One on one with DFW’s Executive Vice President

We’ve recently spoken one on one with DFW's Executive Vice President, John Ackerman. He is in charge of Global Strategy and Development at Dallas/Fort Worth International Airport (DFW). Here’s what he said to us. Give us a quick overview of 2021 for DFW? We are in the aviation business; it was a tough year for all airports and airlines. Still, DFW did better than most of our competitors in the US and the world, so we feel very fortunate that while our business suffered, we suffered much less, and we recovered much faster. We are optimistic about the future. In terms of passengers, how are you closing this year? We are closing the year very strongly. I was looking at a new forecast, and we have increased our forecast for December, even from just a couple of weeks ago, when we were picking up some weakness from the variant omicron. That seems to have been a very short weakness, and now things are growing stronger again, so we think we will finish December very strong. Near 100% of 2019? I am not sure if we will get back to 2019 levels, but we will be within a few percent of 2019, and if you look at the second half of the month, it would be ahead of 2019 but when you take the first half and the second half together, it would be probably below. During our Thanksgiving holiday, we were only 1.6% below 2019, so it is a robust recovery. We always want more, obviously, and we want our airline partners to recover and be more profitable, but we think we are very fortunate for our position. How has been your relationship with airlines in 2021? Last year, it is almost hard to believe this has almost been two years now, but in 2020 we did a few things to benefit our airline partners. First, we were among the first airports in the US to react to the pandemic. We have a veteran management team, we have a lot of former airline leaders on our teams, so we felt early on that things were bad, and we took dramatic steps to reduce our discretionary budget very quickly; another measure was to take out almost a third of our operating expenses for the second half of the year. We did that all in a matter of a couple of weeks, we reacted quickly and strongly, and we felt other people were saying let’s wait and see, and we felt that if we waited, it would just get worse, and so we would have to make even more difficult decisions; so we reacted very early, and we reduced our operating expenses and the airlines pay a lot of that expenses, so that helped the airlines, just reducing our cost structure. And then, on top of that, we decided not to collect fees from the airlines for most of 2020. We deferred those costs because we knew they needed the help with their cash flows and their balance sheets. So, we were in a better financial position to weather the storm, so we were able to forgive the airline for most of that year, and then collect when they were a little bit healthier, so that helped quite a bit. And then we went into the pandemic; our balance sheet was solid. In a situation like this, we have to be strong and be the ones that remain standing, so we went into it very healthy as well, and that benefitted us. The last thing that we did, not a direct benefit to the airlines, but we forgave our partners that operate restaurants, retail, and shopping; we forgave their rent for many months because we felt that many of them are small and local businesses owned by people in the community, and they simply didn’t have the money. We could have demanded the money, but all we would have done was push them into bankruptcy. It was the right thing to do, not only from a moral perspective, but we also knew that we would come out of the pandemic and that if we forced all our partners into bankruptcy, then who is going to be there when the customer returns, so we made the decision early on to do whatever it took to help our partners and make sure that we all got to the other side so when our customers get back, we would have the shops and restaurants ready to receive our guests. How was the recovery of the Mexican market in DFW? This is actually nothing short of remarkable. Before the pandemic, United in Houston and American Airlines in DFW, we competed with who had the biggest presence in Mexico. It would depend on what statistic you chose, so Houston would say they were ahead, or we could say we were ahead. During the pandemic, American heavily invested, they opened up more stations in Mexico. We now serve more destinations in Mexico today than we did before the pandemic. We have 24 destinations in Mexico and around the holidays we will have 26, because of some seasonal destinations. So our Mexican market got even stronger. Before the pandemic, about 35% of our international business was Mexico; this country has been our most important market for a long time. Prior to the pandemic, you could argue we were equal with Houston, now we are far ahead of Houston and American has indicated that they intend to continue to invest. At one point during the pandemic, Mexico was about 80% of our international travel. It has come down a little bit as some longer international routes have restarted, but Mexico has always been the most essential, and now it is even more important. In the long term, how much market share will Mexico win? I think for the next couple of years, as a rough estimate, Mexico can