Sun Country Airlines (SNCY) 2 Aug 242024 Q2 Earnings call transcript

Welcome to the Sun Country Airlines Second Quarter 2024 Earnings Call. My name is Crystal, and I will be your operator for today's call. [Operator Instructions]

As a reminder, this call will be recorded. I will now turn the call over to Chris Allen, Director of Investor Relations. Mr. begin. may you Allen,

joined Davis, Jude Officer; President others questions. group I'm Executive and our Officer; of answer help Dave and to today you. Bricker, by Chief a Thank Chief Financial

like we may company statements to Before certain I'd remind that call, make statements. during forward-looking constitute everyone that the this begin,

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

at to second would XXXX on find ir.suncountry.com. the press turn our that can You said, over now quarter I to Relations Jude. like earnings release With call website the Investor

everyone. Thanks, Good Chris. morning,

be service industry-leading grown to to We challenging we've year-on-year. In to shocks. excess exogenous so through our in business scheduled worked advantages, fixed combination we predictability hard scheduled and July, by and profitability low cost our model Charter both is diversified flexibility both in respond us predictable and of scheduled deliver this employees deliver model Our summer. most industry to our airline to unique the demand acknowledging to leisure of structural reliably throughout the to and we'll industry. start industry. The of capacity all in able believe fluctuations the businesses, Due Cargo June our want the due allows able departures cycles. I are XX% that service have flexible

an disable key aircraft extended operational out system. and IT the outage, temporarily some the facing of service While events

personally been our discussion usual, customers lot Our our in and for of employees industry. grateful. delivered There's I'm about overcapacity a like

Minneapolis, rest next seat through of and domestic For rate the July in subsides of market the spring. the growth the and peaked our year key us, in into

encouraging to the see as schedules. lessening aggressively As to rightsize we the fare expect move move pressure such, industry year. It's through we

capacity. environment Our changes market to reaction in be adjust to will always

seats will volume year-on-year. Minneapolis be challenging September. September X% up being seats July XX% demand. service than X.XXx scheduled always leisure year-on-year. for larger September, most By the our will month were down Our be July

we We will our XX% Charter unit our want in peak expect winter our season our a As XX% June sold into for leisure winter. I that other July planning strong growth versus scheduled already nearly segments, continued capacity point had of and move and mid-single-digit aggressively demand for revenues comps, to still product. up excess announced, even pre-COVID for out and are to Cargo. capacity upcoming with months both loads We be considering months service during growth. strong

unit compared manage domestic to the while advantage, other our mostly scheduled explains of to maintaining cost outperformance of the business ability capacity as carriers. leisure Our our

have along through contractual In improvements of growth with rate Cargo, the end we XXXX.

For the generally charter, to our while we've pre-COVID cost to contracts been new adjust flat, as environment. manage margins to long-term volumes we able were higher

plans As our fleet XX. XX of from before, fleet in-service current have expansion we mentioned to aircraft

X aircraft; fleet, from this X require In cases, will All aircraft. and CapEx. both out this won't Cargo from come additional growth committed leased our deliveries, growth

over expect flow near that, cash free the midterm. we to to So And turn in deliver continue yields I'll to with it high Dave.

is carriers, first We're profitable the profitability half of QX fact despite in Jude. was the unlike that that other This quarter for is slower most XXXX, consecutive that seasonally and Thanks, most QX to quarter Country Sun pleased the eighth for our airline Sun was Country. a report U.S. of the through

impact hardest. fares domestic-focused on be LCC The and domestic overcapacity revenue the a environment is continues by impacted resulting to as the

allowed diversity our of the Our of revenue because us streams. resilient remain business has to model profitable

slowing scheduled through move third we we are the growth. quarter, As capacity

allocation capacity decisions While to our tactical model moves quickly, to require several execute. quarters large allows us make

versus Cargo no segment our free Country in is our cash we portion segment Sun XX% Amazon, with our XXXX. starting a model. our Country's the during and of segment The Cargo greater XX% approximately CapEx almost improved expansion revenue in agreement required business As will to flow. larger our be become from with expect revised of Cargo revenue of and essence total the of almost business announcement our mid-XXXX. By mentioned of profitability This drives comes Sun XXXX, we

turn Let of me quarter. the to now second the specifics

declined the versus $XXX.X In to second revenue the to of second quarter, First, million. revenue XXXX quarter X.X% capacity. and total

service a off-peak revenue our periods on For declined in total includes decline environment which XX.X% flew than by X% support. an X.X%, scheduled and year-over-year. Scheduled revenue businesses, we during Charter TRASM demand increase in the ASMs. fell XX.X% could Passenger segment, more driven service Clearly, our scheduled service

