UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-40217

Sun Country Airlines Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware		82-4092570
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2005 Cargo Road
Minneapolis, Minnesota		55450
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (651) 681-3900

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SNCY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐☑ No ☑☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☑
	Smaller reporting company ☐	Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares outstanding by each class of common stock, as of ~~March 31,~~September 30, 2021:

Common Stock, $0.01 par value – ~~57,153,467~~57,551,741 shares outstanding

Table of Contents

Sun Country Airlines Holdings, Inc.

Form 10-Q

Table of Contents


			Page			Page

Part I. Financial Information	Part I. Financial Information			Part I. Financial Information
Item 1. Financial Statements	Item 1. Financial Statements		3	Item 1. Financial Statements		3
Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets		3	Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of Operations	Condensed Consolidated Statements of Operations		5	Condensed Consolidated Statements of Operations		5
Condensed Consolidated Statements of Stockholders’ Equity			6
Condensed Consolidated Statements of Changes in Stockholders’ Equity				Condensed Consolidated Statements of Changes in Stockholders’ Equity		6
Condensed Consolidated Statements of Cash Flows	Condensed Consolidated Statements of Cash Flows		7	Condensed Consolidated Statements of Cash Flows		7

Notes to the Condensed Consolidated Financial Statements	Notes to the Condensed Consolidated Financial Statements		8	Notes to the Condensed Consolidated Financial Statements		8

1		Company Background	8		Company Background	8
2		Basis of Presentation	9		Basis of Presentation	9
3		Impact of the COVID-19 Pandemic	10		Impact of the COVID-19 Pandemic	10
4		Revenue	12		Revenue	12
5		Earnings per Share	14		Earnings per Share	14
6		Aircraft	15		Aircraft	15
7		Debt	17		Debt	18
8		Fuel Derivatives and Risk Management	19		Fuel Derivatives and Risk Management	20
9		Fair Value Measurements	20		Fair Value Measurements	21
10		Income Taxes	21		Income Taxes	22
11		Special Items, net	22		Special Items, net	23
12		Commitments and Contingencies	22		Commitments and Contingencies	24
13		Operating Segments	22		Operating Segments	24
14		Subsequent Events	23		Subsequent Events	25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	Item 3. Quantitative and Qualitative Disclosures About Market Risk		44	Item 3. Quantitative and Qualitative Disclosures About Market Risk		57
Item 4. Controls and Procedures	Item 4. Controls and Procedures		44	Item 4. Controls and Procedures		57

Part II. Other Information	Part II. Other Information			Part II. Other Information
Item 1. Legal Proceedings	Item 1. Legal Proceedings		44	Item 1. Legal Proceedings		58
Item 1A. Risk Factors	Item 1A. Risk Factors		45	Item 1A. Risk Factors		58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		45	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		70
Item 3. Defaults Upon Senior Securities	Item 3. Defaults Upon Senior Securities		45	Item 3. Defaults Upon Senior Securities		70
Item 4. Mine Safety Disclosures	Item 4. Mine Safety Disclosures		46	Item 4. Mine Safety Disclosures		70
Item 5. Other Information	Item 5. Other Information		46	Item 5. Other Information		70
Item 6. Exhibits	Item 6. Exhibits		46	Item 6. Exhibits		71

Signatures			48			72

- 2 -

Table of Contents

PART I. Financial Information

ITEM 1. FINANCIAL STATEMENTS

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

March 31, 2021

December 31, 2020

(Unaudited)

ASSETS





Current Assets:




Cash and Equivalents

$
269,599

$
62,028
Restricted Cash

6,019

8,335
Investments

5,777

5,624
Accounts Receivable, net of an allowance for credit losses of $293 and $224, respectively

25,897

28,690
Short-term Lessor Maintenance Deposits

1,723

3,101
Inventory, net of a reserve for obsolescence of $1,089 and $996, respectively

5,457

5,407
Prepaid Expenses

11,678

8,002
Derivative Assets

1,205

—
Other Current Assets

804

5,553
Total Current Assets

328,159

126,740

Property & Equipment, net:




Aircraft and Flight Equipment

384,950

331,685
Leasehold Improvements and Ground Equipment

13,856

13,526
Computer Hardware and Software

7,949

7,845
Finance Lease Assets

117,833

117,833
Rotable Parts

8,808

8,691
Property & Equipment

533,396

479,580
Accumulated Depreciation & Amortization

(76,467)

