Sun Country reported a net loss of $4 million...

Sun Country Airlines, the budget U.S. regional carrier has issued its financial results for its second quarter ended June 30, 2022, which show a net loss of $4 million, which is rather good considering the difficult trading conditions over the last few months. 

The airline 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 of 2019 by $28.5 million. 

Charter service revenue is primarily generated through services 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.

Highlights for the quarter included:

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

“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.”  

Dave Davis, President and Chief Financial Officer. said “Demand continues to be at some of the strongest levels that we have seen. 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.”

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

alance 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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited)

	Three Months Ended June 30,
		2022			2021(7)				% Change
Operating Revenues:
Scheduled Service	$	108,412			$	67,073			61.6
Charter Service		42,749				28,898			47.9
Ancillary		44,201				29,159			51.6
Passenger		195,362				125,130			56.1
Cargo		21,190				22,098			(4.1	)
Other		2,515				1,961			28.3
Total Operating Revenue		219,067				149,189			46.8
Operating Expenses:
Aircraft Fuel		76,947				29,709			159.0
Salaries, Wages, and Benefits		60,298				42,316			42.5
Aircraft Rent		2,211				3,815			(42.0	)
Maintenance		12,782				11,300			13.1
Sales and Marketing		7,881				5,822			35.4
Depreciation and Amortization		16,854				14,208			18.6
Ground Handling		8,212				6,551			25.4
Landing Fees and Airport Rent		9,496				8,752			8.5
Special Items, net		—				(39,819	)		(100.0	)
Other Operating, net		21,017				16,746			25.5
Total Operating Expenses		215,698				99,400			117.0
Operating Income		3,369				49,789			(93.2	)
Non-operating Income (Expense):
Interest Income		532				9			NM
Interest Expense		(7,042	)			(6,080	)		15.8
Other, net		(1,702	)			18,054			NM
Total Non-operating Income (Expense), net		(8,212	)			11,983			(168.5	)
Income (Loss) before Income Tax		(4,843	)			61,772			(107.8	)
Income (Benefit) Tax Expense		(921	)			9,595			(109.6	)
Net Income (Loss)	$	(3,922	)		$	52,177			(107.5	)
Net Income (Loss) per share to common stockholders:
Basic	$	(0.07	)		$	0.91			(107.7	)
Diluted	$	(0.07	)		$	0.84			(108.3	)
Shares used for computation:
Basic		58,060,716				57,156,159			1.6
Diluted		58,060,716				61,982,441			(6.3	)

“NM” stands for not meaningful

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited)

	Six Months Ended June 30,
		2022			2021(7)				% Change
Operating Revenues:
Scheduled Service	$	232,479			$	121,693			91.0
Charter Service		75,628				54,703			38.3
Ancillary		89,287				52,929			68.7
Passenger		397,394				229,325			73.3
Cargo		42,243				43,684			(3.3	)
Other		5,954				3,793			57.0
Total Operating Revenue		445,591				276,802			61.0
Operating Expenses:
Aircraft Fuel		141,492				53,984			162.1
Salaries, Wages, and Benefits		119,915				86,392			38.8
Aircraft Rent		5,397				9,414			(42.7	)
Maintenance		24,777				20,510			20.8
Sales and Marketing		16,509				10,932			51.0
Depreciation and Amortization		32,182				26,823			20.0
Ground Handling		16,170				11,781			37.3
Landing Fees and Airport Rent		19,782				17,537			12.8
Special Items, net		—				(72,355	)		(100.0	)
Other Operating, net		44,166				31,397			40.7
Total Operating Expenses		420,390				196,415			114.0
Operating Income		25,201				80,387			(68.7	)
Non-operating Income (Expense):
Interest Income		556				24			NM
Interest Expense		(15,604	)			(13,201	)		18.2
Other, net		(8,577	)			18,049			NM
Total Non-operating Income (Expense), net		(23,625	)			4,872			NM
Income before Income Tax		1,576				85,259			(98.2	)
Income Tax Expense		1,861				16,304			(88.6	)
Net Income (Loss)	$	(285	)		$	68,955			(100.4	)
Net Income (Loss) per share to common stockholders:
Basic	$	0.00			$	1.30			(100.0	)
Diluted	$	0.00			$	1.20			(100.0	)
Shares used for computation:
Basic		57,984,608				52,850,041			9.7
Diluted		57,984,608				57,403,593			1.0

