Interview: Sean Donohue, Dallas-Fort Worth International Airport CEO

DFW CEO Sean Donohue discusses the US airport’s recovery strategy, its major network targets, and how the US aviation market will fare in the next few months.

Rush Transcript: 

Wes Charnock:           Hi everyone and thanks for joining us, the CEO interview for Air Transport Community Week. I'm Wesley Charnock, the editor-in-chief of Routes. I'm delighted to be joined by Sean Donohue, the CEO of Dallas-Fort Worth. Sean, thanks very much for being with us today. Last time we met was the ATW Awards in New York, I think in 2019—an awful lot has changed since then, I think. So how have things been for you and how are things at the moment?

Sean Donohue:          Wes, it's good to see you and wish we could be doing this in person. I’m spending a lot of time on these video calls, I think like everybody else is, but hopefully sooner than not, we'll be able to get together in person and we're doing fine. Just like the rest of aviation, the last couple months have been a quiet period as you know, but at least in the U.S. for domestic travel, there are some good signs and we're optimistic that especially into this summer and into fall, we're going to see a pretty good demand for travel and we're looking forward to that.

Wes Charnock:           Okay. That's good news. Where do you think that demand is going to come from? Is that going to be the pent up demand for leisure or is it a bit of VFR, a little bit of business returning? Is it mainly leisure?

Sean Donohue:          You're right. It's mainly leisure. And as you said, visiting friends and family. Starting to see some business traffic coming back, but predominantly it's going to be on the leisure side. And as we talk to all of our airline partners, Wes, every time we talked to them, what we're hearing consistently is there's a lot of pent up demand. And especially in the U.S., I feel like we've turned a corner in the last couple of weeks. If you look at the data right now from a COVID perspective in the U.S., for every person who catches COVID, 20 people are actually getting the vaccine. And when you look at those numbers, that's going to make a big difference over the next couple of weeks and the next couple of months. And just as you talk to people, you're just getting a sense of optimism and that's great to see.

Wes Charnock:           Yeah, definitely good news. Over here in the UK, they've set everyone to be vaccinated by July. So that's still, hopefully, there's a good bit of the summer season left that we can try and recapture there.

Sean Donohue:          Right.

Wes Charnock:           And you mentioned the airline relationships, obviously probably a slightly different relationship or that it might've been before the pandemic, are they requiring more support from you at the moment, more data, more information, more regular touch points? What does that look like now?

Sean Donohue:          Well, I would say our relationships with our airline partners have always been strong at DFW. I mean, they are our customers. That's how we look at them. But since the pandemic hit, I would suggest it's been stronger than ever. And as you know, American has 80% of the traffic at DFW. So we work with them the closest. We've been sharing data, we've been working on projects together. Obviously, we are doing our best to be as cost efficient as possible. And in general, just to be as efficient as possible in running the airport. We made the decision early on in the pandemic, Wes, to defer payments from our airline partners. And I know that has helped and we've cut back on our capital program, have reduced our operating budget, but at the same time we are ready for when the traffic does come back.

Wes Charnock:          You mentioned earlier that the leisure will be the first thing to come back. And obviously this potential for different airlines to play a role in that and different airlines to pivot to new opportunities where they might not have flown before. Do you think in the future, there's a potentially different mix of the carriers taking a bigger role there, potentially more low cost carriers coming in? What do you think that will look like in future?

Sean Donohue:          Sure. That could happen. I believe, Wes, it will happen on the margin. Just again, you know the economics of the aviation industry. And when you look at the hubs where an airline has 75, 80% of the traffic, it's tough even for the low cost carriers to come in and establish too big of a presence. But having said that, we're hearing from all of our airline partners that they're starting to plan, especially on the domestic side, to get back to where they were in 18 and 19, and that's a good sign.

Wes Charnock:           And the door is always open to conversations, right? That's always the case.

Sean Donohue:          Absolutely. Absolutely.

Wes Charnock:           In terms of your network, the places you do serve at the moment, you still have a large and impressive network, I was just looking before, still serving internationals as well, but are there any white spots or any routes you might've lost or any commercially important countries or geographies that you want to target in the recovery?