(65,065)
Total Property & Equipment, net

456,929

414,515

Other Assets:




Goodwill

222,223

222,223
Other Intangible Assets, net

92,110

93,110
Operating Lease Right-of-use Assets

80,587

121,269
Aircraft Lease Deposits

8,027

10,253
Long-term Lessor Maintenance Deposits

18,855

22,584
Deferred Tax Asset

30,810

36,216
Other Assets

6,502

6,357
Total Other Assets

459,114

512,012
Total Assets

$
1,244,202

$
1,053,267


	September 30, 2021		December 31, 2020
	(Unaudited)
ASSETS

Current Assets:
Cash and Cash Equivalents	$	275,332	$	62,028
Restricted Cash		15,693		8,335
Investments		5,997		5,624
Accounts Receivable, net of an allowance for credit losses of $232 and $224, respectively		31,221		28,690
Short-term Lessor Maintenance Deposits		—		3,101
Inventory, net of a reserve for obsolescence of $1,257 and $996, respectively		5,496		5,407
Prepaid Expenses		11,155		8,002
Derivative Assets		248		—
Other Current Assets		1,299		5,553
Total Current Assets		346,441		126,740

Property & Equipment, net:
Aircraft and Flight Equipment		435,901		331,685
Leasehold Improvements and Ground Equipment		19,005		13,526
Computer Hardware and Software		8,459		7,845
Finance Lease Assets		189,689		117,833
Rotable Parts		9,331		8,691
Property & Equipment		662,385		479,580
Accumulated Depreciation & Amortization		(101,356)		(65,065)
Total Property & Equipment, net		561,029		414,515

Other Assets:
Goodwill		222,223		222,223
Other Intangible Assets, net		90,110		93,110
Operating Lease Right-of-use Assets		65,215		121,269
Aircraft Deposits		9,092		10,253
Long-term Lessor Maintenance Deposits		23,226		22,584
Deferred Tax Asset		19,149		36,216
Other Assets		5,828		6,357
Total Other Assets		434,843		512,012
Total Assets	$	1,342,313	$	1,053,267

See accompanying Notes to Condensed Consolidated Financial Statements

- 3 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

March 31, 2021

December 31, 2020

(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:




Accounts Payable

$
34,171

$
34,035
Accrued Salaries, Wages, and Benefits

16,870

16,368
Accrued Transportation Taxes

10,402

5,883
Air Traffic Liabilities

94,733

101,075
Derivative Liabilities

—

1,174
Over-market Liabilities

5,487

9,281
Finance Lease Obligations

9,995

11,460
Loyalty Program Liabilities

7,115

7,016
Operating Lease Obligations

20,672

34,492
Current Maturities of Long-term Debt

29,232

26,118
Other Current Liabilities

8,963

6,841
Total Current Liabilities

237,640

253,743

Long-term Liabilities:




Over-market Liabilities

16,113

28,128
Finance Lease Obligations

93,293

95,710
Loyalty Program Liabilities

13,659

15,053
Operating Lease Obligations

77,840

112,707
Long-term Debt

274,109

256,345
Income Tax Receivable Agreement Liability

115,200

—
Other Long-term Liabilities

6,388

7,764
Total Long-term Liabilities

596,602

515,707

Total Liabilities

834,242

769,450

Commitments and Contingencies





Stockholders' Equity:




Common Stock

572

468
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,153,467 and 46,839,659 issued at March 31, 2021 and December 31, 2020, respectively.




Loans to Stockholders

—

(3,500)
Additional Paid In Capital

473,848

248,525
Retained Earnings / (Deficit)

(64,460)

38,324
Total Stockholders' Equity

409,960

283,817
Total Liabilities and Stockholders' Equity

$
1,244,202

$
1,053,267


	September 30, 2021		December 31, 2020
	(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable	$	35,676	$	34,035
Accrued Salaries, Wages, and Benefits		21,718		16,368
Accrued Transportation Taxes		8,882		5,883
Air Traffic Liabilities		105,048		101,075
Derivative Liabilities		—		1,174
Over-market Liabilities		4,309		9,281
Finance Lease Obligations		9,740		11,460
Loyalty Program Liabilities		10,175		7,016
Operating Lease Obligations		17,353		34,492
Current Maturities of Long-term Debt		19,835		26,118
Other Current Liabilities		8,884		6,841
Total Current Liabilities		241,620		253,743

