Q&A: Aaron Burkes discusses low-cost carriers, other priorities for XNA

Aaron Burkes had no aviation experience before he became CEO and executive director for Northwest Arkansas Regional Airport (XNA) more than six months ago.

But, he could have.

Burkes’ first professional job offer was from Continental Airlines in Houston nearly 30 years ago. When he was in graduate school studying economics, he wrote a paper on “how to maximize profits through optimal pricing and price discrimination in airfares,” he said. He sent the paper to Continental Airlines, and the company called him in and offered him a position as a pricing analyst. He declined because he wanted to pursue a law career after earning a master’s degree in economics from Clemson University. He earned a law degree from Baylor School of Law and is a licensed attorney in Arkansas, but instead of pursuing a law career, he became a Realtor and established a business in real estate construction and property management.

Before joining XNA, the Northwest Arkansas native worked for Gov. Asa Hutchinson in one of 43 cabinet-level positions and previously was a Republican state representative for District 95 in Lowell. He recently was appointed to a three-year term on the Transportation Industry Council of the Federal Reserve Bank of St. Louis. The council is one of four District Industry Councils that provide the Fed with feedback on economic conditions within the Eighth District, which includes Arkansas.

Burkes, who said he usually wakes up at 3:30 a.m. daily, took time to answer questions about his role at XNA.

Jeff Della Rosa: How much has your job changed from when you were president of the Arkansas Development Finance Authority?

Aaron Burkes: It’s changed a fair amount from that job. It actually is real similar to the job I had at [Madison Area Technical College] in Wisconsin — in that you’ve got a physical property to manage. When I was at the college, we had 2 million square feet that we had management of. You always had building construction projects and maintenance issues and people getting hurt. And we had our own police department like we have here [at XNA].

When I was with the Development Finance Authority, you’re basically managing office staff, and you’re not physically managing any projects. You’re managing the paper to finance those projects. It’s always interesting when you have physical assets to manage and oversee.

Della Rosa: What are your top three priorities for XNA over the next three to five years?

Burkes: Continuing to attract new carriers and new routes is a top priority, and I’m not necessarily sure I would put them in any particular order. Getting the access road done — I’d like to have it done in five years.

Then, developing new opportunities, new revenue sources, new partnerships, and I don’t have anything specific yet. But we know that we’ve got the OAS [Ozark Aircraft Systems] hangers out here that we need to get reused and get those put back in service and jobs created. So those things will be a top priority, and that’s in addition to just the usual stuff. And we’ve got these construction projects that we will have done, but that’s going to happen. We’re on course to do that.

Della Rosa: You’ve been CEO of XNA for six months. What changes have you made or plan to make soon?

Burkes: We’ve changed our approach on the access road. We’ve partnered with Arkansas Department of Transportation to allow them to take the lead on the environmental and design of that project — with the goal of getting it done. Some of the changes are ones the board already put in place in terms of the new positions that we’ve got. Nothing really transformative yet, just tweaking at the margins.

Della Rosa: You were among some strong candidates with a significant amount of aviation experience before you were selected CEO. Why do you think you stood out even though you had no aviation experience?

Burkes: I think the board saw a person who had a lot of economic development experience and good experience in finance. And I think that those two things were important to the board because, as they will tell you, they see this airport as more than just an airport. They see it as a driver of economic growth, and so I think that was a big factor or a big thing they liked.

I think the ties to the community were important as well. A lot of times in aviation you look at the path of people who are going through a career in aviation. Typically they switch jobs a lot. They move from place to place, and Kelly Johnson obviously is an exception to that as well, but I think they wanted the stability that they’ve had for the last 20 years with one CEO and one COO/airport director in Kelly.

So they’ve had tremendous stability. I think they wanted that same stability going forward. I wasn’t looking at this as a stepping stone to anything else. I have no desire to run DFW [Dallas/Fort Worth International] airport or anything like that.

Della Rosa: What have you learned in your six months on the job?

Burkes: Other than a lot of acronyms. [Laughs] Just kidding. I’ve learned a lot about a lot of different things.

I’ve learned more federal regulations related to aviation. I’ve learned the regulations related to land acquisition for a public entity. I’ve learned some of the ins and outs of recruiting air service, the data behind that.

Della Rosa: What’s surprised you about the job so far?

Burkes: How well-run the organization was before I got here. It’s got great people. It’s got a really strong, engaged board. And every other position that I’ve taken, I’ve stepped into something that needed to be cleaned up, and that’s not been the case here. So it’s been a really refreshing and surprising in a good way sort of thing.

