New on Charter Flight Roller Coaster - Eased Cuba Restrictions

New on Charter Flight Roller Coaster: Eased Cuba Restrictions
BY MAX KUTNER 2/1/15 AT 5:20 PM

The people who have spent decades arranging flights between the United
States and Cuba compare the history of their industry to a roller
coaster. The half-dozen or so charter companies are subject to the
politics of two countries, plus opposition that is at times
explosive—literally.

Since President Obama announced the return of diplomatic relations with
Cuba in December, and the easing of travel and trade restrictions in
January, business at the charter companies has been on its way up. But
those cashing in on the detente fear that once commercial airlines start
regular service, charter profits will go into free fall.

The charter company names are well known in Cuban-American
circles—Gulfstream, Marazul, ABC, Xael, Wilson, Cuba Travel Services and
others. Most are based in Florida and fly from Miami or Tampa, though
some hold headquarters in New Jersey and California. Multiple companies
claim to have been the first in operation, and many of the founders have
had hands in politics for decades.

Air service agreements between the two countries date to 1953. Before
last month's changes, the U.S. limited air travel to Cuba to companies
holding special licenses and operating non-regularly scheduled flight
service. Starting in the late 1970s, when President Carter began easing
travel restrictions, Cuban-Americans, exiles and other people
established licensed companies to coordinate travel and charter flights.
Over the years, as various administrations made it easier for Americans
to visit Cuba under certain circumstances, those travel companies grew
their operations to include arranging tours, booking hotels and leasing
aircraft and crews from major airlines.

In the early 2000s, however, after President Bush put new restrictions
in place, the charter companies scrambled to fill airplane seats.

"He hit us really hard," Tessie Aral of ABC Charters says about Bush.
"We had to lay off half our staff."

Michael Zuccato of Cuba Travel Services says the company downsized to
smaller aircraft at the time, and John H. Cabanas of C&T Charters, which
stopped flying in 2012, says those restrictions made him go bankrupt.

Business began to improve in 2009, when President Obama eased
restrictions on Cuban-Americans visiting family, and again two years
later, when the president restored "people-to-people" travel categories.

Last month, the U.S. announced that while regular tourism to Cuba
remains banned and travelers must fit into one of 12 categories, the
government would no longer require case-by-case approval for travelers.
Further, Americans visiting Cuba can now use credit cards there and
spend larger amounts of money.

In the two weeks since that announcement, people have flooded charter
companies with requests. "We have just been inundated," says Bob Guild,
vice president of Marazul, which has been around for three and a half
decades and flies mostly between Miami and several Cuban cities. "I have
gotten more than 1,500 requests for group travel in two weeks. That's
just way above the norm for us."

In fact, Guild says he's discouraging people from packing their bags
just yet. "We're telling everyone who is now licensed to travel to Cuba
to postpone their travel until at least April or maybe even May," he
says, "because Cuba is already filled, as far as their hotels go."

Zuccato, who runs Cuba Travel Services with his wife Lisa, says he
participated in a travel show last week and, "I'm just now getting my
voice back." He estimates that business has increased more than 100
percent since the 2011 changes. Responding to the rise in demand, Cuba
Travel Services will begin flying weekly from New York City to Havana in
March. It also flies from Miami and Tampa.

Still, major airports are waiting to see the excitement translate into
hard numbers. A spokesman for Miami International Airport says its
number of chartered flights to Cuba scheduled for February is actually
less than the number for last year. "For now we're just waiting as
everybody else is," he says.

A spokeswoman for Tampa International Airport wrote by email that it is
still reviewing the January numbers, but that "charter operators have
indicated that they are likely to add flights in coming weeks." The
spokeswoman also wrote that traffic on the website GoToCuba.org has
jumped since the government's announcements. Before those, she wrote,
the site received some 50 visitors per day; now the daily average is
more than 800.

The Department of Transportation issued a notice on January 15
explaining its plans to renegotiate the 62-year-old air travel agreement
currently in place. "The U.S. Government will engage with the Government
of Cuba to assess our aviation relations and establish a bilateral basis
for further expansion of air services," the notice states, adding:
"Nothing in this Notice is intended to interfere with U.S.-Cuba charter
services."

