As further US airlines exit Cuba, what does the future hold for US-Cuba relations?

As further US airlines exit Cuba, what does the future hold for US-Cuba
relations?
Karen Gilchrist | @_karengilchrist
Thursday, 16 Mar 2017 | 9:02 AM ET
CNBC.com

U.S. airlines Silver Airways and Frontier Airlines have become the
latest to bow out of Cuba due to weakened demand, posing new questions
about the U.S's future relationship with its former Cold War foe.

For a brief period under President Barack Obama, longstanding tensions
appeared to be easing. But now, as the White House conducts a "full
review" of U.S.-Cuba policies, diplomatic relations between the two
neighbors look as uncertain as ever.

Indications so far suggest that President Donald Trump would be loath to
continue the détente initiated by his predecessor, which sought to
loosen travel restrictions and barriers to trade implemented more than
50 years earlier. During campaigning, the now President tweeted his
condemnation of human rights abuses conducted by Cuba's totalitarian
government. Then, last week, Cuba's President Raúl Castro made his first
public retort, describing President Trump's policies as "egotistical"
and "irrational".

However, President Trump also has a pro-business agenda to ally. A
number of U.S. companies took advantage of Obama's executive order and
efforts to restrict business freedoms will not come easily. Indeed, it
would not go unnoticed that Trump built his fortune on the tourism
industry and his organization reportedly once sought to pursue possible
business interests on the island.

So where does President Trump go from here - and how should business
respond?

What are companies currently doing?

Airline carriers Delta, jetBlue and American Airlines were some of the
first to capitalise on Obama's policies. In the first year after
restrictions were lifted, travel to Cuba by U.S. citizens grew 77
percent. However, a recent surplus of carriers and weakening demand have
caused some national airlines to reduce services, while regional
carriers Frontier Airlines and Silver Airways are to suspend their Cuba
services entirely.

"Lack of demand coupled with overcapacity by the larger airlines has
made the Cuban routes unprofitable for all carriers. As a result, Silver
has made the difficult but necessary decision to suspend its Cuba
service effective April 22, 2017. It is not in the best interest of
Silver and its team members to behave in the same irrational manner as
other airlines," Silver Airways said in a press note.

Trade association Airlines for America told CNBC it is currently
"working with government" to secure an adequate framework between the
two destinations.

Meanwhile, delivery services company FedEx announced this month that it
is delaying the implementation of its regularly scheduled cargo service
to Cuba by six months to address "operational challenges in the Cuban
market."

These challenges are also acutely felt by entrepreneurial start-ups on
the island. Chad Olin, president of U.S. Tour operator Cuba Candela, set
up his business to facilitate U.S. tourists under President Obama's
normalisation programme. He now faces an uncertain wait under the White
House's policy review.

"Although the new U.S. administration has introduced some uncertainty to
the continued improvement of U.S.-Cuba relations, we are cautiously
optimistic that relaxed travel rules will not be repealed," Olin told CNBC.

John Kavulich, president of the U.S-Cuba Trade and Economic Council,
regularly deals with businesses and policy makers with interests in the
U.S. and Cuba and indicated that more still are in a state of limbo.

"U.S. companies are hesitant to re-engage or engage due to the
uncertainty about what the Trump administration will or will not do with
respect to Cuba," he explained, adding indications that the White House
may intend to rescind certain freedoms.

Potential hurdles

If it is the case, however, that the new administration wishes to repeal
President Obama's executive order, it won't be without litigation issues
from current business license holders, noted Kavulich. A more likely
scenario, at least in the short term, would be a partial freeze on
issuance while the U.S. confirms its position, he said, noting
conversations heard within government and the business community.

"There is not a desire to issue further (business) licenses, but also an
acknowledgement that some license applications are and will be
legitimate," he said.

Christopher Sabatini, lecturer of international relations and policy at
Columbia University, agreed that full reinstatement of the trade embargo
would be unpopular, particularly in Florida, a crucial swing state which
helped secure President Trump's election.

"Some of the entrepreneurial concession will be hard to roll back
because people's lives rely on them," Sabatini told CNBC, referring to
Florida businesses which export to Cuba. Such moves would make the
President very unpopular, he said: "You would see protests on the
streets if they were removed."

"Big ticket" items, such as large corporates, would be easier to remove,
Sabatini suggested.

Political contention

As well as on the streets, Florida is likely to have an influential role
in policy at a Congressional level, too.

Marco Rubio, U.S. Senator for Florida, is one of six hard-line Cuban
American members of Congress who believe President Castro's government
is deeply untrustworthy and are likely to push for a retightening of policy.

"This (Cuban sanctions) is a concession President Trump can make to a
very powerful constituency in Congress," said Sabatini, who remarked
that the President may be keen to maintain his perceived favourability
among Floridians. Last month, President Trump met with Senator Rubio and
told a press conference of their "very similar views on Cuba."

Such a concession may also be necessary given the complexity of the
issue, notes Sebastian Arcos, associate director of the Cuban Research
Institute at Florida International University.

"President Trump will delegate his Cuba policy to others he trusts and
he assumes understand the issue better."

"That means people like Senator Rubio or Congressman Mario Diaz-Balart
will be quite influential in defining the new policy.

"We don't know yet what such policy will look like, but based on the few
signals from the Trump administration, it will be less congenial than Mr
Obama's," Arcos noted.

A new era for Cuba?

Such hard-line members of Congress clearly criticize the reform agenda
for further embedding repression, which has dogged the island for
decades. They claim that new businesses and tourist dollars only serve
to further fund the Castro regime and aggravate segregation on the island.

Trump's adviser Helen Aguirre Ferre said last week that the
administration has not seen Cuba make any "concessions" despite "all the
things it has been given."

However, Cuba has clearly been changing. Citizens are now more globally
connected than ever before, benefiting from improved telecommunication
services and internet connectivity, and certain legacies of Obama's
reform agenda will not be undone

With citizens now more exposed to the freedoms enjoyed by democratic
societies, including more private industry and gradually increasing -
albeit still limited - access to a free press, President Trump now
stands at a crucial juncture for U.S.-Cuba relations: continue pursuing
reforms or return to isolation tactics.

President Castro has stated his intentions to step down in 2018 which
could provide President Trump with greater leverage in his aims to
create a "better deal for the Cuban people." Tactical diplomatic
negotiations could secure greater democratic freedoms for Cuban citizens
if the President is willing to engage with his political opponent – an
enviably legacy for any President.

However, it remains a big if.

When contacted by CNBC, the White House and the Trump Organization were
not available for comment.

Source: As further US airlines exit Cuba, what does the future hold for
US-Cuba relations? -
http://www.cnbc.com/2017/03/16/as-further-us-airlines-exit-cuba-what-does-the-future-hold-for-us-cuba-relations.html