In late million. addition, Passenger June operational in reduced that $X we challenges million impacted MSP by between by revenue and $X.X were

soft be up the demand scheduled roughly quarter versus a X% to we're in ASMs were planning. environment, service to originally response XX% to X% In growth and expect we the curtailing year-over-year our third

We pull quarter. XX% full ASMs expect XX.X% July our Scheduled network by during by But by shrink year-over-year. growth September, fall by year-over-year fare per passenger further fell QX. The for comes off-peak still from total will mainly in flying. service XX%. the about Average reducing they to in will down grow

of more the last of QX second declined TRASM service flew While 'XX. the since ASMs total higher the QX And that versus fare we second first than year, 'XX was quarter XXXX. was in quarter scheduled XX.X% COVID has

year-over-year operated. a scheduling declined quarter the high. in ferry flights was reduced due grew block we number was revenue second to more which result quarterly which X.X% of This Charter $XX million, second even improvements, hours as the to charter impressive new XX.X% quarter

grew in revenue the versus of the year. Charter year significantly quarter last was XX% total charter revenue versus last XX% hoc and Ad of second

our by drive X.X% to scheduled decrease maintenance Cargo For heavy are and hours Cargo block influenced moderate grew a aircraft block events, segment, X.X% $XX.X in revenue in hours. million by changes which availability.

that sharply both in rates year to first upward an expected the XXXX a grow on June throughout hours month quarter additional X effect. in year. the the third take portion block as we inflect cargo and Amazon of then went contract revised year-over-year of freighter was aircraft into this to fourth expect We the and

impact rates second until full new of the The in be of effect half will the XXXX. not

Turning now to costs.

Second our quarter block X.X% increase CASM in declined adjusted increased an the on CASM expenses X.X% by total operating total year-over-year of marking versus of hours. while XXXX quarter quarter declined second X.X%, declines. third consecutive X.X%

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

had costs airport came handling year-over-year, of fees. Ground scheduled increases by CASM declining while using contributed minimize and brown payments expenses that expenses. roll-off and increases landing a the by a XX.X% airport grew despite Our rent in relief higher to rate increase to driven in XX% handling XX.X% fees departures been airports increase COVID both service in

in move slowing growth scheduled is to the we QX, business As into likely an adjusted in our result service in CASM. increase

balance sheet. Regarding our

end liquidity until XXXX second total on million. point, $XXX $XX.X at aircraft Our was to for spent not any begin million Year-to-date, the quarter incremental CapEx. the purchase need we we of looking this we capacity. do At

CapEx XXXX million. cash continue generate we full We be still flow free and below to well year strong anticipate to $XXX

adjusted debt X.Xx. ratio with our at of remains second quarter end the EBITDA the to net leverage low Our at

some XXXX, increased year ended June related to tax to during compensation. as compared months tax the rate Finally, the substantially prior with due income XX, expense additional stock effective X

guidance. to our Turning

anticipating be We cost achieve to to growth expect be for per total X% second million to million of third between on and our us sorry, total operating hour quarter We're and X%. and quarter -- revenue for between $XXX to gallon margin X% fuel X%. an $XXX block $X.XX

to minimize With that, for and earnings business I'll questions. built to continue allocate maximize and Our profitability open is it volatility. for will between capacity resiliency segments up

[Operator Instructions]

And Morgan Ravi question first will our Shanker from come Stanley. from

an half resources capacity to the cuts ability reallocate around is unique industry do But big that kind your the those you given from back to CASM. model anything in of and move on overall perspective. to resources, So guys impact can is to good there the offset see

our some answer projections a job extent, that company the of Probably in fully. is to second to on yes, year. has We've consistently done the probably but great favorable cost half front. the that not in been coming the To

sort be of looking we'll the be that impact able down offset done opportunities, CASM we've it recently, reallocation short of much of on pull we'll some fairly notice. in given can and the as all for we to the sort of but market Just here particularly relatively probably not charter as

do operations charter higher drive than costs scheduled unit I'd service that capacity. our also our add

that minimum cargo be -- it unit service. guarantees as our we unit So start we we excuse won't and level finally, hit operating anyway. inflect when costs charter -- apples-for-apples crews exchange below revenue really scheduled won't into And for from me,

So efficient we'll an be still in bandwidth.

would our reports follow-up, in really as and in how helpful. maybe And there. ramp Minneapolis, environment That's you competitive characterize a Understood. up of be meet going the may to kind looking delta to our that

has changed So anything there?

mean, I rate I'm improving all growth are the through information for of spring. the across an selling and all schedules, from being condition through year way And year. the end network getting the July we see the next of out mostly which March OAs next peak Well, as into our and

Thank you.

