Earnings call transcript: Sun Country Airlines Q2 2025 beats EPS forecast

Sun Country Airlines Holdings Inc. (SNCY) reported its Q2 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.14, compared to the forecasted $0.11. This marks a 27.27% surprise. Total revenue reached $263.6 million, slightly above the anticipated $255.98 million. The company maintains a solid financial foundation with a "GOOD" overall health score according to InvestingPro analysis. Despite the positive earnings report, Sun Country’s stock experienced a 10.09% decline, closing at $11.59, influenced by broader market conditions and sector trends. Based on comprehensive analysis, the stock appears undervalued at current levels.

Key Takeaways

• Sun Country reported its twelfth consecutive quarter of profitability.
• Cargo segment revenue surged by 36.8% year-over-year.
• Stock price fell by 10.09% following the earnings release.
• The company plans to expand its cargo fleet to 20 aircraft by Q3 2025.
• Sun Country anticipates revenue between $250-260 million for Q3 2025.

Company Performance

Sun Country Airlines continues to demonstrate resilience with its diversified business model, achieving profitability for the twelfth consecutive quarter. The company reported a total revenue of $263.6 million, a 3.6% increase year-over-year. With trailing twelve-month revenue of $1.09 billion and an impressive free cash flow yield of 19%, the company shows strong financial performance. Despite a slight decline in the passenger segment, the cargo segment excelled with a significant revenue increase of 36.8%, marking its highest quarterly cargo revenue to date. InvestingPro subscribers can access 8 additional key insights about SNCY’s financial health and growth prospects.

Financial Highlights

• Revenue: $263.6 million, up 3.6% year-over-year
• EPS: $0.14, surpassing the $0.11 forecast by 27.27%
• GAAP pretax margin: 3.2%
• Adjusted pretax margin: 3.9%
• Cargo revenue: $34.8 million, up 36.8%

Earnings vs. Forecast

Sun Country Airlines exceeded expectations with an EPS of $0.14, compared to the forecasted $0.11, resulting in a 27.27% positive surprise. Revenue also beat projections, coming in at $263.6 million against the expected $255.98 million. This performance highlights the company’s ability to outperform in a challenging market environment.

Market Reaction

Despite the earnings beat, Sun Country’s stock fell by 10.09% to $11.59. This decline may reflect broader market volatility and investor concerns about the airline sector’s near-term prospects. The stock is trading closer to its 52-week low of $8.10, with a beta of 1.62 indicating higher volatility than the market. Trading at a P/E ratio of 10.47 and EV/EBITDA of 5.12, the stock shows attractive valuation metrics. InvestingPro analysis reveals the stock has significant upside potential, with 3 analysts recently revising their earnings estimates upward.

Outlook & Guidance

Looking ahead, Sun Country projects Q3 2025 revenue between $250-260 million. The company aims for a linear growth trajectory, targeting $1.5 billion in revenue and $300 million in EBITDA by 2027. Analyst consensus remains bullish, with price targets ranging from $12 to $21 per share. Expansion plans include increasing the cargo fleet and launching a new pilot base outside Minneapolis. Get detailed valuation analysis and growth projections with InvestingPro’s comprehensive research report, part of our coverage of over 1,400 US stocks.

Executive Commentary

CEO Jude Bricker stated, "We’re pleased to report our twelfth consecutive quarter of profitability." He emphasized the company’s unique business model, saying, "Our diverse business model is unique in the airline industry." Bricker also highlighted the company’s focus on earnings per share, noting, "We run the business for EPS."

Risks and Challenges

• Fluctuating fuel prices could impact operating costs.
• Economic uncertainties may affect consumer travel demand.
• Competitive pressures from other airlines could influence market share.
• Potential disruptions in the supply chain may affect fleet expansion.
• Regulatory changes in the aviation industry could pose challenges.

Q&A

During the earnings call, analysts inquired about the cargo fleet expansion and potential partnerships, such as with Amazon. Questions also focused on capital allocation strategies and the impact of geographic performance variances. Sun Country addressed these concerns, highlighting its flexibility and strategic plans for growth.

Full transcript - Sun Country Airlines Holdings Inc (SNCY) Q2 2025:

Andrew, Conference Call Operator: Hello, and welcome to the Sun Country Airlines Second Quarter twenty twenty five Earnings Conference Call. My name is Andrew, and I’ll be your operator for today’s call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. You will need to press 11 on your telephone.

You will then hear an automated message advising your hand has been raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I will now turn the call over to Chris Allen, Director of Investor Relations. Mr.

Allen, you may begin.

Chris Allen, Director of Investor Relations, Sun Country Airlines: Thank you. I’m joined today by Jude Bricker, our Chief Executive Officer Bill Troutzales, Chief Financial Officer and a group of other self answer questions. We begin, I’d like to remind everyone that during this call, the company may make certain statements that constitute forward looking statements. Our remarks today may include forward looking statements, which are based on management’s current beliefs, expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially.

We encourage you to review the risk factors and cautionary statements outlined in our earnings release and our most recent SEC filings. We assume no obligation to update any forward looking statements. You can find our second quarter twenty twenty five earnings press release on the Investor Relations portion of our website at ir.suncountry.com. With that said, I’d now like to turn the call over to Jude.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Thanks, Chris. Good morning, everyone. We’re pleased to report our twelfth consecutive quarter of profitability. Our diverse business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we are able to deliver the most flexible scheduled service capacity in the industry.