One of the other surprising things is how interested people are in the airport, just the community as a whole. This could be an obscure job that nobody really cares about, and there seems to be a lot of interest in the airport and how we operate and the things that we do. And I guess that’s because it does impact everybody’s lives here, whether you’re a business traveler or a leisure traveler. And I think there’s something unique about XNA in that XNA was created, it was conceived of and built during the lifetime of many of the people who still live here. And so, they got to see it from concept through to a finished product, so that everybody feels like that they kind of … watched this baby grow up.

Della Rosa: How have Kelly Johnson, chief operating officer, and former CEO Scott Van Laningham helped you in your role?

Burkes: They’ve both been tremendously helpful. Scott has stayed on in a contract capacity for six months. He’ll be here through June 30 and on an as-needed basis. He’s been very helpful. Kelly has been phenomenal. She’s been incredibly supportive. Having been employee No. 1, she’s got knowledge that goes back to before this was ever an airport. So she has all of the history, and she’s been very good to share that history and bring me up to speed.

Della Rosa: What’s it mean to you that Kelly chose to remain with XNA after the CEO search and be promoted to chief operating officer?

Burkes: I think that Kelly has seen this airport through from the very beginning, and this is her baby. And she justifiably has a lot of pride in the accomplishments that she’s had here. And I think she wanted to make sure it was in good hands and see it through. I am really pleased that she has stayed. She’s a terrific asset to the airport.

Della Rosa: What is the progress on selecting a chief financial officer and chief business development officer?

Burkes: Those positions are both filled. They started April 29.

We’ve got Tim O’Donnell, who is the former vice chancellor for finance and administration [at the University of Arkansas]. He’ll be coming in as our CFO. He was basically the top finance person at the U of A at Fayetteville. Then, he was with Southwestern Energy for 20 something years before that. So, I think he’s going to be dynamite and really do a great job.

Then, our chief business development officer — that’s a brand new role that the board created in consultation with Russell Reynolds, which was the search firm that did the search for the CEO. And they were kind of modeling this after other airports.

We’ve hired a person named Andrew Branch, who was CFO for the Arkansas Department of Veterans Affairs. He’s an attorney. He’s got an MBA. He’s got a lot of sales experience — business to business sales experience. So I think he will be really good in that role, too. Great relationship builder. And that position will be over government relations and advertising as well.

Della Rosa: How significant to Northwest Arkansas is it to land Frontier as a carrier?

Burkes: I think it’s huge. You look at what’s happened to airfares already with United, which flies to Denver, and they’re essentially matching what Frontier has. A lot of the airlines have charged high fares out of XNA because they’ve been able to, and as we get more competition for them, they will have to reduce their fares to be competitive.

Frontier is an ultra-low-cost carrier so it puts a lot of pricing pressure. There are 100 markets that can be accessed out of Denver through the Frontier network, and so it’s really not just Denver. This opens up low price airfare to lots of destinations, so I think it’s very significant.

Della Rosa: It’s no secret that leisure travelers drive to other airports to fly because of the lower fares. With Frontier, how many of these travelers do you anticipate will choose to fly from XNA instead of driving to other airports?

Burkes: I don’t have numbers or percentages for you, but I think the route is going to be a huge success. Frontier is starting out with three flights per week to Denver, and we’re very optimistic that it will be a success, just like Allegiant had in going to Destin [Fla.]. There are now seven flights a week to Destin, and that started out as a two-days-a-week service. So we think it’s going to be very successful.

Della Rosa: Do you anticipate more low-cost carriers will offer flights at XNA as a result of Frontier starting to offer service here?

Burkes: We are continuing to recruit, and so I feel confident there will be other airlines that will come into this market. I don’t know about the timing, but Allegiant has done well here as an ultra-low-cost carrier capturing leisure travelers. Frontier, I think, will demonstrate the same. They’ll do very well. And so, other carriers will see that success and be a part of it.

Della Rosa: As more lower-cost flights are added at XNA, do you expect the fares of existing carriers to decline?

Burkes: Yes, anytime you have competition in the market. You have the three legacy airlines [and] you have Southwest. Those four airlines capture most of the market. And you basically have 10 airlines that are out there really in the commercial air service world.

They are classic oligopolistic competitors. Each competitor responds to the actions of the other players in the market. Typically, airlines match or get very close to matching their competitors in that market, and they may have other ways that they distinguish themselves, with loyalty programs and things like that. But they’re typically going to be very aggressive to not lose that market share.

Della Rosa: Are any existing carriers threatening to pull out?

Burkes: No, I think all of the carriers are doing well here and expanding. They’re substituting out larger planes, there’s more capacity in the market than we’ve had before, so they’re all doing well, we believe.