- (female announcer) Production funding for Behind the Headlines is made possible in part by the WKNO Production Fund, the WKNO Endowment Fund and by viewers like you, thank you.

- What's next for the Memphis Airport, tonight on Behind the Headlines.

[intense orchestral music] I am Eric Barnes with The Daily Memphian, thanks for joining us.

I am joined tonight by Scott Brockman, present CEO of the Memphis Airport Authority.

Thanks for being here again.

- My pleasure.

- Along with Mike Keeney, Chair of the Board of Commissioners of the Memphis Airport Authority.

Thanks for being here.

- Thanks, Eric.

- We'll talk a bit, y'all made some news recently.

You are moving out of the position.

Your COO is taking over as CEO at the end of this year.

And we'll talk maybe a little bit at the end about the transition, but it's been a couple years, partly 'cause of COVID since we've had you on, Scott and what, a year plus now year and some months, that the new passenger terminal has been open.

And I honestly say, and I travel quite a bit, I have not heard a single complaint about that new terminal and it's been kind of overwhelming praise for it, so there's that.

- You know, it's amazing that even today, and we get people that have said, "I've traveled 15 times in the last year "and every time I walk in this new concourse, I just smile.

And I just wanna say thanks."

They still love it.

It's just a fabulous building, and... and it was a long time coming, but I couldn't be prouder of what the team accomplished.

- I told you before we started, I told you both, I had some family in town who hadn't been in town, been in town many, many times over the years, my brother and his wife, but hadn't been in town since before COVID.

And they literally had that sensation of like, we thought we got off on the wrong city, 'cause we just remember the old brown dark kind of sort of cigarette stained walls of the old airport.

With all that said, what about the rest?

[all laughing] So let's move on to, well, there's still things to do, right?

I mean, you guys have a plan for the main terminal.

You've got the baggage area.

Walk through the plan.

We'll talk first about the passenger side of the airport and then we'll kind of segue into the freight side, which is obviously a huge, huge component of what the airport does.

- Well, the concourse project was really big because it kind of sets the tone for the vision of the rest of the airport.

And so the next step we're gonna embark on, I honestly believe, and I hope this summer, the first phase.

Now I will tell you that this is gonna be a long process because when you move into the terminal, ticketing, baggage claim, it's not.

- This is the big vaulted ceiling.

- The vaulted ceiling in the front of the house.

When you come in through the roadway system and you enter that vestibule and the ticket counters are in front of you, that whole area is gonna get rebuilt, if you will.

Modernized, expanded.

We're gonna bring that same look and feel of the concourse out to the front of the building.

The challenge is, unlike the concourse where we can build a construction wall and just build it, this, we have to be able to do it in phases and pieces with construction walls and navigate people through all that, while you're trying to build all of this stuff around it.

But we hope to start this summer.

- And that'll be a two year project kind of thing?

- Oh, no, I think the first phase, which is $150 million.

- Just in that opening space, in that entrance space?

- Well, the vision across the entire project, and we have to define how those phases are gonna go, is really taking all three ticketing lobbies, A, B, and C, connecting them in more of a visible line of sight.

- Right.

- Take the entire north wall of that building, which is now bricks and offices and concessionaires, take all that and move it, make it bigger and create a glass wall on the entire front, like the concourse.

So I would guess to get that core part of that entire building done, which is really moving the north wall, relocating the vertical transportation, stairs, escalators, elevators, out to the outer wall, and then moving the ticket counters, expanding those out to the east and the west, and expanding the TSA checkpoint.

We are woefully short on lanes for the amount of passengers we have traveling.

The lines are getting way too long.

So all that, I would tell you that project is easily probably five to seven years because of the way the phases have to flow - To keep it operating.

- In order to manage operations.

- One more question, I'll go to Mike.

You said about $150 million.

How much was the concourse project, give or take?

- The total concourse project was about $225 million.

But that included enabling projects on A and C to be able to move airlines.

The actual contract for the concourse was about $140 million.

With changes.

- So comparable in some ways.

- So comparable, much more complicated in the front of the house.

The difference was the B concourse, we basically leveled the top and built a new structure around it.

This case we've gotta come in and seismically upgrade an historical facility and keep that structure, while modernizing it, seismically upgrading it, and expanding.

