Sun Country Airlines Reports Third Quarter 2024 Results
Revenue of $249 million, highest third quarter on record(1)GAAP diluted EPS of $0.04, operating income of $12 million and margin of 5.0%Adj. diluted EPS(2) of $0.06, adjusted operating income(2) of $14 million and margin of 5.6%
MINNEAPOLIS, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Sun Country Airlines Holdings, Inc. ("Sun Country Airlines," "Sun Country," the "Company") (NASDAQ:SNCY) today reported financial results for its third quarter ended September 30, 2024.
"Sun Country is pleased to report our ninth consecutive profitable quarter with GAAP EPS of $0.04 and adjusted EPS of $0.06(2)," said Jude Bricker, Chief Executive Officer of Sun Country. "Despite the impact of the Crowdstrike outage and the hurricanes during the quarter, we delivered $249 million of total revenue, the highest third quarter on record for Sun Country. Robust growth in our charter and cargo businesses helped offset lower scheduled service revenue, demonstrating the effectiveness of our diversified business model. Additionally, our GAAP operating margin of 5.0% and adjusted operating margin of 5.6%(2) exceeded the top end of our guidance range. While third quarter unit revenue was lower than last year, we began to see year-over-year favorability in fares booked in September, which has persisted into the fourth quarter. As always, we want to thank our employees for their hard work and dedication during a challenging operating period."
Overview of Third Quarter
Three Months Ended September 30,
(unaudited) (in millions, except per share amounts)
2024
2023
% Change
Total Operating Revenue
$
249.5
$
248.9
0.2
Operating Income
12.4
19.0
(34.9
)
Income Before Income Tax
3.0
10.1
(70.2
)
Net Income
2.3
7.6
(69.1
)
Diluted earnings per share
$
0.04
$
0.13
(69.2
)
Three Months Ended September 30,
(unaudited) (in millions, except per share amounts)
2024
2023
% Change
Adjusted Operating Income (2)
$
13.9
$
20.0
(30.8
)
Adjusted Income Before Income Tax (2)
4.5
11.1
(59.5
)
Adjusted Net Income (2)
3.5
8.4
(58.4
)
Adjusted diluted earnings per share (2)
$
0.06
$
0.14
(57.1
)
Nine Months Ended September 30,
(unaudited) (in millions, except per share amounts)
2024
2023
% Change
Total Operating Revenue
$
815.3
$
804.1
1.4
Operating Income
79.9
110.4
(27.6
)
Income Before Income Tax
52.6
86.5
(39.1
)
Net Income
39.5
66.5
(40.7
)
Diluted earnings per share
$
0.72
$
1.12
(35.7
)
Nine Months Ended September 30,
(unaudited) (in millions, except per share amounts)
2024
2023
% Change
Adjusted Operating Income (2)
$
84.5
$
118.5
(28.7
)
Adjusted Income Before Income Tax (2)
57.2
94.9
(39.7
)
Adjusted Net Income (2)
43.0
72.9
(41.1
)
Adjusted diluted earnings per share (2)
$
0.78
$
1.23
(36.6
)
Amounts presented in the tables above may not recalculate due to rounding
For the quarter ended September 30, 2024, Sun Country reported net income of approximately $2 million and income before income tax of $3 million, on $249 million of revenue. Adjusted income before income tax(2) for the quarter was approximately $4 million. GAAP operating income during the quarter was $12 million, while adjusted operating income(2) was $14 million, and GAAP operating margin was 5.0% and adjusted operating margin(2) was 5.6%.
"Our third quarter results reflect the continued earnings power of our diversified business model," said Dave Davis, President and Chief Financial Officer. "Cargo revenue per block hour grew by 16.0% year-over-year while third quarter charter revenue easily exceeded charter block hour growth. This strength partially offset the weaker third quarter scheduled service demand environment that we experienced. We expect strength in these businesses to persist, while we also see improving trends in scheduled service unit revenue in the fourth quarter and into 2025. We continue to exhibit solid cost control as our GAAP operating expense grew 3.1% while total block hours grew 3.8% in the third quarter. Adjusted CASM(3) grew by 3.7% year-over-year, largely driven by near-in reductions in scheduled service capacity. We have right-sized our scheduled service capacity to match current demand and we expect fourth quarter scheduled service ASMs to grow by slightly over 3% versus last year. We are preparing to take on additional cargo aircraft in 2025, and still expect the first aircraft to enter service in late March or early April 2025, allowing us to take full advantage of seasonally strong first quarter passenger demand."
Notable Highlights
Ninth consecutive profitable quarter and highest third quarter total revenue on record(1).