easily be half of our international business for the next year or two. Our Asia business is way down, China is not open, we used to have daily service to Beijing, Shanghai, and Hong Kong. Now we have two flights a week to Shanghai, that’s all. And those flights go over Seoul because the crews can’t stay in China, so they do a turn. And we think that’s probably like that for most of next year; it doesn’t look like the US and Chinese governments will have a lot of cooperation. So we think that business will be impacted for a couple of years until that recovers. In our Europe long-haul business, the summer of 2022 will be our biggest summer ever. Finnair announced service to Helsinki, American will serve Tel Aviv for the first time, Turkish started service to Istanbul a couple of months ago, and Iberia will fly from Madrid to DFW for the first time ever. With all of that, I would see Mexico being half of our business, and part of what is constraining Mexico right now is the Category 2 issue. We are meeting with our airline partners on the cargo and passenger side and all of them have indicated that they would like to do more, but the Category 2 issue is holding them back. What we are hearing is that maybe in the late spring, maybe May, the country will regain Category 1 status. If that happens, the Mexican carriers would respond with even more service. What else have DFW and American Airlines done to win the race against Houston? At the end of the day, we don’t make the decisions on where airlines fly. We don’t own the airplanes, we don’t make the final decision. Obviously, we try to influence those decisions, and we provide data, commercial support, sales supports. We do a lot of things to support the airlines, but we feel that our job is to provide a world-class airport -the physical airport- but also the soft skills, like the hospitality and the other things that make a good customer experience and on that, we’ve invested heavily. Additionally, we opened four brand-new gates in Terminal D, our crown-jewel international terminal, and they don’t look just like the other gates. They are kind of what we are calling our gates of the future. We are testing new technologies, you can order food to any seat. It is almost like one large hall room with four gates around the edges, so you can sit in the restaurant and order food, or you can sit in your chair by the gate and order food for pickup. We are doing a lot of innovative things on the customer experience side, and what we learned during the pandemic is that a lot of this is about trust. There are the facts and how people feel in their hearts and guts, and it is really a trust issue. Do I trust that this journey is going to be safe for my family, both on the airplane and in the airport and hotel? I have been in Mexico for personal reasons, I chose to take my holidays in Mexico, and the first time I came back people said how was it? And I said the Mexican government, the airport, the hotel, the restaurants, the Mexicans are taking it more seriously than the Americans, so I felt very safe when I was here, it was easy and comfortable, and we are doing the same thing at the airport. We have invested in UV technology and sterilization. Everywhere a passenger would go in the airport, all the area is sterilized, and very few airports can claim that. We made that investment, which was multiple millions of dollars, but it is the right thing to do, and it gives our customers the comfort that the air they are breathing is as healthy as we can make it. During the pandemic, we learned clean and sanitary aren’t the same thing. Something can be clean but still have germs on it, bacteria and viruses. So we said we have to be able to sanitize the airport and make sure that all the surfaces are clean. We realized early on that we would need an independent validation, the Global Biorisk Advisory Council, is an international organization, and they have a sanitization standard called the GBAC STAR program, and we were the first airport in the world to get the GBAC certification. That way we could tell our customers don’t believe us, go look at the independent validator. We did different things to make the airport and environment as welcoming as possible and to earn the trust of our travelers. Two years ago, trust wasn’t a word we talked about. We thought about it, but we didn’t articulate it that way. Now, in executive meetings, we talk about customer trust, consumer trust in almost every meeting. It has always been important, but people took it for granted, and now it is staring right in the face, and you have to address it. We are also doing things beyond sanitization. We implemented a fast pass, you can do a security reservation. Nobody travels to go to an airport. Customers want their trips through airports to be easy, fast, and they want them to be predictable. If you don’t deliver those things, then the restaurants and shopping you have don’t really matter because the customer not going to have the time to do it, or not be in the mood to enjoy the airport and all the cool stuff that we do, so we have invested heavily on easing the experience for the customer. A month ago we started the security reservation system, you can pick it up to seven days in advance, you can make a reservation online for a security slot so when you get to the airport you show the reservation, we had a