Long-term Liabilities:
Over-market Liabilities		11,505		28,128
Finance Lease Obligations		164,902		95,710
Loyalty Program Liabilities		10,136		15,053
Operating Lease Obligations		63,139		112,707
Long-term Debt		266,985		256,345
Income Tax Receivable Agreement Liability		95,400		—
Other Long-term Liabilities		5,746		7,764
Total Long-term Liabilities		617,813		515,707
Total Liabilities		859,433		769,450

Commitments and Contingencies

Stockholders' Equity:
Common Stock
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,551,741 and 46,839,659 issued and outstanding at September 30, 2021 and December 31, 2020, respectively.		576		468
Preferred Stock
Preferred stock with $0.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2021 and December 31, 2020.		—		—
Loans to Stockholders		—		(3,500)
Additional Paid In Capital		481,108		248,525
Retained Earnings		1,196		38,324
Total Stockholders' Equity		482,880		283,817
Total Liabilities and Stockholders' Equity	$	1,342,313	$	1,053,267

See accompanying Notes to Condensed Consolidated Financial Statements

- 4 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended March 31,


2021

2020
Operating Revenues:




Passenger

$
104,195

$
178,486
Cargo

21,585

—
Other

1,831

1,844
Total Operating Revenue

127,611

180,330

Operating Expenses:




Aircraft Fuel

24,274

55,561
Salaries, Wages, and Benefits

44,075

38,091
Aircraft Rent

5,599

11,032
Maintenance

9,210

6,478
Sales and Marketing

5,110

8,572
Depreciation and Amortization

12,615

10,527
Ground Handling

5,230

9,292
Landing Fees and Airport Rent

8,785

11,114
Special Items, net

(26,871)

—
Other Operating, net

14,651

14,433
Total Operating Expenses

102,678

165,100
Operating Income

24,933

15,230

Non-operating Income (Expense):




Interest Income

15

251
Interest Expense

(7,121)

(5,616)
Other, net

(5)

(169)
Total Non-operating Expense, net

(7,111)

(5,534)

Income before Income Tax

17,822

9,696
Income Tax Expense

5,406

2,445
Net Income

$
12,416

$
7,251

Net Income per share to common stockholders:




Basic

$
0.26

$
0.16
Diluted

$
0.24

$
0.15
Shares used for computation:




Basic

48,496,077

46,805,951
Diluted

52,508,186

48,225,603


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating Revenues:
Passenger	$	147,718	$	62,472	$	377,042	$	272,299
Cargo		24,400		14,272		68,084		17,491
Other		1,545		1,229		5,338		3,889
Total Operating Revenue		173,663		77,973		450,464		293,679

Operating Expenses:
Aircraft Fuel		36,647		13,139		90,631		69,377
Salaries, Wages, and Benefits		43,424		36,348		129,815		106,923
Aircraft Rent		3,925		6,410		13,339		23,376
Maintenance		9,660		6,338		30,170		15,242
Sales and Marketing		5,470		2,921		16,402		13,123
Depreciation and Amortization		14,029		12,929		40,103		35,631
Ground Handling		7,873		4,880		19,654		15,786
Landing Fees and Airport Rent		12,069		8,596		29,606		22,377
Special Items, net		(65)		(32,852)		(65,456)		(64,333)
Other Operating, net		18,629		10,447		50,026		34,363
Total Operating Expenses		151,661		69,156		354,290		271,865
Operating Income		22,002		8,817		96,174		21,814

Non-operating Income (Expense):
Interest Income		28		26		52		340
Interest Expense		(6,286)		(5,157)		(19,487)		(16,215)
Other, net		456		164		18,505		(331)
Total Non-operating Income (Expense), net		(5,802)		(4,967)		(930)		(16,206)
							��
Income before Income Tax		16,200		3,850		95,244		5,608
Income Tax Expense		2,297		923		17,172		1,470
Net Income	$	13,903	$	2,927	$	78,072	$	4,138

