Todd Sanders (Host):
Well, welcome back to the podcast. We have a very special guest today, Chad Makovsky, who is the director of the Sky Harbor International Airport, one of the jewels of not only Phoenix, but of Arizona. Chad, thanks for coming back and joining us.
Chad Makovsky (Guest):
It's great to be back, Todd.
Todd Sanders (Host):
Well, I know you've been busy and certainly it's been a busy summer. It's been about a year since we had the pleasure of your company. What's happened since? I think there's been a lot of action down at the airport.
Chad Makovsky (Guest):
For those of us working at the airport, it feels like it was just yesterday. It's been incredibly busy and it's just been a lot of fun serving our customers. We ended 2023 with the most customers we've ever served at Sky Harbor Airport in the history of the airport. We had 48.6 million passengers traveled through our airport last year at the end of last year. So we've been busy. And then as you know, we've had a lot of great events happen. We had the World Series, we had the WNBA All-Star game. We had the NCAA Final Four. So a lot of activity on our team just preparing and greeting all those customers to the Valley.
Todd Sanders (Host):
And you also had summer, which normally high traffic time and you also accommodated all of those big events that came through.
Chad Makovsky (Guest):
That's right. Yeah. And making sure that we're ready for the summer is really important too. So making sure that not only our customers but our employees are prepared for the summer heat. That was really important to us. It was very important to our city council. We did a lot of work to make sure that we were educating employees about heat safety and making sure that in this hot summer temperatures that they're going to be safe and we can continue to deliver services.
Todd Sanders (Host):
Absolutely. I'm so glad to hear that that's something you're focused on. Clearly, we're all thinking about the heat and our folks that are on the tarmac and doing that work that's so important for us, to know that they're staying cool and safe is tremendous.
Chad Makovsky (Guest):
Absolutely.
Todd Sanders (Host):
So you mentioned a record, a high watermark. We always seem to benchmark things with COVID. This includes prior to COVID travel numbers. This is the high watermark.
Chad Makovsky (Guest):
A hundred percent. 48.6. We were at 46 million in 2019, so we've definitely eclipsed that previous record. If you look at year over year, we actually were up 10%. So we're double-digit growth. That's also pretty remarkable. If you think of how we plan for growth, typically airports, especially in our market, we experience about a 2.5% percent growth rate per year, so to see double-digit growth, that's pretty phenomenal.
Todd Sanders (Host):
Well, and it doesn't happen just by accident. Talk to us a little bit about what goes into that. Clearly, you have a team at the city that's doing a lot of work, but you're also having to drive that at the airport level. Talk to us a little bit about how that happens.
Chad Makovsky (Guest):
Yeah, so the airport is an Enterprise Fund Department within the city of Phoenix, and the nuance behind that means that we don't use general fund taxpayer revenue to operate the airport. The people who use the airport services are the ones who pay for the services. That revenue comes in and it comes in through a variety of ways. It comes in if you decide to park at the airport, a portion of the ticket that you purchase goes to the airport, if you decide to buy food and beverage, any of those types of things, rent a car, we get a percentage of that revenue and that allows us to develop a revenue stream to support not only the day-to-day operation of the airport, but also the growth to make sure that we can keep up with our growing community.
Todd Sanders (Host):
Well, and I think I'd love to be able to quantify that for folks listening, because obviously we're down at the airport, we see a lot of activity. What does it mean in terms of dollars and cents for our economy?
Chad Makovsky (Guest):
Yeah, so that's really an interesting point. We have worked with ASU, the School of Economics and W. P. Carey School of Business to do an economic impact update. The last time we did that was in 2016. We just did one this summer and a remarkable $44.3 billion in economic activity is what's generated at our system of airports for not only the community, but the entire state of Arizona. That eclipsed the previous study by over 16%. So the airport continues to grow. It's the number one economic engine in the state of Arizona. It's important that a healthy and thriving airport can serve this healthy and thriving community.