- We'll talk about more parts of that, but I wanna go to Mike, so Board of Commissioners oversees the whole, your role is not so much to pick and choose the glass walls and the paint colors, I assume.

- That would be a disaster.

- But the last, the $220 million that has just been invested, this $150 million in the front of house, as Scott calls it, that gets paid for how, that is financially responsible in what way?

I mean those sort of big picture questions about the sustainability and the, if not profitability, but the financial health of the airport.

- Sure.

Well, the big picture especially on those projects, and I may have to hand some of this over to Scott 'cause he knows the details and I make it my business not to get in the middle of the details, but that, especially a lot of the terminal improvements are gonna come from the infrastructure bill that was passed by Congress.

When was that, Scott?

- We're in the second year.

- What that was created, they created a grant program and airports were included in that.

And it was a competitive process in order to get some of that.

And so, we were able to successfully get some of this money.

And I also will add on to, I'm not answering your whole question, I know that, the other piece is that, what Scott just talked about was the beginning of the terminal, that's not everything.

I mean, what people also realize, if they've been to the airport recently and tried to find a parking spot, we're tight on parking.

And so we've got the rental cars that are on the first two levels of the parking garage then plus the rest of the parking garage.

Well, we run outta spots.

In fact, we, at our last board meeting, we had to authorize, they're gonna have to reconfigure parts of the airfield so that we can have more parking area.

- Off to the left and right, surface lots.

- That's a hundred percent right.

So we're gonna have to, I mean, another part of this project that's on our master plan is we're gonna build a new rental car facility.

And then that will then free up some of that space for parking.

- And so we are, we were talking about this before, checking my math, that we are about 10 years from being de-hubbed by Delta.

So Delta bought Northwest in '08, '09, something like that.

- In bankruptcy.

- In bankruptcy, we go through the financial crisis, they make some promises that Memphis will remain a big part of the hub systems on, that goes away.

The airport fell.

You took your job going, I think from COO to CEO in 2014 when things were really grim, right?

The number of flights had gone from 250 to 300 at the peak to in the 30s, 40s, 50s?

- Total flights were down in the 60s, yeah.

- Down in the 60s, in terms of nonstop flights.

- Delta dropped from 200, roughly 200 a day to 17.

- Yeah.

Right.

So, how often do people say, well, when are we gonna get a hub back?

When are we gonna get back to 200 flights?

Those questions about passenger growth, are we gonna ever gonna get back to 200 in?

Not by January, so it's not your problem, but, and also, where are we now in terms of number of daily flights?

- Number of daily flights right now are about 80.

Between 80 and 90.

It depends on the day you pick and the time of year you pick.

The thing is, really it's unserved markets that we're attacking, trying to add those markets we don't have today.

And because the industry has changed radically.

We used to have 300 and something flights a day, but the average number of seats was 50.

- 'Cause all the smaller, regional.

- Because we had 34-seat Saabs, we had 59-seat Avros, we had a lot of small planes.

A 50-seat RJs.

Now we're flying big planes, I mean, most of them.

We've got a majority of our flights are mainline.

So the average number of seats per aircraft has gone from 58 to 128.

- Really?

- Yes.

And so you've got a lot of 180, 190-seat aircraft, this flying domestically, these are big planes.

And so, yeah, the challenge is, is what are we doing on seats?

What are we doing on destinations, nonstop destinations, and what are we doing on the number of seats?

How are we growing that?

Because the dynamics of the industry with COVID have changed radically.

- People want, I have so many questions.

People want flights to the West Coast.

I know that comes up a lot.

San Francisco, Seattle, Portland.

It's where, we do have a number of direct flights to LA.

There's other cities, people pick and choose.

How do you though approach, we are gonna go here or not?

I mean, it's very much up to the airline, right?

I mean, I think sometimes you see in comments and you see on social media, people are like, why doesn't the airport just start a flight to San Francisco, right?

I'm sure you would love to be able to wave a magic wand and do that.

So how did the dynamics, the back and forth with the airlines work, and then also what is the role of incentives at this point in terms of incenting airlines to pick up a route?

- Well, first of all, we look at what, there's software and there's federal databases that we can tap into to see what's called a PDEW, a passenger daily each way.

