Sean Donohue, the CEO of Dallas-Fort Worth International Airport, has seen his airport make a significant rebound from the pandemic, becoming the world’s No. 2 in terms of passenger count.
Donohue explained at the recent Skift Aviation Forum how DFW parlayed its strengths, including its location in a fast-growing region, into a rapid recovery.
Donohue also discussed DFW’s digital transformation strategy, sustainability efforts and its preparations for the arrival of electric air taxis.
Watch the full video of Donohue’s interview with Skift founder and CEO Rafat Ali below, and you can also read the transcript below.
Interview Transcript
Rafat Ali: All right folks, we are well into the conference. Thank you again for coming. Thank you, Sean, for hosting us in your city.
Sean Donohue: Thank you, Rafat.
Ali: The back story is that I just randomly walk up to Sean in 2019 at a conference and said, “Hey, maybe we should talk together to do an airline industry conference.” To his credit, he the next day followed up with an email, had a conversation [with] John [Ackerman, head of strategy for DFW], who’s here as well, and we made it happen. It was going to happen in 2020, but now we’re back here in 2022.
The conversation that we’re going to have — all the three conversations that we had before this were all airline-focused and obviously, airlines cannot take off unless there are airports. And so for you, the pandemic, except for the early part, and I guess it’s the story of airlines as well, over the last year, has just been a huge boon. DFW now is the world’s No. 2 airport by what count?
Donohue: By passengers.
Ali: By passenger count, which is an incredible, incredible feat.
Donohue: It is.
Ali: I mean, there are multiple intersecting stories here. One, the recovery of the airline sector itself. Two, DFW’s position as the hub in the country, as well. Three, the story of Texas and North Texas, I guess, and how many people have moved here over the pandemic. So there are multiple intersecting things that make DFW probably one of the most fascinating airports to study.
The conversation we’re going to have today is about resilience, and we had this conversation last night at the dinner that we had, and then a lot of what your focus is, which is predictability and predictability for your business, but also for people who are passing through basically passengers like us who came for this conference through that. That’s the conversation that we’re going to have today on a bunch of these levels. From a resiliency perspective, three years into the pandemic, how ready are you now compared to 2019?
Donohue: Well, good morning everybody and welcome to the Dallas-Fort Worth region. [I’m] delighted, as Rafat said, that we’re finally having this forum in person. I think we all would agree it’s great to be back in person. I would say one of our learnings over the last three or four years, and I believe I can speak for the airline partners in the room, everyone really, there is a spirit to travel. I think that’s what we’re seeing right now. People do want to come together, they want to see each other, they want to connect. And so again, thanks for joining us in person. Resiliency, it’s kind of the word of the day, I think in corporate America and for all of us in aviation.
Ali: Not in the crypto industry, but outside of that.
Donohue: True, good point.
Ali: Sorry, I had to make that joke.
Donohue: All of us in aviation, and I’ve been in aviation for almost 40 years, we’ve all had to be resilient. We’ve all had shocks, we’ve had multiple shocks to the industry over 30 to 40 years. Obviously, the pandemic was the largest one. What our team at DFW has tried to achieve from a resiliency standpoint is not just surviving, but how did we recover and how could we recover quickly? How could we recover successfully? In two weeks time, when the pandemic hit, we lost 95 percent of our traffic. But when we got together as a team, we said, what are our strengths? What are the strengths of DFW Airport?
Ali: When you mean together, you really were together, unlike a lot of the world because you had to run an airport physically, right?
Donohue: Right, exactly. We started with, what are the strengths of DFW? We went into the pandemic with a very strong balance sheet and that obviously helped us. Number two, the last trip I took before travel shut down was to Washington, D.C. to meet with the [Biden] administration, meet with the [Federal Aviation Administration], [Department of Transportation], because it was apparent the airlines were going to get federal relief, which we were delighted about. We felt the airports needed to get some relief, as well, because we were seeing the same traffic decline and we were able to get that relief. And that was helpful.
Number three to the point you made, Rafat, American, as you heard [CEO] Robert [Isom] say, DFW is kind of the cornerstone, I think that’s the term he used, of their entire system. We felt confident that despite all of the chaos going on, that American would still invest in DFW. Then finally this region, this Dallas-Fort Worth region is just on fire economically. I’ve been here nine years and every year I see the projections and I say, nah, I don’t think we can keep growing at this pace and we do. Those were the strengths. We tried not to panic. We said, we’ve got strengths. How can we focus on that?