ISI. will Duane Evercore question from come next from Our Pfennigwerth

given ahead about cargo next on up year? you sheet? Can ramp balance of thinking you the to the free cash capacity the for you this buybacks build just are Is year? to much liquidity there remind for us want the flow generate, keep desire to expect powder you And how any dry rest of how

Yes.

we year start this our thing our we sort can chunk liquidity as levels a and we end this about peak business between because trough liquidity predictable is at we'll So we're time, liquidity than liquidity probably building is the of very lower of of sort other the liquidity the sort businesses. The of of airlines our the relatively of year. begin revenue this think stream for winter and schedule, selling big at at Charter of sort Cargo towards operate of

it's really into business. much continuing from reallocation we're pilot hiring of little the there's where well some a service liquidity we're doing as cargo liquidity CapEx then There's resource I throw required It build very or no required. an below and ramp below that because of scheduled need that be a hesitate really but very, head stream at Cargo the our today. exact the CapEx will to to -- minimum into we out number, not of

will So for a new there. because the us event really a liquidity of cargo profitability of improved the liquidity there's any of significant be not need positive kind That flying.

second buybacks we'll question, done sort look our in and of over well profile. free cash $XXX we've continue at your flow to share million To

of quickly. a pretty down are lot -- and paying Our we're debt coming debt balances back our

this through year something take is early another plate this always at our into we that's next. So and and on revisit probably look move we'll as and

more one a our that. want airlines segments do I capital to that, typically, Just things remind everybody just a that fleets that transition X from thing lot pilots of crew require working training because single of to we across all mean, like on Duane. flying base. the new all do and I

operating transition associated no costs with really incremental there's the So either.

just X the lead to time How Yes, in? clear. to Good on And opportunities are scheduled that's set that quarters segment versus harder you opportunity the tilt operationally, Is Or very out? you now? And you to you service. need to looking do Charter. of follow is closer maybe just kind react view into up X that maybe reminders. can what

and I'll over Duane, Grant. I don't start why turn then it to

is in contracted is related same an of comes the about kind we operates. that flying, it's aircraft that's worth it's for And X X fleet And of else. Charter aircraft airline to essentially, service flying long-term One It's under do flavors. us our the charter being scheduled someone agreements. passenger that So which that.

and So it's very volumes dependable it's profitability. interchangeable, but

soccer. that a And of flying of domestic that's big booked amount ad and high-margin for allocate surplus to in, the relatively major sports significant market that then is hoc, close mostly capacity do into we us predominantly charters for sports profitable that's charters way military there's which in league participate And a a flying. section NCAA and we

color predict are into fall going it pretty those on expand we're because market. that? on harder close do you it's bullish bit little Grant, that a we've continued in So a to but have to as this

poised out and opportunity, going a have aggressive. we where to Jude in scheduled thing to bias mentioned, There's those will We're really and when towards is we coming reputation -- thought very where we take do come only quickly don't market really right to add we profitably. closed as pretty it would to were be, of it we very those very up our towards to much do team have the even -- we're half the such pretty do we we and in still year, we an to so the pretty able using we're going all very, The quickly, us, resources, the us wait we growth we sort were hoc we place in of ad people second crew there's which good go can that when can that significantly, And have would military get look And to on it be doing back capacity. are Yes. when I were tight, trips. what off that quarter, capacity service turn of the trips now. those in things to as pivot requests do when

from will question next Our Wolfe. Group from Scott come

talking September there you're like capacity there that your starts like and September mind, then a And the just inflection? a is in you is of are this reaccelerate the risk off-peak in a RASM head camp capacity fake is a QX? about, in is What to

change I rate. No, we're structural in seeing think growth the a

late 'XX everybody selling market connectivity, domestic think peak those saw capacity of leisure capacity market and in the Midwest demand we a through get big post-COVID into is we growth the I chase April and from transatlantic, reallocation environment, that rates was And saw out capacity into now. then of reallocations in July. growth the kind to

we the move schedule feel that kind this our So into all as I will we're winter. confident expecting peak fairly profitability that of show winter

I don't think case. the no, So that's

us. for . September

The September piece?

