Sun Country Airlines (SNCY) 7 May 242024 Q1 Earnings call transcript

Welcome to the Sun Country Airlines' First Quarter 2024 Earnings Call. My name is Jill, and I will be your operator for today's call. [Operator Instructions] Please be advised that today's conference is being recorded.

We will now turn the call over to Chris Allen, Director of Investor Relations. Mr. begin. may you Allen,

begin, joined certain Davis, Jude Officer President others the questions.Before group I'm that remind Executive this that during and our constitute Officer; of call, we answer help Dave and may to like today you. to Bricker, everyone make by company Chief a I'd statements Thank Chief statements. Financial forward-looking

statements. uncertainties. beliefs, statements, Actual expectations We to may earnings today outlined recent based obligation are We most remarks to materially. which risks may SEC in our include subject results assume forward-looking no and assumptions update differ encourage and review to forward-looking management's and Our and the our are current cautionary filings. and upon you release risks statements any

first earnings like I'd Jude. the find the XXXX of portion can to release Relations turn at press ir.suncountry.com. that You website it over Investor our With on to said, quarter

morning, Thank you, Good Chris. everyone.

again frontlines product. best the It's highs. public quarter, our customers. due growth model predictability factor The and most continued to yields XX of off us business service had industry we diversified first low past excellence demand all post-pandemic to throughout Among momentum our cost leisure to were Congratulations shocks. is this delivering we fluctuations deliver able structural our and our is our our both cargo Country deliver by with for for XX.X% their customers the fixed We completion in carriers, core a predictable and respond industry. absorbed costs. on to flexible the justifies employees, charter declines airline saw flexibility Sun schedule industry-leading reset we're the profitability advantages, especially of to fare mainline partially at These businesses, scheduled our industry. allows charter the model our Our believe are cargo to reliably XQ. quarter.In exogenous to cycles.Operational excellence capacity tenet critical our of to service able our in the combination scheduled unique Due and the and

declined effects flat CASMex heavy of the buyback Our cost aircraft growth, of program with in slightly in increase versus control, significant our in scheduled last along year. produced visits. spite EPS service Diligent XQ

profits Our March XX% lower variable adjusted for in just operating of costs of This is us. into strong of at approaching mostly expectations over margins, is due gross the the great a margin coming March excess end less still month was in We in bookings variance XX%. XXXX. close than to finishing our quarter. had

through However, January an even March bookings made stronger would have indicated month.

As fare the most across may and is to allocate adjust surplus variance lows charter high, environment response growth our attributed segments. capacity markets.Our continue that results. so into possible, to produce capacity marginal can cargo capacity we price to remained positive industry-leading largest to or industry be changes our fuel the of When inputs in we

in on year, looking the periods selling the So rest fares. we're off-peak too of allocating much growth capacity based currently into

lease Easter April percentage in points scheduled. trends on I XXXX of peak should some XX well about out fleet fleet at XX% committed capacity.Finally, we'll already growth and to fair process Easter about quick induction capacity This provide our to on remain season XXXX, Also, through operate. revenue sell have these September the in shift. Once make of continues hours peak in XX to and million. operation it's early aircraft as we mostly peak X will block cargo we capacity $X a all we're and in or remain because XQ. some to May, winter on March late explains these in activities. about note An aircraft more displaced the in by are purchase, us produce operating significant than that late enter recent are more in fleet of With charter.Summer and controlled currently service capacity While X now to expect November, have in reduces recoverable isn't a opportunities aircraft, aircraft drop

we As that, fall year.And million that won't maintenance million turn aircraft Dave. require over is for I'll paid which levels, already expect CapEx so to CapEx growth, $XX and any $XX to we to it per to about with

operating which pleased the top strong expect to QX to report we be and the margin Jude. including adjusted of industry. We're XX.X%, revenue results, record Thanks, an at of

as is able our experienced Our to to.Year-over-year the staffing-driven for we quarterly high rapidly airport-related carriers. fell for and consecutive mind this to quarter second of utilization a quarter were grow our the the eased, maintenance despite model, intended now keep consecutive increases results business we diversified of unit again service significant expenses. demonstrate as important and is in unique operating profitability. year as scheduled costs model earnings of our over Xth opposite business power The we've and our the resiliency It's in that have constraints

to cargo cycles. diversification charter operations across service, scheduled resiliency business Our through leads and

