Kerosene Shortage in Cuba: Transat and Sunwing Top Canceled Flights
Cuba is currently facing a severe kerosene shortage, prompting Transat A.T. and Sunwing to suspend flights to the island. This disruption is expected to have significant short-term effects, leading to the cancellation of hundreds of flights.
Kerosene Shortage Impacts Flights to Cuba
The kerosene supply issue has resulted in the cancellation of numerous travel routes, particularly affecting the well-known Quebec-based travel provider, Transat, and its competitor, Sunwing. As of now, these airlines are among the most impacted by this situation.
Flight Cancellations and Duration of Suspension
- Transat and Sunwing have announced the suspension of flights until at least May 1.
- Approximately 436 round trips were scheduled from Canada by Air Transat since the start of the month.
- Sunwing could see over 1,000 routes canceled if the suspension lasts until May.
Cuba is one of Transat’s top three sunny destinations, accounting for 10-15% of its winter capacity. Tim James, an analyst at TD Bank, suggests that this disruption could lead airlines to redirect excess capacity to other markets, potentially affecting their revenue outcomes.
Investor Reaction and Market Performance
The stock market has reacted negatively to these developments. On Tuesday, Transat’s stock fell by 3.8%, ending the trading session at CAD 2.54. The situation appears more precarious for Sunwing, a subsidiary of WestJet, which is privately held and not publicly traded.
Air Canada and Overall Airline Exposure
Air Canada, including its subsidiary Rouge, is the second-largest player in Canadian air travel to Cuba. In February, the airline planned 145 departures from Canadian airports to Cuba, but this accounted for only 0.3% of its total capacity. Analyst James McGarragle of RBC Capital Markets emphasized that Air Canada’s diverse network offers a competitive advantage, allowing for the flexibility to shift capacity to different vacation destinations.
U.S. Sanctions and Fuel Supply Issues
Compounding the situation, the U.S. has indicated potential sanctions through tariffs on countries selling oil to Cuba. Reports show that no oil shipments have reached Cuba in recent weeks, leading to depleted reserves.
While WestJet has had limited engagement with the Cuban market—having only 28 round trips scheduled in February—the combined size of WestJet and Sunwing means they have less reliance on this market overall.
As the situation develops, airlines continue to navigate the challenges posed by Cuba’s fuel crisis, maintaining a focus on adjusting their operations and market strategies effectively.
