February 23, 2016 / 11:25 PM / in 2 years

Exclusive: U.S. airfares to Puerto Rico slide; debt crisis, Zika weigh

NEW YORK/SAN JUAN (Reuters) - U.S. airlines have slashed leisure fares to Puerto Rico in recent months to lure travelers to the debt-strapped island, hit by economic turmoil and lately the arrival of the mosquito-borne Zika virus.

A view of the Luis Munoz Marin international airport in San Juan May 10, 2012. REUTERS/Ana Martinez

The lowest fares to San Juan, Puerto Rico, have fallen 22 percent on average from a year ago, according to an early February analysis of six of the busiest U.S. domestic routes to the island’s capital by Harrell Associates, shared exclusively with Reuters.

The drop outpaced an 18 percent fall nationwide in the high-restriction fares during that time, according to the travel consultancy’s analysis.

“It’s a combination of slack demand in both directions,” said Robert Mann, an airline industry consultant.

“Leisure travelers going to Puerto Rico are concerned both about the state of the economy and the extent to which leisure resort facilities are going to be properly maintained,” he said. “If you’re a Puerto Rican resident, the buying power just isn’t there.”

With a stagnating economy and an exodus of its population to the mainland, the U.S. territory has defaulted on part of its $70 billion in debt and asked its creditors to renegotiate the borrowing terms to slash its debt burden.

Puerto Rico is also one of 28 countries and territories in the Americas battling the Zika virus. It reported 63 cases as of Feb. 18, and U.S. health officials expect many thousands of residents to contract the virus once the mosquito season peaks this summer.

“Mosquito-borne viruses are a severe and immediate threat to the health and safety of my constituents,” the territory’s representative to Congress, Pedro Pierluisi, said in a statement on Tuesday, urging the U.S. government to help reduce threatening mosquitoes on the island.

CONFERENCES CANCELED

Harrell Associates data showed the lowest fares to San Juan already dropped more than 14 percent in early February from a month before, following a Jan. 15 travel advisory for pregnant women from the U.S. Centers for Disease Control and Prevention. Fares slipped only 1 percent nationwide during this time.(tmsnrt.rs/1QwvgNN)

Scientists are investigating a potential link between Zika infections of pregnant women and more than 4,000 suspected cases in Brazil of microcephaly, a condition marked by abnormally small head size that can result in developmental problems.

Airlines have yet to report lower bookings due to the virus.

Frank Comito, chief executive of the Caribbean Hotel and Tourism Association, said a recent study that found bookings were down 3.4 percent to Zika-hit regions had made a causal “leap,” noting factors such as hot January weather and global economic uncertainty.

However, three conferences at major Puerto Rican hotels were recently canceled and one postponed because of concerns over the virus, costing the island 1,969 hotel-room nights, said Joyce Martinez, vice president of business development and sales at nonprofit Meet Puerto Rico.

Puerto Rico hosts an estimated 20 to 30 conferences each month, she said.

Data suggests fares have fallen not from a surge in seat supply but because airlines want to stimulate demand.

According to Harrell Associates, the one-way fares excluding taxes and fees dropped 36 percent in early February from a year ago to $80 from New York Kennedy, a hub for JetBlue Airways Corp (JBLU.O) and American Airlines Group Inc (AAL.O).

There was a 1 percent reduction in seats on the route in this period, aviation data and analytics company OAG said.

JetBlue, the largest airline in San Juan, and American declined to comment on pricing or whether either would reduce service to the island.

At American’s Philadelphia hub there was a 40 percent drop in the fares to $125, buoyed partially by a 13 percent rise in seats.

Atlanta flights had a 15 percent reduction in seat supply and the only fare rise, up 21 percent.

Additional reporting by Toni Clarke in Washington and Megan Davies in New York; Editing by Matthew Lewis

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