ASG chair Carlos Gutierrez on business outlook for Cuba
Cuba, U.S. Agree to Resume Flights Amid Slow Normalization of Ties
Move will ease travel but remaining embargo still hampers business ties
WASHINGTON—The U.S. and Cuba have reached an agreement to resume direct, scheduled flights, officials said on Thursday, a significant development in the longer process of normalizing relations between the countries.
In the year since President Barack Obama and Cuban President
Raúl Castro announced a move to normalize relations, progress has been slow and uneven, with a flurry of action on diplomatic issues but few business deals. Among the most visible signs of change is travel, and the aviation agreement, reached by negotiators late Wednesday and announced on Thursday, will make trips back and forth easier still.
Thomas Engle, the lead negotiator in the talks and the State Department’s deputy assistant secretary for transportation, said in an interview that the agreement will allow 110 regularly scheduled flights per day, including 20 to Havana and 10 to each of Cuba’s nine other international airports. The U.S. and Cuba are working to finalize the details so flights can resume at some point next year, he said.
“This is good for the traveler, for consumer choice...it’s good for business, for U.S. carriers,” Mr. Engle said. “Everyone is pushing in the same direction to get this launched soon.”
The deal won’t allow direct service to resume right away, but lays the groundwork for completing technical talks so scheduled airline flights can begin next year, likely in the first six months, officials said.
Despite the agreement, it still will be illegal for Americans to travel to Cuba purely as tourists. But travelers in 12 broad categories—including business, cultural exchange, journalism, professional research, athletic competition, and academic, humanitarian or religious work—may travel from the U.S. to Cuba provided they self-certify that their travel falls under one of the preapproved classifications.
As the process of normalization began, travel by U.S. citizens to Cuba has surged more than 50% in the past year. Much of the growth comes from newly loosened restrictions on “people-to-people” exchanges—cultural or educational travel, as opposed to standard tourism.
However, under current regulations, those trips must be booked on charter flights and are difficult for travelers to arrange online. With the aviation agreement, travel between the U.S. and Cuba will be allowed on scheduled airline service, which will be more convenient, frequent and easily accessible.
U.S. airlines welcomed Thursday’s announcement and said they were eager to resume regularly scheduled service.
“Interest in Cuba has reached levels not seen for a generation,” said Scott Laurence, JetBlue's senior vice president for airline planning. “We will review the terms of the agreement to understand how JetBlue can expand from charter service to regularly scheduled service.”
The move is expected to trigger fierce competition among U.S. airlines. The Department of Transportation will oversee a carrier selection process that analysts expect to be particularly heated for flights from Miami.
Big U.S. carriers including American Airlines Group Inc, United Continental Holdings Inc., and JetBlue Airways Corp. plan to file application in the new year when an agreement is finalized.
Howard Kass, American Airlines’ vice president of regulatory affairs, said on a call with reporters that carriers would still have to abide by existing restrictions on Cuba travel.
“We understand that we collect the paperwork from travelers,” he said.
Mr. Kass said charter traffic had continued to grow since travel restrictions were eased, and American planned to target routes from Miami and its other hubs in an effort to maintain its status as the largest airline between the U.S. and Cuba. He added that American may explore potential commercial opportunities in Cuba at some stage.
Mr. Obama, in a statement on the broader normalization effort, said Thursday it has placed the U.S. in a better position to engage with countries across Latin America but added that normalization “will be a long journey.”
“The last 12 months, however, are a reminder of the progress we can make when we set the course toward a better future,” he said.
Mr. Obama also renewed his call on Congress to lift the U.S. economic embargo. The president and supporters of the policy shift argue that more than 50 years of isolation failed to improve the lives of Cuban people, while increased contacts, commerce and travel will benefit the Cuban people, even if gradually.
Critics of the president’s policy, however, say it hasn’t delivered. Rep. Mario Diaz-Balart
(R., Fla.), a son of Cuban exiles, said in an interview that Mr. Obama’s policy has coincided with a sharp increase in Cubans leaving the island and an increase in political arrests.
“It has been an absolute disaster for our national-security interests and also for the Cuban people," Mr. Diaz-Balart said.
The high expectations in both countries that followed last year’s announcement have been tempered by steep hurdles to full normalization, including the embargo, divisions over human rights, billions of dollars in competing property claims and other issues.
However, the two former Cold War foes have reopened embassies and restored diplomatic relations. Messrs. Obama and Castro twice met face to face this year and Mr. Obama said this week he hopes to travel to Cuba before the end of his second term if conditions are right.
The U.S. and Cuba have launched a host of bilateral dialogues, including on property claims, civil aviation, counternarcotics, law enforcement, human rights and telecommunications. Negotiators reached a deal to resume direct mail service last week and one on environmental cooperation last month.
Cuba opened up 35 Wi-Fi hot spots over the summer, and Mr. Obama predicted Cuba would make further progress on telecommunications issues.
But Mr. Obama’s loosening of restrictions on U.S. companies doing business with Cuba has led to few deals so far, though many major companies have visited the island to explore opportunities.
Two cellphone carriers have signed roaming agreements, and MasterCard and Florida-based Stonegate Bank partnered to release debit cards for use in Cuba.
Ariel Pereda, a Miami businessman, said he used his card last week to pay for his bill at the Hotel Saratoga in Havana—what he said was the first successful use of one of the debit cards.
Carlos Gutierrez, a Cuban American and a former commerce secretary in the Bush administration, said business executives who travel to Cuba increasingly find that the U.S. embargo stands in the way of deals despite the steps Mr. Obama took. Pressure on that front could move the needle in Congress, which alone has the authority to dissolve the embargo, said Mr. Gutierrez, now a chair of Albright Stonebridge group.
“There are a lot of businesses that would like to see Cuba open up. Those businesses in some cases have done a good job explaining to their representatives why opening up Cuba would be good,” said Mr. Gutierrez, who reversed his long-standing support of the embargo this year. “I think you’ll see a lot more Republicans shifting their position.”
Ultimately, Congress must act to make Mr. Obama’s moves permanent. Even the most optimistic supporters of the policy shift in and outside of the administration say it is unlikely Congress will act to fully lift the embargo before Mr. Obama leaves office, though Mr. Obama said this week that he would try to get Congress to do so. The GOP generally opposes Mr. Obama’s policy.
Rep. Tom Emmer (R., Minn.), who launched a bipartisan Cuba policy group in the House this week and introduced a bill this summer in the House to lift the embargo, said he has been meeting with Republicans to try to rally them around lifting the embargo. Even staunch critics of doing so have told him they see it as inevitable, he said.
“I’m optimistic for next year,” he said. “The issue really is nobody has sat down and had this discussion out of respect for just a small group within the conference. And we’re going to force the conversation. It’s time.”
—Doug Cameron contributed to this article.