Yes, September challenging. always. always It's is price

cut cut positive those we aren't obviously, a down that down flights when able identify the contribution capacity, out. So the flight very to we're to level to make and going

the we're which time September, environment, we've the to because out. current expecting So prepare than pretty different a planned all substantially when under good year the had things is equal we

-- the Can until partial you just we higher you but had just a you impact Can half June, talk a us that remind of And year. impact the the full then the aircraft see next about ramp of comment second in of timing with Amazon? seeing we're don't that? rates the

Yes.

can't But increase rates basically, when on partial how in. I got the details into the the rate come we we go in deal. So signed a

So on didn't impact any really, that numbers our have until June.

that the then quarter, came as very, in very And start of But the piece the here. of all now, the we new then aircraft rates in. Amazon board in right increases So in to of signed expect quickly the and there's they're the come to arriving March quarter the aircraft effect third of this second so deal small. And is come kind that relatively when we additional by on XXXX.

that sort bit, Now little been things can move path instruction left but that's a and given to the we've of the we're right on.

and still year? we of Cargo the of ramp schedule we rest lack then X better in so I benefit we this, get for bites the And the the get like word, of guess, the like next of where year apple QX a get

exactly that's Yes, right. Yes.

next look, on So the you reason really of -- we're and year we're what part said. just is bullish

the to Cargo going down our be all we're as transition the So smoothly schedule obviously slow QX, as then service into for biggest business as able allocating and to in us of us quarter far scheduled necessary for things continue by to very to more. which much service resources is

So works well. it of out kind really

from Michael from Linenberg Our next question come will Bank. Deutsche

or some were like the serve we it's of. it for what from there out competitive just at markets? common markets some I cities are than part of serving When maybe ramp that? sort away what flying going winter, you're year a well, maybe ago, they denominator the pulled of didn't what that it think talked take schedule Curious that the those that Minneapolis. XX the When about did, you Anything up package or in you some that the I they didn't maybe of charter about you're response. is and Was was does going you of can just accompany have seem nonstop your to to look serve you for XX more

Well, market in first, Minneapolis mean more our to nearly works I and June all winter capacity in repetitive markets there network everything across are winter and are nearly and we happen from July, that our be every of every year works. to seasonal going -- everything need nearly --

I think but everything works winter. networks well, they're summer in that period of time very as different to

summer into our I be years and through as will think be our network markets 'XX, but the some to that's cargo is until need we reallocation thing will to go into into winter intact, yes. come 'XX summer and because suspended future of watch back not the network of

And on any issues pilots about and you versus secondly, with as and Okay. the teething just are first we captains, as additional staffing airplanes sort we on of talked additional ramp sort should reallocating on cargo, bring cetera? helpful. then coming for where XXXX up and into you That's officers the ramp et see resources, of we airplanes

is Greg Mays. this Yes,

I resources think staffing pilots, be regard able to not to constrained with or allocate generally. pilots really by will been we've and

as look industry out We into way we overall XXXX, that. see hiring see change we So don't to is down. any

bullish to for really, not things in But more growth. constraining still at We time, our captives us. have that's good this So about would look point love XXXX. as upgrade. We Dave said, feel

[Operator Instructions]

TD And our question from Tom Cowen. will next come Fitzgerald from

going of allocation now, debt given Can stock? issue back use buy cheap down right the your is and and again? go how where we is of just stock everything back just to with not capital why proceeds instead And to paying the business debt

as the looking here, making cheap it sort we've months. term, a stock of probably just isn't to at with But balance with to is considered sort not to debt sheet do the short of now We're allocation X next right here. this buy avenues of X decisions to term. not loading kind conservative operate we're We want continue for long be of for point? back and sort could up are going everything. capital of that to Look, all at we in Debt sort different more the something

That's Fair you the -- XXXX, of kind how need like whether you And city about on helpful. you and on once get Minneapolis? term, kind then Okay. just network are just thinking you beyond past as longer focus another enough.

outside Texas of of In Caribbean in stuff our schedule there's the a past, opportunities Mexican footprint into already down the origination Tom, of Midwest not like markets the than in expanding lot a Minneapolis success other that the have had growth we've around the we Minneapolis. markets summertime. origination lot

had a nice not in also is Hawaii. be a Hawaii business to XXXX place right great now. flying We

the nothing into. urgent with us So and for obvious that's yield there's environment, to move

be Cargo And up powder opportunity waiting to think it an to want on best for going to so be what for reallocate think about difficult think thing that's competitors frankly, near of going itself, just is as to we're what free to be some some to and some through able I when go as having we we're about Charter we and on sheet is us dynamic be opportunities. why talked I And able balance that's presents here which us. the we the times sit being The capacity term in our to today. predict and opportunity challenging to quite some

the new -- aircraft growth 'XX landscape And cargo agree Yes. just advantage we'll you This new us of look others, different it be minute. and integrating with There's taking 'XX. deal. elsewhere, growth these completely 'XX think to looks the but there of state see some for the what opportunities what then looks expect economics we'll the beyond. opportunities of And landscape we in of opportunities just in at I a is at is said. year particular landscape could I it given a that than Dave. this like be like growth here,

your conclude that FitzGerald. Mr. questions, Does

Yes.

