Sun Country Airlines Holdings, Inc. (SNCY) has emerged as a standout player in the highly competitive airline industry, showcasing remarkable resilience and adaptability in the face of ongoing challenges. With a unique business model that blends scheduled service, charter, and cargo operations, the company has consistently delivered strong financial results, cementing its position as a force to be reckoned with.
Business Overview Founded in 1983 and headquartered in Minnesota, Sun Country Airlines has come a long way since its humble beginnings as a regional charter service. The company has established itself as the largest low-cost airline operating at Minneapolis-St. Paul International Airport (MSP), which serves as its largest base. Sun Country is the second largest airline at MSP after Delta Air Lines, with a substantial portion of its business focused on serving markets originating or ending in the Minneapolis-St. Paul area.
In 2018, the company underwent a transformative acquisition by private equity firm Apollo Global Management, which paved the way for a strategic shift towards a diversified, synergistic business model. This shift transformed Sun Country into a "new breed of hybrid low-cost air carrier," expanding beyond scheduled passenger service to include charter and cargo operations. Today, Sun Country operates a fleet of 63 Boeing 737-NG aircraft, serving a diverse array of leisure and visiting friends and relatives (VFR) passengers, charter clients, and cargo customers.
A key operational advantage for Sun Country has been its fleet of mid-life Boeing 737 aircraft, which provides lower ownership costs compared to new aircraft. This strategy has allowed the company to maintain a competitive low-cost structure while still offering amenities that surpass the typical ultra-low-cost carrier experience. These include complimentary in-flight entertainment, reclining seats, and seat-back power, contributing to a strong brand and product differentiation.
The company's unique approach to capacity optimization sets it apart from its peers. By dynamically deploying shared resources across its Scheduled Service, Charter, and Cargo segments, Sun Country is able to generate high returns and margins while mitigating the seasonality inherent in the airline industry. This agile strategy has allowed the company to navigate turbulent market conditions with remarkable success, including volatile fuel prices, economic downturns, and increased competition.
Financial Performance Sun Country's financial performance has been nothing short of impressive. In the fiscal year 2024, the company reported total revenue of $1.08 billion, the highest in its history. This impressive figure represents a 2% year-over-year increase, driven by strong performances across all business segments.
The company's Passenger segment, which encompasses Scheduled Service and Charter operations, generated revenue of $914.09 million in 2024, a 1% decline from the previous year. However, this was offset by a 7% increase in Cargo revenue, which reached $107.17 million. Additionally, the company's Other revenue, which includes income from services related to its vacation products and rental activities, saw a substantial 83% jump, reaching $54.48 million.
Sun Country's profitability has also been noteworthy. In 2024, the company reported a GAAP diluted earnings per share (EPS) of $0.96 and an operating income margin of 9.9%. On an adjusted basis, the company's diluted EPS was $1.05, and its adjusted operating income margin reached an impressive 10.4% – the highest in the company's history. The company's net income for 2024 stood at $52.9 million.
For the fourth quarter of 2024, Sun Country reported revenue of $260.41 million, representing a 6.1% year-over-year growth. The quarterly net income was $13.44 million. The revenue growth was driven by an increase in rental revenue included within Other revenue, as well as an increase in Cargo revenue due to the Amended and Restated Air Transportation Services Agreement (AR ATSA) with Amazon. This growth was partially offset by a decrease in Passenger revenue as a result of a 9% decrease in total fare per passenger, which was impacted by increased industry capacity.
Liquidity The company's strong cash flow generation has been another key highlight. In 2024, Sun Country reported operating cash flow of $164.86 million and free cash flow of $117.53 million, underscoring its ability to consistently convert earnings into tangible financial resources.
As of December 31, 2024, Sun Country had a debt-to-equity ratio of 0.47, cash and cash equivalents of $83.22 million, and a $25 million Revolving Credit Facility, of which $24.74 million was available. The company's current ratio and quick ratio both stood at 0.63. Sun Country's strong financial position is further evidenced by its improving leverage ratio, which finished 2024 at a net debt to adjusted EBITDA ratio of 2x.
Operational Excellence Sun Country's operational performance has been a significant contributor to its success. The company's Scheduled Service completion factor, which measures the percentage of scheduled flights that are completed, stood at an impressive 98.7% in 2024, even in the face of adverse weather conditions and other industry challenges.