Net Income per share to common stockholders:
Basic	$	0.24	$	0.06	$	1.44	$	0.09
Diluted	$	0.23	$	0.06	$	1.33	$	0.09
Shares used for computation:
Basic		57,355,104		46,805,950		54,368,231		46,805,950
Diluted		61,712,378		48,350,943		58,699,991		48,350,943

See accompanying Notes to Condensed Consolidated Financial Statements

- 5 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

Three Months Ended March 31, 2020

Common Stock

Loans to

Additional

Retained


Warrants

Shares

Amount

Stockholders

Paid-In Capital

Earnings

Total
December 31, 2019

40,005,885

6,800,065

$
68

$
(3,500)

$
244,928

$
42,228

$
283,724
Exercise of Apollo Warrants

(40,005,885)

40,005,885

400

—

(379)

—

21
Net Income

—

—

—

—

—

7,251

7,251
Stock-based Compensation

—

—

—

—

369

—

369
March 31, 2020

—

46,805,950

$
468

$
(3,500)

$
244,918

$
49,479

$
291,365


	Nine Months Ended September 30, 2020
		Common Stock			Loans to		Additional		Retained
	Warrants	Shares	Amount		Stockholders		Paid-in Capital		Earnings		Total
December 31, 2019	40,005,885	6,800,065	$	68	$	(3,500)	$	244,928	$	42,228	$	283,724
Exercise of Apollo Warrants	(40,005,885)	40,005,885		400		—		(379)		—		21
Net Income	—	—		—		—		—		7,251		7,251
Stock-based Compensation	—	—		—		—		369		—		369
March 31, 2020	—	46,805,950	$	468	$	(3,500)	$	244,918	$	49,479	$	291,365
Net Loss	—	—		—		—		—		(6,040)		(6,040)
Stock-based Compensation	—	—		—		—		388		—		388
June 30, 2020	—	46,805,950	$	468	$	(3,500)	$	245,306	$	43,439	$	285,713
Net Income	—	—		—		—		—		2,927		2,927
Amazon Warrants	—	—		—		—		933		—		933
Stock-based Compensation	—	—		—		—		496		—		496
September 30, 2020	—	46,805,950	$	468	$	(3,500)	$	246,735	$	46,366	$	290,069

Three Months Ended March 31, 2021

Common Stock

Loans to

Additional

Retained


Warrants

Shares

Amount

Stockholders

Paid-In Capital

Earnings

Total
December 31, 2020

—

46,839,659

$
468

$
(3,500)

$
248,525

$
38,324

$
283,817
Shares Surrendered by Stockholders

—

(140,737)

(1)

3,500

(3,499)

—

—
Initial Public Offering

—

10,454,545

105

—

224,552

—

224,657
Net Income

—

—

—

—

—

12,416

12,416
Income Tax Receivable Agreement

—

—

—

—

—

(115,200)

(115,200)
Amazon Warrants

—

—

—

—

1,400

—

1,400
Stock-based Compensation

—

—

—

—

2,870

—

2,870
March 31, 2021

—

57,153,467

$
572

$
—

$
473,848

$
(64,460)

$
409,960


	Nine Months Ended September 30, 2021
								Retained
	Common Stock			Loans to		Additional		Earnings
	Shares	Amount		Stockholders		Paid-in Capital		(Deficit)		Total
December 31, 2020	46,839,659	$	468	$	(3,500)	$	248,525	$	38,324	$	283,817
Shares Surrendered by Stockholders	(140,737)		(1)		3,500		(3,499)		—		—
Initial Public Offering	10,454,545		105		—		224,552		—		224,657
Net Income	—		—		—		—		12,416		12,416
Income Tax Receivable Agreement	—		—		—		—		(115,200)		(115,200)
Amazon Warrants	—		—		—		1,400		—		1,400
Stock-based Compensation	—		—		—		2,870		—		2,870
March 31, 2021	57,153,467	$	572	$	—	$	473,848	$	(64,460)	$	409,960
Initial Public Offering Expense Adjustment	—		—		—		349		—		349
Exercise of Stock Options	5,000		—		—		27		—		27
Net Income	—		—		—		—		51,753		51,753
Amazon Warrants	—		—		—		1,400		—		1,400
Stock-based Compensation	—		—		—		744		—		744
June 30, 2021	57,158,467	$	572	$	—	$	476,368	$	(12,707)	$	464,233
Exercise of Stock Options	393,274		4		—		2,376		—		2,380
Net Income	—		—		—		—		13,903		13,903
Amazon Warrants	—		—		—		1,400		—		1,400
Stock-based Compensation	—		—		—		964		—		964
September 30, 2021	57,551,741	$	576	$	—	$	481,108	$	1,196	$	482,880

