Tuesday, March 14, 2017

Frontier and Silver Quit Cuba

Two airlines already calling it quits in Cuba

Two U.S. airlines are pulling out of Cuba, ending service to the nation only about six months after regular passenger flights resumed for the first time in nearly 50 years.
Silver Airways is dropping all nine of its planned routes to the nation by April 22. And low-cost carrier Frontier will do the same, dropping its Miami-Havana route on June 4.
In doing so, both Frontier and Silver -- a small regional carrier -- blamed overcapacity on the recently allowed service between the nations.
Additionally, Frontier found the cost of operating in Havana "exceeded our initial assumptions," spokesman Jim Faulkner said in an e-mail to Today in the Sky.
Frontier pointed to specifically to seat capacity between Florida and Cuba, saying that made it difficult for its own Miami-Havana route to perform well. Seven airlines alone are flying to Cuba just from South Florida's two biggest airports: Miami and Fort Lauderdale. Southwest and JetBlue are also flying to Cuba from other cities in Florida.
As for Silver, it too pointed to a glut of new Cuba service in deciding to exit the market.
“While the actual total number of passengers currently traveling to and from Cuba on all carriers combined is in line with what Silver originally projected, other airlines continue to serve this market with too many flights and oversized aircraft, which has led to an increase in capacity of approximately 300% between the U.S. and Cuba,” Silver spokeswoman Misty Pinson said in a statement to Today in the Sky.
When Cuba opened up to U.S. airlines last year, routes and capacity to the island were capped and carriers had to apply for the rights to serve the Cuba’s international airports. Nearly all of the big U.S. airlines rushed in with requests to fly to the island – especially on routes to Havana.
Against that enthusiasm, however, some industry executives openly wondered whether demand would live up to the hype.
Without regular airline service to the island in five decades, there was little data available to carriers in trying to assess potential demand for flights to new destinations. And unlike other foreign markets, Cuba remains a unique and highly regulated place for U.S. airlines to do business.
While other carriers flying to Cuba are doing so with medium- or full-size jets, Silver’s flights between Fort Laurderdale and Cuba are on 34-seat Saab 340B Plus turboprops. Silver does not fly to Havana, but rather to eight secondary destinations across the island. A ninth route had been planned for later this year.
“Silver has maintained from the beginning that these smaller Cuba markets – which are similar to its successful network and fleet strategy in Florida and the Bahamas – are best suited for Silver’s smaller aircraft type,” Pinson added in the statement from Silver.
Additionally, Silver said selling Cuba flights through online travel sites hasn’t always been a consumer-friendly process.
“In addition to overcapacity, distribution through online travel agencies and codeshare agreements have been unavailable since airlines began servicing Cuba last fall,” Pinson said. “Now, six months later, this issue is still not fully resolved, resulting in depressed demand.”
Despite all that, Silver didn’t rule out a return to Cuba in the future.
“Silver continues to focus efforts on their longer-term strategy of growing its successful Florida and Bahamas network and its fleet transition strategy that will allow the airline to serve many more markets further into the Caribbean and other destinations from its key hubs with longer range aircraft,” Pinson said.
Beyond Silver, two other U.S. carriers – American and JetBlue – each have reduced their capacity to Cuba.
American did not drop and destinations, but said in December that it would reduce its number of flights to Cuba. JetBlue also did not drop any routes, but announced in February that it would fly smaller planes to certain destinations.
American first hinted at problems with Cuba sales in October, commenting on the issue during a quarterly earnings call.
“I think everyone is struggling a little bit in terms of selling in Cuba,” Don Casey, American's senior vice president of revenue management, said during that call. “There a lot of restrictions that are still in place that has made it difficult to sell."
Other airlines have acknowledged sluggish sales to Cuba, after the intense competition through the Transportation Department to secure routes to the island. But larger airlines say they will wait for the market to develop.
Southwest Airlines CEO Gary Kelly told investors on an earnings call Jan. 26 that it’s too early to tell what the performance in Cuba would be, and that he would need a year to compare results. He said the early load factors looked fine, and added that the service began in early December during what he described as a weak part of the year seasonally.
“I get asked all the time whether it’s meeting our expectations,” said Kelly, who noted that Southwest has only been flying internationally for two and a half years. “I didn’t have any expectations. I mean, I don’t know how you would know because there hasn’t been air service to Cuba for 50 years.”
“With the way we approach new markets, we’re very well prepared that the initial response could be rather weak,” Kelly said. “And we have a lot of experience with being patient and stimulating the market, and getting people to notice that we’re there and change their travel habits.”
“So I’m happy with the initial results,” Kelly said. "They are nowhere near where we want them to be eventually. But I, at this point, don’t have any reason to believe we can’t get there.”
Contributing: Bart Jansen

My comment

This seems to leave Santiago orphaned. Silver was already flying there and Frontier was approved to do so originating in Chicago with a stop in Florida.

Santiago is Cuba's second largest city with many historic and cultural attractions, including San Juan Hill, the Moncada barracks, and the graves of Jose Marti and Fidel Castro. Not to mention a fabulous Carnival July 21-27. However, relatively few Americans will go to Santiago as their only destination in Cuba.
One of the airlines that has a slot in Havana could help by adding a domestic Havana-Santiago-Havana leg before returning to the US. Or one of them could propose a new US-Santiago-Havana-Santiago-US route. Cuba's domestic air service is inadequate and unreliable. There is precedent for international carriers carrying domestic passengers.

A Havana-Santiago bus on is available from Cubanacan or Viazul, but the trip takes 14 hours.
The airlines benefited when the restriction on independent visits was lifted one year ago, requiring only that the traveler affirms that the purpose fits within the 12 authorized categories when she or he books an air ticket. http://tinyurl.com/P2Pindiv
What is missing still is tourism for recreational holiday purposes, i.e. at the all inclusive coastal resorts. Only that mass tourism will fill planes and only Congress can make that possible.

John McAuliff
Fund for Reconciliation and Development

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