Sun Country Airlines Holdings has just reported financial results for its fourth quarter and full year ended December 31, 2021.
“We closed out 2021 in a very strong way,” said Jude Bricker, Chief Executive Officer of Sun Country. “The fourth quarter delivered our 5th consecutive quarter of greater than 15% adjusted EBITDAR margins and a full year adjusted net profit of $20 million or $0.33 cents per share. We also ratified a new labor agreement with our pilots, offering highly competitive pay rates, benefits and work rules, allowing Sun Country to attract the pilots we need to support our future growth. Even including the new agreement, we expect our 2022 full year adjusted CASM to be lower than our adjusted CASM in 2019. The company is in a tremendous position, and we are excited to see it outperform in 2022 and beyond.”
For the quarter ended December 31, 2021, Sun Country reported a net loss of $0.6 million and income before income tax of $0.2 million, on $173 million of revenue. Adjusted income before income tax for the quarter was $8 million(1). GAAP operating income during the quarter was $11 million, producing an operating margin of 6%, while adjusted operating income was $15 million(1), resulting in an adjusted operating income margin of 9%(1).
“We are very pleased to have produced a 9% adjusted operating margin and adjusted earnings of $0.10 per diluted share in a challenging fourth quarter,” said Dave Davis, President and Chief Financial Officer of Sun Country. “Similar to other airlines, our operations were challenged by harsh weather conditions and staffing outages driven by the Omicron variant. In addition, we faced a technology issue that impacted us during the peak Christmas holiday travel period. Demand was modestly softer than expected in December, which we believe to have been due to the Omicron variant. Beginning in mid-January, we have seen a very strong rebound in bookings. Despite the challenges in the fourth quarter, we exceeded our earlier revenue and earnings expectations, and fourth quarter total revenue per available seat mile (total system TRASM(2)), which excludes cargo revenue, exceeded fourth quarter 2019 TRASM by 3.4%.”
Ratified a new four-year agreement with our pilots that became effective in January 2022, which will serve as a key enabler of Sun Country’s growth plansAnnounced a new five-year agreement with Caesars Entertainment to provide them with two aircraft worth of flying beginning in March 2022In January 2022, we entered into letters of intent (LOI) to add five 737-800 aircraft to the Sun Country fleet in 2022. In addition to the two aircraft that were acquired in 2021 with deliveries scheduled in 2022, seven of the eight planned adds for this year have already been identifiedWelcomed Marion Blakey to the Board of Directors
Capacity
The Company continues to grow sensibly through the recovery. Fourth quarter total available seat miles (“ASM”) decreased versus the third quarter of 2021 by 6% as a reflection of the seasonality of leisure demand and are still 12% lower than the fourth quarter of 2019 due largely to ongoing efforts to match supply to COVID-reduced demand levels. Charter activity continues to recover as block hours have grown sequentially for three consecutive quarters from the second to the fourth quarter of 2021. Charter block hours increased by 8%, and cargo block hours grew by 5% versus the third quarter of 2021. Cargo comparisons to the fourth quarter of 2020 are not meaningful as the first quarter of 2021 was the first time all twelve cargo aircraft were in service.
Revenue
For the fourth quarter of 2021, the Company reported total revenue of $173 million, which was $9 million, or 5%, higher than the fourth quarter of 2019. The Company’s scheduled service TRASM (3) of 9.3 cents in the fourth quarter of 2021 increased 5% from the fourth quarter 2019, while fourth quarter 2021 ancillary revenue of $44.05 per passenger was the highest in the company’s history.
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 fourth quarter of 2021, the Company’s charter service revenue was $39 million, an increase of 15% versus $34 million in the third quarter of 2021. Charter revenue was down 21% versus the fourth quarter of 2019 due to continued weakness in military flying. The Major League Soccer and Caesars agreements signed in 2021 will ramp up meaningfully in early 2022.