Todd Sanders (Host):
Well, it's an incredible economic impact. And I think it's easy to take it for granted because we know it's there and it's easy to get to, but I think that number is really meaningful for us here, especially in light of the fact that we're seeing so much growth. One of the things that happened to me this past year is I started getting phone calls and emails from my colleagues around the country because we were once again rated by The Wall Street Journal the number one airport. So I think it's worth talking about. How do you manage the growth while maintaining quality? I mean, The Wall Street Journal doesn't give things away.
Chad Makovsky (Guest):
Yeah, that is the eternal challenge. And I love that award because that is an award designated by the people. So we didn't apply for that award. That was what the people told The Wall Street Journal in the survey that they independently did, and we're so proud to get that. And this is the second time we've actually won that award, so we're really, really grateful for that.
But with that growth comes the challenge you're referring to. So airlines are upgauging their airplanes, meaning that the planes that we used to serve, maybe they had 120 people in it, now the same planes or the same flights will have aircraft that are much larger and hold up to 200, 220 people. And if that plane pulls into the gate that remember, that gate was designed for the smaller airplane, and so what you're seeing is more and more congested facilities. And so as that continues to evolve and happen, we need to grow our facilities to meet that need.
And what we've done is we've developed a five-year plan of finance to invest over $3.5 billion in our airport to meet those growing needs. And then there's a long-range forecast, and you may have heard about this, but the Mayor Gallego mentioned at the state of the city address that we believe this is the time to start planning for that next new terminal. So we're really excited about that. That could be in 40 years to start with the ability to grow beyond that, so we're really happy, excited about that.
Todd Sanders (Host):
That certainly was the comment heard around the world. I got so much buzz out of that comment and people love it. Everyone has a very personal relationship with the airport. I'm sure you know that. And so it's really great to hear, and I want to come back to that in a minute. It feels like you just got here from, thank God, from Dallas, we've got you to come back to Arizona. Thinking about Sky Harbor then, now, what are some of the biggest changes?
Chad Makovsky (Guest):
Yeah, if you think about when I came back, I came back in March of 2021 and if you remember, 2020/2021, those were pretty tough years. And so the airport actually deferred some of our capital projects because we didn't know what was going to happen with the pandemic. And because we're a self-supporting enterprise fund department, we needed to make sure we were protecting our revenues to be able to meet just our day in day out needs. And so we deferred some of that work. I was dealing with employees who were kind of reeling with the effects of the pandemic. And so my head, my focus at that time was really just about stabilizing the organization and about making sure that we were focused on the core needs of the airport to keep it operational.
Thanks to just the remarkable rebound that we've seen not only in Arizona's economy and the tourism industry, but at our airport as well, I am now in a position where I'm thinking about growth. I'm thinking about can we build the facilities fast enough to meet the demand that we're anticipating we're going to see in the next 5 to 10 years?
Todd Sanders (Host):
Well, and you really did come in at one of the toughest times, I think, for the Valley, for the country, and certainly for travel. Lessons learned from COVID?
Chad Makovsky (Guest):
Yeah. So one of the things I would say is we have much closer relationships with all of our stakeholders than we've ever had. And what we recognize is our success as airport operators depend on the success of so many people that work with us. And by way of example, we have over 47,000 employees who work at Sky Harbor Airport in total. I only am responsible for about 950 of those employees. And so I am relying on thousands of companies and all of their workforce to make sure that they're delivering services to the people who go through our airport in perfect fashion. If they fail, there's a gap in service and the customer's going to notice that, so-
Todd Sanders (Host):
And they don't care who's responsible necessarily.
Chad Makovsky (Guest):
You're exactly right. And so that's why one thing I think we really learned through the pandemic is we have to be much closer in terms of how we coordinate with each other to deliver that service through thick and thin.
Todd Sanders (Host):
Silver lining then to a really tough time.
Chad Makovsky (Guest):
I would agree.
Todd Sanders (Host):
Well, going on to sort of good news, I think one of the greatest things we heard this year was the fact that we had a new international flight that was, well, I know there were many, but one in particular was direct service to Charles de Gaulle, Phoenix to Paris. It's so amazing. Talk to us a little bit, walk us through how that came together.