Further extended the existing lease on one 737-800 aircraft Sun Country has on lease to an unaffiliated airline. This aircraft is now expected to redeliver to Sun Country in November 2025.
Supported Major League Soccer by flying all 18 Liga MX teams home for 2024 Leagues Cup.
Capacity
System block hours flown during the third quarter of 2024 grew by 3.8% year-over-year. All of this growth was allocated to the passenger segment, resulting in a 5.8% increase in scheduled service ASMs and 1.7% increase in charter block hours. Scheduled service ASMs are expected to grow in the fourth quarter 2024 by slightly more than 3% over fourth quarter 2023. Cargo block hours declined in the third quarter by 3.6% year-over-year due to scheduled heavy maintenance events and the impact of the hurricanes on cargo operations in the Southeast.
Revenue
The domestic market continued to be impacted by overcapacity in the third quarter which pressured unit revenue. The Company reported total revenue of $249 million for the third quarter, which was 0.2% greater than the third quarter of 2023. Scheduled service TRASM(4) of 10.42 cents decreased 11.1% year-over-year, while scheduled service ASMs increased 5.8%. The third quarter 2024 total fare per scheduled passenger of $141 was lower than third quarter 2023 by 7.8% as scheduled service passengers grew 2.0%. The Company's third quarter charter service revenue was $51 million, an increase of 7.0% year-over-year despite charter block hour growth of only 1.7% and the impact of lower fuel cost reimbursements from our customers.
In the third quarter of 2024, cargo revenue was $29 million, an 11.9% increase versus the third quarter of 2023 on a 3.6% decline in cargo block hours. This improvement was primarily driven by the annual rate escalation which went into effect in mid-December 2023 and the beginning of the new Amazon contract rates which went into effect in June 2024.
Cost
Third quarter CASM fell 1.9% while adjusted CASM(3) was up 3.7% year-over-year. Total GAAP operating expenses increased 3.1% year-over-year, primarily due to a 3.8% increase in total block hours. The top non-fuel expenses that grew faster than the level of flying included ground handling costs, which increased 23.3%, driven by a 5% increase in Passenger segment departures and rate increases at our outsourced ground stations. Landing fees and airport rent increased 14.5% due to the expiration of COVID assistance that airports had used to limit rate increases.
Balance Sheet and Liquidity
Total liquidity(5) was $165 million on September 30, 2024, while the Company's net debt(6) was $532 million.
(in millions - amounts may not recalculate due to rounding)
September 30, 2024
December 31, 2023
(Unaudited)
Cash and Cash Equivalents
$
56.8
$
46.3
Available-for-Sale Securities
83.3
134.2
Amount Available Under Revolving Credit Facility
24.7
24.7
Total Liquidity
$
164.8
$
205.2
(in millions - amounts may not recalculate due to rounding)
September 30, 2024
December 31, 2023
(Unaudited)
Total Debt, net
$
351.8
$
401.6
Finance Lease Obligations
298.5
277.3
Operating Lease Obligations
21.4
18.8
Total Debt, net, and Lease Obligations
671.6
697.7
Cash and Cash Equivalents
56.8
46.3
Available-for-Sale Securities
83.3
134.2
Net Debt
$
531.5
$
517.2
Fleet
As of September 30, 2024, the Company had 44 aircraft in its passenger service fleet, operated 12 freighter aircraft in its cargo operation and had seven aircraft that are currently on lease to unaffiliated airlines.
Guidance for Fourth Quarter 2024
Q4 2024
H/(L) vs Q4 2023
Total revenue - millions
$250 to $260
2% to 6%
Economic fuel cost per gallon
$2.47
(20)%
Operating income margin - percentage
7% to 9%
0pp to 2pp
Effective tax rate
23%
Total system block hours - thousands
36.5 to 37.5
2% to 5%
Conference Call & Webcast Details
Sun Country Airlines will host a conference call to discuss its third quarter 2024 results at 8:30 a.m. Eastern Time on Thursday, October 31, 2024. A live broadcast of the conference call will be available via the investor relations section of Sun Country Airlines' website at https://ir.suncountry.com/news-events/events-and-presentations. The online replay will be available on the same website approximately one hour after the call.
About Sun Country Airlines
Sun Country Airlines is a new breed of hybrid low-cost air carrier, whose mission is to connect guests to their favorite people and places, to create lifelong memories and transformative experiences. Sun Country dynamically deploys shared resources across our synergistic scheduled service, charter, and cargo businesses. Based in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers and charter customers and providing cargo service to Amazon, with flights throughout the United States and to destinations in Mexico, Central America, Canada, and the Caribbean. For photos, b-roll and additional company information, visit https://www.stories.suncountry.com/multimedia.
