The Dallas- based low cost carrier Southwest Airlines (NYSE:LUV) became the latest US carrier to reduce its services to Cuba. The carrier has decided not to fly to Varadero and Santa Clara from Sep 5 as the routes had ceased to be viable.
The tweaked Cuba policy announced by President Trump earlier this month might also have played a part in Southwest’s decision. The new policy, which prohibits individual travel to the island nation, might hurt the already weak travel demand to Cuba further. Thus, the revenues of American carriers operating in Cuba are likely to shrink.
Even though Southwest has decided to end its operations to two Cuban cities, it will continue its Havana service. The company operates nonstop flights to the Cuban capital from Ft. Lauderdale (twice daily) and Tampa (once daily) now.
It is to be noted that not only will those flights remain in operation but the carrier has also sought permission from the U.S. Department of Transportation to start a third roundtrip (on a daily basis) connecting Ft.Lauderdale and Havana. Demand on the Havana routes is much stronger than in the smaller Cuban cities. Currently, Southwest Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Southwest Airlines Company Price
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We remind investors that the resumption of scheduled commercial flights to Cuba from the U.S. last year after a gap of more than five decades was greeted warmly by American carriers. In Jun 2016, the U.S. Department of Transportation authorized six U.S.-based carriers to operate scheduled flights to nine second-tier Cuban cities. Approval to fly to Havana came two months later.
However, a few months after commencement of the service the above enthusiasm started declining. This was because travel demand to Cuba fell short of expectations. Consequently, the likes of American Airlines Group (NASDAQ:AAL) and JetBlue Airways Corporation (NASDAQ:JBLU) trimmed their services to the nation. Also, lower-than-expected demand caused the likes of Frontier Airlines and Spirit Airlines (NASDAQ:SAVE) to terminate their flights to Cuba.
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Southwest Airlines Company (LUV): Free Stock Analysis Report
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