With the recent changes in regulations implemented by the now previous Obama administration, the Cuba market offers an interesting insight into the air charter industry and the travel industry as a whole.
As of December 17th, when the ex-President published a statement announcing a change of relationship between U.S. and Cuba, and August 31, 2016, when JetBlue flight 387 performed the first in five decades commercial flight from the U.S. to Cuba, many charter operators were uncertain regarding limitations and regulations of conducting flights to Cuba.
While the FAA does not implement any restrictions specific to Cuba, the State Department has a long list of sanctions dictating the “do’s” and mainly “don’ts.” Administered by OFAC – Office of Foreign Asset Control has a very long list of prohibited activities in Cuba, the main one being tourism.
While OFAC does allow travel under a general license that can be applied for 1 (or more) of 12 reasons providing an individual with a permission to travel, such as visiting relatives, journalism, humanitarian aid and other, it does not include enjoying the beach nor savoring rum and cigars.
What has changed in the preceding years?
The process itself. Before the recent changes, a passenger had to obtain a permit from OFAC and present it to the IAC (Indirect Air Carrier) that arranged for transportation with the air carrier to Cuba. Today, travelers do not require to physically obtaining a license to travel, but that does not give them the authorization to do so.
Additional difficulties associated with Cuba travel are the restriction on financial transactions. While blocked credit cards may be a hurdle, they also implement restrictions on air charter operators. A case of minor mechanical can become a full-scale mission if you cannot legally pay for your expenses. At Monarch Air Group we have had a long discussion with our insurance provider, to plan for a situation of a failure in Cuba, such as FOD.
But with commercial airlines opening the skies and cigar travel packages being sold online most passengers are not aware and not interested in the details administrated by OFAC 50 years ago. It is also hard to imagine a government trying to enforce any penalties with the amount of commercial traffic operating to Cuba.
If anything, the restrictions should increase the forbidden fruit effect and generate more interest in the new destination. While it was never shut down for Europeans or Canadians, the opening of Cuba has the effect of the last communist wall falling down.
However, at Monarch Air Group, most of our Cuba travelers are corporations, journalists on assignments and medical doctors. We have not experienced the anticipated growth in charters nor has it become a select destination. In fact, we are conducting more flights to the Dominican Republic than Cuba, and within the Caribbean, our most popular destination remains The Bahamas.
It is possible that the new, unfamiliar destination does not generate enough interest. We estimate that over the next five years it will pose a big competition to neighboring countries, such as The Bahamas, Dominican Republic, and Jamaica, but for now, it seems that the familiar beaches of Exuma are more welcoming than the yet to be discovered beach of Varadero.
Established in 2006, Monarch Air Group has been providing aircraft management, private jet charters and long-term lease solutions to select individuals, Fortune 500 corporations, leading NGO’s and the US Government.