Last week, Dallas/Fort Worth Airport chief executive Sean Donohue testified at a Congressional hearing, saying the airport had an additional $5 billion to $10 billion in capital infrastructure projects it needs to do even after it spends $3 billion renovating three of its 40-year-old terminals.
That made us wonder what projects Donohue was talking about. So we asked him when we caught up with Donohue on Monday at the airport’s celebration for being named the best large airport in North America for customer service.
Donohue:We’re talking about airfields. If you think about it, obviously we spent $3 billion renovating the 40-year-old terminals. We have four runways that are 40 years old. We have roadways and bridges that are 40 years old. If you look at the end around taxiways, we think there is a benefit of adding at least one more to the taxiways. When you look at our airfield needs, that’s several billion right there…And obviously as you know, we continue to talk to American about the master plan and what that means in terms of a new terminal or whatever that may be. So you put those two together it’s an easy $5 to $10 billion.
S-T: And where does DFW expect to get the funding for those projects?
Donohue: In my mind and this is the point I made last week, there is no silver bullet and we really have to look at this holistically. Obviously, we are going to continue to hit the bond market and the airlines pay for our debt and that will continue. [The FAA Airport Improvement Program] will continue but if you look at AIP, last year, we were very fortunate we got $40 million...There is a lot of discussion in Washington about infrastructure. There seems to be bipartisan support on the benefits of infrastructure spending.
We’re delighted that when infrastructure is mentioned airports are actually cited. But you know, how you bake that into a deal that everyone agrees to and whatever the funding mechanisms are, that obviously has to be done. But the fact that airports are being mentioned in that is a very positive thing. And we have to keep participating in those discussions and I’m not going to predict how they’ll come or how they’ll wind up being.
$2.7 billion spent on renovating Terminals A, B and E
And then PFCs [passenger facility charges], I don’t know (if it will get passed). PFCs have been at the same rate since 2000 so effectively they’ve lost a third of their value and again, PFCs are not going to pay for everything and my point again last week is there’s got to be several different aspects of funding. Over the next four years in U.S. airports what’s already been announced is $100 billion in infrastructure projects. There’s no way that one mechanism can fund that.
S-T: At what point does the debt level for airports get too high?
Donohue: That’s exactly my point. Over the last couple of years, our big projects, most of it, the majority of it has been funded through the bond markets. Airlines pay that….When you look at $100 billion in U.S. airports in the next four or five years, I don’t think it should be just hitting the bond market, it should be more than that.
S-T: What about DFW Airport, since the airport is carrying about $6 billion in debt, making annual bond payments between $250 to $300 million a year?
Donohue: We still have good credit ratings. We go out and we brief the bond market and we brief the rating agencies they know we’re going to be borrowing more money over the future. They don’t seem to be too stressed with that. They’re not saying ‘Hey wait a second, you cannot borrow anymore money, you can’t go to the bond market anymore.’ Again, my point is we have to, from an airport community and an aviation community, look at multiple funding sources looking forward.