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As further US airlines exit Cuba, what does the future hold for US-Cuba relations?

Cuban and US flags are seen on balconies in Havana
Yamil Lage | AFP | Getty Images
Cuban and US flags are seen on balconies in Havana

U.S. airlines Silver Airways and Frontier Airlines have become the latest to bow out of Cuba due to weakened demand, posing new questions about the U.S's future relationship with its former Cold War foe.

For a brief period under President Barack Obama, longstanding tensions appeared to be easing. But now, as the White House conducts a "full review" of U.S.-Cuba policies, diplomatic relations between the two neighbors look as uncertain as ever.

Indications so far suggest that President Donald Trump would be loath to continue the détente initiated by his predecessor, which sought to loosen travel restrictions and barriers to trade implemented more than 50 years earlier. During campaigning, the now President tweeted his condemnation of human rights abuses conducted by Cuba's totalitarian government. Then, last week, Cuba's President Raúl Castro made his first public retort, describing President Trump's policies as "egotistical" and "irrational".

However, President Trump also has a pro-business agenda to ally. A number of U.S. companies took advantage of Obama's executive order and efforts to restrict business freedoms will not come easily. Indeed, it would not go unnoticed that Trump built his fortune on the tourism industry and his organization reportedly once sought to pursue possible business interests on the island.

So where does President Trump go from here - and how should business respond?

President Donald Trump
Mandel Ngan | AFP | Getty Images
President Donald Trump

What are companies currently doing?

Airline carriers Delta, jetBlue and American Airlines were some of the first to capitalise on Obama's policies. In the first year after restrictions were lifted, travel to Cuba by U.S. citizens grew 77 percent. However, a recent surplus of carriers and weakening demand have caused some national airlines to reduce services, while regional carriers Frontier Airlines and Silver Airways are to suspend their Cuba services entirely.

"Lack of demand coupled with overcapacity by the larger airlines has made the Cuban routes unprofitable for all carriers. As a result, Silver has made the difficult but necessary decision to suspend its Cuba service effective April 22, 2017. It is not in the best interest of Silver and its team members to behave in the same irrational manner as other airlines," Silver Airways said in a press note.

Trade association Airlines for America told CNBC it is currently "working with government" to secure an adequate framework between the two destinations.

Meanwhile, delivery services company FedEx announced this month that it is delaying the implementation of its regularly scheduled cargo service to Cuba by six months to address "operational challenges in the Cuban market."

These challenges are also acutely felt by entrepreneurial start-ups on the island. Chad Olin, president of U.S. Tour operator Cuba Candela, set up his business to facilitate U.S. tourists under President Obama's normalisation programme. He now faces an uncertain wait under the White House's policy review.

"Although the new U.S. administration has introduced some uncertainty to the continued improvement of U.S.-Cuba relations, we are cautiously optimistic that relaxed travel rules will not be repealed," Olin told CNBC.

John Kavulich, president of the U.S-Cuba Trade and Economic Council, regularly deals with businesses and policy makers with interests in the U.S. and Cuba and indicated that more still are in a state of limbo.

"U.S. companies are hesitant to re-engage or engage due to the uncertainty about what the Trump administration will or will not do with respect to Cuba," he explained, adding indications that the White House may intend to rescind certain freedoms.

People take to the streets of Florida with Cuban flags
Joe Raedle | Getty Images
People take to the streets of Florida with Cuban flags

Potential hurdles

If it is the case, however, that the new administration wishes to repeal President Obama's executive order, it won't be without litigation issues from current business license holders, noted Kavulich. A more likely scenario, at least in the short term, would be a partial freeze on issuance while the U.S. confirms its position, he said, noting conversations heard within government and the business community.

"There is not a desire to issue further (business) licenses, but also an acknowledgement that some license applications are and will be legitimate," he said.

Christopher Sabatini, lecturer of international relations and policy at Columbia University, agreed that full reinstatement of the trade embargo would be unpopular, particularly in Florida, a crucial swing state which helped secure President Trump's election.

"Some of the entrepreneurial concession will be hard to roll back because people's lives rely on them," Sabatini told CNBC, referring to Florida businesses which export to Cuba. Such moves would make the President very unpopular, he said: "You would see protests on the streets if they were removed."

"Big ticket" items, such as large corporates, would be easier to remove, Sabatini suggested.

The exterior view of the south side of the White House
Alex Wong | Getty Images
The exterior view of the south side of the White House

Political contention

As well as on the streets, Florida is likely to have an influential role in policy at a Congressional level, too.

Marco Rubio, U.S. Senator for Florida, is one of six hard-line Cuban American members of Congress who believe President Castro's government is deeply untrustworthy and are likely to push for a retightening of policy.

"This (Cuban sanctions) is a concession President Trump can make to a very powerful constituency in Congress," said Sabatini, who remarked that the President may be keen to maintain his perceived favourability among Floridians. Last month, President Trump met with Senator Rubio and told a press conference of their "very similar views on Cuba."

Such a concession may also be necessary given the complexity of the issue, notes Sebastian Arcos, associate director of the Cuban Research Institute at Florida International University.

"President Trump will delegate his Cuba policy to others he trusts and he assumes understand the issue better."

"That means people like Senator Rubio or Congressman Mario Diaz-Balart will be quite influential in defining the new policy.

"We don't know yet what such policy will look like, but based on the few signals from the Trump administration, it will be less congenial than Mr Obama's," Arcos noted.

Justin Solomon | CNBC

A new era for Cuba?

Such hard-line members of Congress clearly criticize the reform agenda for further embedding repression, which has dogged the island for decades. They claim that new businesses and tourist dollars only serve to further fund the Castro regime and aggravate segregation on the island.

Trump's adviser Helen Aguirre Ferre said last week that the administration has not seen Cuba make any "concessions" despite "all the things it has been given."

However, Cuba has clearly been changing. Citizens are now more globally connected than ever before, benefiting from improved telecommunication services and internet connectivity, and certain legacies of Obama's reform agenda will not be undone

With citizens now more exposed to the freedoms enjoyed by democratic societies, including more private industry and gradually increasing - albeit still limited - access to a free press, President Trump now stands at a crucial juncture for U.S.-Cuba relations: continue pursuing reforms or return to isolation tactics.

President Castro has stated his intentions to step down in 2018 which could provide President Trump with greater leverage in his aims to create a "better deal for the Cuban people." Tactical diplomatic negotiations could secure greater democratic freedoms for Cuban citizens if the President is willing to engage with his political opponent – an enviably legacy for any President.

However, it remains a big if.

When contacted by CNBC, the White House and the Trump Organization were not available for comment.

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