MARKET SITUATION FOR FLIGHTS TO CUBA
Currently there are three daily flights from Cancun to La Havana with an average potential of 300 passengers from Cancun to Havana and 300 from Havana to Cancun . This demand is currently catered by Aerocaribe (subsidiary of Mexicana de Aviacion) and Cubana de Aviacion.
We estimate the numbers of passengers going from Mexico to Cuba (given current US regulation) will increase dramatically during the coming years as Cuba gradually becomes the next new grand holiday destination for American tourists.
The operation of flights to Cuba was initiated in 1992 by three travel agencies with the support of Cubana de Aviacion. From February 1992 two weekly flights started operating with capacity for 30 passengers leaving Cancun on Thursdays and returning on Sundays.
Gradually the flight increased in frequency from 2 to 4 weekly flights. Later the increase in passengers made the flight frequency increase to 6 weekly flights. Currently Cubana de Aviacion has one daily flight and occasionally adds special and charter flights due to the interest of Mexican, American, Cuban residents in the US, South American and European passengers.
In addition Aerocaribe (subsidiary of Mexicana de Aviacion) started operations to Cuba with 2 weekly flights with DC-15 planes for 85 passengers and due to the growing interest in Cuba, Aerocaribe operates two daily return flights Cancun-Havana-Cancun.
From September 1996 Cuban authorities started a policy of migratory flexibility towards Cubans living in the US. In the same way Cuban customs implemented this flexibility. Cuban immigration gave an special live long visa to visit Cuba freely to all Cuban Americans living in the US.
This new policy incremented dramatically the number of passengers to Cuba. Many of this passengers fly regularly to Cuba with a frequency of 2 or 3 times per week. Due to present limited offer occasionally (but with more and more regularity) bottlenecks are created in the Cancun airport by overbooking.
US government authorization to start charter operations from NY and LA to La Havana, recently announced, added to this positive momentum towards Cuba as a destination, which has created a dramatic increase in the number of contacts via email and telephone calls from American from all States (and in particular LA, San Francisco, NY, Atlanta, New Orleans, Denver, Chicago and Houston).
CUBA TRAVEL CORPORATION MARKETING STRATEGY
MARKET RESEARCH
Cuba Travel Corporation recently send 5,800 faxes to main wholesale travel agencies in the main cities in the US with very positive feedback, in particular asking prices and conditions of hotels, flights, the Cuban system, US citizen security in Cuba, all inclusive packages, rental of cars and other questions. Some of this agents have requested fun trips and have traveled to Havana, Varadero and Santiago de Cuba to see in person what is Cuba like as a destination for their American clients.
Currently we are inviting those travel agents who have not yet visited Cuba to attend our USA-Cuba travel submit that takes place in Cancun from the 5th to the 7th of May.
For further information, please visit our website http://cubatravelcorp.net/information/, to which we will bring hotel managers and travel agents from Cuba, so they can explain American travel agents the current situation in Cuba.
As our marketing strategy takes effect Cuba Travel Corporation will be able to concentrate a large number of passengers three times per week from Cancun to La Havana, including not only our only passengers but also those channeled by wholesale travel agents attending our submit in Cancun and in La Havana and also tourists visiting Cancun, Playa del Carmen, Isla Mujeres and Cozumel.
In order to offer further services to our clients we have contact 15 travel agencies both in Cancun and Miami which currently move in between 300 and 500 passengers per week. (mainly Cubans residents in the US, who usually transport medicines and clothes to friends and relatives in Cuba, converting them into repetitive clients). These agencies will be prepared to join efforts in our charter venture.
Cuban good sources estimate that ones the situation becomes more flexible, the number of American tourists will increase from 500,000 per annun (currently) to 8,000,000 for 2005, estimated time of US sanctions against Cuba being lifted. At this point in time American tourists will be able to fly from operating flights from LA, NY and Miami, thus reducing their need to fly to Havana via Cancun. However, the strategic importance of Cancun as access port to Cuba remains since every year there are approximately 3,000,000 American tourists visiting the Cancun area who will be able to visit Cuba from this city.
PRODUCT
We have negotiated with the Manager of Mexicana de Aviacion in Cancun who has offer us the possibility of using a Fokker 100 which overnights in Cancun when finishing its daily regular service. Initially availability of this flight will be Saturday, Sunday and Tuesday nights after 10:00 pm, having to return to Cancun before 6:00 am to start its regular service.
The time frame of this flights will allow us to cater for those passengers that have lost their planes or for those passengers wishing to travel to Cuba after working hours (regular travelers from Cancun).
PRICE STRATEGY
We base our viability analysis on a 100 PAX charter flight with a net cost of US$ 27,600 including all costs related to the return flight plus US$13,800 as a requested deposit with Mexicana. In addition a further US$8,600 will be needed for marketing and advertising costs, reduced price thanks to our continues investment in marketing and advertising (over US$ 25,000 per year). Totaling US$50,000 as a minimum start up investment.
We calculate that in order to make a good return and keep ourselves competitive the agency round trip fair should be 30% over the net price thus resulting in a benefit for the first flight assuming full occupancy of US$8,280. See table 1
After the first flight, a chain of flights will be originated not only from Cancun but also by our
contacts in Havana allowing us to fill the planes in Havana prior to their return to Cancun. See table 2. In our base case for 100PAX we meet the initial US$50,000 investment (based on 100% occupancy and three flights per week) after three weeks of continued operations. We consider this the best case scenario.
Break even point will be met at 77% level of occupancy. See table 3
In the event of not being able to achieve 100% occupancy but 80% (we consider this our worst case scenario) the initial US50,000 investment will be met after 17 weeks of continued operations based on three flights per week. See table 4