See accompanying Notes to Condensed Consolidated Financial Statements

- 6 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,					Nine Months Ended September 30,
	2021		2020			2021		2020
Net Income	$	12,416	$	7,251		$	78,072	$	4,138
Adjustments to reconcile Net Income to Cash from Operating Activities:
Depreciation and Amortization		12,615		10,527			40,103		35,631
Tax Receivable Agreement Adjustment							(19,800)		—
Reduction in Operating Lease Right-of-use Assets		5,401		6,951			12,920		19,685
Non-Cash Loss on Asset Transactions, net		(8,729)		72
Unrealized Loss (Gain) on Fuel Derivatives		(2,386)		21,752
Non-Cash (Gain) Loss on Asset Transactions, net							(12,666)		381
Unrealized (Gain) Loss on Fuel Derivatives							(3,527)		15,766
Amortization of Over-market Liabilities		(2,004)		(2,913)			(4,159)		(8,101)
Deferred Income Taxes		5,406		2,471			17,068		1,493
Amazon Warrants Vested		1,400		—			4,200		933
Stock-based Compensation Expense		2,870		369			4,577		1,253
Amortization of Debt Issuance Costs		1,496		708			2,187		1,625

Changes in Operating Assets and Liabilities:
Accounts Receivable		2,358		5,322			34		(3,141)
Inventory		(173)		(367)			(456)		(696)
Prepaid Expenses		(3,676)		(403)			(3,153)		(409)
Lessor Maintenance Deposits		(2,219)		(5,476)			(5,464)		(8,293)
Aircraft Lease Deposits		2,226		600			1,162		1,290
Other Assets		233		(2,313)			2,297		(4,396)
Accounts Payable		626		7,107			2,257		(9,092)
Accrued Transportation Taxes		4,519		(10,539)			2,999		(10,527)
Air Traffic Liabilities		(6,343)		(21,903)			3,972		(18,262)
Loyalty Program Liabilities		(1,295)		(570)			(1,759)		(769)
Reduction in Operating Lease Obligations		(10,722)		(7,803)			(19,983)		(19,078)
Other Liabilities		1,820		3,015			8,514		4,122
Net Cash Provided by Operating Activities		15,839		13,858			109,395		3,553

Cash Flows from Investing Activities:
Purchases of Property & Equipment		(54,399)		(75,250)			(111,053)		(94,307)
Purchase of Investments		(337)		—			(1,436)		(427)
Proceeds from the Sale of Investments		184		202			1,062		523
Net Cash Used in Investing Activities		(54,552)		(75,048)			(111,427)		(94,211)

Cash Flows from Financing Activities:
Cash Received from Stock Offering		235,894		—			235,894		—
Costs of Stock Offering		(7,226)		—			(8,706)		—
Proceeds Received from Exercise of Apollo Warrants		—		21
Proceeds from Stock Option and Warrant Exercises							2,407		21
Proceeds from Borrowings		68,000		108,777			80,500		220,307
Repayment of Finance Lease Obligations		(3,911)		(4,256)			(9,113)		(84,742)
Repayment of Borrowings		(46,068)		(47,255)			(75,728)		(55,594)
Debt Issuance Costs		(2,721)		(2,432)			(2,560)		(3,279)
Net Cash Provided by Financing Activities		243,968		54,855			222,694		76,713

Net Increase / (Decrease) in Cash, Cash Equivalents and Restricted Cash		205,255		(6,335)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash							220,662		(13,945)

Cash, Cash Equivalents and Restricted Cash--Beginning of the Period		70,363		64,478			70,363		64,478

Cash, Cash Equivalents and Restricted Cash--End of the Period	$	275,618	$	58,143		$	291,025	$	50,533

