Sun Country Airlines celebrates 40 years of flying

Sun Country Airlines is celebrating 40 years of flying with a special “40 Years of Flight” banner on several aircraft.

Copyright Photo: Mark Durbin.

Over the years, Sun Country has reshaped itself many times in order to survive, endure and grow.

Currently, the company is tagging itself as “a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter and cargo businesses.”

Overview

Sun Country Airlines is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter and cargo businesses. By doing so, we believe we are able to generate high growth, high margins and strong cash flows with greater resilience than other passenger airlines. We focus on serving leisure and visiting friends and relatives (“VFR”) passengers and charter customers and providing CMI service to Amazon, with flights to destinations in North America, Central America and the Caribbean. Based in Minnesota, we operate an agile network that includes our scheduled service business and our synergistic charter and cargo businesses. We share resources, such as flight crews, across our scheduled service, charter and cargo business lines with the objective of generating higher returns and margins and mitigating the seasonality of our route network. We optimize capacity allocation by market, time of year, day of week and line of business by shifting flying to markets during periods of peak demand and away from markets during periods of low demand with far greater frequency than nearly all other large U.S. passenger airlines. We believe our flexible business model generates higher returns and margins while also providing greater resiliency to economic and industry downturns than a traditional scheduled service carrier.

Company Facts

  • Number of Operating Aircraft: 43 passenger, 12 freighter
  • Number of Routes as of April 2022: 92
  • Number of Airports Served as of April 2022: 73
  • Number of Employees: More than 1,600 employees, predominantly based in Minnesota
  • Headquarters: Minneapolis, Minnesota, USA

Our Network

The map below represents our current network as of July 2022.

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Community Partnerships

Sun Country Airlines remains committed to giving back to the communities in which it serves. The airline partners with local organizations that demonstrate the same shared values to celebrate the individuals who continue to make Minnesota a great place to live and visit.

Make-A-Wish Minnesota

Sun Country Airlines has been a longtime partner with Make-A-Wish Minnesota, bringing joy to children experiencing hardships. Sun Country Airlines provides flights for children with critical illnesses to help them safely arrive at their wish destinations and achieve their dreams.

In 2018, Sun Country Airlines began a 3-year commitment to donate an estimated $720,000 worth of travel to accommodate every wish kid traveling anywhere the airline flies.

Each December, Sun Country Airline’s annual “Flight to the North Pole” helps bring holiday cheer to more than 70 Wish Kids by “flying” them to the home of Santa Claus.

Everyday Heroes

Sun Country Airlines has partnered with Hubbard Broadcasting to create a one-of-a-kind recognition program called “The Sun Country Everyday Heroes” program. The program invites Minnesotans to nominate someone in their community who goes above and beyond to help others in times of need, often with little or no recognition. Everyday Heroes are selected monthly with a special spotlight on the “KS95 Morning Show,” KSTP’s “5 Eyewitness Morning News” and KSTP’s talk show “Twin Cities Live.” This hero also wins a Sun Country Airlines travel voucher valued at $500.

Hennepin Theatre Trust Spotlight Education Program

Sun Country Airlines sponsors the Hennepin Theatre Trust Spotlight Education program which honors and supports Minnesota high school musical theater students and programs. As a presenting sponsor, Sun Country Airlines donates all-expense-paid trips to New York City for up to four selected students to meet with industry professionals, participate in musical theater workshops and attend Broadway shows.

Saint Paul Saints

Sun Country Airlines is the Official Airline of the St. Paul Saints, a local baseball team that’s part of the American Association of Independent Professional Baseball. This partnership aligns two like-minded hometown brands that strive to offer family-friendly fun at a great value. For years, Sun Country has focused on bringing Minnesotans to fun places, and this partnership is an opportunity to have fun right here in Minnesota. As part of the partnership, Sun Country sponsors Travel Tuesdays, which includes a chance for fans to win free travel.