The combination of our scheduled flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe, due to our structural advantages, we will be able to reliably deliver industry leading profitability throughout all cycles. The theme in 2025 for Sun Country is about growth in our cargo business. At the August, we expect to have all eight twenty twenty five cargo additions in service, bringing our cargo fleet to 20 aircraft. We anticipate fleet growth, along with contractual rate increases, will roughly double versus prior contract our cargo revenue once these additional aircraft reach mature utilization.

In the short term, this rapid growth has caused a pullback in our scheduled service volumes. We are planning that these reductions will be recovered as we move through 2026. I want to provide a little color as to the effects of this rapid cargo growth as it has on our results. Our 2Q results reported yesterday reflect the year over year TRASM improvement of 3.5%. Within the quarter, each month had a positive unit revenue performance.

May had the best year on year improvement with TRASM up 6.6%, which is consistent with our expectation that off peak and shoulder periods are the most sensitive to capacity changes. Importantly, the peak summer months of June, July and August could absorb much more capacity than we were able to deliver with little fall off in unit revenue performance. Here’s the point. First, the rapid growth of our cargo business has required us to pull back scheduled service during our peak summer months. Second, during peak months, unit revenue improvements won’t overcome unit cost pressures of lower utilization.

This situation will be most acute in July and therefore most impactful in 3Q twenty five. We expect margins to expand as we build back our scheduled service with flying that was productive, but that we had to cut. With all this complexity in our current results, I think it’s worthwhile to look into the future when we get the cargo fleet fully utilized, recover our passenger fleet utilization, and add in our own fleet of leased out aircraft, mostly nine hundreds, coming back to us through 2026. That will be an in service fleet of 70 aircraft, 20 cargo, and 50 passenger. With current demand for our product and current fuel prices, I expect the business to deliver roughly $1,500,000,000 in revenue, dollars 300,000,000 in EBITDA, and $2.5 in EPS.

The timing of getting to this is a bit uncertain as we are challenged with induction timing and pilot upgrades, but I expect to be there right around the 2027. In the meantime, we’ll be focused on deploying our free cash flow. Our success in achieving these results will be mainly dependent on our ability to continue to deliver a great product. For 2Q, I’m particularly proud that we delivered the industry’s best completion factor, our most important operating metric. Airline operations are a team event.

I’m so proud of all our folks for delivering for our customers every day. Over to you, Bill.

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Thanks, Jude. As Jude mentioned earlier, we are pleased to report that the second quarter marked the twelfth consecutive quarter of profitability. Our truly diversified revenue streams focused on traditional scheduled passenger service, charter passenger service, and our growing freighter service delivered the highest second quarter revenue in Sun Country history and generated a GAAP pretax margin of 3.2% and an adjusted pretax margin of 3.9%. Furthermore, this is our third consecutive quarter of both total revenue growth year end and year over year improvement in pretax margin. During the second quarter, our cargo block hours were lower than we had anticipated at the beginning of the quarter due to the timing of cargo aircraft deliveries.

That being said, we were able to pivot our pilot resources toward passenger flying and more than offset the reduction in cargo revenue with increased charter revenue, demonstrating the powerful benefit of our uniquely diversified business model. As of today, we have received delivery of all eight of our incremental cargo aircraft, and as Jude mentioned, we remain on track to have them all in service by the end of the third quarter. Second quarter total revenue of $263,600,000 was 3.6% higher than 2024 on a 0.5% decrease in total block hours. Revenue for our passenger segment, which includes both our scheduled service and our charter businesses, was down 0.8% year over year, primarily on a greatly reduced scheduled service operation. Due to our focus on growing our cargo segment this year, scheduled service ASMs declined 6.2% in Q2 versus the same period last year.

Scheduled service TRASM increased 3.7% as total fare increased 6.5%, which offset the 1.3 percentage point decline in load factor. Throughout this year, we have seen scheduled service revenue book closer in and are not anticipating that to change anytime soon. As you described, second quarter demand was strong with May exceeding expectations. Third quarter scheduled service ASMs are expected to contract between 910% as we continue to pull back in support of the growth of our cargo business. Second quarter charter revenue grew 6.4% to 54,300,000 on a 7.9% increase in charter block hours.

As a reminder, some of our contracts have revenue reconciliation based on fuel prices. Since fuel prices were down 15% in the quarter versus the same period in 2024, we naturally received less fuel reconciliation proceeds than we did a year ago on a per block hour basis. Excluding this fuel revenue reconciliation, revenue received from charter flying easily exceeded the 7.9% increase in block hours in the quarter. About 77% of our Q2 charter block hours were flown under long term contracts, which is a similar level as Q2 of last year. Revenue in our cargo segment grew 36.8% in Q2 to $34,800,000 This was the highest quarterly cargo revenue in our history.

Cargo block hours grew 9.5 as we had 15 cargo aircraft in service by the end of the quarter, up from 12 in the previous year. We expect to have all 20 flying by the end of the third quarter as our cargo aircraft induction process is now pacing as planned. Turning now to costs. Q2 total operating expense grew 2.2% on a slight decline in block hours. Adjusted CASM increased 11.3% and was heavily impacted by the 6.2% decline in scheduled service ASMs arising from our ship out of the passenger business into cargo business.