a question. follow-up Wolfe. for from Group Scott One from moment do we next have our And

think 'XX, want then to sort how about full remind I how So much what year ASMs with you be down? a to just year thinking just you full right, we're -- hours block us Can pieces. moving And make going just scheduled to of are sure the for about think just cargo?

Yes.

me describe let just this way. sort it of So

is. taking in we available, pilot where call remaining going is have aircraft we're between and as have these Then charter front. to depending Cargo resources basically, to on of here, going be first that allocate scheduled have the the on we'll sort So we the particularly resources opportunity that service that and on the

part of into from where exactly standpoint, we pilot a So depends availability going 'XX. frankly, on sit this

block where could to to an down single, a double basis on pilot Our sorry, basis exactly right, move or low on current sit that hour service. high on from ASM be is for left depending outlook scheduled likely But digits a perspective. we

availability, block for that, service hour in but in growth next by up size number business think scheduled bringing follow it will our you X I obviously with X the be significant me going front. 'XX of Yes, the since we resource But the on here. to don't driven second We pilots. be cargo aircraft. year. had is and right new have particularly I Give we're charter can

thoughts unit And that mean mix just cost on shift should or from a total any perspective? cost what

happen consume The Cargo what's here. to CASM Probably going to to precisely. that of is next with about a year some little business talk premature our resources going sort as to of

and going to some of So Cargo the other overhead to allocation there's things business. be additional

So yet. straightened quite that sort just mix of out isn't

be Sorry, over say, let's Yes, in block to the think as to just in XXXX segment XXXX. I expecting we're up, quickly. XX% right Cargo sit now, XX% we hours

from you Ultimately, guys us laid so is made first sound anything really announcement, changing. it doesn't when this you it doesn't what June sound like in out anything for like

service could that year only maybe say the a which a a we improved availability, next be Nothing bigger pilot little little really a bit we're scheduled I'll bit trend changing maybe you, of significantly. bit little is seeing from is tell perspective. would

service scheduled On in the call, I XX%, said segment. to the down XX%

have high digits. Our like single latest numbers us more

but the the cargo the of kind on that's call now, I right So talked moving aircraft relevant. still delivery left and is that's number last schedule about the of

seasonality the Importantly, out growth the you is beneficial really called for of us.

as and quarter a and move first be down business. drop mid-single-digit we'll March. cargo And intact at growth least our the then [indiscernible] that's where of we year the taking see So and start see will we'll into January, February airplanes,

Okay. Appreciate it.

Bank. And next Deutsche from comes from our follow-up Michael Linenberg

as to do about get your Just XX% next XX% to we of quick composition Just for your think I get revenue too like and/or revenue, just we a Charter sense. or Or of Cargo year? high? trying am is

No.

unrealistic I number think 'XX be high. probably number 'XX that that in is for not but is that XX-plus sort of going to not

to out, other end get higher some next lot the density point we costs too. and like because scheduled subsequent of going towards of hours, into something want and I revenue year. and that fuel block in is But of a the service might pass-through charter year the

So in cargo, hour that. don't way things for we the the lower because block fuel lot of per like just accounting and revenue the a is pay that expenses treated is

big of costs about thinking your that's to business, your fuel pass-through. and going be it chunk and to just going this some also Yes. I'm your bill impact how is

Okay. helpful. No, that's

Thanks, Mike.

to in I now remarks. lines. our showing Jude no the conference any to further closing I'd And Bricker over am phone like for questions back turn

end big moving fare Thanks it's going interest, we and growth environment that the peaked, a the through Capacity be your points. year. constructive Three for feel guys. has of to

growth free years. the flow we're as several we cash hour into on acquired shift production black will the already bullish next growth have going continue, And Cargo to for we're our Our but predominantly. really

interruption, so our that just just to guys proud so I'll severe executed was well to part to for end beautifully and Thanks, employees, you had executed whole And to Appreciate IT and your a them. team proud being I'm of with such the deal talk they of This interest. and through be quarter. so frontline period. challenging we'll lastly, next this industry

your Thank Thank concludes conference you today's for This participation. call. you.

disconnect. You may have a wonderful day. now Everyone,