Almost one year ago, FedEx was granted permission to operate freighter flights between the U.S. and Cuba by the U.S. Department of Transportation (DOT). FedEx has until October 15, 2017, to inaugurate its U.S./Cuba all-cargo air service, but those plans are in jeopardy now, thanks to a policy change by the Trump administration.
In a speech scheduled to take place in Miami this afternoon, the President is expected to announce policy changes that complicate the process for Americans looking to travel to the island – these include detailed itineraries, limited visas, no dealings with the Cuban government, restricted hotel stays, fewer options for solo trips and forcing visitors into tour group situations.
A Cessna Caravan, once candidate for US Cuba routes
These conditions will also depress bilateral trade between the two countries as the tourism market shrinks.
The policy change is ostensibly about targeting government-owned businesses, which account for a large percent of Cuba’s national economy, and the country’s hotel and tourism sector, specifically. However, those same policies are likely to also reduce the number of Americans patronizing smaller businesses in the country’s incipient private sector. “FedEx continues to believe that opening cargo service to Cuba will not only be beneficial to U.S. export customers and help create U.S. jobs, but also open trade opportunities for the Cuban people, particularly Cuban entrepreneurs,” the integrator said.
The Cuban private sector is an important part of FedEx’s airfreight strategy in the country. “Less activity means less usefulness for FedEx,” explained John Kavulich, president of the U.S. Trade and Economic Council, in an interview with Air Cargo World. Kavulich noted that DHL has a circuitous route, and could pick up the slack if FedEx backs out. But ultimately, he argued that “when FedEx and UPS go into a marketplace, it brings legitimacy.”
For the broader aviation market, the Obama administration’s self-directed travel provision, which gave travelers more economic freedom when in Cuba, has been a windfall up to this point. If that provision is reversed, Kavulich expects airlines to decrease their frequencies and reduce the size of the aircraft in service. “It’s likely that there will be an impact on the movement of cargo,” he said.
Ultimately, there are a number of factors that will determine the effects of the Trump administration’s initiatives on trade. First, it remains to be seen what commercial, economic and political decisions the Cuban government takes in response. “If they take the attitude of ‘We don’t care what you do, we’re going to hunker down, and the revolution will prevail,’ then you will see the private sector in Cuba suffer, which is the potential marketplace for FedEx, as well as the USPS, and commercial carriers,” said Kavulich.
Another development to watch out for is how the administration actually implements Trump’s new directive. “There will be opportunity to work with the administration to develop some of these regulations,” Kavulich explained. He said he remains optimistic that regulators will talk to businesses, noting that “everything is in the details.”
“The U.S. business community is not happy today,” Kavulich concluded during yesterday’s interview, “and they are going to be more unhappy tomorrow.”