JetBlue Stock One of Several That Could Suffer if Trump Repeals Cuba Deal
American Airlines Group Inc (NASDAQ:AAL) and JetBlue Airways Corporation (NASDAQ:JBLU) are two American companies that could drop if President-elect Donald Trump follows through on his threats to repeal the Cuba deal. American Airlines stock and JetBlue stock were both performing well this week, thanks to favorable U.S. economic data.
However, Trump has threatened to renegotiate the U.S.-Cuba deal, which allows Americans to travel to Cuba. Perhaps he has some leverage now. Fidel Castro died last Sunday, leaving his brother, Raul Castro, more “ideological” room to make concessions to Washington. In the meantime, JetBlue stock and AAL stock could weaken based on uncertainty.
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Carnival Corp (NYSE:CCL) could also suffer. Like JetBlue and American Airlines, this travel-focused company was among the top beneficiaries of the thaw in relations with Cuba. If anything, the deal was going to lead to more opportunities for American investment—including, eventually, Trump’s own companies.
Carnival had welcomed the opportunity to offer cruises to Cuba in 2014. AAL stock could suffer a bit more should Trump interfere with the deal, because it has a major hub in Miami. Therefore, it was shaping itself as the go-to airline to reach the Caribbean country. JetBlue stock could see greater proportional repercussions, because Cuba represents one of its main growth strategies.
It remains to be seen how Trump expects to play Cuba. His threats to repeal Obama’s two big international achievements in diplomacy, Cuba and Iran, have softened already since he won the election. Ultimately, he might change a few clauses just so he might claim them as his own. But, for the time being, Trump’s hard line will prevail, which might prove useful in the eventual talks later.
International delegations are traveling to Cuba for Fidel Castro’s funeral. Most of the world will be represented, reminding Trump that simply repealing the deal is not an option. There are many interests—including many American ones—at stake. Trump called Fidel Castro a “brutal dictator” and promised to do everything possible to guarantee Cuba’s path to freedom. (Source: “Donald Trump calls Fidel Castro ‘brutal dictator’,” BBC, November 26, 2016.)
Republicans in general have criticized Obama for making too many concessions to Havana. Everything suggests that relations between Havana and Washington will contrast with what Obama achieved. Trump’s tweet may have jeopardized them for now, but there is yet hope for companies like American Airlines, Carnival, and JetBlue.
Indeed, it was none other than Communist-fearing President Richard Nixon who made the first move to open relations between Washington and Beijing in 1972. And it was Ronald Reagan, another stalwart of conservatism, who signed nuclear disarmament deals with the Soviet Union. It should surprise nobody if Trump makes difficult demands such as the release of political prisoners, as the President-elect has previously demanded.
Trump is playing one of his typical moves, intended to secure more advantages from direct negotiations. The fact remains that Castro’s death creates an opportunity for Raul Castro as well. He could issue an amnesty in honor of his brother, or allow more pragmatic members in the Cuban Communist Party to play a bigger role. After all, at 85 years of age, Raul does not expect to govern much longer.
Obama said that Americans have benefited from the Cuba deal. Trump will try to deny this at the beginning, but a greater rapprochement between Cuba and the U.S. is inevitable. Cuba has lost financial support from Venezuela and lost the Soviet Union two decades ago. Isolation is no longer an option.