“NM” stands for not meaningful

KEY OPERATING STATISTICS

The following table presents key operating statistics and metrics for the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30,
		2022		2021(7)			% Change
Scheduled Service Statistics:
Revenue passenger miles (RPMs) – thousands		1,126,030			919,034		22.5
Available seat miles (ASMs) – thousands		1,343,116			1,198,768		12.0
Load factor		83.8	%		76.7	%	7.1
Revenue passengers carried		884,088			700,019		26.3
Departures		5,674			4,921		15.3
Block hours		18,205			15,900		14.5
Scheduled service TRASM(1) - cents		11.55			8.19		41.0
Average base fare per passenger	$	122.63		$	95.81		28.0
Ancillary revenue per passenger	$	50.00		$	41.66		20.0
Fuel gallons - thousands		14,187			12,267		15.7
Charter Statistics:
Departures		2,235			1,727		29.4
Block hours		4,573			3,656		25.1
Available seats miles (ASMs) - thousands		278,804			237,723		17.3
Fuel gallons - thousands		3,271			2,622		24.8
Cargo Statistics:
Departures		2,693			2,752		(2.1	)
Block hours		7,762			8,198		(5.3	)
Total System Statistics:
Average passenger aircraft		34.5			31.0		11.3
Passenger aircraft – end of period		41			33		24.2
Cargo aircraft – end of period		12			12		—
Available seat miles (ASMs) – thousands		1,632,501			1,442,744		13.2
Departures		10,687			9,445		13.1
Block hours		30,755			27,874		10.3
Daily utilization – hours		7.4			7.0		5.7
Average stage length – miles		1,120			1,179		(5.0	)
Total revenue per ASM (TRASM)(2) - cents		12.12			8.81		37.6
Cost per ASM (CASM) - cents		13.21			6.89		91.7
Adjusted CASM - cents		7.14			6.40		11.6
Fuel gallons - thousands		17,568			14,955		17.5
Fuel cost per gallon, excluding derivatives	$	4.39		$	2.07		112.1
Employees at end of period		2,282			1,815		25.7

1 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs

2 – Total system TRASM = total revenue – cargo revenue / system ASMs

KEY OPERATING STATISTICS

	Six Months Ended June 30,
		2022		2021(7)			% Change
Scheduled Service Statistics:
Revenue passenger miles (RPMs) – thousands		2,464,490			1,694,033		45.5
Available seat miles (ASMs) – thousands		3,027,648			2,356,780		28.5
Load factor		81.4	%		71.9	%	9.5
Revenue passengers carried		1,806,740			1,253,051		44.2
Departures		11,901			9,244		28.7
Block hours		40,638			31,107		30.6
Scheduled service TRASM(1) - cents		10.82			7.57		42.9
Average base fare per passenger	$	128.67		$	97.12		32.5
Ancillary revenue per passenger	$	49.42		$	42.24		17.0
Fuel gallons - thousands		31,587			23,824		32.6
Charter Statistics:
Departures		3,855			3,238		19.1
Block hours		8,377			6,987		19.9
Available seats miles (ASMs) - thousands		514,509			449,444		14.5
Fuel gallons - thousands		6,029			4,979		21.1
Cargo Statistics:
Departures		5,267			5,317		(0.9	)
Block hours		15,152			16,440		(7.8	)
Total System Statistics:
Average passenger aircraft		34.3			31.0		10.6
Passenger aircraft – end of period		41			33		24.2
Cargo aircraft – end of period		12			12		—
Available seat miles (ASMs) – thousands		3,560,651			2,819,540		26.3
Departures		21,174			17,897		18.3
Block hours		64,560			54,806		17.8
Daily utilization – hours		8.0			6.8		17.6
Average stage length – miles		1,227			1,225		0.2
Total revenue per ASM (TRASM)(2) - cents		11.33			8.27		37.0
Cost per ASM (CASM) - cents		11.81			6.97		69.4
Adjusted CASM - cents		6.64			6.28		5.7
Fuel gallons - thousands		37,813			28,948		30.6
Fuel cost per gallon, excluding derivatives	$	3.76		$	1.99		88.9
Employees at end of period		2,282			1,815		25.7

