Trump's Cuba rollback to spare airlines but could hurt demand

U.S. President Donald Trump's plan to roll back his predecessor's opening toward Cuba will spare airlines and cruise operators betting on a new revenue source but the rollback could affect them by weakening demand.

Trump is expected to outline moves meant to reverse the trade-and-travel rapprochement by the Obama administration that will enrich Cuba's "oppressive regime," senior White House officials said.

The new policy will ban most U.S. business transactions with the Armed Forces Business Enterprises Group, a sprawling conglomerate involved in all sectors of the economy, including the hotel and hospitality industry, but make some exceptions, including air and sea travel, the officials said.

American Airlines Group Inc, Delta Air Lines Inc , United Continental Holdings Inc and Southwest Airlines Co all declined to comment until Trump makes a formal announcement on Friday afternoon in Miami.

JetBlue Airways Corp will review the policy once it becomes formal, but planned to "operate within the policies set by the government."

Obama's initial opening prompted a dash to launch flights into Cuba in mid-2016. Some early entrants, including smaller carriers Frontier Airlines, Silver Airways and Spirit Airlines Inc, have pulled out.

Larger U.S. carriers have pared back flights to smaller Cuban cities to focus on the capital, Havana. American, Delta, United, Southwest and JetBlue want to increase the number of flights to Havana. The requests are pending the administration's review.

U.S. cruise operators and airlines could lose around $712 million in annual revenues if the Trump administration fully reinstates restrictions on travel, Washington lobby group Engage Cuba said in a recent report.

While Trump's new policy avoids the worst-case scenario of canceling all commercial flights or severing diplomatic relations, it will still be a blow to a travel sector betting on Cuba as a new high-growth market.

"It's a huge island," David Scowsill, chief executive officer of the World Travel & Tourism Council, told reporters before the White House detailed the new policy. "There's lots of potential for U.S. businesses to do business, and of course it's a great leisure destination in the Caribbean for people to go on vacation."

Marriott International Inc on Friday urged the White House to improve relations with post-Castro Cuba and recognize tourism as a strategic tool in the effort.

Marriott, the world's biggest hotel chain, operates the Gaviota 5th Avenue Hotel, which is owned by the Cuban military, under its Four Points Sheraton brand. The Trump administration has criticized the Cuban military as repressive and vowed to crack down on financial ties between U.S. businesses and Cuban armed forces.

James Williams, president of Engage Cuba, said on Thursday it would be "insane" to revert to policies that could cripple the ability of U.S. businesses to operate on the island, calling it a "betrayal" of Trump's "America First" agenda.

"This is bad policy, bad politics and bad for U.S. business," Williams said.

(By Alana Wise; Additional reporting by David Shepardson in Washington; Editing by Christian Plumb and Jeffrey Benkoe)