Supplemental information:
Cash Payments for Interest	$	2,728	$	3,278		$	14,521	$	12,027
Cash Payments (Receipts) for Income Taxes, net	$	(7)	$	(55)
Cash Payments for Income Taxes, net						$	144	$	34
Non-cash transactions:
Lease Deposits Applied Against the Purchase of Aircraft	$	2,766	$	—		$	3,296	$	—
Aircraft and Flight Equipment Acquired through Finance Leases						$	71,856	$	—
Purchases of Property & Equipment in Accounts Payable	$	243	$	1,186		$	—	$	648
Costs of Stock Offering in Accounts Payable	$	1,829	$	—

The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Consolidated Balance Sheets:
The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets:					The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets:
	March 31, 2021		March 31, 2020			September 30, 2021		September 30, 2020
Cash and Equivalents	$	269,599	$	53,112
Cash and Cash Equivalents						$	275,332	$	44,288
Restricted Cash		6,019		5,031			15,693		6,245
Total Cash, Cash Equivalents and Restricted Cash	$	275,618	$	58,143		$	291,025	$	50,533

See accompanying Notes to Condensed Consolidated Financial Statements

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

1.	COMPANY BACKGROUND

Sun Country Airlines Holdings, Inc. is the parent company of Sun Country, Inc., which is a certificated air carrier providing scheduled passenger service, air cargo ~~customers,~~service, charter air transportation and related services. Services are provided to the general public, ~~Amazon,~~cargo customers, military branches, wholesale tour operators, individual entities, schools and companies for air transportation to various U.S. and international destinations. Except as otherwise stated, the financial information, accounting policies, and activities of Sun Country Airlines Holdings, Inc. are referred to as those of the Company (the “Company” or “Sun Country”).

Stock Split

In March 2021, the Company effected an approximately 18.8886 for 1 stock split of its common stock (the “Stock Split”), with exercise prices for outstanding warrants and options adjusted accordingly by dividing such prices by the Stock Split ratio. The par value of the common stock was not adjusted as a result of the Stock Split. As a result of the Stock Split, the Company issued an additional 44,226,587 shares of common stock. All references to common stock, warrants to purchase common stock, stock options, per share amounts and related information contained in the accompanying Condensed Consolidated Financial Statements and applicable disclosures have been retroactively adjusted to reflect the effect of the Stock Split for all periods.

Approval of the Omnibus Incentive Plan

In March 2021, the stockholders approved the Sun Country Airlines Holdings, Inc. 2021 Omnibus Incentive Plan (the “Plan”). The Plan authorizes that no more than 3,600,000 shares of Common Stock may be delivered in the aggregate pursuant to Awards granted under the Plan. An “Award” means any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award, or Other Cash-Based Award granted under the Plan.

Upon implementation of this new Plan, there were 0 more grants under the October 2018 equity incentive plan. Awards already issued under the 2018 plan are not impacted by the new Plan.

Initial Public Offering of Common Stock and ~~Concurrent Private Placements~~Other Stock Sales

On March 16, 2021, the Company priced its initial public offering of 9,090,909 shares of common stock to the public at $24.00 per share. The stock began trading on the NASDAQ on March 17, 2021 under the symbol SNCY. The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised. In total, all 10,454,545 shares were issued on March 19, 2021 and the net proceeds to the Company were ~~$224,657~~$225,006 after deducting underwriting discounts and commissions, and other offering expenses.

Concurrently with the closing of the initial public offering, SCA Horus Holdings, LLC, an affiliate of investment funds managed by affiliates of Apollo Global Management (the “Apollo Stockholder”), also completed a concurrent private placement in which the Apollo Stockholder sold 2,216,312 and 2,216,308 shares of common stock to PAR Investment Partners, L.P. and certain funds or accounts managed by an investment adviser subsidiary of Blackrock, Inc., respectively. Each of the twosales was based on an

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

aggregate purchase price of $50,000 and a price per share equal to 94% of the initial public offering price of $24.00 per share.

In May 2021, the Apollo Stockholder sold 7,250,000 shares of the Company’s common stock at a public offering price of $34.50 per share. The underwriters in this offering exercised their option to purchase an additional 1,087,500 shares at the public offering price, bringing the total offering to 8,337,500 shares. The Company incurred offering expenses of $640 and did not receive any of the proceeds from the offering. All proceeds went to the Apollo Stockholder.

