Monday, March 23, 2015

Charter flights brace for change as scheduled service to Cuba nears

Charter flights brace for change as scheduled service to Cuba nears
Some experts believe regularly scheduled air service to Cuba — a far cry
from the charter- only operations of the recent past — could start by
early next year.
03/22/2015 3:00 PM 03/22/2015 7:57 PM

An aerial view of Cuba is seen from a Miami-bound American Airlines
charter taking off from José Martí International Airport earlier this
For years, Vivian Mannerud has had an unusual message for young
employees interested in working for her Cuba travel company, Airline
Brokers Co.

"I say go back to college. There is no future in this business," said
Mannerud, CEO of the Hialeah-based agency. "Don't think of this as a
career because this could end tomorrow."

At the moment, Mannerud's business — arranging trips to Cuba for VIP
travelers and booking traditional passengers on flights with charter
flight operators — is bustling since President Barack Obama announced a
plan to normalize diplomatic relations and ease travel restrictions in

Tourism is still prohibited; Americans born outside Cuba who want to
travel there individually are required to declare that they fit into one
of 12 approved categories, such as scholarly research or peopleto-people
programs. Still, agencies that organize legal trips say demand has
skyrocketed since January, when rules changed to allow travelers to
visit on a general rather than specific license.

That boom may be short-lived for the eight companies, most Miami-based,
that until now have been the only U.S. agents for booking flights to the
island. In the not-too-distant future, the airways likely will include
competition from carriers like American and JetBlue. In preparation,
some traditional suppliers are seeking to beef up other parts of their
business, while others are looking at potential partnerships with major
airlines or exploring destinations beyond Cuba.

No matter what, most experts agree the companies that have made Cuba
travel their bread and butter will have to change course.

"They'll disappear. There will be no need for charters," predicted
attorney Peter Quinter, chair of the customs and international trade law
group at GrayRobinson in Miami. "It'll be a while before that happens."

Quinter said his best guess is that a final agreement could be reached
by the end of 2015 with service starting the following year.

Before that scenario becomes reality, officials with the U.S. and Cuba
must hammer out a bilateral agreement that will determine the amount of
air service that both sides are prepared to allow.

Experts anticipate scheduled service would be eased in.

"You wouldn't suddenly get a situation where the floodgates would open
and any airline could fly from the U.S. to Cuba and vice versa," said
John Grant, executive vice president for data and market intelligence at
OAG, a provider of data and analysis to the aviation industry. "I think
it would be a controlled expansion of services between the two markets."

He said that other government agencies such as the Federal Aviation
Administration and the Department of Homeland Security would also need
to make sure international airports in Cuba conformed to the appropriate
standards, as would be required for any new destination.

Since Cuba already has service from Canada, Europe and other Caribbean
destinations, Grant said he believes all those standards are likely met.

"As to where the Cuba-U.S. air service agreement is at this moment in
time, I have no idea because I can't get into the White House," Grant said.

The work has started, but it's far from over. A U.S. Department of
Transportation spokesperson said the two countries held talks on civil
aviation in Washington, D.C. on March 2 and 3 to "explore opportunities
to expand our civil aviation relationship as the two countries move
toward normalizing diplomatic relations."

"The government-to-government discussions covered economic, safety, and
security issues related to civil aviation," the spokesperson said. "The
next steps are still to be determined."

Grant said he expects that airlines are already weighing in to let
governments know the amount of service they want to offer and what kind
of agreement they hope to see. If a final agreement called for a limited
number of flights, the two countries would have to decide which airlines
would be allowed to fly.

Some aviation experts have questioned why governments and airlines would
rush to establish scheduled service when Cuba's infrastructure is
struggling to keep up with demand. The island saw more than 3 million
visitors in 2014, mostly Canadian tourists. But there are only about
63,000 rooms to accommodate visitors at hotels, motels, hostels and
serviced apartments, according to statistics from Cuba.

"In terms of it being ready for prime time, Cuba is 10 years away at
best," said Michael Boyd, president of aviation consultancy Boyd Group
International in Evergreen, Colo.

Boyd said several factors make Cuba a likely dud for scheduled air
service: the lack of business travel to Cuba, rules that still prohibit
tourism for Americans, constraints on Cubans traveling outside the
country and a weak economy on the island.

"There is no potential for regularly scheduled air service," Boyd
predicted. "You'll fly empty. The problem is there's no demand."

Still, major airlines, some of which already lease aircraft to charter
companies for Cuba flights, have expressed their interest in operating
their own service to the island.

United Airlines said in January that it plans to serve Cuba from hubs in
Newark and Houston once it receives government approval.

American Airlines and its regional carrier Envoy will offer almost 1,200
charter flights to Cuba this year through partnerships with charter
companies, a spokeswoman said. With its large Miami hub and enormous
presence in the Caribbean and Latin America, the airline is monitoring
changes to the Cuba travel policy "and will follow the laws and policies
of the U.S. government, and the host governments of the countries we
serve," according to spokeswoman Martha Pantín.

"When legally allowed to do so, we will offer our customers scheduled
service to Havana and other destinations in Cuba," Pantín said.

JetBlue, which operated 173 flights to Havana and Santa Clara last year
through charter partnerships, also hopes to operate scheduled service
when possible.