While specifics generating has continue me pressured of first to turn OA there markets, and businesses, growth seen significant the our returns.Let allocate of large increases yields, cargo segments our the quarter. the which are to and to we've the accretive highest in we'll capacity some charter in opportunities now in for capacity

$XXX.X $XXX.XX, and $X.XXX versus load factor. Scheduled XX%. revenue total decreased than plus fare record. revenue to maintained as the more declined is also our XX.X% Total an In X.X% of quarterly XX% on revenue $XXX.X the to year on scheduled highest ancillary while QX first ASMs quarter, million, service Scheduled TRASM grew total service revenue capacity. million. grew we to highest to record. last on service by This X.X% First, grew XX.X% revenue

saw our XX%. service scheduled the For of factor March, load month we at

quarter QX.Charter first into $XX.X growth on in the the and block historically expecting X%, block seasonally to million revenue X.X%. driven exacerbated ASMs to shift QX up driving per from to grew a decline nearly revenue service scheduled a in charter QX, is and Easter fall hour hour XX% X.X% of strongest, we're we quarter revenue First to in expect our see unit see the QX by in

exclude reimbursement and this hoc you X.X% grew over fuel XX% changes period versus revenue year block revenue under charter versus $XX.X X.X% If block cargo grew grew hour flying last to hours. charter year.First on of QX both a of of XX% X.X% quarter the QX XX% decrease revenue per and charter contracts QX up year, Ad and revenue total in charter last X.X%. of year in long-term revenue revenue was million with from last

annually the end rates me December.Let increase As of to costs. turn now a cargo at reminder, our

Our while in first hours. X.X%, versus on CASM CASM total operating declined a second of 'XX, expenses quarter our X.X% marking total consecutive X.X% by of declined QX adjusted increased quarter year-over-year X.X% declines. by increase CASM block

grow utilization, last availability we've As higher been able hours to was issues year. up flying aircraft through QX, have eased, per X QX which in versus of day our pilot X.X%

overhaul to maintenance CASM Maintenance grew Our engine X the and by declining both and by in of costs. airport increases XX% despite expenses higher expenses number airframe from came in driven in events this an year-over-year, increase of drive COVID fees.Now turn X to off now quarter, helped payments rolling the the airports let landing to relief sheet. 'XX and in while to me rent balance a of XX.X% increase QX

well quarter in of made incorporates $XX.X in CapEx to do $XX.X the incremental full be purchase this at was At share until year repurchases point, which the $XXX end Our total to QX begin any we that during capacity CapEx anticipate at we we for We not XXXX million the million and million. expect spend. below earliest. aircraft liquidity XXXX looking very million, $XXX

maintain we a and debt guidance. have debt to we do our the not cash.Turning was have very our significant now continue burden, We EBITDA balance we Since strong at a in to sheet ratio to X.Xx. QX of flexibility end how net deploy adjusted

between be expect and for achieve growth block total our second million XX%. cost $X.XX X% for and be gallon $XXX on quarter us fuel of hour We to anticipating for $XXX between of million to revenue We're questions. maximize to business per to volatility.With minimize margin to our will is business and to and allocate X% profitability between lines that, operating and for up we'll it an X%.Our capacity continue open built we resiliency earnings

the question from Shanker this session. comes Ravi with Stanley. time, At conduct First question-and-answer you. Thank [Operator Instructions] Morgan we'll

of about go into long that you what kind just you where some you markets guys off I with absorb can Can the actions kind ended detail little that are some in doing and talk difference how oversupplied segment capacity. of more start in terms the take? in and to a of on specific of will capacity Dave, excess your reallocation of of or realignment

Jude let add I'll that here. on Yes. high level a speak just let but mainly, me to

lines seeing we're scheduled resources We're pilot from be There's opportunities continue allocate the look for we present have pursue think into that reallocate the some think going our opportunities both in term, scheduled themselves, capacity, our businesses. across of say, In to all part for company segments based QX, we're service away There we of to off-peak pressure capacity our on in business, the our explains of are basically, cargo business. of business segments. the other other into particularly quarter. and to that going of margin half between the I committed our If medium capacity, the to going opportunities the training in longer So in opportunities the our pressure to them. capacity, the continued of service our term, the and allocate segments to to there's we our charter the profitability. is the will that we're allocate back business in that that year second capacity times there

