“We had a very strong second quarter driven by revenue outperformance in our scheduled passenger service business amid strong continued recovery in leisure travel demand,” said Jude Bricker, Chief Executive Officer of Sun Country. “Passenger revenue growth was driven by higher fares, strong ancillary sales and continued recovery in capacity. When combined with our resilient Cargo business and steadily improving charter operation, we generated a second quarter profit after removing the benefit of the CARES Act grants, further demonstrating the strength of our unique, variable capacity business model.”
Second Quarter 2021 Highlights
Taken delivery of two additional aircraftAnnounced continued expansion of the Company’s route network including service to eleven new airports: Milwaukee Mitchell International Airport (MKE), Palm Beach International (PBI), Owen Roberts International Airport in Grand Cayman (GCM), Providenciales International Airport in Turks and Caicos (PLS), St. Pete-Clearwater International Airport (PIE), Punta Gorda Airport (PGD), Asheville Regional Airport (AVL), Phoenix-Mesa Gateway Airport (AZA), Duluth International Airport (DLH), Green Bay Austin Straubel International Airport (GRB) and Rochester International Airport (RST)Announced 20 new nonstop routes, our largest in company history, the majority will begin flying in the second half of 2021Welcomed Tom Kennedy to the Board of Directors and as Chairman of the Audit CommitteeReceived $39.4 million grant from the CARES Act Payroll Support Program during the second quarterCapacity
On a total available seat mile (“ASM”) basis, the Company saw total ASMs grow 5% versus the first quarter of 2021, which is down 17% versus the second quarter of 2019. Charter block hours also increased sequentially versus the first quarter of 2021, by 10%, and are 24% lower than they were in the same period of 2019. Cargo block hours were approximately flat versus the first quarter 2021 which was as expected. Comparisons to the second quarter 2020 are not meaningful as that was the first full quarter that was impacted by COVID-19.
Revenue
For the second quarter of 2021, the Company reported total revenue of $149.2 million which was $22 million, or 17%, sequentially higher than the $127.6 million recorded in the first quarter of 2021, and 12% below the second quarter of 2019. The Company’s scheduled revenue per scheduled ASM (PRASM) of 5.6 cents in the second quarter of 2021 declined 16% versus the same time period in 2019 while scheduled service load factor was 77%, the highest since the fourth quarter of 2019. Ancillary revenue has remained strong throughout the downturn. Ancillary revenue per passenger of $41.66 was 26% higher than the second quarter of 2019 which helped to limit the decline in TRASM to 9% when compared to 2019.
Charter service revenue is primarily generated through service provided to collegiate and professional sports teams, the U.S. Department of Defense, casinos and other customers. In the second quarter of 2021, the Company’s charter service revenue was $28.9 million, an increase of 12% versus $25.8 million in the first quarter of 2021. Charter revenue was down 31% versus the second quarter of 2019 as the Casino business is still ramping up from 2019 levels and military charter unit revenues are depressed due to other airlines redeploying large aircraft that are normally flying in international markets.
Cargo revenue consists of revenue earned from flying cargo aircraft under the Air Transportation Services Agreement (“ATSA”) with Amazon. In the second quarter of 2021, cargo revenue was $22.1 million, a 2% increase versus the first quarter of 2021. Flying under the ATSA began in May 2020.
Cost
For the second quarter of 2021, total GAAP operating expenses decreased 3% sequentially versus the first quarter of 2021 and 37% versus the second quarter of 2019. Second quarter 2021 operating expense includes a net Special Items credit of $38.5 million, consisting primarily of a $39.4 million credit from the CARES Act Payroll Support Program, offset by certain one-time items related to the purchase of an aircraft that was previously under operating lease. Excluding these Special Items, total adjusted operating expenses decreased 9% versus the same time in 2019. The Company recognized an $18.7 million gain in the period, recorded in non-operating income / (expense), for the Tax Receivable Agreement with our pre-IPO stockholders.
The Company continues to focus on reducing its unit operating costs including reducing aircraft ownership expenses, ground handling, and distribution expenses. Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, Special Items described above, non-cash management stock compensation expenses, costs allocated to its cargo operations (starting in 2020 when the Company launched cargo operations), certain commissions and other costs of selling its vacations product from this measure. In the second quarter of 2021, Adjusted CASM was 6.35(2) cents.
Balance Sheet and Liquidity
The Company reduced its net debt(3) for the second consecutive quarter from $236 million at the end of the first quarter 2021 to $208 million at the end of the second quarter. Cash generated through operations have been better than expected which has improved cash balances. During the second quarter, the Company received a total of $39.4 million of PSP grant proceeds from the US Treasury under PSP-3 and a top-off of PSP-2. As of the end of the second quarter, the Company had total liquidity of $336 million, consisting of $311 million in cash and equivalents and access to $25 million through an undrawn revolver.
Fleet
The Company currently operates 34 aircraft in passenger service, an increase of three since March 31, having taken deliveries of two aircraft during the second quarter and one additional in July. It also operates 12 freighter aircraft in its cargo operation. The Company is actively pursuing used aircraft transactions and expects to have at least 36 passenger aircraft in our fleet by the end of the year.
Overview of Second Quarter
| Three Months Ended June 30, | |||||||
| (unaudited) (in millions, except share amounts) | 2021 | 2020 | % Change | ||||
| Total operating revenue | $ | 149.2 | $ | 35.4 | 321 | ||
| Operating income (loss) | 49.2 | (2.2 | ) | NM | |||
| Income (loss) before income tax | 61.2 | (7.9 | ) | NM | |||
| Net income (loss) | 51.8 | (6.0 | ) | NM | |||
| Diluted earnings (loss) per share | $ | 0.83 | $ | (0.13 | ) | NM | |
“NM” stands for not meaningful
| Three Months Ended June 30, | |||||||
| (unaudited) (in millions, except share amounts) | 2021 | 2020 | % Change | ||||
| Adjusted operating income (loss) (1) | $ | 11.5 | $ | (30.8 | ) | NM | |
| Adjusted income (loss) before income tax (1) | 5.4 | (36.2 | ) | NM | |||
| Adjusted net income (loss) (1) | 4.5 | (27.8 | ) | NM | |||
| Adjusted diluted earnings (loss) per share (1) | $ | 0.07 | $ | (0.59 | ) | NM | |
| Six Months Ended June 30, | |||||||
| (unaudited) (in millions, except share amounts) | 2021 | 2020 | % Change | ||||
| Total operating revenue | $ | 276.8 | $ | 215.7 | 28 | ||
| Operating income | 74.2 | 13.0 | 471 | ||||
| Income before income tax | 79.0 | 1.8 | NM | ||||
| Net income | 64.2 | 1.2 | NM | ||||
| Diluted earnings per share | $ | 1.12 | $ | 0.02 | NM | ||
| Six Months Ended June 30, | |||||||
| (unaudited) (in millions, except share amounts) | 2021 | 2020 | % Change | ||||
| Adjusted operating income (loss) (1) | $ | 12.7 | $ | (15.2 | ) | NM | |
| Adjusted income (loss) before income tax (1) | 0.7 | (26.0 | ) | NM | |||
| Adjusted net loss (1) | (0.4 | ) | (20.2 | ) | NM | ||
| Adjusted diluted earnings (loss) per share (1) | $ | (0.01 | ) | $ | (0.42 | ) | NM |
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