So we get data, and it doesn't matter whether you fly through Atlanta to get to somewhere, we're tracking what your final destination is.

So we look at those markets that we know are lacking.

You hit some.

San Diego, Seattle, San Francisco, a lot of it West Coast.

And we look at those and you look and you go, okay, what's the PDEWs and the PDEWs, you know, a lot of those cases, the PDEWs are less than a hundred.

Now that's a 1500 to 1800 mile stage length.

You're not flying a small plane there because of the distance that they're allowed to fly, a two-class RJ, a CRJ900, you can't get there.

So you gotta fly a mainline aircraft, which is 160 to 180 seats, and you can document 70.

- The demand just isn't there.

- So what we have to do is to get more creative in looking at how do you spur demand?

How do you look at what the demand really is?

There are people that are outside the Memphis Metroplex, okay, that really come from further away, that if we had a flight, would fly.

'Cause we proved that with the hub.

When we had the hub, they came from as far as 120, two hundred miles away to pick up a flight.

So we're changing our direction a little bit on air service and getting a lot more strategic.

Kind of one of my last gifts to the airport before I leave is to really restructure how we approach attacking air service because the industry's changed radically.

- Go ahead.

- In the last two years, through COVID, it's drastically changing.

And keep in mind, when we had those 300 flights a day, most everybody, they were changing planes in the airport.

We've now converted, that's what Scott really did a good job under his leadership is we converted from what they call, we are an O&D airport now, we're origination and destination.

So we're serving more Memphians than we did when we were a hub, just in a different way.

- The incentives.

Are y'all still doing incentives to get people to try out flights?

I know you were at one point.

- We do some incentives.

The problem is that-- - And this is basically paying an airline money to underwrite that, the potential gap between the number, this is how I put it.

Between the number of, the demand number you described, what they need to make money on it, and you say, hey, for a period of time we'll incent you to help fill what you might lose money on that route.

But we think if they keep doing it, more people will use it than you think.

- We have a limited capability to do that just because of the structure of how our relationship is with our airlines.

We're, and I don't wanna get too geeky, but we're full residual, which means that the airlines pay for everything.

And you cannot take one airline's money and use it to offset the cost of another.

- Right.

- So you have to have independent money.

So we did, for a period of time, we had about $2 million that was generated outside of the airline fees that we were using, not to pay someone cash to fly a flight, but to offset their fees.

We gave 'em landing fee waivers.

- Gotcha.

- So they could land and not have to pay, but we had to take the money from our own savings account and give it back to the system when we did it.

So it's really a highly regulated part of the business, the incentive part.

It's not as easy as it sounds.

- We'll stay with some with passenger, but segue into, I mean, the airport is what's still the biggest cargo airport in the world, or one or two.

I mean, there was a period of time where Shanghai, I think, was a little bit more, but for you, Mike, I mean people, if they know you're on the airport board, you're very connected politically kind in the business community.

How many people do you think who primarily use the airport as a passenger airport understand, they know FedEx is here, they maybe drive by the planes, but probably don't fully get how much of that airport facility is paid for by FedEx's presence.

- It's unbelievable.

And I think, when you drive down Plough Boulevard and you're going to the airport and you see all of those airplanes, the purple tails as we like to say, that are over there, it's incredible.

And we are easily the busiest airport in the world between midnight and 5:00 AM, that's just where everything's flying.

And the other thing I would say as, I'll be on the Airport Authority and the people that call me and ask me, they're like, Hey, why don't we get a, why aren't we having a nonstop to Moline, Illinois or Seattle, Washington, or whatever it is, you know.

It is complicated for one.

And you've really got to work with these airlines to be able to show, these airlines aren't dumb.

I mean, they're gonna go somewhere where it's profitable.

And so if we've got the passengers that we're gonna be able to fill airplanes, they're gonna put a flight there.

- Well, and anybody who flies a lot and I've flown a lot for my whole life for a variety of reasons, used to get, you're on a plane, you're pretty often, you might get an empty middle seat.

If you were in the window, you could gamble and you could be on planes that were half full.

You could be planes that were easily 20% empty.

Planes are not empty, right?

I mean, the airlines have changed everything and the way they book and the way they monitor this, I mean, it's every dollar, every seat.

And so that is different than the old days, right?

Where you could have a flight to Moline that might be half full.