Thanksgiving focus to Day more usually through charters. that try up is is the way. it in But The to Labor Yes. pick period

going are to So incremental marginal. allocations be

mostly flights make to that it's don't scheduled of contribution. going So capacity service variable cuts be

it. Got

about follow point the And think so to from we relative to on normal given how XQ seasonality kind of extremely XQ, for maybe starting of [indiscernible]. low just modeling kind do kind up of that, to

It's in perform a April and May XQ fair point. we typically, an I overcapacity This see both would and XQ shift. XQ has Easter and equally. mean,

XQ. outperform our expectation XQ So we is and

Pfennigwerth from Next Evercore comes ISI. Duane question with

started flex theoretically these just ability ability you to you're So back at have peak flex Those a now of was periods, the and for greater constraints which if constrained kind be up to obviously peaks, your RASM. ease to higher kind incremental of extended we in of up going play to an time. period in

I quarter? peaks relative I so gone? take how you managed are in, what relative going maybe to flexing has in expectations going up So forward? importantly, you guess, future first the do with about to more guess, you in how peaks that how And thinking And your you

on scheduled expected in the its performance periods, the do. off-peak that the growth the The we granular mind, network biggest based surprise Keep the service we a way designed level. on in to absorb of the year largely is network prior didn't it

this but day the So on end let's market well, was peak at flight this performing was did of period, another. cut right strongly. the This add

into the didn't maybe can they decisions off-peak So period would. produce we contribute. it and margin go that the results the And on thought still those

And between be And turned interesting leave downward pretty expected in have the are flights okay, then there we and pressure unit are going those fare would lasted isn't the saying, on growth, just we be to market were So explained expect. fares fare between flights well, start that What's the these this really aren't more should about one OAs. common. be XQ its way revenue most off-peak time like looking fares should in selling coming give, on the lot there just to mid-February. until difference periods, strong we contributing, been us them sold in those where in selling change And the but in just flights. at to This and really of period. be didn't to really can not margin down, protect they of on the out not to when a some markets, where from the as actually there's the the further, positively seats seats in the in change the through a correlation fluctuations fare, And of and you these is seat from schedule. but environment through

keep trough. these and So the I think then XQ, post-summer going we decision we'll environment the adjust made the in new markets in to right

That's great.

Is here period approach XQ that learnings that the really that kind you're to half. XQ from So taking is change. off-peak, your more not to It's of measure basically, fair? second the

I in we're on Yes. adjusting But mean, always fare environment Duane, inputs utilization the based keep that and of mind fuel.

period. the can reverse the this the out as So comes resides that off-peak of in or itself but in schedule marginal well, largely capacity

our June, think kind it's then when So And in of into and on month not capacity, can there's or December, business price August, about that's bad April, a there's a and September, allocating of like [indiscernible]. shoulder then based fuel variable X couple there's months, July, always month, March. as really that months and think There's good we are one awesome absorb fare that about those environment. the February,

Yes. is the quarter the to fourth quarter fair we did third But obviously, second it have Duane, we or than of more quarter. say, sold the

ability So adjust better on and at to it's go, our schedule limited this in the we the somewhat gets further point. QX

follow-up. Any can in or provide cargo segment. outlook outlook That's the you all great. for us, And new update just my your wins

right about Nothing to talk now.

point. Yes, have at we talk about probably don't much this to

Becker from question comes next Helane with Cowen. TD The

is for costs event? of Or continue level the then a just points. a be Just this of couple rest maintenance you expecting year? at to this the X-quarter to clarification Are

to No. through rest elevated year. bit the are this like a of The maintenance going the stay costs

through on QX it we will keep likely end costs 'XX I think our at or in about persist going And 'XX program based the of or to are made we maintenance we on going that higher. talked to about the our that plan persist get that's intentional call to changes the some 'XX.

to to the That's it air with But you decline from quarter, decline is traffic first the Dave. to down quarter And in have fourth declined respect question bookings. the as maybe explained changes it was the much Okay. but other the it XX%. through and in very usually, it liability helpful, doesn't as seems I have then

Or So you how about explain that? thinking you that did are already?