Cost
For the fourth quarter of 2021, total GAAP operating expenses increased only 6% versus the fourth quarter of 2019, despite a 25% increase in total block hours flown. In the fourth quarter of 2021, Adjusted CASM(4) was 6.91 cents. For the full year 2021, Adjusted CASM was 6.44 cents versus 6.31 cents in 2019 while total ASMs in 2021 were 18% lower than in 2019.
Balance Sheet and Liquidity
The Company’s net debt(5) at year end 2021 was $236 million, versus $475 million at the end of 2020. Total liquidity(6) at the end of the fourth quarter was $334 million. Total liquidity increased $34 million from the end of the third quarter.
Fleet
As of December 31, 2021, the Company operated 36 aircraft in its passenger service fleet, an increase of five from the beginning of 2021. Sun Country has committed to take delivery of two more aircraft in first quarter 2022 and has executed LOI’s for an additional 5 aircraft for delivery in 2022. The Company expects to add eight or more total aircraft to its passenger fleet this year. It continues to operate 12 freighter aircraft in its cargo operation.
1 – See additional details in the tables below in the section titled “Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income, Adjusted EBITDAR and Adjusted EBITDAR Margin”
2 – Total system TRASM = total revenue – cargo revenue / system ASMs
3 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs
4 – Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, Special Items, non-cash management stock compensation expense, costs arising from 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. See table titled “Reconciliation of CASM to Adjusted CASM”
5 – Net debt = current portion of long-term debt + long-term debt + finance lease obligations + operating lease obligations – cash and cash equivalents
6 – Total liquidity = cash and cash equivalents + amount of undrawn revolver
Overview of Fourth Quarter and Full Year
| Three Months Ended Dec 31, | |||||||||
| (unaudited) (in millions, except per share amounts) | 2021 | 2020 | % Change | ||||||
| Total operating revenue | $ | 172.6 | $ | 107.8 | 60.1 | ||||
| Operating income (loss) | 10.9 | (4.4 | ) | NM | |||||
| Income (loss) before income tax | 0.2 | (10.3 | ) | NM | |||||
| Net income (loss) | (0.6 | ) | (8.0 | ) | NM | ||||
| Diluted earnings (loss) per share | $ | (0.01 | ) | $ | (0.17 | ) | NM | ||
“NM” stands for not meaningful
| Three Months Ended Dec 31, | |||||||||
| (unaudited) (in millions, except per share amounts) | 2021 | 2020 | % Change | ||||||
| Adjusted operating income (loss) (1) | $ | 14.8 | $ | (3.4 | ) | NM | |||
| Adjusted income (loss) before income tax (1) | 8.0 | (9.2 | ) | NM | |||||
| Adjusted net income (loss) (1) | 6.2 | (7.2 | ) | NM | |||||
| Adjusted diluted earnings (loss) per share (1) | $ | 0.10 | $ | (0.15 | ) | NM | |||
| Twelve Months Ended Dec 31, | |||||||||
| (unaudited) (in millions, except per share amounts) | 2021 | 2020 | % Change | ||||||
| Total operating revenue | $ | 623.0 | $ | 401.5 | 55.2 | ||||
| Operating income | 107.0 | 17.4 | 514.9 | ||||||
| Income (loss) before income tax | 95.4 | (4.7 | ) | NM | |||||
| Net income (loss) | 77.5 | (3.9 | ) | NM | |||||
| Diluted earnings (loss) per share | $ | 1.31 | $ | (0.08 | ) | NM | |||
| Twelve Months Ended Dec 31, | |||||||||
| (unaudited) (in millions, except per share amounts) | 2021 | 2020 | % Change | ||||||
| Adjusted operating income (loss) (1) | $ | 50.5 | $ | (40.2 | ) | NM | |||
| Adjusted income (loss) before income tax (1) | 25.4 | (61.8 | ) | NM | |||||
| Adjusted net income (loss) (1) | 19.8 | (47.9 | ) | NM | |||||
| Adjusted diluted earnings (loss) per share (1) | $ | 0.33 | $ | (1.02 | ) | NM | |||
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