How DFW became the world’s busiest airport and a rare bright spot in the COVID crisis
At a time when air travel is mired in uncertainty, DFW Airport is emerging as one of the industry’s safest bets.
DFW Airport is now considered the world’s busiest airport, with more takeoffs and landings in May than aviation hubs in Atlanta, London or anywhere else. DFW is expected to keep that prestigious spot at least through July, based on airlines’ schedules.
DFW had 27,230 flight takeoffs and landings in May, 16% more than No. 2 Chicago O’Hare Airport, according to the Federal Aviation Administration. Those operations included commercial and general aviation, military flights and other aircraft movements.
Holding the No. 1 spot is likely only a temporary title, airport officials said, and not overly meaningful given how the crisis has turned some airports into near-ghost towns.
“We all were happy that we’re No. 1 for a month, but we’re still down about 50%,” said Chris Poinsatte, DFW chief financial officer. “We’re doing relatively better than others, but that’s nothing to be bragging about.”
But there’s something else about DFW that seems to provide a rare bright spot in the otherwise-stormy aviation industry during the COVID era.
The airport, which is often referred to as the economic engine for the North Texas region for its creation of aviation and related jobs, has developed a knack for socking away cash for emergencies.
DFW has managed to put away $968 million in unrestricted cash and investments, which makes up its rainy day fund. That’s enough money to cover expenses at the airport for 729 days, if necessary.
“DFW is stronger relative to the average across the sector and also stronger than many of its peers’ hub airports,” said Seth Lehman, senior director of global infrastructure and project finance for Fitch Ratings, a New York credit rating agency. Lehman has tracked DFW’s finances since 2008.
This week, DFW sold $400 million in bonds to shore up debt expenses, and investors gobbled them up. The bonds were “oversubscribed” by a factor of 8.5 to 1, meaning only a fraction of investors who wanted shares could get them.
By refunding the bonds, DFW can get a better interest rate, and potentially save tens of millions of dollars.
“People look at airports as being essential infrastructure,” Lehman said.
That solid financial footing helped set the stage for DFW’s dominant carrier, Fort Worth-based American Airlines, to reorganize its routes with an even greater emphasis on connecting domestic flights through DFW and Charlotte than before the pandemic.
DFW’s ‘strong cash position’
Fitch considers DFW Airport an “A+” risk, which is one of the highest marks a debt instrument can be given.
“The airport’s balance sheet indicates both an elevated debt burden but mitigated, in part, by a strong cash position,” Lehman and his co-authors wrote in their July 1 Fitch Ratings for DFW. They noted that DFW has nearly $6.3 billion in long-term debt.
The pandemic has made investing in airlines stocks riskier than normal, but the economic situation hasn’t slowed interest in investing in airports and aviation-related infrastructure.
“As an asset class, it has proved itself during other difficult times, including 9-11, the Great Recession and airline bankruptcies,” Lehman said.
DFW is perennially among the top 10 busiest hubs in the world, and has been for decades, according to Airports Council International — although DFW has never finished a year ranked No. 1 globally. That top spot has typically fallen to Atlanta’s Hartsfield-Jackson Airport in recent years.
Before the pandemic, DFW was ranked No. 3 globally in takeoffs and landings, and was in the top 10 in total passengers.
Fortress hub for American Airlines
The dominant carrier at DFW is American Airlines, a Fortune 500 company which is headquartered in Fort Worth and operates 85% of flights at DFW.
American has reworked its domestic and international routes as it brings back flights that were shut down in March and April. The airline is re-emphasizing the use of DFW and Charlotte as its primary domestic hubs.
DFW also is American’s main hub for certain international flights, including those to Asia.
The leadership at DFW Airport has taken several steps to make room for American Airlines to respond to the crisis.
The airport lowered some of the fees paid by American and other airlines, and postponed signing a 10-year use agreement with the air carriers until September 2021, giving the companies time to deal with the crisis and map out a plan to bring back commercial aviation to pre-pandemic levels by 2022 or 2023.
Other steps DFW Airport officials have taken:
▪ Accepted $299 million in federal COVID aid to offset revenue lost in parking, concessions and other revenue sources. The airport plans to spread that money out over the next two years.
▪ Cut costs by $78 million, including $53 million in operating expense reductions and $25 million in debt service reductions.
▪ Suspended most capital projects, for a savings of about $100 million.
▪ Shelved plans for construction of a new passenger Terminal F until the future of air travel becomes more clear.
Long road ahead
Although airport officials expect passenger traffic to return to 2019 levels by 2022 or 2023, it’s not a given that all the traffic will return that quickly.
Fitch Ratings, in its July 1 report on DFW, projects that it will be closer to 2025 before passenger traffic returns to pre-COVID levels.
Last year, DFW averaged about 205,000 passengers per day. In April, DFW hit rock bottom with 14,617 passengers, but that number has since rebounded to an average of 70,000 passengers per day as recently as June 23.
“To whatever extent people want to travel, DFW Airport will be ready for them,” said Bill Meadows, a long-time DFW Airport board member. The board is made up of appointees from Fort Worth and Dallas.
“We have run DFW Airport in a conservative fashion for decades,” Meadows said, “and that’s what has prepared us for this.”
