Sun Country Airlines Reports Second Quarter 2023 Results

Revenue of $261 million, highest second quarter on record⁽¹⁾
GAAP diluted EPS of $0.35 and operating income of $36 million
Adj. diluted EPS⁽²⁾ of $0.40 and adjusted operating income⁽²⁾ of $40 million_, highest second quarter on record⁽¹⁾

MINNEAPOLIS, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Sun Country Airlines Holdings, Inc. (“Sun Country Airlines,” “Sun Country,” the “Company”) ( SNCY) today reported financial results for its second quarter ended June 30, 2023.

“Sun Country had an historically strong second quarter, in what is typically a seasonally weaker quarter for us,” said Jude Bricker, Chief Executive Officer of Sun Country. “Total revenue was up by 19.2% versus the second quarter 2022 and we produced a GAAP operating margin of 13.6% and an adjusted operating margin⁽²⁾ of 15.3%. The revenue environment continued to be robust as total average fare increased 2.7% and load factor was up by 2 percentage points versus the second quarter of 2022. This helped to drive a GAAP diluted EPS of $0.35 and an Adjusted diluted EPS⁽²⁾ of $0.40 in the second quarter. In addition to our excellent performance, our board of directors has authorized an additional $30 million for repurchases of Sun Country shares.”

Overview of Second Quarter

"NM" stands for not meaningful

For the quarter ended June 30, 2023, Sun Country reported net income of $21 million and income before income tax of $27 million, on $261 million of revenue. Adjusted income before income tax⁽²⁾ for the quarter was $31 million. GAAP operating income during the quarter was $36 million, while adjusted operating income⁽²⁾ was $40 million_.

“During the quarter, revenue growth continued across our scheduled service, charter and cargo businesses, and the second quarter was our eighth consecutive quarter where year-over-year total revenue growth has exceeded total block hour growth,” said Dave Davis, President and Chief Financial Officer. “Scheduled service TRASM⁽³⁾ increased 10.3% while scheduled service ASMs increased 5.6% versus second quarter 2022. This contributed to net income of $21 million and an adjusted EBITDA margin⁽²⁾ of 23.9% for the quarter, and net income of $59 million and an adjusted EBITDA margin of 25.3% year to date. Total flown block hours during the second quarter across all business lines grew by 11.3% year over year. Adjusted CASM⁽⁴⁾ was 10.4% higher than second quarter 2022, which reflects declining year-over-year CASM growth versus the first quarter. We expect year-over-year Adjusted CASM⁽⁴⁾ trends to continue to improve in the quarters ahead.”

Notable Highlights

• Named the Best Low-Cost Airline in North America by Skytrax at the 2023 World Airline Awards.
• Added nonstop flying from Milwaukee to both Orlando and Phoenix, and increased flying between Milwaukee and Cancun over the busy winter travel period.
• The Company repurchased 416,751 shares at an average price of $17.82 during the second quarter. The board of directors approved an additional $30 million of buyback authority which brings the current repurchase authorization to $32.8 million.
  

Capacity

System block hours flown during the second quarter of 2023 grew by 11.3% year-over-year. Cargo block hours grew in the second quarter by 10.4% year-over-year as Amazon flying was constrained last year due to scheduled maintenance events. Scheduled service block hours and charter block hours increased by 7.4% and 23.9%, respectively year-over-year on a 21.7% increase in average passenger aircraft.

Charter block hours under long-term contracts comprised 87.2% of the total charter flying performed in the second quarter of 2023. As the Company continues to normalize its aircraft utilization, it intends to pursue more ad-hoc charter flying.

Revenue

For the second quarter of 2023, the Company reported total revenue of $261 million, which was 19.2% more than the second quarter of 2022. The Company’s scheduled service TRASM⁽³⁾ of 12.74 cents in the second quarter of 2023 increased 10.3% year-over-year while scheduled service ASMs also increased 5.6%. The second quarter 2023 average total fare of $177 exceeded second quarter 2022 by 2.7% and included strong average ancillary revenue per passenger of $66. In the second quarter of 2023, the Company’s charter service revenue was $50 million, an increase of 16.1% year-over-year. On a rate basis, second quarter 2023 charter revenue per block hour was 6.3% lower than the rate in the second quarter of 2022 as lower fuel prices reduced the fuel reimbursement amount that we received from our charter customers.

In the second quarter of 2023, cargo revenue was $25 million, an 18.1% increase versus the second quarter of 2022. The variance was primarily driven by a 10.4% increase in block hours and the annual rate escalation which went into effect in mid-December 2022.

Cost

For the second quarter of 2023, total GAAP operating expenses increased 4.5% year-over-year, primarily due to a 25.9% increase in salaries, wages, and benefits. This increase was driven, in part, by a $3 million one-time vesting of management stock options. Fuel expense decreased by 32.0% compared to second quarter 2022. Adjusted CASM⁽⁴⁾ in the second quarter increased 10.4% versus the second quarter 2022 due to a decrease in daily aircraft utilization of 9.5% for the same period.

Balance Sheet and Liquidity

Total liquidity⁽⁵⁾ was $263 million on June 30, 2023, while the Company’s net debt⁽⁶⁾ was $490 million.

Fleet

As of June 30, 2023, the Company had 43 aircraft in its passenger service fleet, operated 12 freighter aircraft in its cargo operation, and had five aircraft held for operating lease.

Guidance for Third Quarter 2023

Conference Call & Webcast Details

Sun Country Airlines will host a conference call to discuss its second quarter 2023 results at 8:30 a.m. Eastern Time on Friday, August 4, 2023. A live broadcast of the conference call will be available via the investor relations section of Sun Country Airlines’ website at https://ir.suncountry.com/news-events/events-and-presentations. The online replay will be available on the same website approximately one hour after the call.

About Sun Country Airlines

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. Based in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers and charter customers and providing cargo services, with flights throughout the United States and to destinations in Mexico, Central America, Canada, and the Caribbean.

End Notes

Forward Looking Statements

This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. The forward-looking statements are relating to:

• our strategy, outlook and growth prospects;

• our operational and financial targets and dividend policy;

• general economic trends and trends in the industry and markets;

• potential repurchases of our common stock; and

• the competitive environment in which we operate.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

These forward-looking statements reflect our views with respect to future events as of the date of this press release and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. We anticipate that subsequent events and developments will cause our views to change. You should read this press release completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements. Additional information concerning certain factors is contained in the Company’s Securities and Exchange Commission filings, including but not limited to the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Non-GAAP Financial Measures

We sometimes use information that is derived from the Consolidated Financial Statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this document to the most directly comparable GAAP financial measures.