And somehow that made sense to the airlines.

The airlines have also made a lot of dumb decisions in the past, they've had a number of government bailouts, just in my lifetime.

- But I'll also say that we compete with the interstate sometimes.

I mean, that's why these ultra low cost carriers, airlines, the Spirit Airlines, the Allegiant Airlines, they have been unbelievably successful in Memphis because people who may not think about flying to Las Vegas, but Allegiant has great flights to Las Vegas and they're full.

And they are really full.

- How many airlines now, give or take fly outta the?

- Nine.

- Whereas, when we were a hub, that 300 flights was 98% Northwest.

And there were real costs associated with that.

I mean, there were real advantages.

There were huge advantages, but there were also real costs.

- We had four airlines when we were a hub, okay.

We had AirTran, we had United, American and Delta.

Well, Northwest until they merged, I counted them together and 75% of the flights were 1 airline, 80%.

- Let's switch back to the construction.

I mean the other thing people talk about, parking.

What is the, I mean, when there is overflow, let me ask it this way.

Did the Airport Authority miscalculate the demand when it built the big new garage?

- I'm gonna laugh because when we built that garage was during the de-hub.

And if you remember the articles back then, people chastised us.

- Oh, I remember.

- Why are these dummies building a parking garage when they're being de-hubbed?

No, I think that based upon the, no one could predict the switch to O&D, the way we've done.

The master plan spells out a pretty good pathway to growing parking.

The problem was, is that when we came back from COVID, March of this year, spring break of this year, we leaped back to, we're in growth mode now.

This fiscal year or this calendar year, January, February, March, we don't have final April numbers, but I would venture to say April, all of those are higher than 2019.

And so we are back to that trend, post de-hub, where we're back in a growth mode.

And the problem is, is not the number of people that are traveling, it's how long they're staying in the parking lot.

They used to leave on a Monday and come back on a Wednesday.

Now they're leaving on Monday, taking their family with them and staying for 10 days or whatever, so the car in the parking lot is not there for two days, it's now there for 7, 10, 12.

- Right.

- We don't get that space back.

- So let stay with the parking thing.

Mike, you and I made a terrible mistake with each other years ago.

We gave each other our phone numbers and you to give me positive, constructive feedback on various articles we write and me, to complain about the garage elevators.

- That's correct.

- And so the elevators in the garage, which we were talking about before, because it is a running joke between us, but it's also, and you take it seriously, it's a joke, but it's not, right?

- Right.

- The elevators in the garage, there are four banks.

We had a letter to the editor once, they got all this play.

I mean, people really do focus on these elevators never work.

But you told me why before, what happened.

- What we learned is when they were originally installed, and this was years ago, and through the construction and everything else, these elevators we learned, they really weren't supposed to be used in humid areas and in an outside parking garage in Memphis, Tennessee, I'm not sure there is any more humid area than there is.

But I will say this, the board took it, and the staff took it unbelievably, very serious, because look, that's what we were hearing.

I mean, not just from you, a lot from you, but not just from you.

- Every time I flew.

- But we've bid it out and we are replacing all the elevators.

But I must tell the viewers, is that now we're in a problem with getting parts and trying to get it together.

We've got a supply chain issue and we're gonna get 'em there.

But we're in the process of replacing those.

- Back to when paying for things.

The airport does not rely on local tax revenue.

- Correct.

- It is the fees you charge the airlines, the FedExs, all the tenants, is that right?

- That's correct.

- We have to generate all our own revenue.

- And some state money, some state grants?

some big federal grants as we talked about.

- Some state money, some federal grants.

- How much does, I mean, if you look and say, all right, we gotta fix a million dollar elevator fix.

Is that money out of the big bucket that includes fees from FedEx?

Or do you try to look at very separately because that elevator, that parking garage, is for passengers, not FedEx employees.

I mean, how is that?

It's a small thing, but it's a big thing, right?

I'm just curious about this distinction for you in operating this massive freight airport and this good sized and growing passenger airport.

- We collect revenue from the different sources.

So FedEx pays landing fees and we have, and that landing fee is set based upon the cost to maintain the airfield.

So it's not like I can take a landing fee FedEx planes and put it in the terminal because I still have to maintain an airfield.

We have to generate.

