$6 million impact: CAL cutback of Cuban flights reduces revenue

In this Jan. 17, 2018 photo, tourists drive in front of a cruise ship in Havana, Cuba, as they tour the city in classic American cars. Cuba’s tourism boom began shortly after U.S. President Barack Obama and Cuban President Raul Castro announced in December 2014 that their countries would reestablish diplomatic relations and move toward normalization. – Photo: AP

Cayman Airways has taken a $6 million annual hit from the opening up of the Cuban market to U.S. airlines, prompting reevaluation of the national carrier’s strategy.

The airline, which will switch to a new fleet of modern jets over the next few years, is investigating alternate opportunities further afield, potentially including direct flights to Central or South America and the western United States.

Former U.S. President Barack Obama’s landmark decision to reopen relations with Cuba in 2016 cleared the way for multiple American airlines to begin direct flights into the communist state.

The influx of new operators immediately took its toll on Cayman Airways, which has now cut the number of flights to Havana from a high of nine per week to three a week.

Fabian Whorms, CEO of Cayman Airways, said the entry of U.S. airlines into the market had “changed the landscape completely,” and had cost the airline between $5 million and $6 million a year.

The route was a money-spinner because of the number of passengers transiting through Cayman between Florida and Cuba.

Mr. Whorms said, “For many years, Cayman Airways benefited from a steady and heavy flow of passengers originating in Cuba, traveling on Spanish passports back and forth to Miami with a stop in Grand Cayman.

“The environment at that time was one where these passengers originating in Cuba had no direct flights to Miami available for them, and it was convenient and cost-effective for them to travel on Cayman Airways with the short stop in Grand Cayman.

“These passengers also traveled with, on average, three or four bags each, which resulted in a very significant amount of excess baggage revenue for the airline. The demand was so strong that at one point we had nine flights a week to Cuba.”

He said much of that business had disappeared with the thawing of relations between the U.S. and Cuba and he does not expect it to return any time soon.

Mr. Whorms previously had addressed the issue of the potential impact the opening up of the Cuban market would have on Cayman Airways. He told the Compass in September 2016 that the introduction of scheduled flights between the U.S. and Cuba for the first time in more than 50 years was not expected to have a negative impact on the airline in the short term.

He said at the time, “We continue to watch what is going on, but it may not necessarily mean that there is going to be any substantial reduction in demand which could have a negative effect on us.”

Mr. Whorms said last week that Cayman Airways is now investigating other ways of generating revenue, including building connecting traffic from Honduras and Jamaica through Grand Cayman to U.S. cities.

In the longer term, he said new Boeing 737-8 Max aircraft, expected to arrive in December this year to replace the current jets, would open up new opportunities for the airline and the country.

“This fleet modernization will ultimately see Cayman Airways having the newest jet fleet in the region, with operational capabilities well beyond that of our current fleet,” he said.

“We will have the ability to conduct direct flights to almost anywhere in North America, all of Central America and much of South America.”

He said airline chiefs were in talks with government over how to use the new aircraft to benefit the tourism industry but would not announce new routes until they had been finalized.

3 COMMENTS

  1. What about the annual hit the national airline has been taken for many years providing jet service to the Brac. This must have contributed substantially to their endless subsidy requirements, but never has the airline ever owned up to what this has cost the taxpayer.

  2. Now that’s not good responsible Management, That would loose 6 million dollars before you see that something has to be changed . Someone need to be held accountable for that one . But things like that is why CAL has been a white elephant to Government.

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