We project this year over year quarterly increase in CASM to be the highest such increase in 2025. It is important to note that our adjusted CASM will remain elevated as we do not anticipate to resume the growth of our scheduled passenger service until the 2026, following the annualization of our cargo growth. Salaries grew in Q2 12.9%, in large part driven by a 7% headcount increase, the increase in pilot contractual rates from the beginning of the year, and our new flight attendant contract that was ratified in the first quarter. Also during the second quarter, landing fees and airport rent expense increased 9.1% on higher rates, while the 14% increase in other operating expense was primarily the result of an increase in operation and a decrease in activity from our engine part sales programs. Regarding our balance sheet, our total liquidity at the end of Q2 was $206,600,000 Given our focus on Amazon growth in 2025 and into 2026, coupled with the aircraft currently on lease to third party airlines, we do not anticipate a need to purchase any incremental aircraft until we begin looking for capacity growth for 2027 and beyond.

During this quarter, we took redelivery of our second Boeing seven thirty seven-nine 100 that was previously on lease to another airline, And we expect both of those aircraft to enter service later this year. We also extended the leases on two of the remaining five aircraft that are on lease to other airlines. And we now expect two of those five to be redelivered to us in Q4 of this year and one in each of Q2, Q3 and 2026. We still expect 2025 CapEx to be between 70,000,000 and $80,000,000 with $21,000,000 already spent in the first half of the year. Our total debt and lease obligations were $562,000,000 at the end of Q2, down from $619,000,000 at the beginning of the year.

We expect to pay down an additional $44,000,000 in debt by the end of the year, and we still have available all of our $25,000,000 share repurchase authorization from our Board of Directors. Turning to guidance, we expect the third quarter total revenue to be between $250,000,000 and $260,000,000 on an increase in block hours of 5% to 8%. I would like to point out that included in our Q3 revenue guide is a reduction of approximately 33% in other revenue versus our Q2 results, driven by a reduction of the number of aircraft we have on lease to unaffiliated airlines, plus a $2,700,000 Q2 benefit of a lease redelivery as described in our 10 Q. We are anticipating our Q3 fuel cost per gallon to be $2.61 and for us to achieve an operating margin between 36%. Our is built for resiliency and similar to what we observed in Q2, we will continue to allocate capacity between segments to maximize profitability and minimize earnings volatility.

With that, operator, I will open up for questions.

Andrew, Conference Call Operator: Certainly. And our first question comes from the line of Ravi Shanker with Morgan Stanley.

Ravi Shanker, Analyst, Morgan Stanley: Great. Thanks. Good morning, everyone. Jude, thanks for that trajectory on the kind of long term normalized EPS. Can you just talk about how purely idiosyncratic versus industry macro dependent that path to two fifty EPS is and maybe kind of what you’re assuming for industry conditions at that time in 2Q twenty twenty seven?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Sure. Thanks, Ravi. When we look at long term revenue forecasts, we use a general tailwind associated with inflation of about 3%. And then we have a two factor model associated with changes in utilization of our fleet and also absolute growth. And we’re not assuming any changes in utilization versus last year as we look forward for those forecasts.

So it really is kind of just normalized, I would say, unit revenue performance, current fuel prices, the cost that we can reliably predict, which today are most of our costs, most of our labor situation has been sorted out post COVID. So I think we are pretty

Ravi Shanker, Analyst, Morgan Stanley: there is not

Jude Bricker, Chief Executive Officer, Sun Country Airlines: a whole lot, I think, of aggressive or conservative assumptions. It’s kind of right down the middle.

Ravi Shanker, Analyst, Morgan Stanley: Understood. That’s helpful. And maybe as a follow-up, apologies if I missed this, but I know your Amazon revenues are not volume dependent, but do you have any sense from them as to what peak season is shaping up like because that’s still somewhat debated in the space? Yes, I’ll make a couple

Jude Bricker, Chief Executive Officer, Sun Country Airlines: of comments and Bill has done a lot of work on this. I mean, the basics are that the utilization of the assets and the availability assets are both delayed. So we’re taking airplanes, we’re doing work to them to get them ready for service, They’re entering service later than we expected, and by virtue of that happening, the fleet isn’t as committed because we want to make sure that we’re executing well. And so it’s just taking a little bit longer to get to, you know, of terminal velocity on that fleet.

Ravi Shanker, Analyst, Morgan Stanley: Very good. Thanks, guys.

Andrew, Conference Call Operator: Thank you. And our next question comes from the line of Brandon Oglenski with Barclays.

Brandon Oglenski, Analyst, Barclays: Good morning. Thanks for taking the question. Jude, maybe I can follow-up there. Can you remind us, do you have like a step up in pricing on that contract as well later this year? Or is that an issue looking into next year?

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Yeah, we so we have a annual this is Bill, by the way, is we have an annual step up on the contract every basically on the anniversary of the contract, that sort of standard with it. And with the with the new fleet coming in, we actually recently, actually, when we put the last aircraft in place, we have a final step up of the of the change in the economics on the on the updated, agreement.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: So current rates will be adjusted by annual escalators from here. Current rates are much higher than they were this time last year based on the the contract that we signed with Amazon at the end of last year. Okay. But we’re at that new

Brandon Oglenski, Analyst, Barclays: higher level run right now? Yeah.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Bill said it just it just kicked in. Just kicked in.