dedicated person who takes you to the front of the line, and you are done. An airline asked me why did you make this investment and why are you not charging for it, and I said right now we are testing it. We could charge down the road, but first of all, is the right thing to do. If customers are waiting in the security line instead of boarding the airplane, that hurt the airlines because they are wondering where their guests are, they may have to delay a flight for customers that are in security, and also if we can get customers through the security line easily, and quickly they are going to be in a much better mood, much happier, and they are going to have more time to shop, eat, so we make money off of that, so we think it is the right thing to do for the customer and down the road, it will also benefit the airlines and the airport as well. What would be your Santa wishlist for 2022? Wow! I would like for COVID to be over, but that’s on everybody’s list. When I see Santa, that’s definitely my number one. Everyone wants that, especially Santa, because he probably has to get 200 COVID tests, so Santa absolutely wants that, or his nose it is going to be sore. First, I want COVID to be over, but I think that is not very likely. One thing that I think would like to happen, but I’m not sure if we are going to get this either, is if we could get some sort of international standards for testing and requirements, that would help people gain confidence. A while ago, we had a business trip where I was going to be in three different European countries in five days. Before COVID, I would do that, we would bounce around and do seven countries in eight days or something, but setting that trip up was incredibly difficult. Myself and my staff, we are as close to professional travelers as you get. This is my job, we are the team that goes out and represents the airport. We do this all the time, and we have done it for many years, but it was hard, even for us, to lay the entire thing and see what we needed. For example, we have to get a test for Ireland in this window, but oh wait, we are going to be airborne during that window, or we are going to be in a meeting. It was very difficult to set the entire thing up, and even after we had it set up, I had a folder for this country and a folder for another country, ready to pull out any piece of paper you wanted, but it was still hard. It was for business, I’m a professional, so I got through it, but if you are a family of four or five, the expense is significant, the testing can be more than the hotel or the airline ticket, and it is just hard. I have friends who say, what if I test positive when I’m in Mexico and I can’t come home. The lack of standardization is hurting the world, so I’m hopeful that we can get some degree of standardization, but it is tough. Not every government in the world is going to agree with this – we don’t even agree with everything within our country. That would help things a lot. We also talked about Category 2. I think a wish Santa could grant me this year would be Mexico’s return to Category 1 status. That would be fantastic for Mexico, Dallas Fort Worth airport, and our region. We’ve long been a top destination for Mexicans for shopping, we have people living on both sides, families, and it has been difficult, it has been tougher for people to travel. Those would be my wishes. Why is Dallas Fort Worth the gateway for Latin America to the rest of the world? DFW is already the gateway, and I can prove that with the data. American has long had an excellent franchise in Latin America, and it goes many years ago when Pan Am and Eastern routes were sold off. American has long had a very strong network in South America and of course Mexico. Five years ago, we developed a new strategy, and the top-level goal is to be the number one gateway between Asia and Latin America, and we are there. LAX was ahead of us for a while, and now we are the number one connecting gateway between those two regions. To maintain that we need to keep developing the Asian traffic, develop Latin American traffic, and make sure that we do our job as an airport, having the right airlines, and delivering the gates, runways, and everything else that airlines need to operate. That’s our job to deliver that, but I’d argue that we are already the best gateway between Asia and Latin America. And I can prove that. Anything else you want to add? We are the fourth-largest metropolitan area in the United States, and we will be the third-largest within the next ten years, we’ll overtake Chicago. We are a very important area in the United States, and we are growing fast. Not only that, but we are very fortunate to have the economic power of our metropolitan area, the citizens, and the communities that surround us. We are very optimistic about the future. Furthermore, we are one of the two large airports in the world that have more destinations today than before the pandemic, the other one is in Dubai. That’s because the airlines understand how good the market and opportunity are, and we also like to think that they also see us as a good airport and partner. Their success is our success. Without airlines, we are a bad shopping mall with expensive parking. We take this very seriously, we take responsibility for the airlines and the region.

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