The second point was we needed to be decisive and we needed to make some decisions. I’m proud one of the first decisions we made was we went out to all of our employees within two weeks of the pandemic and we said, no one is going to get furloughed. No one will see any change in their comp and benefits, and why that became important was it relieved the stress for our employees, but it has also allowed us to recover faster.
We also made a decision to support our business customers, so to the airlines during the pandemic on multiple occasions, we waived landing fees, which saved the airlines well over $30 million. The one thing that is not widely known in the industry is the federal relief proceeds that airports received, a lot of airports, including DFW, used those proceeds to keep airline rates flat so that they wouldn’t see an increase in rates. That was worth well over $100 million to the airlines.
Then finally, for those of you who travel, hopefully you visit the concessionaires in the airports. Almost all of the concessionaires at DFW are small businesses. Many of them are minority and women-owned businesses. Thank you for bringing up diversity in your opening remarks, Rafat. We knew we had to help them, so we made a quick decision and we said to all of our concessionaires, we would waive all their rental payments. We waived them for almost 18 months. We walked away as an airport from $60 million in rental payments that we’ll never get back and we’re fine with that. But what it has led to is they’re all open now and as all the traffic came back this summer, every one of our concessionaires was open. They survived. When we think of resiliency, we think of it not just for DFW, but we think about it for all of our business partners as well.
Ali: You, as an airport, are also very unique in that your ownership is shared between two different cities, sister cities, but cities themselves. So you very much have to cater to the two cities and their benefit as well.
Donohue: True. We are in a unique situation in the U.S. where you have two cities who own the airport, but we are very, very fortunate. Unlike a lot of U.S. airports, we have a board of directors, so the governance of the airport …
Ali: So airports do not typically have a board of directors?
Donohue: Typically, airports report into city government. Again, we’re very fortunate that Dallas and Fort Worth as cities own us.
Ali: So very much like a private corporation.
Donohue: But the governance is a board of directors, and that allows us, I think to be more decisive, allows us to make quicker and faster decisions. And again, from an owner city perspective, they gain the economic benefit of the airport, but there’s no revenue diversion or anything like that. They get no revenue from the airport, but we don’t take any money from the city. We fund all of our operations from the operation of the airport.
Ali: One of the things we were talking about last night, when we talk about ancillaries, we usually think about airlines as ancillaries. But you were talking and John, I think, is leading this charge for you, the parking business apparently boomed and continues to boom. Talk a little bit about that, which is you’re thinking about not just concessions, but also ancillaries for airports in a different way.
Donohue: Sure. One of the items that really surprised us during the recovery, and I believe this is true for a lot of U.S. airports, is how fast parking came back. We weren’t ready for it. We didn’t open up not enough of our parking facilities fast enough and we learned from that. But what’s been fascinating for us during the pandemic, for obvious reasons, the utilization of the [transnational corporations], the Ubers and the Lyfts declined and people felt more comfortable coming to park. A lot of that behavior has continued.
The other opportunity it provided for us, and as you said John and his team have been working on this, is we’re now trying to look at parking, we’re early in the journey, as airlines look at pricing through yield management. Now, you can purchase parking online. We discount it, we discount it on length of stay, we discount it on a Saturday night. But one of the ways we look at it, with all due respect to Uber and Lyft, if you take Uber or Lyft from DFW, downtown Fort Worth [or] Dallas, up to North Dallas, it can be $80 round trip.
Ali: It’s become quite expensive.
Donohue: It’s expensive.
Ali: They now have to show returns to the shareholders.
Donohue: Right, so now through yield management parking, we can look at offering pricing for parking and maybe looking at it from a three day perspective, not an unusual length of stay, and we can price it right underneath that $80. That has generated a lot of volume because customers will say, “Maybe I don’t need to spend 80 bucks for a [transnational corporation]. It’s more convenient for me to go out and park.” Parking at DFW literally is 100 yards from the parking garage to your gate, so we want to take advantage of that convenience and it’s worked out quite well.
Ali: We were talking about digital transformation. All three speakers talked in different ways about digital transformation. For an airport, what does digital transformation mean?
Donohue: Well, I agree with some of the comments that were made. We have a digital transformation strategy and what we’re focused on is, how does it make things more predictable? Predictable for our customers, but also predictable with all of the facilities we operate. When you leave to catch a flight back at DFW, some of you might be flying out of Love [Field], which is great as well. They’re a partner of ours. We view Love Field as a partner. We have 15 checkpoints at the airport. Several years ago, we installed real-time technology so you’ll walk in and you’ll say at your checkpoint, it’s three minutes to get through TSA. That is real-time line waits. It will say 10 minutes for general. But what it will also tell you is 200 yards down the hallway where there’s another checkpoint, what the line waits are there.