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: So q three will be the

Brandon Oglenski, Analyst, Barclays: Got it. Then, Jude, maybe just a bigger question about industry capacity and maybe strategic actions that can be taken here, just given some of the challenges that your competitors, larger low cost competitors.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah. Our strategy here is to just continue to execute and produce good results and keep an eye out for organic growth opportunities that present themselves through restructuring or disruptions around the industry. I certainly agree with your assessment that there are some challenged airline operators out there. I don’t know what to say. I mean, our approach is basically let’s get a good balance sheet, let’s continue to execute, and hopefully we will be able to move quickly when these opportunities present themselves.

Immediately though, as I look around, I mean, the reason that a lot of these carriers are struggling is because of overcapacity situations, which means we can’t really move into these markets in advance of them having a pullback. So I think we taking the right approach, just continue to execute, build up our Amazon base that allows us to be really nimble with our scheduled service capacity, continue to strengthen the balance sheet, maybe distribute some of our surplus capital to shareholders, and be ready to move when an opportunity.

Ravi Shanker, Analyst, Morgan Stanley: Okay. Appreciate it.

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Thank you. Thank

Andrew, Conference Call Operator: you. And our next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Duane Pfennigwerth, Analyst, Evercore ISI: Hey. Good morning. Thanks. Jude, appreciate you speaking to the longer term earnings power. But wanted to ask you just maybe in the more intermediate term.

It it feels like, we’ve been in kind of a known holding pattern where you’re holding resources in expectation for this cargo ramp. It sounds like although there’s been some shift, the idea that you’re going be kind of fully ramped by the fourth quarter is still on the table. So maybe you could just help us understand kind of the intermediate term margin improvement when you kind of hit your stride in cargo, which feels like the fourth quarter and feel free to push back on that if you don’t feel like fourth quarter would be a good measurement point.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Hey, Duane. Yeah, I think fourth quarter for cargo ramp is pretty good. We’re on track for that. And really what we’re experiencing right now is we’re going to grow credit hours, so pilot availability hours, by 10% year on year. That’s a nice, stable output for us, predictable.

We’re not having to add extra infrastructure. That puts you know, cargo is pilot intensive, so we get less block hours for every credit hour than we do in sched service. And so, you know, we’re gonna grow block hours by a little bit less than that. And when we planned the third quarter, we were planning on the cargo business being even bigger than it turned out to be for the reasons I mentioned earlier. As a result, our scheduled service is incrementally smaller.

Now, we don’t get any offset cost savings on the fixed basis. So we have a bigger fleet, and something else that’s happening is that we have lease returns that are going through induction. Every airline, when they take an airplane, typically begins expensing the ownership of that aircraft when the airplane goes into service. Differently for us, we’re taking a lease redelivery, putting it through our induction process, and continuing to depreciate the asset while it’s being inducted. So we have unproductive assets on the passenger side.

We have, you know, no change in the overhead of the passenger fleet that we had had in service before we started our cargo ramp, and that’s just putting a lot of cost pressure on the business on a unit cost basis as we absorb this cargo growth. But 10% growth this year, 10% growth next year, that puts us into a growth mode again on our scheduled service fleet, you know, scheduled service operations, probably around the second quarter of next year and just continuing on to absorb the fleet that we already own coming into our operating fleet thereafter. So there’s a there’s a little bit of noise. I mean, we’re we’re gonna still lead the industry in margins, but the the growth rate is gonna be a little bit constrained as we absorb this cargo expansion.

Duane Pfennigwerth, Analyst, Evercore ISI: Okay. Appreciate those thoughts. And then just on your I I understand this can move around a little bit, but on your initial view of five to 8% block hour growth for the third quarter specifically, I wonder if you could just comment on how that looks by segment.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yes, sure. Ben, you

Ravi Shanker, Analyst, Morgan Stanley: got that?

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Yes, I have that. So for the third quarter, obviously, there’s going to be a tremendous amount of block hour growth in our cargo segment probably year over year up between 4050%. Scheduled service will be down high single digits. Charter service will be kind of up single digits.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: One thing that’s really important that I tried to cover with my prepared comments is that capacity cuts and service in July are, you know, profit they’re very expensive because the market can easily absorb those hours, and we don’t get much change to our unit revenues by cutting really profitable flights by necessity. Differently, September, we’re cutting marginal marginal flights that would have been in the schedule. So there’s almost, you know, there’s very little effect in, in months like September and early May and off peak periods like that. So it really, you know, we’re kind of at the most acute situation right now with this imbalance across our segments in July and August as we are cutting really productive flying.

Duane Pfennigwerth, Analyst, Evercore ISI: Thank you.

Andrew, Conference Call Operator: Thank you. And our next question comes from the line of Michael Linenberg with Deutsche Bank.

Michael Linenberg, Analyst, Deutsche Bank: Yes. Hey, good morning, everyone. Hey, just sort of back to Duane’s question and maybe trying to get it a little bit more granularly. When we think about just the margin drag in the September, Jude, you’ve talked through all the puts and takes about the ramp up and the fact that you’re underutilizing across your skid service. How should we think about it on a margin basis?