Chad Makovsky (Guest):
Before I even go there, I want to tell you how excited I was the day I got a chance to call the mayor and council and let them know about this new service. I was on cloud nine. So these types of opportunities don't happen overnight. They actually take years and years of work. I have an air service development marketing manager who goes out and travels the world and meets with these airlines and tells the story of Phoenix, and they work with destination marketing organizations and great business partners like yourself to make sure that we're telling our story, making the case to these airlines because airlines are profit motivated and they're not going to put a plane on there just because an elected official wants them to. They're going to do it because it makes them money. And so we have to tell the story about how we can actually fill that aircraft and make it a profitable route for them. We did that over many years with Air France and we were so excited when they called and said, "We're going to test the market this summer and see how it works." And what was really cool was when we launched, they said, "The bookings have been so great. We're going to do this year round now."
Todd Sanders (Host):
So we switched.
Chad Makovsky (Guest):
Yeah, we are now a year-round service with Air France. This was just meant to be a summer test and really, really our community has shown up and showed them how much we value that route.
Todd Sanders (Host):
Absolutely. I think it's tremendous, and it shows that this community's on the map-
Chad Makovsky (Guest):
That's right.
Todd Sanders (Host):
... from a national and a global perspective.
Chad Makovsky (Guest):
Absolutely.
Todd Sanders (Host):
I mentioned Air France and obviously it's very high profile, but I know there's been other announcements as well for international service out of Sky Harbor. Is that correct?
Chad Makovsky (Guest):
Yeah. So Condor brought back their service and they actually added a day frequency. They were two days a week, now they're three days a week. Seasonal service back to Frankfurt. We're excited about that. Porter Airlines, a brand new airline, it's going to be our 24th airline at the airport is going to be providing service to Toronto later this year. Frontier Airlines is primarily a domestic airline, and they're actually now providing service to Cabo. American Airlines is flying to Tijuana now, so we're really continuing to see that route map, especially the international route map grow. Really, really great.
Todd Sanders (Host):
Well, that's tremendous. It's so good to see that growth. And so a few minutes ago, you did mention the fact that we're going to need to look at growth now. And certainly we have the new concourse in Terminal 4, which is absolutely spectacular, but we're going to need to be planning for more and you mentioned a new terminal. Walk us through what is the thought there? And I know you're just beginning, but what would that look like?
Chad Makovsky (Guest):
Yeah, and I'll give you an example. So Frontier Airlines has grown its business in Terminal 3. We have two terminals now, Terminal 3 and Terminal 4. Terminal 4 has our international concourse with our customs and border protection officials. Frontier has grown their domestic business in Terminal 3 to the point that they are are so large they can't operate at Terminal 4, but they decided they wanted to test the international market out of Phoenix. And so what does that mean? It means now we are running what we call a split operation where Frontier runs international out of Terminal 4, and then they're domestic out of Terminal 3. And that's not ideal, right? It's not ideal for the customers, it's not ideal for the airline.
So as we think about the next increments of development, we're going to build a new concourse in Terminal 3. It'll be a domestic concourse. We're going to build a post-security walkway that connects Terminal 3 and 4. That's going to make it very convenient for customers that need to move between facilities. And then as we think about the new terminal, we recognize international at Sky Harbor right now is growing at twice the rate of domestic. So when I say 10% growth in domestic last year, 20% international. So we know we have to create a new facility that has new modern customs facilities to continue to meet that international growth that we're experiencing.
And really right now, we're going through what we call the environmental phase. So we're going to be working for several years with the FAA to go through an environmental analysis to make sure that the facilities and the development that we're planning meet all federal requirements as it relates to the environment and then we're going to go through a planning, design and development process. So in total, we're talking about probably five to six years for environmental review. Then we go into design, development for a couple of years, and then we'll be actually looking in that early 2030s, we'll be breaking ground with the idea of by 2035-ish, we'll have a new facility open.
Todd Sanders (Host):
So 10 years generally speaking start to finish.
Chad Makovsky (Guest):
About 10 years.