Sean Donohue:          Well, it's twofold, Wes. Number one, our priority on the international side is returning back to DFW all the service we had and that's going to take more time than the domestic recovery as we all know, and that's true I believe, for all the major international gateways. But if you look at it from a geography perspective, Mexico and South America has pretty much already recovered. A matter of fact, I believe we serve more destinations to Mexico now than we did prior to the pandemic. When you look at Asia, most of the traffic now is being funneled through Tokyo. We're looking forward to getting back, the nonstop service to Shanghai and Beijing and Hong Kong. We're really focused on hopefully getting Qantas back on their nonstop to Sydney. So Asia has not recovered yet, but we're very focused on that. When you look at Europe, again, similar story, the key foundational points in Europe are still getting the service, London, Frankfurt, Paris, Madrid, and we just want to make sure that fully recovers.

                                   And then we're excited that American's going to start service to Tel Aviv this fall. And they had announced their plans for nonstop service to Auckland, New Zealand. So we want to get that back on the radar soon. So we need to build the foundation back first and then look for opportunities to expand on that. And then finally, Qatar has continued to serve Doha almost during the entire pandemic. Emirates comes back, I believe next week. So we feel like we're covering all of the key markets and we just want to get everyone back as soon as possible.

Wes Charnock:           Perfect. And the airlines are telling you that. Obviously there's a lot of restrictions at the moment, which would be preventing that the airlines are telling you. It's those restrictions, once those have gone, they'll come back in, right?

Sean Donohue:          Yes, they are. And we put together an updated and rather aggressive incentive program for all the international carriers. They're aware of it. We're getting great feedback on it and we believe that will help restart the service as well.

Wes Charnock:           Perfect. Thank you. And then the last question really, just around travel habits, post-COVID, there are a lot of fears at the moment, nobody really knows. There's operational things like will masks become the norm, but one of the things I hear about hub airports is that travelers will prefer to fly point to point and will feel less safe traveling through a hub airport post-COVID. What's your view on the hub and spoke model and how that will continue to work in America and work for you really after post-COVID?

Sean Donohue:          Yeah. Great question. And you're right. There's a lot of views on that. My view is twofold. Number one, just like all the major airports, we're doing a very good job from a cleanliness, sanitization perspective. Actually, our cleanliness ratings at DFW now are higher than they've ever been. And as I walked the terminals, my sense is the people who want to travel now Wes, feel comfortable traveling. And I believe that that group is only going to grow based upon some of the points I made earlier in the discussion, but the economics, as you know, Wes, the economics of these mega hubs like DFW, they just work so well. And I actually believe the hubs are going to become stronger over the next couple of years because the airlines can cost-effectively feed the traffic. And then as you know, customers at the end of the day, it's all about pricing.

                                   And if they can get a price that's $25 cheaper and connect, that behavior I think, is going to continue to be the priority and it's going to drive all the decisions. And then finally the point to point markets, again, as you know, those historically have been successful because the airlines have been able to get a revenue premium. They're more costly to operate because they don't have all the connecting traffic, but they've been able to get the revenue premium. My view is it's going to take some time before a lot of those markets come back because it's going to be hard to gain that revenue premium until overall the economy improves. So my view and hey, I don't have a crystal ball, is that I actually think the hubs are going to become stronger.

Wes Charnock:           Interesting. None of us have a crystal ball. I've given up asking the question about when things will recover, because I was asking that last year and the answer just got worse and worse until I stopped asking the question, really.

Sean Donohue:          I know. I know.

Wes Charnock:          But listen, it's really interesting. Thanks very much for your time and best of luck with the recovery, best of luck with post-COVID and everything that entails. Thanks very much for your time today. Sean.

Sean Donohue:          Yeah. Wes. Great to see you. And hey, listen, as we all know, there's a spirit to travel and it's going to come back and it's going to come back domestically in the U.S. faster than international, but that spirit is going to help us on the recovery. And we look forward to taking care of our customers as they do return.

Wes Charnock:          Perfect. Thanks very much. Take care.

Sean Donohue:         All right. All the best.

Wes Charnock:          All right. Thanks.