"While we're not selling our flights to the customer, we have customers
coming back and forth to Cuba every week on JetBlue airplanes," said
Dave Clark, the airline's vice president of network planning. "They're
getting the whole JetBlue experience."

The airline has publicly said it is interested in serving Cuba once
legally allowed.

"We believe there is demand for regular service, especially for JetBlue
since we are the largest carrier to the Caribbean with focus cities in
New York and Florida where there is a significant Cuban population,"
spokesman Doug McGraw said in an email. "It continues to be difficult
for U.S. airlines to gauge specific demand levels since there is no
scheduled service today and government regulations limit travel, but we
anticipate that demand would ramp up over time as flights become available."

With the existing agreement dormant for more than 50 years, only
non-scheduled flights — or charters — have been allowed to operate, and
just a handful of companies have provided the service. Many have
operations in Miami, including Marazul Charters, ABC Charters, Xael
Charters, Gulfstream Air Charter, Island Travel & Tours and Havana Air.
Mannerud's company also operated charter flights until a couple years
ago when her office was firebombed and Cuba suspended landing rights for
the business in 2012.

Grant, of OAG, said the emergence of scheduled service will disrupt that
corner of the travel industry.

"The customer will have a choice and the market price will be dictated
by the price of the service," he said. "The one thing the charter
carriers will have at their advantage, for at least an initial period of
time, is that they will have developed relationships with the traveling
communities and the groups of travel organizations who are flying from
the U.S. to Cuba. They'll have a working relationship — but that's not
to say JetBlue and American can't replicate that pretty quickly."

Some charter companies are refocusing their efforts. Bill Hauf,
president of Island Travel & Tours with offices in Tampa and Miami, said
the company is now flying to Freeport in the Bahamas and plans to start
offering flights to South America in mid-April.

"We are diversifying," he said.

The operator will also keep working with niche markets such as
university groups that want to travel to Cuba as well as specialty tours.

For now, Island Travel & Tours operates six roundtrip flights a week
from Miami to Havana with plans to start service from Baltimore in June
and another U.S. city later.

"We're trying to do some different things and fly from different
locations," Hauf said.

Havana Air Co. added a flight from Key West to its schedule earlier this
month; president and chief operating officer Mark Elias said the company
has seen a "substantial" increase in passengers for services that
include 14 flights a week on a Boeing 737-400 to three Cuban cities. The
company uses a Havana Air-branded aircraft operated by Las Vegas-based
Vision Airlines.

In an email, Elias said Havana Air will continue to use wide-body
aircraft and is open to reaching interline agreements with major
carriers in the future and possibly adding more destinations with the
potential of those agreements.

"We will continue to run our operation as we do today, and as charter
companies around the world do alongside of scheduled service," Elias wrote.

Bob Guild, vice president of Marazul Charters, said he expects charter
flights to still be needed once scheduled service begins.

"Even with regularly scheduled flights, which we're looking forward to,
there will still be a need for groups that want their own schedule," he
said. "And then it could supplement the regularly scheduled flights
during high season."

But the company, which has operations in Miami and New Jersey, is also
making plans for all of its divisions, which include charter flights as
well as sending people to Cuba as part of legally allowed programs.

"We have big discussions on how we're going to rebrand ourselves within
this new world of Cuba travel reflecting our strengths and history and
contacts that we have so that we can provide the best programs as
possible compared to anyone in the country for people-to-people groups,
academic groups, professional research, events," Guild said. "And that's
where we see our niche."

As for Mannerud, she said her VIP customers will still want her to
arrange for travel on private planes. She expects to continue to book
day-to-day customers on other operators, and might eventually make it
possible for people to book flights through her web page.

Mannerud said she has been approached by three major carriers to be
their booking agent once scheduled service is allowed to make sure they
are in compliance with current rules on who can travel. But she sees the
real future potential not in the air but at sea: She recently applied
for a ferry permit with an eye toward the cargo potential.

She said she expects other companies in her line of work to also be
thinking about their next steps.

"I think that any charter company that is doing the day-to-day charters
and is not prepared has done so out of ignorance, because everybody knew
this day was coming," she said. "Sooner or later, this day was coming."

Most U.S. travelers fly to Cuba on charter air carriers, but aviation
industry data and analysis provider OAG breaks down the data on
alternate routes:

18,021 passengers traveled between the U.S. and Cuba via points outside
the country in 2014.

77 percent of those travelers started or ended their trip in Miami,
followed by much smaller numbers in John F. Kennedy International
Airport in New York, Minneapolis-St. Paul International Airport, Los
Angeles International Airport and others

To get to Cuba, 53 percent of passengers went through Nassau on
Bahamasair, followed by 24 percent through Grand Cayman on Cayman
Airways. Other entry points included Tocumen International Airport in
Panama, Toronto Pearson International Airport and airports in Mexico
City and Cancun.

Source: OAG

There were 7.2 million airline seats to and from Cuba in 2014 globally,
a 6 percent increase compared to 2013.

Scheduled seat capacity grew by 14 percent in 2013 and 26 percent in 2012.

Last year, one in three seats was heading to or from Canada, a market
that grew by 253 percent between 2010 and 2014.

Source: Charter flights brace for change as scheduled service to Cuba
nears | Miami Herald Miami Herald -

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