“We are excited that Sun Country’s uniquely diversified business model, and the efforts of our outstanding employees, produced another strong quarter, with record revenue(1), a 7.0% GAAP operating income margin and a 7.4% adjusted operating income margin(2),” said Jude Bricker, Chief Executive Officer of Sun Country. “Additionally, we continue to maintain solid cost control with fourth quarter adjusted CASM(3) falling by 2.2% versus fourth quarter 2022. Results for the full year were equally impressive. Full-year 2023 revenue exceeded $1 billion for the first time, our GAAP operating income margin was 12.1%, and our adjusted operating income margin of 13.0%(2) was our highest on record(1). GAAP net income for the year was $72.2 million and we grew total year-over-year block hours by 9.8% and total revenue by 17.3%. We believe our unique business model produces superior results across operating environments and 2023 again proved that out. We could not have achieved these record results without the hard work of our dedicated employees. We are looking forward to another successful year in 2024.”
Q4 2023 total revenue of $245.5 million, highest fourth quarter on record(1)Q4 2023 GAAP diluted EPS of $0.10 and operating income margin of 7.0%Q4 2023 Adjusted diluted EPS of $0.12(2) and adjusted operating income margin of 7.4%(2)FY 2023 total revenue of $1.05 billion, highest full year on record(1)FY 2023 GAAP diluted EPS of $1.23 and operating income margin of 12.1%FY 2023 Adjusted diluted EPS of $1.37(2) and adjusted operating income margin of 13.0%(2), highest full year on record(1)
For the quarter ended December 31, 2023, Sun Country reported Income Before Income Tax of $7.7 million and Net Income of $5.6 million, on $245.5 million of revenue. Adjusted Income Before Income Tax for the quarter was $9.3 million(2). GAAP Operating Income during the quarter was $17.1 million, producing an Operating Income Margin of 7.0%, while Adjusted Operating Income was $18.3 million(2), resulting in an Adjusted Operating Income Margin of 7.4%(2).
“We had a very successful 2023,” said Dave Davis, President and Chief Financial Officer. “Our full year GAAP pre-tax margin was 9.0% and we produced an adjusted pre-tax margin of 9.9%(2), which we expect to be the best, or among the best in the industry. Our cost performance improved throughout the year as our fourth quarter adjusted CASM(3) of 7.3 cents was 2.2% lower than a year ago. Additionally, our 2023 GAAP diluted EPS was $1.23, our adjusted diluted EPS was $1.37(2) and we generated a record(1) 21.4% adjusted EBITDA margin(2) for the full year. These positive results allowed us to return cash to shareholders through share repurchases, which in 2023 totaled 4.2 million shares for $68.6 million. Total Capex spending in 2023 was $218.2 million, of which approximately $200 million was for additional aircraft. We expect these aircraft to provide almost all of the passenger lift we need through 2025, resulting in much lower capex levels in 2024.”
Notable Highlights
Strengthened ties with our Minnesota community by becoming the Official Airline of the University of Minnesota Gopher Athletics
Acquired one 737-800 which will remain on lease to Fly Dubai until the fourth quarter 2024. Expected to acquire another 737-800 by the end of February 2024 which will also remain on lease to Fly Dubai.
Capacity
System block hours flown during the fourth quarter of 2023 grew by 10.4% year over year, while scheduled service ASMs increased 14.9%. Cargo block hours also grew 1.8% year over year during this time. For full year 2023, system block hours grew 9.8% driven by an increase in scheduled service block hours of 8.6%, an increase in cargo block hours of 5.8% and an increase of charter block hours of 18.9%.
Fourth quarter charter block hours grew 7.8% year over year driven by the continued growth in flying under long-term contracts, which comprised 70% of total charter flying versus 61% in the fourth quarter of 2022. Full year 2023 charter block hours under long-term contracts were 80% of total charter block hours versus 76% last year. This was mostly due to 25.7% growth in charter flying under long-term contracts versus the full year 2022.
Revenue
For the fourth quarter of 2023, the Company reported total revenue of $245.5 million, which was 8.1% more than the fourth quarter of 2022. The Company’s scheduled service TRASM(4) of 10.7 cents in the fourth quarter of 2023 decreased 9.1% year over year as scheduled service ASMs increased 14.9%. The fourth quarter 2023 total fare per passenger of $156.39 was less than fourth quarter 2022 by 11.8% while scheduled load factor of 84.7% was little changed versus last year. Full year 2023 scheduled service TRASM(4) increased 7.6% while scheduled service ASMs increased 7.2% for the same time period. Full year total fare per passenger of $176.30 grew by 0.6% on a 2.8 percentage point increase in scheduled service load factor.
Charter service revenue is primarily generated through service provided to collegiate and professional sports teams, the U.S. Department of Defense, and casinos. In the fourth quarter of 2023, the Company’s charter service revenue was $46.9 million, an increase of 8.8% year over year. For the full year, charter service revenue was $190.1 million, an increase of 17.6% versus last year.
Cargo revenue consists of revenue earned from flying cargo aircraft under the Air Transportation Services Agreement (“ATSA”) with Amazon. In the fourth quarter of 2023, cargo revenue was $25.3 million, a 3.6% increase versus the fourth quarter of 2022. For the full year, charter service revenue was $99.7 million, an increase of 10.4% versus last year.
Fleet
As of December 31, 2023, the Company had 42 aircraft in its passenger service fleet, operated 12 freighter aircraft in its cargo operation and had six aircraft that are currently on lease to unaffiliated airlines.
Number of Operating Aircraft: 42 passenger, 12 freighter
Number of Routes as of May 2023: 120
Number of Airports Served as of October 2023: 104
Number of Employees: More than 2,500 employees, predominantly based in Minnesota
Headquarters: Minneapolis, Minnesota, USA
2 - See additional details, including reconciliations to the most comparable GAAP measures, in the section titled “Non-GAAP financial measures”
3 - Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, non-cash management stock compensation expense, costs arising from its cargo operations, depreciation and amortization recognized on certain assets that generate lease income, certain commissions, and other costs of selling its vacations product from this measure. See table titled “Reconciliation of CASM to Adjusted CASM”
4 - Scheduled Service TRASM includes Schedule Service revenue, Ancillary revenue, and ASM generating revenue classified within Other Revenue on the Consolidated Statement of Operations / Scheduled Service ASMs. Other Revenue includes rental revenue of approximately $5.9 million and $17.7 million associated with certain assets that generate lease income in the three months and year ended December 31, 2023, respectively, which is not included
5 - Total liquidity = cash and cash equivalents + available-for-sale securities + amount available under revolver
6 - Net debt = current portion of long-term debt + long-term debt + finance lease obligations + operating lease obligations – cash and cash equivalents - available-for-sale securities