And so we have to move money around in our budget.

So what we did for these elevators, because it was such a problem and it was so difficult to try to keep 'em alive because they were not the right elevators for the garage, is we basically moved money around within our capital outlay budget on the terminal side of the slate and went to the board and said, this is important enough.

We can't keep playing this game of chasing maintenance.

- With just a couple minutes left here.

Doug McGowen, right now, the head of, relatively new head of, MLGW, he's talking a lot about, he was on the show after he got the job in January after the big storms in the winter.

He's talking a lot about changes to the grid system.

Some of that is all climate change, right?

I mean, just weather events.

We've had more severe weather events.

How much, for long-term planning, how much do you all weigh that, do you have to say, we have to plan for more and more severe weather, hotter and hotter days.

And what does that mean both on the freight side and the passenger side?

- Well, I'll take a quick shot at it and Scott will have his comments as well.

But I mean obviously all that comes into, I'm gonna make a little bit of a U-turn on you on that question because one thing, when you brought up McGowen, one thing that we also have to worry about is electric vehicles.

All this new talk about that.

Well, how are we gonna install more charging stations?

We get that about the parking garage.

Well, speaking of McGowen, we've got a problem having enough power to be able to get to the airport and to be able to utilize all of that.

So, and I say that is 'cause I think that's part of the whole climate.

We do have more severe weather things that are going on and that we have to prepare for.

And with FedEx, they don't take the time off.

You still want your package, whether it's raining and storming or whatever it is in Memphis, you're still gonna want that package the next day.

- For you in terms of the planning and your successor will take on planning for more and more severe weather?

- Well, I mean that's always, safety is paramount.

So we always look at how those things affect our operations.

The airport right now has diesel generators that we installed after Hurricane Elvis in 2004, 2003, when the straight line winds took out the entire power grid.

And we installed those generators back then.

So we can power, as long as we can get diesel, we can power it, generate power for the terminal.

The challenge is, is looking, the board just recently approved about three months ago, an electric need study to look at, not only today but the future, because it's not just charging rental cars in the rental car garage.

It's all of the electric vehicles that are going on within the airfield operation completely.

Tugs and buses and different things.

But that, and Doug McGowen and I have talked about, how are you going to provide the power to us, reliably and at the kilowatts that we need to do all this.

- And that's not just for the passenger side, that's for the freight side.

- That's for everybody.

So we've talked about the need to partner MLGW, the state, and the airport in a micro-grid at the airport where we generate power through alternative sources to support them, but also to take stress off of the grid by providing enough of our own.

We will go to some solar, we will go to some other stuff and have to blend all that in an overall electrical plan.

- One thing I would, this is maybe way too wonky, but anyway, I'm gonna ask it anyway.

When you're in the airport, it's an interesting thing that as you walk in, you've got the people, you've got the security out front.

Then you've got the people at the desk who work for Delta, or they work for Allegiant, they work for whatever airline brand.

You've got TSA, you've got vendors who have employees, you've got more airline employees, you've got people running around on the tarmac, moving things around.

All those, some of those employees work for the Airport Authority.

A lot of 'em work for the airlines, they work for third parties.

And I was thinking about it, it's the analogy of like a commercial real estate building, an office building.

You have all these different tenants, except they don't all work together.

These people all have to work together.

So I am curious about that, how many employees and what services do you all provide?

'Cause it's not TSA and it's not the airline people, but what else is going on in there that is provided by the employees of the Airport Authority?

- Well, to put it in perspective, Eric, there's about 4,000 employees on site every day total.

All of the operations.

The Airport Authority employs 300 or less.

- Okay.

- So less than 10%.

What our people do is we have, they're the police, security, they are the administrative people that manage the facility.

We have building maintenance, we're running almost a small city.

So we've got a million square feet of building.

So we've got people running those.

- I asked you a big question.

And didn't look at my clock and we ran outta time.

We also didn't talk to you about your transition.

Hopefully we'll get you on before that.

But thank you both for being here.

Sorry to cut you off at the end.

Apologies.

Mike, thank you for being here.

- Thank you.

- That is all the time we have this week.

Join us again next week.

If you missed any of the show today, you can get it online at wkno.org or download the full podcast wherever you get your podcasts.

Thanks very much and we'll see you next week.

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