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) (amounts may not recalculate due to rounding)

	June 30, 2022			December 31, 2021(7)			% Change
	(Unaudited)
Cash & Cash Equivalents	$	212.9		$	309.3		(31.2	)
Other Current Assets		150.5			66.1		127.6
Total Current Assets		363.3			375.4		(3.2	)
Total Property & Equipment, net		745.6			578.5		28.9
Other		397.8			426.5		(6.7	)
Total Assets		1,506.7			1,380.4		9.2
Air Traffic Liabilities		124.0			118.6		4.6
Current Finance Lease Obligations		29.4			11.7		151.3
Current Operating Lease Obligations		10.2			17.2		(40.7	)
Current Maturities of Long-Term Debt		43.8			29.4		49.0
Other Current Liabilities		124.0			104.7		18.4
Total Current Liabilities		331.4			281.7		17.6
Finance Lease Obligations		220.2			180.5		22.0
Operating Lease Obligations		21.4			58.8		(63.6	)
Long-Term Debt		319.7			248.0		28.9
Income Tax Receivable Agreement Liability		106.2			98.8		7.5
Other		11.9			22.1		(46.1	)
Total Liabilities		1,010.9			889.8		13.6
Total Stockholders Equity	$	495.9		$	490.6		1.1

SUMMARY CASH FLOW (Dollars in millions) (Unaudited - amounts may not recalculate due to rounding)

	Six Months Ended June 30,
		2022			2021(7)				% Change
Net cash provided by operating activities	$	37.1			$	96.8			(61.7	)
Purchases of property & equipment		(137.6	)			(73.7	)		86.8
Other		(61.3	)			(0.5	)		NM
Net cash used in investing activities		(199.0	)			(74.2	)		168.3
Cash received from stock offering		—				235.9			(100.0	)
Proceeds from borrowing		172.5				80.5			114.3
Repayment of finance lease obligations		(24.3	)			(7.9	)		208.9
Repayment of borrowings		(86.0	)			(74.7	)		15.2
Other		(1.0	)			(11.4	)		(90.9	)
Net cash provided by financing activities		61.1				222.5			(72.5	)
Net Increase (Decrease) in cash		(100.8	)			245.1			(141.1	)
Cash, Cash Equivalents and Restricted Cash – Beginning of the Period		317.8				70.4			351.6
Cash, Cash Equivalents and Restricted Cash – End of the Period	$	217.0			$	315.5			(31.2	)

“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 June 30,
		2022		2021(7)
CARES Act employee grant recognition (1)	$	—		$	(39.4	)
CARES Act employee retention credit (2)		—			(0.4	)
Total Special Items, net	$	—		$	(39.8	)

	Six Months Ended June 30,
		2022		2021(7)
CARES Act employee grant recognition (3)	$	—		$	(71.6	)
CARES Act employee retention credit (2)		—			(0.8	)
Total Special Items, net	$	—		$	(72.4	)

(1	)	In the quarter ended June 30, 2021, the United States Department of the Treasury awarded the Company a grant of $39.4 under the Payroll Support Program (“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	)	In the first half of 2021, the United States Department of the Treasury awarded the Company a grant of $71.6 under the Payroll Support Program (“PSP2”) under the Consolidated Appropriations Act, 2021