It gives the customer the optionality of choosing and that’s really allowed us to work well with TSA and reduce line waits. But more importantly, it reduces the stress. Because anytime you walk into a TSA checkpoint and there’s a line, you think it’s going to be longer than it really is and it will tell you in real-time. We’ve put that on our app, so before you leave home, you can look at all 15 checkpoints, see what are the line waits, which are the shortest line waits.
The other one is biometrics from a customer perspective. Several years ago, we put in biometric boarding technology at all of our international gates. We’ve now expanded it to our domestic gates. On the international side, an international wide body, if you used biometrics to board, is about half the time to board as a typical traditional way of boarding.
Customs and border patrol. Anyone who flew into DFW internationally, if you’re in global entry and you’re within in a visa waiver program, you no longer have to put your passport into the kiosk. As you walk up to the kiosk, there will be a biometric picture taken of you and that becomes your clearance from a customs and border patrol perspective.
As we look at digital, we look at it from a customer perspective, facilitation, predictability. We also look at it though, as I said, from a facility perspective. We are implementing digital twins in all of our terminals.
Ali: Yeah, what does that term mean?
Donohue: A digital twin basically takes the architectural (computer aided-design) drawings that are familiar in the industry and we digitize them. What we’re trying to do, and we’re starting to see some early success, is now we have more predictability when there’s a mechanical issue or there’s a plumbing issue because we get real-time information. We have sensors so we can be more proactive than reactive to a lot of our facility issues. One of the things that drives me crazy in airports and we’re guilty is when you see escalators down and moving sidewalks down. We’ve now installed sensors on all of those that feed directly into our operations center, and we know right away if there’s a problem and we fix it and we can get at it.
Ali: How did you used to get notified earlier, just by humans?
Donohue: A customer would call or maybe an airline employee would call and it would take sometimes hours to fix it. Now, we have teams on hand that can fix it literally in minutes.
Ali: Talking of the transformation, can we play this video? It’s a cute little video. I’m going to ask you a question about it, as well. This is your video. This is obviously a gimmick. I mean, you could essentially do the same thing by putting up iPads everywhere or a tablet everywhere. But that’s not the question.
The question is that airports as a crucible, I’m guessing a lot of brands come to you, the tech brands because you have a captive audience. It literally is a captive audience that is there for hours and hours. In your decision making process of whether to put this or whatever Samsung is pitching you or whatever this company’s pitching you, how do you go through that process and how much of it actually does happen?
Donohue: Great question. We launched an innovation team three or four years ago at DFW and Paul Puopolo, who leads it is here today. I remember interviewing Paul. DFW historically has had a pretty good reputation for being innovative. A lot of good ideas and led the airport industry in many cases. But what struck me was just like everything else, innovation is a process. If you don’t have a process, you’re going to hit and miss.
What we’ve set up, what Paul and his team have set up is a process where they work cross-functionally with all the business units, understand what the issues are, see where technology can help. The other thing we’ve learned, and airports aren’t great with this, is it’s OK to take a risk. It’s OK to test. You research, you test. Some of the tests fail. I’m not sure that’s going to be a permanent part of our offering at DFW. But in all of that testing and learning, you do gain a better perspective of what works and what doesn’t work. Then finally, we measure the hell out of it from an [return on investment] perspective. It’s great to put cool gadgets in, but at the end of the day, if it’s not driving real measurable value, then we move on to the next opportunity
Ali: Which you can tell pretty quickly because it’s just so much traffic going through the whole thing. We do have time for questions. If anybody wants to ask questions they can do it through the app, whether you’re online watching or here in the room, as well.
I want to come to sustainability because you’ve done a lot of work over the last few years, including the pandemic, as well. Talk about how the whole airport is powered through wind power, which I don’t think everybody knows here.
Donohue: Sure. We’ve been on a sustainability journey for 15 years at DFW and we absolutely have a commitment to it. We feel a responsibility, a stewardship responsibility. But Rafat, one of the things that I think is missed in the whole climate discussion because unfortunately, it seems to be on both sides of the extreme. We work in the middle and what I mean by that is we look again at where can it drive economic value.