The company's focus on maintaining a modern, efficient fleet of Boeing 737-NG aircraft has also played a crucial role. By operating a single-family fleet, Sun Country is able to achieve significant cost savings and operational efficiencies, further strengthening its competitive position.
Moreover, Sun Country's strong relationships with its customers, particularly in the Charter and Cargo segments, have been instrumental in driving its growth. The company's long-term contracts with the Department of Defense, collegiate and professional sports teams, and e-commerce giant Amazon have provided a stable revenue stream and shielded it from the volatility that often plagues the airline industry.
Business Segments Sun Country Airlines operates two primary business segments: Passenger and Cargo.
The Passenger segment comprises the company's Scheduled Service and Charter businesses. In 2024, the Scheduled Service business flew 4.50 million passengers, with an average total fare per passenger of $159.93, including $68.68 in average ancillary revenue per passenger. The Charter business includes various service contracts, with 74% of total Charter flying in 2024 coming from long-term contracts.
The Cargo segment provides CMI (Crew, Maintenance, Insurance) services to Amazon under the AR ATSA. In June 2024, Sun Country entered into an agreement to increase the number of cargo aircraft operated for Amazon from 12 to 20 by the end of 2025. For the year ended December 31, 2024, Cargo revenue represented 10% of Sun Country's total operating revenues.
Resilience in the Face of Adversity Sun Country's ability to navigate challenges has been a testament to its resilience. During the COVID-19 pandemic, the company was able to quickly adapt its business model, capitalizing on the surge in demand for cargo transportation services while strategically adjusting its Scheduled Service operations to match evolving passenger travel patterns.
The company's diversified revenue streams have also played a crucial role in its ability to weather industry-wide disruptions. While the pandemic severely impacted many airlines' passenger operations, Sun Country's Charter and Cargo segments helped to offset the decline, ultimately positioning the company for a stronger recovery.
Geographic Market Performance Sun Country's operations are highly concentrated in the U.S., primarily within its Minneapolis-St. Paul (MSP) home market, but include service to many international locations. For the full year 2024, 96% of total operating revenue was from domestic markets, 3.4% was from Latin America, and 0.5% was from other international markets.
Looking Ahead As Sun Country Airlines enters the future, the company remains well-positioned to capitalize on the ongoing recovery in the aviation industry. The company's recent agreement with Amazon to expand its Cargo fleet by eight additional aircraft is a clear indication of its commitment to leveraging its operational expertise and driving further growth in this high-margin business segment.
Furthermore, Sun Country's agile capacity management strategy is expected to continue paying dividends. The company's plan to strategically reduce Scheduled Service capacity in the second and third quarters of 2025, while ramping up its Cargo operations, underscores its ability to adapt to changing market conditions and optimize profitability.
For the first quarter of 2025, Sun Country expects total revenue between $330-$340 million, with block hour growth of 7-9% and an operating margin between 17-21%. For the full year 2025, the company anticipates ex-fuel operating expenses to grow in line with total block hour growth of 9-10% versus 2024. However, lower scheduled service ASM production in 2025 is expected to put pressure on adjusted CASM, which is anticipated to increase mid to high single-digits in 2025. Capital expenditures for 2025 are projected to be between $70-$80 million, primarily for spare engines.
With a strong balance sheet, a resilient business model, and a seasoned management team, Sun Country Airlines is poised to soar above the industry's turbulence, solidifying its position as a formidable player in the dynamic world of air transportation.
Industry Trends The airline industry is expected to see a compound annual growth rate (CAGR) of around 5-7% in the coming years as the industry recovers from the COVID-19 pandemic and travel demand continues to rebound. Sun Country's diverse business model and strategic focus on leisure and VFR travelers position it well to capitalize on this growth trend.
Conclusion Sun Country Airlines Holdings, Inc. (SNCY) has emerged as a standout performer in the airline industry, showcasing remarkable financial and operational excellence. Its unique business model, centered on the synergistic deployment of resources across Scheduled Service, Charter, and Cargo operations, has enabled the company to navigate the industry's challenges with remarkable agility and resilience.
As the airline industry continues to navigate a complex landscape, Sun Country's focus on cost control, operational efficiency, and strategic adaptability positions it well for continued success. With a strong financial foundation, a modern and efficient fleet, and a growing presence in the lucrative Cargo segment, the company is well-equipped to capitalize on the industry's recovery and deliver sustainable growth for its shareholders.