I mean, are we looking like a drag of 300, 400 basis points here? Any color on that would be great.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: I think for the third quarter,

Ravi Shanker, Analyst, Morgan Stanley: you could $10,000,000,

Jude Bricker, Chief Executive Officer, Sun Country Airlines: 4% is To

Michael Linenberg, Analyst, Deutsche Bank: Super, super helpful. And then my second question, as we’ve heard from other carriers, the consumer may be changing in how they book. We’ve heard carriers talk about shorter booking curves. We’ve obviously, the most price sensitive customer seems to be the most impacted right now in the current macro environment. Is there anything that you can talk about?

And maybe what you’re seeing and I realize you’re coming into this with a very constrained capacity backdrop, which may make it more difficult for you to discern some of the maybe structural structural or secular changes that we’re seeing in how people book, etcetera? Thanks.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah. I’ve listened to the second quarter earning calls that have come out thus far, and we’re not really seeing similar situation. I mean, our our bookings are strong. We’re seeing year on year monthly improvements in unit revenue. Our peak periods remain really good.

We’re concentrated on the peak, so that’s kind of drives the business. If you go back to pre COVID margin comparisons for peak days, we’re replicating those situations in spite of higher fuel prices, higher airport costs, higher labor costs, higher maintenance costs associated with OEM pricing. It’s all pass through, it’s just incredibly similar. And the other thing that we’re seeing is kind of like everybody’s saying, domestic’s weak, and we’re going to see pressure on the third quarter. And in some cases, airlines are kinda banking on a fourth quarter recovery.

When you go back and look at our expectation of the third quarter when we plan the year, our budget is almost spot on our performance that we now expect So, to experience in the third like, things are pretty good, and I think it mostly reflects, one is we’re concentrated on a healthy local economy here in Minnesota. Secondly, the the capacity overall for the industry across our network is either slow growth or modestly declining.

Scott Group, Analyst, Wolfe Research: Mhmm.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: And then, you know, we’re we’re kind of also into a point where we’ve absorbed most of the inflationary pressure, so we can be pretty good about where we think costs are gonna fall as we add capacity into the network. So, you know, things are pretty good, and we have a lot of tailwind looking forward into the back of the year with the launch of our loyalty loyalty program. We’re getting PBS out to our crews, which I think is gonna increase productivity. We’ve absorbed the last contractual rate increase on our pilots here this year. So that’ll be a tailwind going into next year’s comps.

One thing on a comp basis that I should bring up is that as you look on third quarter year on year, the only month in the six month period of the second and third quarter where we’ll be near zero or maybe slightly negative on a unit revenue basis is July. And that’s because the comp for 2024 was when Delta experienced their CrowdStrike outage, and we had a lot of reacomp revenue last minute at really high yield. So, but, you know, if you if you stabilize for that, July looks really good. I mean, we’re booking the winter right now. We’re we’re, scheduled out through April.

Bookings look really strong into the winter peak period for us. I mean, August is closing in a lot better than we had thought just a couple weeks ago. So I’m kinda somewhat experiencing what Scott Kirby talked about on his call with the recent strengthening of closed end bookings. We’re certainly seeing that here. But I mean, we’re not experiencing the variance to what we expected that other airlines are talking about that I can’t can’t

Michael Linenberg, Analyst, Deutsche Bank: Dude, how much of December quarter’s booked right now? Like, if you do you have a sense of just

Jude Bricker, Chief Executive Officer, Sun Country Airlines: budget. Mid

Michael Linenberg, Analyst, Deutsche Bank: okay. Okay. That that makes sense.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Looking at the actual numbers right here. Hang on one sec, Mike. What do you got?

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Yeah. That word. Sort of, yeah, mid teen. Exactly. Right?

Ravi Shanker, Analyst, Morgan Stanley: Yeah.

Michael Linenberg, Analyst, Deutsche Bank: Perfect. Now thanks for that. That’s all very helpful. Really appreciate it.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Thanks, Mike.

Andrew, Conference Call Operator: Thank you. And our next question comes from the line of Tom Fitzgerald with TD Cowen.

Tom Fitzgerald, Analyst, TD Cowen: Hi, everyone. Thanks so much for the time. Jude, wanted to return back to capital allocation. And it just seems like you guys have such a lower risk opportunity here versus a normal airline. And with the stock trading around like four times the 2027 potential or mid year 2027, how do you weigh like next year?

How do you kind of weigh that balance between growth opportunities and then shareholder returns? Like will the PE be kind of deciding metric or what else kind of goes into the calculus?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: We run the business for EPS and it’s certainly a viable strategy then to reduce the share count. I think that for me the balance is and I’ll turn this over to Bill then, is that when we got liquidity, we are producing a lot of free cash flow. So to start with that, we are not going to do any debt prepayments beyond our amortization schedule unless it is associated with a refinance. So we’re going to continue to build cash. And I think the balance is do we return to shareholders?

Do we try to find asset deals, which we’re working real hard on trying to find some? Or I’m talking asset deals are for aircraft. Or are we going to have a bunch of dry powder for what we think is going to be a shakeup in the low cost space in the near term? And I think probably we’ll end up doing a little bit of all three. So do you have anything to add?