QX. of fare the the already, there's But the little in quarter. to think might weaker ATL I but in this through ATL it A be is drop environment the decline explained we don't unusual mean I the drop. we nothing bit time going as second go

helpful. very that's Well, Okay.

of just fare environment. and a in on our is lot seasonality the volatility ATL There schedule our based of

we'll quarter, going ATLs into the of the So year. highest first have the

did Easter Right. but I other quarter, of expect, decline about having That's shift guess that all as you've would how it? January March. bookings has wouldn't second to we do should think with to the from the as right? the it and to things for not Is as what many it expect I But already I explained, it much sort all

about it's that issues it. fare bit unusually of To a large, would and big it the is Easter a Yes. part the little extent be you're talking

Perfect.

Okay. Thanks your help. it. for appreciate I

Our next Michael from Bank. question Deutsche comes Linenberg with

Any and you was how sense In of Can the capacity release, better March great. I sort capacity. in think your mentioned changes OA OA by maybe quarter? us a that maybe in it September, June quarter that year-over-year of what markets Jude you looks June, on maybe in the give even maybe the be color would competitors' capacity trends,

you our Those a I markets. as in from But just capacity because quarter mind, X see the Minneapolis, and mean, into is Labor network the that's first seats of Domestic trim in routes second between to lot capacity the seasonal, lot Keep consistent we quarter. overlay markets a really was the are different where and seat where XX% those a we up we've we're was back Day as quarter quarters. X% year, basically concentration trunk that's the seeing that in of in capacity of our of become of resides. concentrated have In and well. are about then trends up dramatically pressure. out lot And major out so Thanksgiving

and the going about industry? smaller being the made would on you've reflects through periods the much The they're of just well before, changes, mentioned I much I frankly, the how of the my network September from nothing by it's so be respond second you of identified Thanksgiving. off-peak just quite in you'll say of and like How obviously many on respond mean then I look changes this that on to established. issue network and seen of When other going churn some structural the the that and sort in seeing where the is more number And we're at carriers, deletions, this churn we're carriers, think of in X. very additions I've of the that may the more Okay. just I industry your because seeing? what's on thoughts the shifts big dramatic other not Just really of it of change to as going that. networks in in maybe sort when question it's difficult

limited It's would challenged when where mean these same and they experiencing I difficult fly are that Spirit in than more that the on they're input. way weaknesses, give to view they of read-through based same. the fly Frontier a off-peak having my very a be long-term with amount we're

addressing so the isn't the issue. network And churn

to in like the canceled of didn't and is those Frontier, been. that look we're some work. other competitive because And kind encroachment down, quite out at is that capacity they're most frankly. just from and like hubs. And post-COVID Minneapolis response pre-COVID seems done it Our then they Cleveland be going from this had what has And there to incremental they shape encroachment, building little later of it Delta, on of seeing been done markets specifically always then are speaking a a Minneapolis ones in than but in recovery they've their has some

our high over and a time. equivocate markets are I it's sort really scheduling fares just seats and of of So people bunch into comp they that the attracted through think had mainly period will it

Scott Wolfe. Group Next from comes question with

I But close-in weaker just Is but seasonally month, in So things incrementally are feel got getting to of at Any June, June things May March, is of sure worse? monthly April are signs the understanding want look you a you make some of better? like seasonally I'm I Easter. had some or it as stabilizing? incrementally and better adjusted, better things getting sort worse? just do I know getting commentary.

But I the expectation what is. guess Scott, depends, it on basis

So then the through the late February slightly. weeks, quarter when come this we below we and in they've for resetting way And quarter. we're couple year, of last now selling built had that. period of up And second last into March the fares

relative expected expectation an that it's recovering say to But selling So we bottomed we're built where been schedule. a I'd we small is slightly. the but recovery about talking when fare and numbers our evolution, has to be is

you And second think in did going you're And capacity helpful. margins then do right to will where hear That's that ultimately QX you take I than your Okay. in QX? be higher the half? think that

second by part, yes, produced shift typically, the particular some handicapped the quarter, had April and and in third And about May. quarter will because margin. second overcapacity same be in the this and On second Easter

to part Labor make your first say some have expect mean, The adjustments. question I point. is to be us But these of I this would time to focused mostly difficult at we post Day, typically on crews scheduled in airplanes then service flying of third handful business. scheduled about positioning quarter, of and charter a support in for markets and those our service a flying have good there's that

So to a September, pretty opportunity there's it's going small. of not be lot in whole so

Yes.

