not be any business travel to the nation as the government doesn’t want foreign investment.
Traffic will also be entirely inbound to the nation as well, given Cubans not only can’t leave, but can’t afford to leave.

“It’s entirely inbound traffic just like it was in China in 1975,” he said. “If you wanted to get outbound, you had to hijack a MiG to get out of town.”

One of the biggest issues with the service will be the initial demand. People who left the nation 50 years ago are now retired, Boyd said, and second generation Cuban Americans might not care about going.

Also, the vast majority of Cuban immigrants live in Florida, with half of the population in Miami-Dade County alone.

Boyd said its important airlines pursued these routes to get them now, but he doesn’t anticipate a lot of people transferring in places like Charlotte to get to Cuba for the time being.

He said airlines are also planning on running bigger planes like A320s into Cuba, so they’re going to be under pressure to make the routes work, which means at least 1.3 million passengers need to travel to Cuba per year.

“After the first six months, I think a lot them are going to pull back on these operations,” he said.

Jonathan Keane, head of aviation for Accenture Travel, said even with the potential for growth in the Cuban market, airlines will still need to keep the routes in line with current standards that make them profitable. Flights will still need a 75 percent load factor and they will still need to be tightly organized.

Creating new service to an emerging market means challenges with infrastructure and customer experience, which Keane said continues to evolve.

Keane said the service could serve as a catalyst for the two nations and building interconnectivity, but it will be interested to watch given how fast the service is being developed.

“Other services normally spend a year on just the normal processes and this has been much shorter,” he said. “That adds a lot of pressure to the airlines to ensure it’s profitable.”

Alaska Airlines will have flights from Los Angeles International Airport (LAX) to Cuba, but Boyd said he questions how the airline will fill seats now, but said it was still important for the airline to pursue the route.

In 2015, there were 3,000 specialized flights between the U.S. and Cuba, Boyd said, and only five of those originated from west of the Mississippi River.

“They will really need to stimulate the growth,” he said. “Will there be a lot of connecting traffic in Charlotte? I don’t think so, but southeast Florida will have service out the Whazoo.

Airlines getting routes to Cuba have “a license to print money,” in the long-term, Boyd said, as the country will continue evolve.

“In 1977, if someone told you that we’d have 3 million Chinese people coming to the U.S. and going back to China, they would have called you crazy,” he said.

Preparing Airports for the Unknown

FLL was awarded the most flights to Cuba by DOT with about 122 going to various cities on the island per week. While there’s a strong Cuban population in the metro area, there’s little idea about what’s going to actually happen in terms of need and demand.

“We haven’t had service there, there’s no data out there and no other markets like this,” said Steve Belleme, business development manager for the airport. “We’ve talked to the carriers and they’re not quite sure how to address this or how it’s going to shake out.”

Between FLL and Miami International Airport (MIA), there will be 31 flights per day from southeast Florida to Cuba, so there’s no projection if they can fill the planes, Bellame said. JetBlue had run charters from FLL to Cuban a few years ago from the airport that were pretty full, he said, it was only one flight per week.

“Some of this, talking to JetBlue is a lot of times based on the possibility of connectivity from people coming down from the Midwest to go to Cuba,” Bellame said. “I think the airlines are looking to a certain extent to be serving more than the local market.”

Greg Chin, communications director for the Miami-Dade Aviation Department, said MIA already handles an average of 16 daily charter flights to and from Cuba for a total of 907,263 passengers in 2015, which makes Cuba one of its 10 busiest international markets. Passengers to/from Cuba grew 30 percent in 2015 year over year and that growth rate has continued in 2016.

Overall passenger traffic at MIA has grown 24 percent since 2010, with eight percent growth in 2015 alone.

“In the last five years, MIA has prepared for projected growth with improvements such as: opening a new 66-lane passport clearance facility; adding 108 self-service passport control kiosks and 24 Global Entry kiosks; being the second U.S. airport to offer Mobile Passport, an app that helps speed U.S. and Canadian citizens through the clearance process; and being the first U.S. airport to partner with CBP in a pilot program that allows the majority of its passengers arriving from abroad to clear passport control and exit the Customs area without a second inspection by CBP officers after collecting their luggage,” he said. “Thanks to these improvements, more than half of our international passengers now receive expedited passport screening electronically, and MIA has the capacity to handle continued passenger growth.”

FLL is rushing to prepare all entities for the unknown amount of service about to start by the end of the year. Bellame said U.S. Customs and Border Patrol officials need to figure out how to handle an increase in processing flyers from Cuba, how to fit the extra flights into the airport and how to fit all the planes at the terminal.

The airport has six international gates, but due to an extensive construction project, that will drop to five when service starts before an eventual five additional gates open sometime in 2017.

Nancy Suey Castles, public relations director for LAX, said in an email that Los Angeles World Airports (LAWA) officials are very pleased LAX will be part of this resumption of scheduled air service to Cuba. The Greater Metropolitan Los Angeles area is among the Top 10 places in the U.S. for Cuban-Americans by population size, so there is great interest locally for nonstop service to Cuba for family, academic, cultural, tourism, entertainment, sports, business and trade purposes.