Todd Sanders (Host):
Where would that go? Would that be a combination or?
Chad Makovsky (Guest):
Yeah, if you think about Sky Harbor, one of the most frequent questions we get is where's Terminal 1 and 2, right? So we only have Terminal 3 and 4. And the reason was is the way our airfield is oriented, our terminals are in the center of our runways, and so we built from the west to the east, we built Terminal 1, then we built Terminal 2, 3 and 4. Then we came back and started working our way to the west. We modernized Terminal 3, which was built in the 1970s, and it's a beautiful new terminal now. If you haven't been into it-
Todd Sanders (Host):
It is.
Chad Makovsky (Guest):
... it's wonderful. But we tore down Terminal 1 and 2 and that now creates a footprint where we can start to develop that brand new terminal, so that's where the new terminal will go.
Todd Sanders (Host):
Okay. I heard something about maybe combining three and four, so that's not what we're doing.
Chad Makovsky (Guest):
No. We are combining them in the sense that we're building that post walkway connector, but that would be it. And so we're actually going to be building a third new terminal. And if you ride the Sky Train, you'll actually see just west of Terminal 3 on the Sky Train, the guideway splits out, and it does that for a reason. Where that split is where the future new station will be for that new terminal. We had already had the-
Todd Sanders (Host):
Oh, you were thinking about that.
Chad Makovsky (Guest):
That's right.
Todd Sanders (Host):
So will that be then Terminal 5?
Chad Makovsky (Guest):
So that's the question that people much smarter than me are going to have to figure that one out. Maybe we'll do a community survey. I'm not sure, but we'll call it something, for sure.
Todd Sanders (Host):
Yeah, absolutely.
Chad Makovsky (Guest):
We call it the West Terminal for now.
Todd Sanders (Host):
Well, and it's great to know that, I mean, obviously when you're thinking about the work that's already been done today that's laying the groundwork that we're already thinking about what the future's going to bring in terms of new demand and how we're going to meet that demand.
Chad Makovsky (Guest):
And it's really a reflection of the airport's nothing without the community it serves, and it's a reflection of the growth in our community, the business development, the leadership that we have in our community, and really where we see the community going. The airport is really just making sure that we're there to deliver and meet the needs of the community, and it's really a remarkable story.
Todd Sanders (Host):
Well, I think the other part of that that's interesting to me is that you have a lot of constituents, obviously. One of those though is those neighborhoods and cities surrounding the airport. It seems like you do a good job of managing those relationships in a way that everyone's a winner. Talk to me about how that works.
Chad Makovsky (Guest):
Yeah, that's an important part of what we do. So if you think, I'd mentioned we have 47,000 employees. $4.8 billion in payroll goes to those 47,000 employees. About 1.9 billion of that goes to the City of Phoenix. When you look at where those 47,000 employees are living in the Valley, very few of them are living in Phoenix as compared to all the other surrounding communities. And so those people are collecting money, they're living in these communities, they're investing in those communities. So it's important we talk to those communities about that investment, to make sure that we're aligned in our growth to meet what they see. That's one thing. And then to make sure that we're working together to ensure that they don't do something that would impact or impair the growth of the airport. What we have is really a remarkable thing. I mean, how many cities do you know that have an airport the size of Sky Harbor right in the center of the city? I mean, it's pretty rare.
Todd Sanders (Host):
It's usually a drive out to the airport.
Chad Makovsky (Guest):
It can be. And so we want to protect that. It's a very delicate relationship with the community surrounding the airport. We want to make sure that we're working closely with them to support, not only the growth of the airport, but to do it in a way that's compatible with the communities that we serve.
Todd Sanders (Host):
And I'm sure that they were probably key in going for some of these new infrastructure dollars that came out that I think are going to be awarded to Sky Harbor or have been awarded to Sky Harbor, if I'm not mistaken.
Chad Makovsky (Guest):
Yeah. The Bipartisan Infrastructure Law has been really beneficial to Sky Harbor. We were awarded just over $200 million for the development of a new, what we call a North-South Connector Taxiway, and that's on the west side of the airport. If you think about it, we have three runways at airport, one on the north side, two on the south side. And so what that connector will do is allow us to be much more efficient moving airplanes around. It increases the capacity of our airport. That's one project.