End Notes
1 -
Records begin in January 2017
2 -
See additional details, including reconciliations to the most comparable GAAP measures, in the section titled "Non-GAAP financial measures"
3 -
Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, non-cash management stock compensation expense, costs arising from its cargo operations, depreciation and amortization recognized on certain assets that generate lease income, certain commissions, and other costs of selling its vacations product from this measure. See table titled "Reconciliation of CASM to Adjusted CASM"
4 -
Scheduled Service TRASM includes Schedule Service revenue, Ancillary revenue, and ASM generating revenue classified within Other Revenue on the Condensed Consolidated Statement of Operations / Scheduled Service ASMs. Other Revenue includes rental revenue associated with certain assets that generate lease income of approximately $10.1 million and $5.9 million in the three months ended September 30, 2024 and 2023, respectively, and $29.2 million and $11.7 million in the nine months ended September 30, 2024 and 2023, respectively, which is not included.
5 -
Total liquidity = cash and cash equivalents + available-for-sale securities + amount available under revolver
6 -
Net debt = current portion of long-term debt + long-term debt + finance lease obligations + operating lease obligations, cash and cash equivalents - available-for-sale securities
Forward Looking Statements
This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "target," "will," "would" and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. The forward-looking statements are relating to:
our strategy, outlook and growth prospects;
our operational and financial targets and dividend policy;
general economic trends and trends in the industry and markets;
potential repurchases of our common stock; and
the competitive environment in which we operate.
These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
These forward-looking statements reflect our views with respect to future events as of the date of this press release and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. We anticipate that subsequent events and developments will cause our views to change. You should read this press release completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements. Additional information concerning certain factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
Non-GAAP Financial Measures
We sometimes use information that is derived from the Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this document to the most directly comparable GAAP financial measures.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited- amounts may not recalculate due to rounding)
Three Months Ended September 30,
2024
2023
% Change
Operating Revenues:
Scheduled Service
$
83,784
$
96,483
(13.2
)
Charter
50,769
47,437
7.0
Ancillary
73,211
70,435
3.9
Passenger
207,764
214,355
(3.1
)
Cargo
29,165
26,059
11.9
Other
12,541
8,462
48.2
Total Operating Revenue
249,470
248,876
0.2
Operating Expenses:
Aircraft Fuel
54,737
61,179
(10.5
)
Salaries, Wages, and Benefits
80,919
72,541
11.5
Aircraft Rent
—
22
(100.0
)
Maintenance
15,973
15,330
4.2
Sales and Marketing
7,748
7,569
2.4
Depreciation and Amortization
23,754
22,762
4.4
Ground Handling
11,568
9,382
23.3
Landing Fees and Airport Rent
15,979
13,958
14.5
Other Operating, net
26,410
27,127
(2.6
)
Total Operating Expenses
237,088
229,870
3.1
Operating Income
12,382
19,006
(34.9
)
Non-operating Income (Expense):
Interest Income
1,659
2,480
(33.1
)
Interest Expense
(11,049
)
(11,403
)
(3.1
)
Other, net
12
(15
)
NM
Total Non-operating Expense, net
(9,378
)
(8,938
)
4.9
Income before Income Tax
3,004
10,068
(70.2
)
Income Tax Expense
662
2,477
(73.3
)
Net Income
$
2,342
$
7,591
(69.1
)
Net Income per share to common stockholders:
Basic
$
0.04
$
0.14
(71.4
)
Diluted
$
0.04
$
0.13
(69.2
)
Shares used for computation:
Basic
52,876,339
55,435,386
(4.6
)
Diluted
54,780,672
58,595,646
(6.5
)
NM - not meaningful
Nine Months Ended September 30,
2024
2023
% Change
Operating Revenues:
Scheduled Service
$
313,056
$
360,607
(13.2
)
Charter
149,090
143,250
4.1
Ancillary
236,677
205,633
15.1
Passenger
698,823
709,490
(1.5
)
Cargo
78,560
74,437
5.5
Other
37,951
20,150
88.3
Total Operating Revenue
815,334
804,077
1.4
Operating Expenses:
Aircraft Fuel
187,229
185,829
0.8
Salaries, Wages, and Benefits
242,516
223,890
8.3
Aircraft Rent
—
2,281
(100.0
)
Maintenance
50,129
44,311
13.1
Sales and Marketing
26,819
26,005
3.1