But introducing regular flights could spell trouble for the mom-and-pop
charters. Several major airlines have expressed interest in recent days,
including American Airlines, Delta, United, JetBlue and Southwest. Many,
if not all, of those carriers have flown to Cuba through the charter
companies.

Travel websites are also jumping on board. Kayak, a travel search
engine, added Cuba hotels and flight information to its search results
last week. "There was quite a bit of interest," Chief Marketing Officer
Robert Birge told Newsweek before announcing that addition.

Booking websites, however, must wait for the government negotiations to
be concluded. A spokeswoman for the Priceline Group, which oversees
Booking.com, Priceline.com and Kayak, says they're eager to facilitate
travel to Cuba as soon as they can. A spokesman for Orbitz, a
competitor, says the same.

"We are in contact with our suppliers, airlines, hotels, cruise lines
and others that are looking at getting into the Cuba market," says Chris
Chiames, vice president of corporate affairs at Orbitz. "We anticipate
being able to sell travel for Americans getting to Cuba by the end of
this year.

"It's been a place so close, but so far," Chiames adds.

When major U.S. providers make it easier to book flights and hotels,
what will become of the charter companies?

"The most logical scenario," says Lillian Manzor, a University of Miami
associate professor and expert on U.S.-to-Cuba travel policies, is that
the influx of options will drive down ticket prices and the charters
will struggle. However, Manzor says, cultural reasons may keep the major
airlines from succeeding in that market. "Conducting business with Cuba
is not simple. These [charter] travel agencies have a long experience
and tradition of working with Cuba," she says. "They have an
experiential know-how that they've already had to deal with for 20-odd
years that the [major] American companies don't have."

Zuccato also says major carriers may have trouble dealing with the
nuances involved with Cuba travel. "These charter flights into Cuba have
operated so efficiently over the past 20 years," he says. "They're able
to take kind of a complicated process and make it really simple and easy
for people…. We have the system down."

Other charter executives, Aral of ABC and Guild of Marazul, concede that
if necessary, they will focus on other aspects of their businesses, such
as running programs and tours.

History shows that the competition could get messy. Companies have gone
after one another in court; most recently, last October, Island Travel
and Tours filed suit against Cuba Travel Services for setting ticket
prices too low and therefore violating antitrust laws. That case is
ongoing and attorneys for Cuba Travel Services have called the claim
"meritless."

Politics have caused problems as well. It is suspected that Cuban exile
extremists were responsible for bombing the Marazul offices twice in
1988 and once in 1996, almost gutting the store and forcing the company
to install bulletproof glass.

Francisco Aruca, the founder of Marazul—"the first American company to
run charter flights to Cuba"—died in 2013. When he was a young man in
Cuba, according to biographies, authorities arrested him for
counter-revolutionary activities and sentenced him to 30 years behind
bars. He apparently escaped and fled the country, eventually settling in
Miami. There, he became a popular radio show host.

The name of another high-profile former charter company owner, John H.
Cabanas of the now-closed C&T Charters, elicits colorful off-the-record
responses from some, and praise as a "pioneer" from others. Cabanas, 72,
says his ancestors came to Florida from Cuba in the 1850s. He says he's
dined with Fidel Castro, and he calls Raul Castro, whom Cabanas says
once lent him 20 pesos for a haircut, "a terrific guy."

Cabanas grew up in a political family, and after an arson attack on
their home around the time he was 19, they fled to Cuba. Cabanas
returned to the U.S. in 1988. These days, he doesn't shy from talking
about his political beliefs, and he has contributed more than $100,000
to both Democrats and Republicans over the past decade. Thanks to the
renewed relations with Cuba, he says, now is a good time to be in the
charter business.

"It's a very romantic industry," Cabanas says, "and I think it's going
to grow into an indefinite size."

Source: New on Charter Flight Roller Coaster: Eased Cuba Restrictions -
http://www.newsweek.com/new-charter-flight-roller-coaster-eased-cuba-restrictions-303594