We also have $36 million that we received from, again, Federal grant and aid funding to support our central plant upgrades in Terminal 4. Terminal 4 is over 30 years old, so it's time to-
Todd Sanders (Host):
Hard to imagine, right? Time to start investing in it.
Chad Makovsky (Guest):
Yeah, so we are going to be doing major upgrades. A lot of it's going to be behind the scenes, but let me tell you, that's a really important investment. When the air conditioning goes out at the airport, you don't want to be there.
Todd Sanders (Host):
I was about to ask you, what does that mean for the average person? I think air conditioning is a great one, but I'm assuming even the taxiway improvements will probably impact people in a positive way.
Chad Makovsky (Guest):
It reduced delays, reduced time on the taxiway. When you land, getting back to the terminal is more quickly. That all adds up in the eyes of the customer. We want to make sure, again, we're delivering the best experience possible.
Todd Sanders (Host):
Well, and it's good that that's being recognized. One of the things that obviously is important to all of us, and I think people have learned that we have to have a security apparatus to make sure that we're all safe and secure. How do you manage that side of the business to make sure that it's as seamless as possible and that it's getting the job done?
Chad Makovsky (Guest):
Yeah. We have an amazing relationship with Phoenix Police and Phoenix Fire who actually have embedded facilities at the airport, and we contract for their services. I have a public safety and security division within my organization. Their job is to work very closely with them to deliver safety, security services to the traveling public. What I've observed, and I've been in the safety security side of our business for many, many years, is the threat is evolving. And we as a society have become more and more dependent on technology. And technology is a wonderful thing until it doesn't work. Right? And if you think about it, not too long ago, there was this crowd strike issue where a lot of computers went down around the world, and Sky Harbor was not immune from that. So we had teams working all night long to bring those systems back up to make sure that the next day, those customers would be able to travel without too much of an impact.
Todd Sanders (Host):
Well, it was one of those I was coming back in, so thank you. I made it back. I appreciate that.
Chad Makovsky (Guest):
Yeah.
Todd Sanders (Host):
But it's something you're always having to stay in front of, it sounds like.
Chad Makovsky (Guest):
That's absolutely right. Yeah. And we've got great teams that work with intelligence groups, not only within our own local jurisdictions, but with the FBI and with the TSA, so we understand what those evolving threats look like and that we're making sure we're making investments to address them. Hopefully, in the eyes of the customer, it'll be seamless.
Todd Sanders (Host):
Right, absolutely. Thinking about the customer, again, some of the innovations that Sky Harbor has, I think have been really big game changers even from the cell phone lots. I think we were one of the first to adopt those. Makes it easier to pick people up, or we have also pet relief areas. It's kind of a full spectrum of things that we do. What are some of the innovations you're thinking about for the next three to five years that are going to impact customers in a positive way?
Chad Makovsky (Guest):
Well, one of the innovations that has just been a lot of fun is our partnership with Waymo, as you've probably heard. We get to brag to be the first airport in the world that actually has autonomous services connecting our airport to our community, which has been a lot of fun. As we go forward, we're really focused on the fact that customers are traveling at older ages now with more discretionary income. And so we want to make sure that we are providing services for people of all ages to be able to travel through our airport with empowerment and dignity, frankly. So we're working on things like, as you might think of folks with hidden disabilities, dementia, folks with maybe audible or visual disabilities. We want to make sure that we have technologies and services that meet those needs. And we've done a lot of great stuff, dementia-friendly workshops. We have an app called Aira, which helps people with visual impairments. We have hearing loop technology for people with audible impairments, and we've gotten a lot of awards for those too, because we are trying to stay at the leading edge of those types of technologies.
Todd Sanders (Host):
Absolutely, and I think it's commendable. Also, the therapy dogs are amazing as well.