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: I would just add, I mean, just one thing that we are cognizant of is a fairly severe inflationary pressure on aircraft assets and specifically engine assets that are that’s important to us that so that while we do have relatively modest CapEx outlook, depending on what the severity is of that inflation, it could sort of have some upper pressure, which puts availability pressure on the ability to do shit for the share buybacks. But certainly at at today’s pricing, it’s more attractive than it was yesterday.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: We want to be opportunistic in the asset market. If there’s a big portfolio that comes along for airplanes that we intend to operate or engines we intend to use, we’re gonna we want to be able to act without without any capital constraints. So that’s a consideration as well.

Brandon Oglenski, Analyst, Barclays: Okay. That’s that’s that’s really helpful just

Tom Fitzgerald, Analyst, TD Cowen: to kinda get some of the philosophy there. And then most of them have already been answered, but just thinking about, things go better than expected in 2026, like what some of those, mainly like scheduled service. Do you foresee just given how nimble your model could be like in like June and

Brandon Oglenski, Analyst, Barclays: July with the World Cup?

Tom Fitzgerald, Analyst, TD Cowen: Is that like something where in the past, like you’ve gone into markets like Texas or Hawaiian when they’ve been hot? Like do you foresee that as like maybe an upside opportunity or things in the track charter? Thanks again for the time guys.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Sure, Tom. No, the World Cup will probably be a slightly negative event for us because we’ll be able to schedule around some of the events and pick up some high yielding traffic, but the offset will be the Major League Soccer will be paused during that period. I think it’ll be probably a little bit slightly negative as a result of the World Cup.

Andrew, Conference Call Operator: Thank you. And our next question comes from the line of Scott Group with Wolfe Research.

Scott Group, Analyst, Wolfe Research: Hey, thanks. Good morning. So that couple of questions ago that $10,000,000 drag you’re talking about for Q3, how should we think about what that looks like in Q4? Do you think it’s fully gone by

Chris Allen, Director of Investor Relations, Sun Country Airlines0: the time we get to ’26?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah, so Q4 goes Thanksgiving and Christmas peak periods. There’s about an aggregate thirty days where things are really good. And so if we can recover really it is about pilot capacity by then, then there won’t be any impact. That is unlikely. I think it will you know, this is kind of peak impact, and it will kind of ameliorate over the fourth and first quarters of the subsequent year.

The next big opportunity for us is in March ’26, And I feel better about getting back to an unconstrained situation on the scheduled service fleet by then.

Scott Group, Analyst, Wolfe Research: And then that longer term comment about February, second quarter twenty seven, it’s just like a very specific sort of quarter. So what and it’s like especially because Q1 is usually your peak quarter, like, why is it Q2? Is there something about the shape of earnings for you that changes now with some of these mix changes? I’m just surprised it was such a specific quarter.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Got it. It’s a pretty simple analysis. It’s just our 10% growth, rolling that out when that gets to a fleet of 70 at at the utilization that we expect it to be over the long run. So it’s it’s just algebra.

Scott Group, Analyst, Wolfe Research: Okay. Okay. And then maybe just lastly, just to follow-up on that. Like, is is there a step function that happens there? Or do you think we see sort of linear improvement, like in ’26, on our way to that sort of longer term goal?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Right. We’re not assuming any step function. We’re assuming a linear approach, but there is a lot of uncertainty there, particularly around changes. We are launching a crew base this year, which is the first non Minneapolis pilot base this company has ever had. We don’t know what the effect of that’s gonna be, but I think it’s gonna be positive.

We’re launching PBS, as I said earlier, which is a different way to roster our crews. There’s a lot of efficiency in that. And so those initiatives together may change the trajectory substantially, and we can bring utilization online faster. So I think we’re summarize all that by saying we’re pretty conservative on where we think growth is gonna go. I think there’s probably, particularly with hiring of pilots being where it is, there’s no constraints there.

Particularly with that, I think that we’re probably on the conservative side.

Scott Group, Analyst, Wolfe Research: Okay, great. If I could sneak one last one. Go ahead. If I could just sneak in one last one, any color on competitive capacity you’re seeing, and as you look out over the next quarter or two?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah, if you kind of look month by month, if you go all the way out, and a lot of airlines haven’t extended their schedules past January, which is a head scratcher in and of itself. But if you look out across our network all the way through our selling schedule in the April, it’s either flat to down. It looks really, really good. And I can’t imagine we don’t have, you know, with kind of demand maintaining its current level, capacity very moderate, you know, down single digits across our network. I think we’re gonna continue to see the kind of unit revenue trends we already produced in the second quarter.

Importantly, Southwest pulled back from Minneapolis market, Sprint Frontier pulled back from Minneapolis market, Allegiant doesn’t have Minneapolis and there’s current selling schedule. I mean, we’re just seeing this become very quickly a two airline market and I think both carriers are be really healthy in that environment.

Scott Group, Analyst, Wolfe Research: Okay, that’s great color. Thank you. Appreciate it.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Thanks, Scott. Take care.

Andrew, Conference Call Operator: Thank you. And our next question comes from the line of James Kirby with JPMorgan.