Community Partnerships

 

Previously the reported on its second quarter results:

Sun Country Airlines Holdings, Inc. (Sun Country Airlines), reported financial results for its second quarter ended June 30, 2022.

“Despite the second quarter being a historically seasonally weaker quarter, scheduled service TRASM in the quarter was up 29% versus the second quarter 2019 and 13% sequentially versus first quarter 2022. We generated a positive operating profit of $3.4 million and an adjusted operating profit of $4 million despite fuel prices averaging $4.39 per gallon during the quarter,” said Jude Bricker, Chief Executive Officer of Sun Country. “During the month of June, scheduled service TRASM was 44% higher than in 2019 and we generated a GAAP operating margin of almost 8%, all while we were paying $4.47 per gallon for jet fuel. We continued to see strong leisure demand in July and expect it to stay elevated through the summer travel period. We are facing the same training challenges that have impacted the rest of the industry, resulting in less scheduled service flying than we would like to have flown and negatively impacting results We are making progress on resolving these training challenges and fundamentally view them to be temporary in nature; I am as bullish as ever on all of the critical factors that will determine Sun Country’s long-term success.”

Overview of Second Quarter Three Months Ended June 30,
(unaudited) (in millions, except per share amounts) 2022 2021(7) % Change
Total Operating Revenue $ 219.1 $ 149.2 46.8
Operating Income 3.4 49.8 (93.2 )
Income (Loss) Before Income Tax (4.8 ) 61.8 (107.8 )
Net Income (Loss) (3.9 ) 52.2 (107.5 )
Diluted earnings (Loss) per share $ (0.07 ) $ 0.84 (108.3 )
Three Months Ended June 30,
(unaudited) (in millions, except per share amounts) 2022 2021(7) % Change
Adjusted Operating Income (1) $ 3.9 $ 10.8 (63.4 )
Adjusted Income (Loss) Before Income Tax (1) (2.6 ) 4.7 NM
Adjusted Net Income (Loss) (1) (1.8 ) 3.9 NM
Adjusted diluted earnings (Loss) per share (1) $ (0.03 ) $ 0.06 NM
Six Months Ended June 30,
(unaudited) (in millions, except per share amounts) 2022 2021(7) % Change
Total Operating Revenue $ 445.6 $ 276.8 61.0
Operating Income 25.2 80.4 (68.7 )
Income Before Income Tax 1.6 85.3 (98.2 )
Net Income (Loss) (0.3 ) 69.0 (100.4 )
Diluted earnings (Loss) per share $ 0.00 $ 1.20 (100.0 )
Six Months Ended June 30,
(unaudited) (in millions, except per share amounts) 2022 2021(7) % Change
Adjusted Operating Income (1) $ 26.7 $ 12.0 123.2
Adjusted Income Before Income Tax (1) 13.0 0.0 NM
Adjusted Net Income (Loss) (1) 10.5 (1.0 ) NM
Adjusted diluted earnings (Loss) per share (1) $ 0.18 $ (0.02 ) NM

“NM” stands for not meaningful

For the quarter ended June 30, 2022, Sun Country reported a net loss of $4 million and a loss before income tax of $5 million, on $219 million of revenue. Adjusted loss before income tax for the quarter was $3 million(1). GAAP operating income during the quarter was $3 million, producing an operating margin of 1.5%, while adjusted operating income was $4 million(1), resulting in an adjusted operating income margin of 1.8%(1).

“Demand continues to be at some of the strongest levels that we have seen,” said Dave Davis, President and Chief Financial Officer. “Unfortunately, despite growing second quarter block hours by 23% versus 2019, we were undersized in the quarter due to training challenges limiting our scheduled service and ad hoc charter growth. Since signing our new pilot agreement in December of last year, we have been able to attract all of the new hire pilots we need, and attrition has been greatly reduced.  We are making strong progress in expanding our training pipeline to accommodate our growth and we anticipate seeing the benefits later this year. Capacity constraints have pressured our unit costs by limiting aircraft utilization. As we hire and train new staff at a record pace for Sun Country, new flying will come at high marginal profitability as the needed assets already exist.”