Chad Makovsky (Guest):
Yeah. The whole goal is as we get more and more crowded and congested, that can really bring up stress in our customers who are already probably stressed for whatever reason about their travel experience. So those are just wonderful ways to deescalate and take the stress down. And who doesn't love a puppy, right?
Todd Sanders (Host):
Oh, absolutely. No, it really makes a difference. Everybody sort of melts. And then, I think from a Frequent Flyer standpoint, what I'm seeing is more selection in terms of lounges and other places for business travelers that might need a place to do business or just relax a little bit. It seems like there's some opportunities there as well.
Chad Makovsky (Guest):
Yeah. We haven't unveiled this yet, but I'm going to give you a little secret and your listeners. The new concourse we're building in Terminal 3 is going to have one of the most beautiful lounges probably in the country when we're done.
Todd Sanders (Host):
Wow.
Chad Makovsky (Guest):
We're so excited about what our designers have proposed to us in terms of just dramatic views of Camelback Mountain, dramatic views of downtown Phoenix. I mean, we're really excited about this.
Todd Sanders (Host):
You heard it here first. That's going to be very exciting. Good to hear. And another reason, I think, for us to really be proud of our airport and everything that we've accomplished. I want to thank you for being here, but also for really focusing on this and doing it in an intentional way that we have one of the best airports in the country, and certainly as I've traveled the world, one of those airports that we can certainly be proud of.
Chad Makovsky (Guest):
Thank you, Todd.
Todd Sanders (Host):
Before we go, we're going to do a quick lightning round with you. Last time, you had 100% success. So we'll start this one. This is a completely different question. First concert.
Chad Makovsky (Guest):
First concert, AC/DC.
Todd Sanders (Host):
Oh. Excellent.
Chad Makovsky (Guest):
At the Met Center in Minneapolis.
Todd Sanders (Host):
Okay. Well, I'm going to part A then, I guess on that, favorite AC/DC song?
Chad Makovsky (Guest):
Oh, well, Thunderstruck is one of my favorites. I mean, that was kind of my generation-
Todd Sanders (Host):
Excellent. Okay. You're doing so well on these. Okay. Obviously, you see it all, you see places all around the world where people are going. What's sort of the most underrated place that people maybe they need to focus on or go to that they aren't going to today?
Chad Makovsky (Guest):
Oh, that's a tough one. There's so many beautiful places to go. I would have to say, and this is kind of cliche, but it's right here in the U.S. and it's on the island. It's going to Hawaii. I mean, I cannot tell you every time I go to Hawaii, when I get off of the plane and I smell that sweet air, I am like, "I'm here."
Todd Sanders (Host):
Yes. I am jealous of Honolulu's open walkways to the terminals. That is nice.
Chad Makovsky (Guest):
That is really cool.
Todd Sanders (Host):
I like that. Absolutely. And great direct flights from here.
Chad Makovsky (Guest):
That's right. We have them on Southwest, Hawaiian and American Airlines.
Todd Sanders (Host):
Absolutely. And then the final, and obviously we know one of my favorite movies is Planes, Trains and Automobiles. We aren't going to put planes on there, but trains or automobiles, favorite mode of transportation?
Chad Makovsky (Guest):
I don't have enough experience on trains. I've done a couple of the fun scenic trains, but automobiles all the way. Nothing like getting on the open road, and especially here in Arizona. There's just so many beautiful places to see.
Todd Sanders (Host):
What's your favorite road trip?
Chad Makovsky (Guest):
I'll tell you what. I like going up to Flagstaff. Of course, going up through Oak Creek Canyon is just stunning. Every time, you just don't think you've seen enough and you go and you see it again, it's just gorgeous.
Todd Sanders (Host):
It's absolutely true. Well, once again, you've stumped us. A hundred percent success on-
Chad Makovsky (Guest):
All right, I'll take it.
Todd Sanders (Host):
... the lightning round. Thank you again. Really appreciate it. Hopefully, we can have you back again in maybe a year to hear about all the new things that we're doing at Sky Harbor.
Chad Makovsky (Guest):
It's my pleasure. Thank you.
Todd Sanders (Host):
Thank you.