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 2022Selected 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 2022Announced new service to Grand Cayman beginning in December 2022Airline 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 |