American Airlines began a once-a-week charter flights in December that runs on Saturday’s and success on this route reflects this great local demand, she said.

“Because LAX is already serving Cuba, albeit once a week with a charter flight, airport operations are not expected to be significantly affected,” she said. “Federal inspection of international arriving passengers is well-established at LAX, as well as with the weekly charter flights by American. Alaska Airlines’ lease gives them several preferential gates at Terminal 6, where they already operate several international flights, mostly to Mexico.”

In terms of the actual number of daily international flights, Suey Castles said Alaska Airlines would be considered the busiest international airline at LAX. If Alaska requires additional gates to accommodate new flights to Cuba, they will let the airport know.

“LAX is an ‘open port,’ we don’t allocate slots,” she said. “So, if new flights are operated by permitted airlines, we’re confident that LAX will be able to address any additional needs the airline may have and accommodate the new flights.”

Sun Country was also awarded charter flights to Cuba, which will run from Minneapolis/St. Paul International Airport (MSP). While the service plans have not been announced as of press time, Patrick Hogan, director of public affairs and marketing for the airport said a warm weather destination like Cuba makes a great addition to the airport for travelers in the winter months.

“Sun Country hasn’t announced its plans for the approved Cuba service yet, but from an airport standpoint, we’re ready when they are,” he said. “In fact, we have four new common-use aircraft gates coming on line at Terminal 2, where Sun Country operates, this October.”

Southwest has never flown internationally through FLL, Bellame said, so the airline needs to know the procedures at the facility and the airport also needs to plan for any unknowns with Cuban infrastructure challenges.

“You know, I worked for an airline about a million years ago that had Cuba service and every night you never knew when the flight was going to come back,” Bellame said. “Every night there could be problems like ground handling problems or whatnot. There’s a lot of unknowns and even going in the middle of the day, there are a lot of snags with the infrastructure and it could come back and all of a sudden it’s two hours late and in a congested area, which created operations issues.”

Bill Peacock, consultant for Robinson Aviation Inc., who is the former director of air traffic for the FAA, said Miami Center will take on the main workload of the new Cuban traffic. Airports that could see an impact on service due to the new traffic could include Key West International Airport (EYW), Miami-Opa Locka Executive Airport (OPF) and Naples Municipal Airport (APF).

“We’re not taking any special precautions at this point,” he said. “We’re going to be watching the traffic mainly at Key West, Opa-Locka and Naples. There’s a lot of corporate jets coming in and out of Naples with a lot of wealthy people and some of those folks might want to go to Cuba, so we’ll be watching those airports and seeing if we need to take action.”

Peacock said there are a lot of unknowns with opening up air service with Cuba, because it’s not something that has been done a lot before. It was done at one time, so he said it really just involves updating procedures and protocols.

“The folks over at Miami center and in Cuba have a lot of common challenges and already talk to each other routinely when flights are flying over Cuban airspace,” he said. “We have a working relationship with Cuba already, so it’s not we’re starting from scratch.”

My comment:

This is an excellent summary that illustrates well the challenge facing airlines to fill their flights.  The best solution is for them to use their lobbying power to end all travel restrictions so the big tour operators in the US can channel passengers into the all inclusive holiday resorts.  The interim solution is for the airlines to promote use of the individual general license and educate travel agents and direct booking customers about the wealth of interesting experiences available countrywide for meaningful people to people engagement.  

Mr. Boyd's general perspective and enthusiasm is sound, but he makes several mistakes:

1) Fortunately there are very few BMWs and all they imply about misdistribution of national wealth.  The risk is being hit by Ladas, US cars from the 1950s, and increasingly Kias.

2)  Mostly wrong: "Traffic will also be entirely inbound to the nation as well, given Cubans not only can’t leave, but can’t afford to leave."  Thousands of Cubans travel to the US every year to visit family members.  There is a growing flow of academic and business specialists to meet US counterparts.  Cuba permits virtually everyone to leave the country as long as they have a visa.  The biggest impediment is the difficulty of obtaining US visas, an obstacle that will be reduced when the White House finally ends the Cuban Adjustment Act's inducement to overstay visas.  In addition to family visits, large numbers of Cubans will come to the US for undergraduate and graduate degrees as soon as visas are available.  Few Cubans will have the money to buy tickets, but relatives and sponsors here will.

3)  Wrong:  "there will not be any business travel to the nation as the government doesn’t want foreign investment".  The Cuban government is extremely interested in foreign investment that respects its evolving norms and priorities.  The problem is that what is most needed for national development is blocked by the unilateral US embargo.

4)  Wrong:  "One of the biggest issues with the service will be the initial demand. People who left the nation 50 years ago are now retired, Boyd said, and second generation Cuban Americans might not care about going."  Over 300,000 Cuban Americans 'went home' this past year, including children and teenagers sent for summer vacations with grandparents and cousins and millennials curious about their family origins.  The policy and actions of President Obama have made travel to Cuba more politically comfortable for a far wider range of Americans, including Cuban Americans.

5)  "connecting traffic in Charlotte" will depend upon how aggressively American Airlines promotes the opportunity of its daily flights

A summary of the opportunities provided since March 16th for people to people travel under the individual general license can be read here. 

John McAuliff
Fund for Reconciliation and Development

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