Notable Highlights

  • Adding a third aircraft to its charter service for Caesars Entertainment in October 2022
  • Selected by the U.S. Department of Transportation to provide Essential Air Service (EAS) for Chippewa Valley Regional Airport (EAU) in Eau Claire, WI, beginning in December 2022
  • Announced new service to Grand Cayman beginning in December 2022
  • Airline Business awarded Sun Country with the Airline Strategy Award 2022 for Sector Leadership

Capacity

System block hours flown during the second quarter of 2022 grew by 10% year over year and by 23% versus the same period in 2019, driven by the growth in our cargo business. Staffing challenges impacted passenger service capacity with scheduled service block hours and charter block hours lower by 9% and 5% when compared to the second quarter of 2019.

Charter block hours under long term contracts remain the bulk of the charter flying performed in the second quarter. This composed 92% of total charter flying versus 51% in the second quarter of 2019. As the Company begins to normalize its aircraft utilization, it will be able to pursue more ad-hoc charter flying.

Revenue

For the second quarter of 2022, the Company reported total revenue of $219 million, which was 29% more than the second quarter of 2019. Excluding the $21 million in cargo revenue that did not exist in 2019, revenue still exceeded second quarter 2019 by $28.5 million. The Company’s scheduled service TRASM (3) of 11.6 cents in the second quarter of 2022 increased 29% from the second quarter of 2019 while scheduled service ASMs decreased 6%. The second quarter 2022 total fare of $173 exceeded second quarter 2019 by 23%, and included strong ancillary revenue per passenger of $50.

Charter service revenue is primarily generated through service provided to collegiate and professional sports teams, the U.S. Department of Defense, casinos, and other customers. In the second quarter of 2022, the Company’s charter service revenue was $43 million, an increase of 3% versus second quarter 2019. On a rate basis, second quarter 2022 charter revenue per block hour was 8% higher than the rate in the second quarter of 2019.

Cargo revenue consists of revenue earned from flying cargo aircraft under the Air Transportation Services Agreement (“ATSA”) with Amazon. In the second quarter of 2022, cargo revenue was $21 million, a 4% decrease versus the second quarter of 2021 due to the timing of planned heavy maintenance events.

Cost

For the second quarter of 2022, total GAAP operating expenses increased 35% versus the second quarter of 2019, primarily due to a 77% increase in aircraft fuel expense in the quarter. Adjusted CASM in the second quarter increased 15% in the second quarter 2022 versus the second quarter 2019 while total ASMs decreased 6% for the same period. Second quarter 2022 was also impacted by the new pilot agreement that was signed at the end of 2021.

Balance Sheet and Liquidity

The Company’s net debt(5) on June 30, 2022 was $362 million, while total liquidity(6) was $308 million.

(unaudited) (in millions) June 30, 2022 December 31, 2021
Cash and Cash Equivalents $ 212.9 $ 309.3
Available-for-Sale Securities 70.1
Amount Available Under Revolving Credit Facility 25.0 25.0
Total Liquidity $ 308.0 $ 334.3
June 30, 2022 December 31, 2021
Long-term Debt $ 363.5 $ 277.4
Finance Lease Obligations 249.6 192.2
Operating Lease Obligations 31.6 76.0
Total Debt and Lease Obligations 644.7 545.6
Cash and Cash Equivalents 212.9 309.3
Available-for-Sale Securities 70.1
Net Debt $ 361.7 $ 236.3

Fleet

As of June 30, 2022, the Company had 41 aircraft in its passenger service fleet, and operated twelve freighter aircraft in its cargo operation.

Guidance for Third Quarter 2022

Q3 2022 H/(L) vs Q3 2019
Total revenue – millions $215 to $220 25% to 28%
Economic fuel cost per gallon $3.84
Operating income margin – percentage 3% – 5%
Effective tax rate 23%
Total system block hours – thousands 31 to 32 17% to 21%

Video:

Sun Country aircraft photo gallery: