The first period of the year has been a good one for Sun Country Airlines Holdings, unlike many in the U.S. aviation industry it has reported a profit for Q1.
For the quarter ended March 31, 2022, Sun Country reported net income of $4 million and income before income tax of $6 million, on $227 million of revenue. Adjusted income before income tax for the quarter was $16 million(1). GAAP operating income during the quarter was $22 million, producing an operating margin of 9.6%, while adjusted operating income was $23 million(1), resulting in an adjusted operating income margin of 10.0%.
Jude Bricker, Chief Executive Officer of Sun Country said: “I am proud of all the people at Sun Country who, once again, delivered quarterly profitable growth despite the challenging macro-economic and pandemic backdrop. Very strong bookings and unit revenue trends, combined with solid cost control, drove a first-quarter net income, adjusted net income and adjusted net income per share of approximately $4 million, $12 million and $0.20 per share, respectively. These results came despite much higher-than-expected fuel prices and Omicron-driven headwinds earlier in the quarter. We anticipate passenger demand to remain strong with second-quarter scheduled service TRASM expected to increase between 25% and 34% versus the second quarter of 2019. Sun Country’s uniquely resilient model has now generated our fourth consecutive quarter of profitability and our sixth consecutive quarter of greater than 15% EBITDAR margins.”
As of March 31, 2022, the Company had 38 aircraft in its passenger service fleet, an increase of two from December 31, 2021. In addition to the two aircraft that entered into service in the first quarter of 2022, Sun Country completed the purchase of four aircraft in April 2022 and is under a letter of intent for a seventh aircraft for delivery in 2022. In April, the Company completed a lease buyout and anticipates a second lease buyout to occur in the third quarter (both of which were financed by the EETC). It currently operates twelve freighter aircraft in its cargo operation.
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.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | % Change | ||||||
| Operating Revenues: | ||||||||
| Scheduled Service | $ | 124,068 | $ | 54,620 | 127.1 | |||
| Charter Service | 32,879 | 25,805 | 27.4 | |||||
| Ancillary | 45,086 | 23,770 | 89.7 | |||||
| Passenger | 202,033 | 104,195 | 93.9 | |||||
| Cargo | 21,053 | 21,585 | (2.5 | ) | ||||
| Other | 3,439 | 1,831 | 87.8 | |||||
| Total Operating Revenue | 226,525 | 127,611 | 77.5 | |||||
| Operating Expenses: | ||||||||
| Aircraft Fuel | 64,544 | 24,274 | 165.9 | |||||
| Salaries, Wages, and Benefits | 59,617 | 44,075 | 35.3 | |||||
| Aircraft Rent | 3,186 | 5,599 | (43.1 | ) | ||||
| Maintenance | 11,995 | 9,210 | 30.2 | |||||
| Sales and Marketing | 8,628 | 5,110 | 68.8 | |||||
| Depreciation and Amortization | 15,328 | 12,615 | 21.5 | |||||
| Ground Handling | 7,958 | 5,230 | 52.2 | |||||
| Landing Fees and Airport Rent | 10,286 | 8,785 | 17.1 | |||||
| Special Items, net | - | (26,871 | ) | NM | ||||
| Other Operating, net | 23,150 | 14,651 | 58.0 | |||||
| Total Operating Expenses | 204,692 | 102,678 | 99.4 | |||||
| Operating Income | 21,833 | 24,933 | (12.4 | ) | ||||
| Non-operating Income (Expense): | ||||||||
| Interest Income | 24 | 15 | 60.0 | |||||
| Interest Expense | (8,562 | ) | (7,121 | ) | 20.2 | |||
| Other, net | (6,876 | ) | (5 | ) | NM | |||
| Total Non-operating Income (Expense), net | (15,414 | ) | (7,111 | ) | 116.8 | |||
| Income before Income Tax | 6,419 | 17,822 | (64.0 | ) | ||||
| Income Tax Expense | 2,782 | 5,406 | (48.6 | ) | ||||
| Net Income | $ | 3,637 | $ | 12,416 | (70.7 | ) | ||
| Net Income per share to common stockholders: | ||||||||
| Basic | $ | 0.06 | $ | 0.26 | (76.9 | ) | ||
| Diluted | $ | 0.06 | $ | 0.24 | (75.0 | ) | ||
| Shares used for computation: | ||||||||
| Basic | 57,907,655 | 48,496,077 | 19.4 | |||||
| Diluted | 61,731,942 | 52,508,186 | 17.6 | |||||
“NM” stands for not meaningful
Key Operating Statistics
The following table presents key operating statistics and metrics for the three months ended March 31, 2022 and 2021.
| Three Months Ended March 31, | |||||||||
| 2022 | 2021 | % Change | |||||||
| Scheduled service statistics: | |||||||||
| Revenue passenger miles (RPMs) – thousands | 1,338,459 | 774,999 | 72.7 | ||||||
| Available seat miles (ASMs) – thousands | 1,684,532 | 1,158,012 | 45.5 | ||||||
| Load factor | 79.5% | 66.9% | 12.6pp | ||||||
| Revenue passengers carried | 922,652 | 553,032 | 66.8 | ||||||
| Departures | 6,227 | 4,323 | 44.0 | ||||||
| Block hours | 22,433 | 15,207 | 47.5 | ||||||
| Scheduled service TRASM(1) - cents | 10.25 | 6.93 | 47.9 | ||||||
| Average base fare per passenger | $134.47 | $98.77 | 36.1 | ||||||
| Ancillary revenue per passenger | $48.87 | $42.98 | 13.7 | ||||||
| Fuel gallons - thousands | 17,401 | 11,557 | 50.6 | ||||||
| Charter statistics: | |||||||||
| Departures | 1,620 | 1,511 | 7.2 | ||||||
| Block hours | 3,804 | 3,331 | 14.2 | ||||||
| Available seats miles (ASMs) - thousands | 235,705 | 211,721 | 11.3 | ||||||
| Fuel gallons - thousands | 2,758 | 2,357 | 17.0 | ||||||
| Cargo statistics: | |||||||||
| Departures | 2,574 | 2,565 | 0.4 | ||||||
| Block hours | 7,390 | 8,242 | (10.3) | ||||||
| Total system statistics: | |||||||||
| Average passenger aircraft | 34.1 | 31.0 | 10.0 | ||||||
| Passenger aircraft – end of period | 38 | 31 | 22.6 | ||||||
| Cargo aircraft – end of period | 12 | 12 | - | ||||||
| Available seat miles (ASMs) – thousands | 1,928,149 | 1,376,796 | 40.0 | ||||||
| Departures | 10,487 | 8,452 | 24.1 | ||||||
| Block hours | 33,805 | 26,932 | 25.5 | ||||||
| Daily utilization – hours | 8.6 | 6.7 | 28.6 | ||||||
| Average stage length – miles | 1,336 | 1,278 | 4.5 | ||||||
| Total revenue per ASM (TRASM)(2) - cents | 10.66 | 7.70 | 38.4 | ||||||
| Cost per ASM (CASM) - cents | 10.62 | 7.46 | 42.3 | ||||||
| Adjusted CASM - cents | 6.21 | 6.15 | 0.9 | ||||||
| Fuel gallons - thousands | 20,245 | 13,993 | 44.7 | ||||||
| Fuel cost per gallon, excluding derivatives | $3.20 | $1.91 | 67.9 | ||||||
| Employees at end of period | 2,316 | 1,768 | 31.0 | ||||||
1 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs
2 – Total system TRASM = total revenue – cargo revenue / system ASMs
SUMMARY BALANCE SHEET
(Dollars in millions)
(Unaudited – amounts may not recalculate due to rounding)
| 3/31/2022 | 12/31/2021 | % Change | ||||
| Cash and cash equivalents | $ | 272.4 | $ | 309.3 | (11.9 | ) |
| Other current assets | 76.8 | 66.1 | 16.2 | |||
| Total current assets | 349.2 | 375.4 | (7.0 | ) | ||
| Total property & equipment, net | 675.6 | 573.6 | 17.8 | |||
| Other | 394.8 | 427.6 | (7.7 | ) | ||
| Total assets | 1,419.6 | 1,376.6 | 3.1 | |||
| Air traffic liabilities | 110.9 | 118.6 | (6.5 | ) | ||
| Current finance lease obligations | 31.1 | 11.7 | 165.8 | |||
| Current operating lease obligations | 10.2 | 17.2 | (40.7 | ) | ||