Chris Allen, Director of Investor Relations, Sun Country Airlines1: Hey, good morning. Maybe just a little more color on charter and how to model that business out into early twenty twenty six given scheduled service. It sounds like capacity is going to be flat to down in the first half of the year. Is that consistent with where charter capacity should be? And maybe just a comment on ad hoc flying, looks like last quarter was better than historical run rate.

And so any comments there as we think about back half of this year and early next?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah. Let me give you some general comments about how we think about charters and then and then Bill can give you kind of what we can guide to. I think so so charters, it comes in two flavors. One is long term commitments, which operate economically very similar to our cargo business. Very stable, very reliable margins, pass through economics associated with ground handling fuel, etcetera.

Those will not change. I don’t think there is going to be a lot of growth in those opportunities for us. It is casino charter charters, Major League Soccer, and our VIP business, which operates out of LA. The other side of that is ad hoc bids, tend to happen closer in. In the fall for us, that is collegiate football.

All year round is military. Those have been up for us recently in the second quarter because of availability of crew and airplanes, as we didn’t have the kind of growth that we had expected from our cargo fleet, as we talked about earlier. Looking forward, I think that’s probably going to continue to be the case through the back half of the year, where we’ll be able to be more aggressive at picking up these ad hoc opportunities. But I think it’s going to be a relatively minor impact on overall results. Bill, any?

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Yeah, we spoke about sort of the the growth of charter earlier. I mean, from a on a unit revenue perspective, I mean, our charter our charter as a whole sort of on a per block hour basis is growing on an annual basis of approximately 4%. There’s some, you know, peaks and valleys to the to the quarters, but that’s probably a good, good run rate.

Duane Pfennigwerth, Analyst, Evercore ISI: Okay, got it. That’s helpful.

Chris Allen, Director of Investor Relations, Sun Country Airlines1: I appreciate the color. And then second question, of the $1,500,000,000 top line by the 2027, are you able to break that down maybe by mix of segment? I mean or if you are not able to? You talked about long term target weights. Is that just consistent with where you are seeing it?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yes, two thirty, two forty of that is going to be in cargo. Bill talked about charter growth, you know, 4% from where it is today. The remainder will be in sketch service.

Duane Pfennigwerth, Analyst, Evercore ISI: Great. Thanks, Jude. Appreciate it.

Michael Linenberg, Analyst, Deutsche Bank: Yep. Thank

Andrew, Conference Call Operator: you. And our next question comes from the line of Catherine O’Brien with Goldman Sachs.

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: Hey, Catherine.

Chris Allen, Director of Investor Relations, Sun Country Airlines2: Good morning, everyone. Hey, good morning. Thanks for the time. So you guys extended two leases that you have with the third party airlines pushing out the returns into 2026. Is that a reflection of your view on staffing or demand?

Doesn’t sound like it or just the economics are too good to pass up? I’m just trying to get a sense of how you’re thinking about when you can start pushing the utilization on that passenger fleet more and if the gating factor is still pilots.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah, so that’s a scenario where we are faced with all the issues that we talked about where we’re growing but not able to absorb the fleet growth that we’re experiencing, and then also the operator really wanting to keep the airplanes. So we’re getting great economics by leasing them out until we’re ready to operate them. It’s kind of an intersection of the two points that you brought up.

Chris Allen, Director of Investor Relations, Sun Country Airlines2: Okay. Great. And then I know you talked about July, having tough comps, rest of the month, driving me positive. Can you give us some more details on how things are booking into the fall? Like, you know, how how does August compare to, June?

Any early thoughts of September or any geographies you’d wanna call out as particularly strong or or maybe less strong?

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah. Sure. I’m happy to give you more color. We’re we’re we’re the most significant trend, I think, in our bookings is that we’re consistently coming in under where we expected on load factor and higher where we expected on fares. And then ancillary unit revenue has continued its steady climb of low single digit improvement.

Now, the fare load factor trade off is a result of demand close in. And as we adjust our pricing in expectation of that demand, we’re accepting lower load factors to hold seats available for the expectation of closer end demand. Across the network, generally, we’re seeing I mean, is really good in the Northeast, really good in the Midwest, and moderately kind of flat MexicanCaribbean, weak in weaker in California, Southern California, desert destinations. And I think most of that is attributable to OA capacity. So, you know, I feel these are sort of normal variations across geographies that we experience every time we look at revenue.

So I think everything is in a pretty tight band of, of, of expectations, and nothing really stands out as weird to me at this point. So I feel really good about where we are predicting things to go based on the fact that we are hitting where we predicted to be now.

Michael Linenberg, Analyst, Deutsche Bank: Yeah. No, that makes a lot

Chris Allen, Director of Investor Relations, Sun Country Airlines2: of sense. Maybe I could squeeze this one really quick one in. You mentioned participating in a potential shakeup in the ULCC space. As of now, I know hard to predict. There’s not like an opportunity exact moment, but are are you speaking more on acquiring assets?

Could that include outright M and A? I know you’ve talked about that in the past. Like, you need to see a cost structure and a pilot. And a pilot contract that would align better with yours, like, as it stands now, are any of those things. Aligned where you could be talking more out in M and A or right now it’s looking more like asset acquisitions if there’s something.

