Hello world!

Havana welcomes the International Air Transport Association’s decision to set up business in the city of its birth.

by TOM BALLANTYNE FROM HAVANA  

December 1st 2015

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Holding a gala dinner in Havana’s historic Hotel Nacional wasn’t just a case of finding a convenient place for the International Air Transport Association (IATA) to stage the event. Read More »

IATA’s director general and CEO, Tony Tyler told guests: “This is my first trip to Cuba, but I am proud to lead an organization that was actually founded in this very hotel 70 years ago. In April 1945, 57 airlines gathered here to lay the foundations for post-war civil aviation. They had a vision that has stood the test of time.”

The timing of Tyler’s visit to Havana was significant, as the thawing of relations between Cuba and the U.S. holds promise of a new era in the country’s aviation industry. Already, talks are underway to forge a bilateral air rights agreement between the two countries.

At present, U.S. carriers and Cuba’s flag carrier, Cubana, are not permitted to fly scheduled air services between the two countries, although some 90 charter flights a week are operated into Cuba by American operators. They bring Cuban expatriates from the U.S. to the country of their birth for visits to friends and relatives.

Asked about direct scheduled flights, Tyler said no one was giving a firm date. “But everybody we are talking to is confident good progress is being made. Discussions are continuing. I get a good sense there is urgency here. Everybody recognizes the importance of air links,” he said.

“When we talk about the thawing of relations between the two countries, the establishment of scheduled air services will be such a major milestone and a mark of progress. It is practical and real and is seen as a very important symbolic step in the re-establishment of normal relations between the two countries. Therefore, it is being given high priority by both sides.”

IATA is building its presence in Cuba, as evidenced by Tyler’s announcement during his visit that the association plans to establish a branch of its industry critical billing and settlement plan, or BSP, in Cuba next year. The BSP, which in 2014 handled some $388 billion, is a global financial system that assists airlines by helping to facilitate the distribution of their products through travel agents.

“In Cuba, we have four accredited agents with well over 100 branches across the country, but we don’t yet offer a BSP. We have been studying the market closely for an opportunity to start one here. I am pleased to announce we believe the potential and timing is right and we hope to start BSP operations within 2016,” said Tyler.

“Setting it up will have some challenges. The banking system will be one, but we will be working with our stakeholders, including Cubana and the Government, to overcome these in relatively short order.”

Establishing an IATA BSP in Cuba will be an important facilitator for growth in outbound ticket sales, but IATA has to yet to receive all the necessary government approvals to go ahead.

“IATA needs to negotiate with the banks to provide a service and to open various accounts. It needs to set up an appropriate risk management structure, whether it is through bank deposits or insurance or something like that. There’s a lot to do, but we are quite experienced in doing it. It’s a matter of months to achieve something like this, not weeks,” the IATA boss said.

In Havana, Tyler met with Cuban Transport Ministry officials, the country’s civil aviation authorities and representatives from the Tourism Ministry as well as Cubana senior managers. The Cuban carrier was a founding member of IATA.

The IATA boss said Cuba’s air transport industry has tremendous potential. “Even in my brief visit, I realize aviation could be contributing much more to Cuba. Look at tourism. Cuba welcomed a record three million tourists in 2014, but the Dominican Republic attracted five million.

“They are both amazing countries, but comparing Cuba’s size against the Dominican Republic indicates it should accommodate a much larger tourism industry than it does today.

“There is tremendous potential for growth in the inbound tourism market. It’s the same for the outbound market. Restrictions on outbound travel were lifted a few years ago. We estimate there were about 300,000 departures from Cuba last year. For a country of more than 11 million people that is relatively small and for sure it will grow as average incomes rise.

“We did a projection to 2034 and conservatively see the potential for one in four Cubans to be travelling by air at that time. Even if the population is steady, which is an unrealistic expectation, it would see a market ten times the size of today in less than two decades.”

Tyler offered IATA’s help, in any way it could, to assist Cuban aviation meet its projected rapid growth. “I’ve offered IATA’s help in planning and designing that infrastructure, particularly airport terminals, probably the most obvious first requirement,” he said.

“But we have also discussed support for other elements such as runways, taxiways and security. All these things need to be done well. We are ready to help in making sure that those developments are done in a way that will work best for the airlines, passengers and also of course the country.”

Infrastructure at Havana’s Jose Marti International Airport is already struggling to cope with current volumes, Tyler said. “The airport terminal and the airfield are in need of major upgrades. IATA isn’t in the business of building or upgrading airports, but we assist airports and governments plan infrastructure developments.

“After just a year of U.S. charter flights, traffic to Cuba has increased by 35%, so you can imagine what will happen once a full range of scheduled flights are available. The international growth in the last several years into Cuba has put strain on a structure that has been in place for almost 20 or 30 years with the current facilities,” he said.

Cuba has 10 international and 15 domestic airports, all with the potential to become international gateways. However, outside Havana the airports are, at best, third world in nature.

“On the other hand, air traffic management is well regarded. Cuba has a lot of overflights to manage, some 700 a day, and the terminal area management is good quality. If you have a lot more traffic demand coming into the country it could put some stress on that. As with everywhere in the world, the technology and processes have to be upgraded.”