Cubana Tu-204 at Quito, Ecuador

As U.S. Airlines Fly To Cuba, Western MROs Remain Cautious

What is the likelihood Western MROs will set up shop in Cuba in the near future?

Printed headline: Luba Libre?

The Obama administration’s efforts to normalize diplomatic and economic relations with Cuba took another step forward last year, when eight U.S. carriers announced plans to resume flights to the Caribbean island after an absence of more than 50 years. In 2016, American Airlines, United Airlines, Delta Air Lines, Spirit Airlines, Silver Airways, Frontier Airlines, JetBlue Airways, Alaska Airlines and Sun Country Airlines all began flights to Cuba with U.S.-registered aircraft.

In October 2016, there was more thawing of the Cold War-era ice when Washington amended a series of regulations relating to U.S.-Cuba trade. The Treasury Department’s Office of Foreign Assets Control said it would allow “persons subject to U.S. jurisdiction to provide civil aviation safety-related services to Cuba and Cuban nationals aimed at promoting safety in civil aviation and the safe operation of commercial aircraft.”

This amendment was a potentially positive one for aviation repair specialists, says Christian Klein, managing member of law firm Obadal, Filler, MacLeod & Klein and executive vice president of the Aeronautical Repair Station Association (ARSA). “My sense is that [the rule] helped clarify that people involved in supporting air operations to and from Cuba and involved in maintenance could do so without fear that they were violating the U.S. embargo,” Klein says.

Cubana, the Caribbean island’s national airline, currently operates 15 Russian-manufactured aircraft.

Cubana, the Caribbean island’s national airline, currently operates 15 Russian-manufactured aircraft. Credit: 

With U.S.-registered aircraft required to be maintained in accordance with FAA standards, Klein believes having maintenance teams stationed in Cuba on a permanent basis would represent progress. JetBlue and other U.S. airlines flying to Cuba typically take FAA-certified maintenance technicians with them, a move Klein sees as inefficient both in terms of human resources and taking up revenue-passenger seats. Anthony Lowery, vice president of technical operations for JetBlue, which has flown Airbus A320s to three Cuban cities from its Fort Lauderdale, Florida, hub since summer 2016, told Inside MRO that its technicians travel on flights to Cuba due the country’s lack of FAA-approved technicians. “We need FAA-licensed technicians to service our aircraft, which Cuba does not have,” he says.

But even if the broader trade embargo is eventually lifted—which remains to be seen, as the Trump administration has yet to formally show its hand on the issue—progress is likely to be slow. “Companies will have to navigate Cuba’s legal system and unique business environment, which will likely require partnering with the Cuban government,” Klein says.

He believes it is highly unlikely that the U.S. and Cuba will sign a bilateral aviation safety agreement anytime soon, so to work on U.S.-registered aircraft, a Cuban repair station would have to become certificated under FAA Part 145 regulations. “That’s a tall order and would skew opportunities in favor of companies that already have experience complying with Part 145 and doing business internationally,” Klein notes.

Cuba’s existing MRO segment is limited to a very few domestic specialists, with projected MRO spending of just $14.8 million in 2017, according to Aviation Week’s 2017 Commercial Aviation Fleet & MRO Forecast. However, the country’s geographical position as a gateway between the Americas could nevertheless prove attractive to Western MROs. This is illustrated by activity in the wider Caribbean area, which  has seen a number of U.S. and European maintenance providers setting up in nearby islands over the past few years.

American Airlines will start flying to Havana from Miami in November.

American Airlines will start flying to Havana from Miami in November.  Credit:

Lufthansa Technik established a foothold in Puerto Rico to repair short- and medium-haul aircraft. To date, customers at the Aguadilla-based facility have consisted of U.S. carriers, among them Spirit and JetBlue. The MRO is targeting its first South American customer this year. Elmar Lutter, who has headed up Lufthansa Technik Puerto Rico since it began operating in July 2015, admits Cuba has some appealing factors for maintenance companies. “Cuba would be an interesting place to start an MRO, with its location close to the U.S. and other benefits, including very competitive labor costs and a high quality of primary education,” Lutter says.

Yet the decades-long effect of strained U.S.-Cuba relations is only one factor influencing the viability of MRO ventures in Cuba for foreign companies, even for a company with its roots in Europe. “The supplier infrastructure and the rule of law are ongoing concerns as well as the willingness to send work from the U.S. to Cuba,” explains Lutter. An immediate drawback would be the fact that Cuba’s state-owned airline, Cubana, operates an all-Russian-built fleet of 15 jets, for which most Western MROs do not possess repair capabilities.

Another MRO provider setting up shop in the region is Florida-based line maintenance specialist STS Aviation, which established a presence in Nassau in the Bahamas in late 2016. With plans afoot to expand into additional Caribbean markets should the timing prove right, could a U.S. MRO like STS turn its attention to Cuba in the future?

Mark Smith, group president of STS, says the company has watched diplomatic developments between the U.S. and Cuba in the past few years with interest. While STS has tentatively reviewed business opportunities in Cuba, Smith concedes that a legal framework conducive to allowing them to proceed would have to come first. “There are still restrictions in place that would call upon American-owned companies like STS to partner with the Cuban government before establishing a legitimate business on the island,” he says.

Despite the evident challenges, ARSA’s Klein says interest in potentially doing business in Cuba from the association’s members remains considerable. Smith of STS is also optimistic about the island’s prospects should diplomatic progress continue to be made in normalizing relations. “As the U.S. continues to expand its relationship with Cuba, the country could very well become a hotbed of activity for the MRO industry,” he says

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