The U.S. Awards Airlines Routes to Cuba - The Big Prize Is Still Up for Grabs

The U.S. Awards Airlines Routes to Cuba: The Big Prize Is Still Up for Grabs
By Adam Levine-Weinberg Published June 14, 2016 Markets Fool.com

More than half a century after the U.S. banned commercial airline
flights to Cuba, scheduled service between the two countries is on the
verge of resuming Opens a New Window. . Last Friday, the U.S. government
awarded the first set of U.S.-Cuba route authorities.


American Airlines , Southwest Airlines , JetBlue Airways , Frontier
Airlines, Sun Country Airlines, and Silver Airways were all awarded
routes to Cuba. However, all of these routes serve secondary cities in
Cuba. Routes to Havana -- which are the real prize -- won't be allocated
until later this year.

JetBlue was one of six airlines to be awarded routes to Cuba last week.
Image source: JetBlue Airways.

Everyone gets what they want -- for now
The new U.S.-Cuba aviation treaty allows U.S.-based airlines to operate
up to 110 daily flights to Cuba: 20 to Havana and 10 each to nine other
international airports in the island nation.

Havana is Cuba's political, cultural, and economic hub -- and its
largest city by far -- so airlines are extremely eager to fly there.
When the U.S. government began the application process for allocating
routes to Cuba, airlines requested nearly three times as many flights
Opens a New Window. to Havana as the 20 daily frequencies that are
available.

By contrast, airlines are a lot less interested in operating routes to
Cuba's secondary cities. Some major airlines didn't even bother bidding
for any flights other than to Havana. As a result, the Department of
Transportation didn't really have to decide anything in awarding the
non-Havana routes. Every airline got what it wanted. (The only exception
was Eastern Airlines, a start-up carrier that isn't yet certified to
operate scheduled commercial flights.)

How the flights shake out
American Airlines, which operates a large hub in Miami -- less than 200
miles from the northern shore of Cuba -- requested the most non-Havana
flights of any airline. American plans to operate eight daily flights to
secondary cities in Cuba. It will fly twice a day to Holguin, Matanzas,
and Santa Clara; and once a day to Camaguey and Cienfuegos.

American Airlines will launch eight daily flights to Cuba this fall.
Image source: American Airlines.

Tiny regional airline Silver Airways will operate 39 weekly flights from
Fort Lauderdale to Cuba -- an average of five or six per day -- spread
across all nine of Cuba's secondary international airports. That will
give it the second largest number of frequencies. However, it will use
34-seat turboprops for its flights, giving it a smaller market share
than its rivals.

JetBlue Airways and Southwest Airlines both plan to fly three times a
day from Fort Lauderdale to secondary airports in Cuba. JetBlue will
operate one flight each to Camaguey, Holguin, and Santa Clara. Southwest
plans to fly twice a day to Matanzas and once a day to Santa Clara.

Ultra-low cost carrier Frontier Airlines will operate a total of 16
weekly flights from Chicago and Philadelphia to a handful of cities in
Cuba. Finally, Sun Country Airlines will fly once a week from its base
in Minneapolis to Matanzas and Santa Clara.

Now comes the hard part
Most airlines are likely to launch their recently awarded routes to
Cuba's secondary airports sometime this fall. The beginning of scheduled
service to Cuba should stimulate strong growth in passenger traffic, as
the flights will be cheaper and more convenient than charter flights.

On the other hand, the U.S.-Cuba air travel market is still undeveloped.
Havana is arguably the only "slam dunk" destination. Furthermore,
travelers still need to provide proof that they fall within one of a
dozen categories of approved travel. Pure tourism is still banned by the
U.S. government.

Thus, some of the flights launching this fall may fail. That's just the
nature of opening a new market. However, other routes could be
unexpectedly successful, prompting capacity increases. Airlines will
have to learn a lot about the U.S.-Cuba travel market in the coming
years in order to fully capitalize on this enticing opportunity.

The article The U.S. Awards Airlines Routes to Cuba: The Big Prize Is
Still Up for Grabs Opens a New Window. originally appeared on Fool.com.

Adam Levine-Weinberg Opens a New Window. owns shares of JetBlue Airways
and is long January 2017 $17 calls on JetBlue Airways and long January
2017 $30 calls on American Airlines Group. The Motley Fool is long
January 2017 $35 calls on American Airlines Group. Try any of our
Foolish newsletter services free for 30 days Opens a New Window. . We
Fools may not all hold the same opinions, but we all believe that
considering a diverse range of insights Opens a New Window. makes us
better investors. The Motley Fool has a disclosure policy Opens a New
Window. .

Source: The U.S. Awards Airlines Routes to Cuba: The Big Prize Is Still
Up for Grabs | Fox Business -
http://www.foxbusiness.com/markets/2016/06/14/us-awards-airlines-routes-to-cuba-big-prize-is-still-up-for-grabs.html