Attractive

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah, so kind of all of the above, but I’d say we’ve I don’t spend any mental horsepower on things. I have limited amount of that to give, I tend to focus on things I could control. So for us, that’s asset acquisitions and then being ready for organic growth opportunities based on a shakeup in the industry. M and A, because of our size, is probably going to be something that we are asked to participate in, initiating. And, you know, so therefore, we don’t I don’t spend any time worrying about it.

And I think it’s an unlikely scenario because of the because of how different our model is. You know, we’re just best serving our shareholders by keeping our heads down, executing a plan, and continuing to outperform the industry.

Chris Allen, Director of Investor Relations, Sun Country Airlines2: I think it sounds like a prudent plan. Thanks so much for the time.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Thanks, Dan. Thank

Andrew, Conference Call Operator: you. And our next question comes from the line of Christopher Stathalopoulos with SIG.

Chris Allen, Director of Investor Relations, Sun Country Airlines0: Good morning, everyone. Thanks for the questions. Going back to the targets on ’27, so just want to understand, I guess, the inputs here. So I heard a two factor model wasn’t clear exactly what’s in that, but 3% inflation, two forty, I think you said, in cargo out of the 1.5 on the top line. So in utilization similar to last year, if that’s the case, so maybe if you could give on the utilization piece exactly what’s contemplated on the schedule and cargo side.

And then is there anything unique with respect to charter? You did call out casinos, Major League Soccer, military, college football, that would be different perhaps versus where those contracts currently sit? Thanks.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah, there’s a lot there. So first to kind of review the inputs, so the 3% is just an inflationary, I mean, we just add inflation to kind of the backdrop of where we do long term forecast. The two factor model is just what we experience on unit revenue impact from a change in utilization, which we are assuming is zero because we replicating our inflation, I mean, our utilization as we look forward. And then absolute growth. So absolute growth puts pressure on unit revenues, but that tends to come down as as incremental capacity adds same store sales or new markets.

The impact of that kinda stabilizes over time. So that’s how we think about forecasting long term revenue. Our last year’s fleet utilization was seven point three hours per day per passenger airplane, and so we’re assuming we get back to that somewhere around 2027. And that’s the inputs on the long range plan that we have. On the charter growth, The track programs, as I mentioned, I don’t see right now a whole lot of opportunity to grow that business.

But ad hoc is really a function of having fleeting and crew available when there’s availability. So as the passenger fleet grows, we’d like to keep ad hoc flying kind of proportionally the same, which is to say, you know, we have off peak opportunities where we have surplus fleet and cruise, and we can take advantage of any opportunity that presents itself. That’s kind of the basis of our long range assumptions. Anything to add, Bill?

Bill Troutzales, Chief Financial Officer, Sun Country Airlines: No, I mean, just keep in mind that this year versus last year that utilization will continue to decline faster in the back half of the year because of the because of the cargo sort of ramping up. So that’s why it’s going to take us a while. You might might not see much utilization variance in the first half of the year as Judith described in it. But that’ll sort of kick in and sort of bottom out probably in Q1 of next year on

Jude Bricker, Chief Executive Officer, Sun Country Airlines: a year over year basis.

Chris Allen, Director of Investor Relations, Sun Country Airlines0: Okay. And the second question on the what I heard is some delay around the utilization with the Amazon aircraft. So is that just some delays with deliveries, prepping or perhaps some hesitation around the schedules given all the noise around tariffs and demand? And that if weak if there is a weak peak season, any are those aircraft able to be deployed in other areas? Just want to understand, again, if you could reiterate weak peak, what that might mean for utilization, volume commitments, etcetera.

Thanks.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: It’s the CMI model. We operate the schedule they give us. And so as the airplanes were coming in and they were delayed, they adjusted by lowering the utilization and also the assumed entry into service dates of the rest of the fleet. We had already built our scheduled service plans that included these higher production levels for the cargo fleet and therefore we were just under allocated. You know, that will correct itself in very short order.

You know, I can’t read anything into what the schedule that they produce was a result of. Just don’t know other than those internal issues around, getting the planes in service.

Chris Allen, Director of Investor Relations, Sun Country Airlines0: Okay. And the week peak season piece, if that does occur? I realize it’s still early.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: I’m sorry. Say it again, please.

Chris Allen, Director of Investor Relations, Sun Country Airlines0: For peak season shipping, still early, but if the season does come in softer than expected, are you able to do anything else around those assets? And just maybe if you could remind us around the volume commitments and and how that all works? Thanks.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Yeah, sure. Looking backwards, generally, the schedule, which is what we love about it, is very flat and reliable. So my assumption would be going forward that we would expect the same. And these are Amazon airplanes flown for Amazon’s purposes, and I don’t expect anything different out of this fleet.

Scott Group, Analyst, Wolfe Research: Okay. Thank you.

Andrew, Conference Call Operator: Thank you. And I’m showing no further questions. So with that, I’ll hand the call back over to CEO, Jude Bricker, for any closing remarks.

Jude Bricker, Chief Executive Officer, Sun Country Airlines: Hey, guys. Thanks for your time today. We’re really excited about where we ended, and I look forward to talking to you again in ninety days. Take care, everybody.

Andrew, Conference Call Operator: Ladies and gentlemen, thank you for participating. This does conclude today’s program, and you may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.