8 Airlines Gain Final DOT Approval To Fly To Havana

The U.S. Transportation Department (DOT) has finally granted eight U.S.-based carriers the permission to initiate commercial flights to the Cuban capital of Havana.

Following the final go-ahead, carriers will be able to start operations from as early as this fall. The verdict has confirmed the tentative approval awarded on Jul 7, 2016. The carriers that have gained the final approval are Delta Air Lines (NYSE:DAL) , American Airlines Group (NASDAQ:AAL) , United Continental Holdings (NYSE:UAL) , JetBlue Airways Corp. (NASDAQ:JBLU) , Spirit Airlines (NASDAQ:SAVE) , Southwest Airlines Co. (NYSE:LUV) , Alaska Air Group (NYSE:ALK) and Frontier Airlines.

Havana Verdict Coincides with First US-Cuba Flight

The announcement was made by Transportation Secretary Anthony Fox on the same day when the first commercial flight to Cuba from the U.S. touched ground in more than 50 years. JetBlue had the honor of operating the first flight (387) which landed in Santa Clara, Cuba, from Fort Lauderdale on Aug 31. Prior to this, U.S. carriers have been operating only charter flights to the region. We remind investors that this June, the DOT granted approval to six U.S.-based carriers, including JetBlue, to operate scheduled flights to nine Cuban cities (excluding Havana).

We note that diplomatic ties between the countries were severed way back in 1961. However, President Obama’s call for restoration of diplomatic ties with Cuba in 2014 granted an approval to resume commercial flights to the region.

Havana- A much Sought After Destination

US carriers were eagerly awaiting the final nod of approval to operate flights to Havana- a favorite tourist spot. That the route was in high demand can be made out from the fact that US carriers had collectively applied for the approval to operate nearly 60 flights to the Cuban capital on a daily basis. However, the agreement granted permission for only 20 daily roundtrip flights on the route.

According to a Reuters report, American Airlines was the biggest winner, clinching four daily flights on the Miami–Havana route and one on the Charlotte, North Carolina–Havana route (i.e. 35 weekly flights in total). Meanwhile, Delta stated that it intends to initiate daily flights connecting Havana to Atlanta, Miami and New York starting Dec 1, 2016, subject to approval from the Cuban government. Alaska Air Group has received the permission to operate commercial flights between Los Angeles and Havana.

The report further stated that United Continental has been granted permission to operate daily flights connecting Havana to Newark, New Jersey and weekly flights between Houston and Havana. Southwest Airlines has also obtained permission to fly from Fort Lauderdale and Tampa to Havana. JetBlue has apparently secured the go-ahead to operate 27 weekly flights from New York, Fort Lauderdale and Orlando.

TRANSPORTATION-AIRLINE Industry Price Index

TRANSPORTATION-AIRLINE Industry Price Index

A Bright Spot amid Multiple Headwinds

The latest authorization is quite a breather for U.S. carriers that are currently grappling with multiple headwinds. The challenges range from a surge in terror attacks, uncertainty following the Brexit vote, unit revenue issues to technological glitches. The struggles are reflected by the bearish Zacks Industry rank of 231 (among 260+ groups) carried by the Transportation-Airline segment.

In such challenging times, the approval to operate commercial flights to Havana is a blessing. However, the extent of the benefit can be gauged only after the service is initiated. Meanwhile, we expect investor focus to remain on this issue for the time being.

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