Prepared For Takeoff

As a quasi-public entity jointly owned by two cities, the Dallas/Fort Worth International Airport may not appear to be the most fertile ground for finance transformation to take root in. However, DFW has been blessed with a multitude of revenue streams, including a natural gas contract that recently paid a $186 million bonus. This month's interview with DFW executive vice president and CFO Chris Poinsatte reveals the role that finance can play in unlocking new revenue streams.

Steve Player: What's the real role of finance here in terms of supporting airport operations?

Chris Poinsatte: First, you have to start with the big picture and understand the nature of the airport. We're owned by the cities, so we're technically a government organization. DFW is a residual airport, which means that revenues must equal expenses at the end of the year as defined in our Airline Use Agreement that was signed back in 1974. The DFW Use Agreement and bond documents define our current business model.

As I said, it's residual in nature, which means that we charge rates to the airlines (primarily for landing fees and terminal rentals) to equal the cost that it takes to operate the airport. If at the end of the year we've collected too much in fees from the airlines, we write them a check back; if it costs us more, they write us a check back.

The profit from certain lines of business, such as concessions and parking, is credited back to the terminals and landing fees. If you take the whole operating environment at the airport, it basically is a zero-sum gain at the end of every year.

SP: Even though you're owned by the cities, you operate on essentially a break-even concept. The airlines pay for the usage, and anything that you make helps to offset that payment. At the end of the day, your goal is to break even and provide a public utility in terms of an airport.

Poinsatte: Yes. In that business model, from a finance standpoint we try to do our budgeting at the beginning of the year so that we establish rates, fees, and charges that are reasonably close to what we're really going to do. We don't want to use the airlines' money all year; we'd rather have that cash flow match more closely to what it's actually costing us to run the airport.

SP: So you don't want to overcollect, but at the same time you don't want to undercollect and have a big surprise.

Poinsatte: That's exactly right. We are constantly monitoring what we're collecting and what it's costing us to run it. And at least for the past several years we have been making midyear adjustments in some cases to give the airlines back money through landing fee reductions and things like that. We call it a settlement at the end of the year, so the settlement is a smaller number.

SP: And that was the original contract -- how long is that in place for?

Poinsatte: It expires in 2009.