| Current maturities of long-term debt | 34.7 | 29.4 | 18.0 | |||
| Other current liabilities | 114.6 | 104.8 | 9.3 | |||
| Total current liabilities | 301.5 | 281.7 | 7.0 | |||
| Finance lease obligations | 239.0 | 180.5 | 32.4 | |||
| Operating lease obligations | 23.9 | 58.8 | (59.4 | ) | ||
| Long-term debt | 242.5 | 248.0 | (2.2 | ) | ||
| Income tax receivable agreement | 105.6 | 98.8 | 6.9 | |||
| Other | 13.8 | 22.0 | (37.3 | ) | ||
| Total liabilities | 926.3 | 889.8 | 4.1 | |||
| Total stockholders equity | $ | 493.3 | $ | 486.8 | 1.3 | |
SUMMARY CASH FLOW
(Dollars in millions)
(Unaudited - amounts may not recalculate due to rounding)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | % Change | ||||||
| Net cash provided by operating activities | $ | 18.2 | $ | 15.8 | 15.2 | |||
| Purchases of property & equipment | (49.7 | ) | (54.4 | ) | (8.6 | ) | ||
| Other | 0.1 | (0.2 | ) | NM | ||||
| Net cash used in investing activities | (49.6 | ) | (54.6 | ) | (9.2 | ) | ||
| Cash received from stock offering | - | 235.9 | NM | |||||
| Proceeds from borrowing | 78.0 | 68.0 | 14.7 | |||||
| Repayment of finance lease obligations | (4.5 | ) | (3.9 | ) | 15.4 | |||
| Repayment of borrowings | (77.9 | ) | (46.1 | ) | 69.0 | |||
| Other | (1.5 | ) | (9.9 | ) | (84.8 | ) | ||
| Net cash provided by financing activities | (5.9 | ) | 244.0 | NM | ||||
| Change in cash | (37.3 | ) | 205.3 | NM | ||||
| Cash and equivalents and restricted cash – beginning of the period | 317.8 | 70.4 | 351.4 | |||||
| Cash and equivalents and restricted cash – end of the period | $ | 280.5 | $ | 275.6 | 1.8 | |||
“NM” stands for not meaningful
Calculation of Special Items
Dollars in millions – Unaudited - amounts may not recalculate due to rounding
The following tables lists the items that are included as Special Items, net.
| Three Months Ended March 31, | |||||
| 2022 | 2021 | ||||
| CARES Act employee retention credit(1) | $ | - | $ | (32.2 | ) |
| CARES Act employee retention credit(2) | - | (0.3 | ) | ||
| Aircraft purchase impacts(3) | - | 5.7 | |||
| Total special items, net | $ | - | $ | (26.9 | ) |
(1) In the quarter ended March 31, 2021, the United States Department of the Treasury awarded the Company a grant of $32.2 under the Payroll Support Program Extension (“PSP2”) under the Consolidated Appropriations Act, 2021
(2) Relates to a credit recognized under the CARES Act Employee Retention credit which is a refundable tax credit against certain employee taxes
(3) Five aircraft were purchase in March 2021 that were previously under operating lease. Aircraft lease buy-out expense represents the net costs incurred to terminate the leases on those five aircraft. This includes the associated lease termination costs, write-off of previously capitalized maintenance deposits, and the write-off of over-market liabilities.
