Airlines expect gradual payout from U.S.-Cuba flight deal

Airlines expect gradual payout from U.S.-Cuba flight deal
By Jeffrey Dastin

(Reuters) - U.S. airlines, set to resume scheduled service to Cuba for
the first time in decades, will be allowed just 20 round-trip flights a
day to Havana.

That compares with some 15 flights by JetBlue Airways Corp alone to
nearby Santo Domingo in the Dominican Republic. The carrier and larger
rivals such as American Airlines Group Inc are betting that the modest
beginning in Cuba will let them gain traction in a market with potential
far beyond the typical Caribbean vacation destination.

Strong demand is likely to come from Cuban-Americans visiting relatives,
leisure travelers desiring an experience that was once off-limits for
U.S. citizens, and executives paying for business class fares to
evaluate commercial opportunities.

"That's a huge difference from the Bahamas," said Henry Harteveldt,
founder of travel consultancy Atmosphere Research Group.

A ban on tourism to Cuba remains part of U.S. law, although President
Barack Obama has authorized new exceptions allowing special travel and
business operations there since the Cold War foes agreed to restore
diplomatic relations a year ago.

Even with the ban, Cuba is forecast to have the largest growth in
worldwide visitors of any Caribbean state through 2024, according to
David Goodger, a director at travel analysis firm Tourism Economics.

Cuba's three million visitors in 2014 accounted for 13 percent of travel
to the region, Goodger said. Removing the U.S. tourism embargo could
raise that to more than 20 percent.

"Not going to Cuba is sort of like a grocery store that doesn't sell
milk," Scott Laurence, JetBlue's senior vice president for airline
planning, said in an interview. "There's this huge country right in the
middle of our route map that we don't serve."

As the top U.S. carriers jostle for position in what amounts to one of
the industry's last frontiers, one challenge will be whether to fly
smaller planes in a bid for higher ticket prices, or larger ones in a
volume play.

In addition, Laurence called a lack of commercial data a "big concern"
as airlines have no sense of what travelers are willing to pay. U.S.
carriers are not privy to the economics and customer profiles of charter
flights they operate to Cuba.

More immediately, airlines will need to propose the routes they wish to
fly to the U.S. Department of Transportation, aiming for as big a chunk
of the limited flight frequencies as possible. That process is expected
to take place in early 2016 after the U.S.-Cuba deal is formally signed.

Claims for limited slots have sometimes turned belligerent, as with
bickering between American and Delta Air Lines Inc over the final U.S.
landing slot at Tokyo's Haneda Airport, preferred by business travelers
because of its proximity to the city center. [nL1N0UK28T]

JetBlue and American are the biggest players in Fort Lauderdale and
Miami airports, respectively, near where many Cuban-Americans live.

American, which operated about 1,200 charter flights to Cuba in 2015,
hopes its scheduled service will take off in the second quarter, pending
regulatory approval, Vice President of Regulatory Affairs Howard Kass said.

"We intend to continue to be the largest carrier between the United
States and Cuba," he later said.

(Reporting By Jeffrey Dastin in New York; Editing by Christian Plumb)

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