peaking So from quarter. planning the fourth segment quarter. and scheduled the just, sort we more in into service the capacity tapering Scott, had third quarter in then growth a perspective, of let's say, the tapering significantly second in year-over-year

weakness. here, growth. quarter pointed we our kind given this And off-peak year-over-year we'll as peak second revisit of So out that was

more to going than be in plan. our probably dramatic was even it it's So

of like to $XX Okay. then, thinking similar, sure a we're that I year the question. number. rest another sounds CapEx. that And I right. Is year that low full is Great. comment? very about comment? it's is just heard make want of I last And then thought Or it just 'XX the million

Yes. right. That's

rate So a my commentary run was about basis.

an completed committed ago. we're purchase for months last be We'll couple to aircraft we also buy. That's of still the So the market a that airplane in engines.

is we trying that to overhaul. an million CapEx opportunistic just buys expect I'm a lumpiness be $XX what bit a to largely replace sense of would about on little would And give maintenance for $XX engines to So the million. going of

Scott. Yes,

around well So barring expect would a Jude's 'XX, sub-$XXX million opportunistic 'XX. saying we several in be terms this than here here less I the be to some to there will on cash calls of CapEx. for and flow year, CapEx are do years on perspective, cash From in to minimal pace what purchases come.

why...cash. that's And

which is too, growth, unusual. with Yes,

Instructions] And Oglenski have now Barclays. we with [Operator Brandon

guess to kind peak was adding I come Delta back to comment target challenges I the Jude, travel tried to the I that odd and that strength thought you peak capacity the about are model guys periods. your the in of guys you in of want Minneapolis seeing because

bit you does little out And summer put go this this guys didn't just play So in just maybe off-peak view Minneapolis way on this set in longer Did can you any the more a your context? and it opportunity in you term, change way? after the thought?

first the on what exactly part, Well, that's happened.

by year-over-year quarter growth into came at the the second So in our previous And year, that's percentage month. the fares comp month is we when June. of because the just in we're smallest looking

of like mean, April we that the the and growth. growth, kind have the it's that yes, flying. incremental have So and pilots, support couldn't of really it it And market support I incremental low-cost 'XX, could think just I capacity, looked we

We're in that's we pretty with quarter, the as along and because pressure OAs so what Minneapolis Minneapolis. adding airline expected. first bright the sort because And of was U.S. in spot out the we side seats in And of were network. beyond fare particular, in the centric the all that's a of

As and I be. not we plan August cutting Minneapolis. probably it There's real look good. to the in June is really mean, the change months like move no summer, in long-term in we opportunity Those into mostly we're July.

now a right, is focus I've said, of the an We hours need all probably think and day based day. we're we about, our probably with flexibility. about performance, X operational and I pretty steady-state per where been in talking be on X easily than per XXXX, we've aircraft age these change And rapidly aircraft is block reliability, off-peak lower term, as we utilization. producing to per a But long restrictions. In it that. fleet hours for itself.The I on were on think things key reverse could just aircraft us based around reset environment kind

So think can, capacity airplane doing we or want we important moment. how to fly business we that And the we if fly best out we about that the very positively, of just you it plane with time to you contribute thing cargo, every or at fly it's incremental understand do things understand run is that that don't when charter.

And so we're just April and to into adjusting at be bit were bigger the a margin, May. and little we we needed than

that, mean, in you prepared but about about Appreciate I Jude. and elaborate in a think the seasonality, can that probably reducing remarks, Dave, I maybe you of Q&A, bit And there? said with confuse volatility your kind in shouldn't little right? we we more this earnings. But spoke

Yes.

we seasonality. be yes, it confuse a So our going shouldn't to That's with business. part of

in future I segment. of on perspective more that volatility to adds somewhat of in I that periods emphasize an will maybe by reduce we are think the that should the more much I And into stable is getting the to earnings. guess capacity business mean ton focus what earnings there without by from our a are pieces scheduled less service volatility, detail exposure and that help continue of reduce

earnings. periods segments, segments be in to and and of So these it's filling off-peak focusing going that stability provide really on are other some to more more on other focusing stable

concludes remarks. Bricker like to closing now now would it question-and-answer to the for I Jude turn session. back This you. Thank

great XX Have everybody. your and talk time, days. Thanks in day, a to we'll for you

for conclude conference. does you in your participation Thank This the program. today's

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