American desires route flexibility to move its daily Charlotte (CLT) – Havana (HAV) flight to its Miami (MIA) hub for the near future. American’s CLT-HAV service is underutilized, with an average load factor of under 55 percent for the first half of 2018. Of the passengers who fly this route, fewer than one in five is a local passenger. Both local passengers and connecting passengers on American’s CLT-HAV service will retain multiple connecting opportunities via MIA.
In every month in 2018, since the new restrictions on U.S.-Cuba travel became effective, the load factor on this route has been substantially lower than at the same point in 2017.8
The evolving restrictions on travel to Cuba have caused sharp changes in demand for U.S.- Cuba scheduled service, creating unique challenges for carriers. When the U.S. Government normalized relations with Cuba and authorized “individual people-to-people” travel to Cuba, traffic to Cuba from several U.S. gateways surged. But the new restrictions on individual people- to-people travel, which became effective on November 9, 2017, reduced demand by non-Cuban- American travelers and caused U.S.-Cuba traffic at many gateways to drop significantly.5 As a result, Alaska and Delta terminated their daily Havana services from Los Angeles and New York, respectively. Both carriers attributed their service terminations to the new U.S.-Cuba travel restrictions.6 Frontier and Spirit cancelled service as well, and several other Havana services were downgauged, greatly reducing overall Havana capacity, to the detriment of passengers.
The cuts to Havana service that began in 2017 have reduced Havana seats by nearly 20 percent from the Department’s initial allocation in 2016, even accounting for the new services that will begin later this year.
American respectfully requests that the Department remove the U.S. gateway conditions applicable to the current allocations and future awards of U.S.-Cuba frequencies.1 This request, if granted, will provide all carriers that offer scheduled service to Cuba the flexibility to operate service from any U.S. gateway where the carrier holds underlying route authority. Route flexibility will enable carriers to respond quickly and efficiently to the unusually frequent and marked changes in demand for U.S.-Cuba travel since the re-introduction of scheduled service in 2016. Passengers will be the winners as scarce frequencies will be more likely to remain in continuous usage and to be directed to gateways with the greatest demand. The current gateway-specific awards have proven not to maximize public benefits. Due to sharp and unforeseeable demand fluctuations, frequencies have gone unutilized pending Department reallocations and carriers have been unable to provide sufficient service where it is most needed. Granting carriers route flexibility resolves these problems by allowing market forces to work while maintaining the Department’s important role in the allocation of scarce frequencies.
Executive Summary
American seeks route flexibility to allow all carriers to adjust their Cuba services efficiently in response to the rapid shifts in demand that are unique to U.S.-Cuba travel. Changing restrictions on travel to Cuba have already contributed to the failure of several Cuba services in the two-year period following the reinstitution of scheduled passenger service. The effect of those changes and the likelihood of further change warrant providing carriers more tools to ensure that Cuba capacity at all U.S. gateways can be realigned to match demand. Without this flexibility, carriers, passengers, and the Department must endure lengthy and repeated frequency allocation proceedings before frequencies can be moved to other gateways. Passengers suffer during the extended period when the frequencies at issue remain unused.