For example, 100 percent of the power at the airport is purchased through wind power. Who would’ve ever thought in Texas, oil and gas, but Texas is the largest state in the US in terms of wind generation. We have tapped into that. We’ve tapped into it early. We obviously were a customer that the wind generators were very interested in having. Over the last 10 years, we’ve reduced our annual electricity costs by $20 million, so it’s been good business.
Ali: How much is the total?
Donohue: We’ve gone from $40 million to $20 million a year.
Ali: Wow, okay.
Donohue: Robert was up here from American, when they built their new campus, which is on DFW airport, they were able to tie into our electricity purchase program, as well. Now, we purchase it, once it comes into the grid, what comes out to the airport is what comes out to the airport. We are the largest carbon neutral airport in the world. We have committed to being net zero from a carbon perspective by 2030. Now, of course, airports measure that from what we control. That excludes aircraft for obvious reasons.
But other examples, airports have far too many vehicles, way too many buses. We’re trying to cut down on that traffic. But one of the things we did is we now use renewable natural gas in all of our bus fleet. We partnered with a local company, they are taking methane out of a local landfill. We’re injecting that and that creates the renewable natural gas saving us a million dollars a year. That’s how we look at sustainability. We have a responsibility, we will always be passionate about that. But sustainability can also drive business value, and we always look at it through that lens, as well.
Ali: Right. So, sustainable aviation fuel, what are the airports’ role, and Neste is here, Neste is one of the big players in it. What are airports’ role in the fuel?
Donohue: Sure. We have to be a convener. Airports, we have to provide the infrastructure in terms of the supply, the pipelines and all of that. We are more than willing to participate in that. Today, for obvious reasons, when you look at SAF, the supply is only on the coast right now. It’s going to take some time I think for it to get into interior parts of the US, but we absolutely want to be part of that solution. But we understand our involvement is to literally provide the infrastructure supply for the airlines to tap into it.
Ali: There’s one question that I want to ask about, which is, how’s Dallas airport preparing itself for the coming of eVTOLs, which is the air taxis.
Donohue: Right. Our friends from McKinsey are with us and were with us last night. Danielle [Bozarth, senior partner] thank you again. They have helped us. As we look at eVTOLs, it’s a tremendous amount of planning. We have to look at, from a DFW perspective, we have five terminals.
Ali: But you have a lot of land.
Donohue: We have a lot of land, but think about from a customer perspective, where do you want the eVTOLs to land? And then how will you get those customers into the terminal? How will you facilitate that? Those are the type of items we’ve been looking at because two things that struck us, number one, eVTOLs in terms of electrification will use a tremendous amount of power. So number one, we got to make sure the grid will support that. And then number two, you’re talking about five or six people on an eVTOL. How much do you want to put into infrastructure to facilitate the movement of five or six people?
Now, it could be a hundred flights a day, but that’s still only five or 600 people, so we’ve got to work with our airline partners, we’ve got to work with the industry and say where does it make sense? Do they land at corporate aviation? Maybe, but then how do they get from corporate aviation over to the terminal? We just want to make sure it doesn’t become, the tail becomes the hardest part of the whole journey.
Ali: Yeah, so I guess from your perspective, it’s still five to seven years out?
Donohue: I heard Allison, I think, said maybe 24, 25?
Ali: At [Los Angeles International Airport], yeah.
Donohue: I would guess we would be a year or two behind that. And again, we’re doing all the planning and the design now to be ready, but I would agree. I’m maybe a little bit more pessimistic on the timing.
Ali: Last question, in the dinner last night, you mentioned, which blew my mind, Qatar has two direct fights from here. You would think, who’s going to Qatar? But most of the traffic is going to India.
Donohue: Qatar Airways is a partner of American now, and so they get a tremendous amount of feed from American at DFW. They have twice daily service to Doha. Emirates has daily service to Dubai. And in all cases, those three flights, half of that airplane in all cases connect to and from India. So, what does that mean for us? It means we have to be ready to take care of customers, not only traveling to the Middle East but to India. And again, the connectivity and how do we facilitate that, so it’s a good driver.
Ali: It’s fascinating how the mechanics of an airport in the middle of the country are so different from the mechanics of airport, but then they’re somehow converging because a lot of the traffic from those airports obviously also go to that part of the world.
Donohue: Absolutely.
Ali: In so many ways, a flattening is happening in terms of how people travel. Well, thank you again. Thank you for being our partner for this conference.
Donohue: Thank you, Rafat, I appreciate it.
Ali: Thank you.