In October 2021, the Apollo Stockholder and Jude Bricker, the Company’s Chief Executive Officer (together, the “Selling Stockholders”), sold a total of 8,500,000 shares of the Company’s common stock at a public offering price of $32.50 per share. In addition, the Selling Stockholders and another existing stockholder of the Company granted the underwriters a 30-day option to purchase up to 1,275,000 additional shares of the Company’s common stock at the public offering price, less underwriting discounts and commissions. The Company incurred offering expenses of $641, through September 30, 2021, and did not receive any of the proceeds from the offering. All proceeds went to the Selling Stockholders.

Amazon Agreement

On December 13, 2019, the Company signed a six-year contract (with 2, two-year extension options, for a maximum term of 10 years) with Amazon.com Services, Inc. (together with its affiliates, “Amazon”) to provide cargo services under an Air Transportation Services Agreement (the “ATSA”). The agreement is structured for the Company to provide crew, maintenance, and insurance (“CMI”) services to Amazon. Sun Country began flying for Amazon in May 2020. On June 27, 2020, Amazon and the Company signed an amendment to the December 2019 agreement that increased the number of aircraft Sun Country operates from 10 to 12.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

In December 2019, in connection with the ATSA, the Company issued warrants to Amazon to purchase an aggregate of up to 9,482,606 shares of common stock at an exercise price of approximately $15.17 per share. The exercise period of these warrants is through the eighth anniversary of the issue date. Of the 9,482,606 total Amazon warrants issued, 632,183 vested upon execution of the ATSA in December 2019. Thereafter, an additional 63,217 warrants will vest for each milestone of $8,000 in qualifying payments made by Amazon to the Company. During the three and nine months ended ~~March 31,~~September 30, 2021, 189,652 and 568,956 warrants vested, ~~and the~~respectively. The cumulative warrants vested as of ~~March 31,~~September 30, 2021 were ~~1,074,704. NaN warrants vested during~~1,454,008. During the three and nine months ended ~~March 31, 2020.~~September 30, 2020, 126,435 warrants vested.

2.	BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements of Sun Country Airlines Holdings, Inc. should be read in conjunction with the consolidated financial statements contained in the Company’s Annual Report for the year ended December 31, 2020, which is included in the Company’s Final Prospectus dated March 16, 2021. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, there were no significant changes to the Company’s critical accounting policies.

Certain prior period Stockholders’ Equity amounts were reclassified to conform to the current period presentation. This involved reducing the Common Stock values to $0.01 times the ~~Shares~~shares outstanding and

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

reclassifying those dollars to Additional Paid-In Capital. These reclasses were $238,694 as of ~~December 31, 2020 and March 31,~~the end of each quarter in fiscal year 2020. The reclass as of December 31, 2019 was $239,073. ~~Also, historical shares of common stock have been adjusted to reflect the March 2021 approximately 18.8886 for 1 stock split.~~

Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited Condensed Consolidated Financial Statements for the interim periods presented. All material intercompany balances and transactions have been eliminated in consolidation. The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant areas of judgment relate to passenger revenue recognition, maintenance under the built-in overhaul method, equity-based compensation, tax receivable agreement, lease accounting, impairment of goodwill, impairment of long-lived and intangible assets, air traffic liabilities, the loyalty program, as well as the valuation of Amazon warrants.

Due to severe impacts from the global coronavirus (“COVID-19”) pandemic, seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of operating results for future quarters or for the year ~~ended~~ending December 31, 2021. Air travel is also significantly impacted by general economic conditions, the amount of disposable income available to consumers, unemployment levels, corporate travel budgets, extreme or severe weather and natural disasters, disease outbreaks, fears of terrorism or war, and other factors beyond the Company’s control.

The Company operates its fiscal year on a calendar year basis.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Recently Adopted Accounting Standards

Income Taxes-Simplifying the Accounting for Income Taxes - In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions related to the approach for intraperiod tax allocation, recognizing deferred tax liabilities for outside basis differences, and calculating income taxes in interim periods. The guidance also reduces complexity in certain areas, including franchise taxes that are partially based on income and accounting for tax law changes in interim periods. The standard was adopted prospectively effective January 1, 2021 and it did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

~~Simplifying the Test for Goodwill Impairment~~ ~~- In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~. The new standard eliminates Step 2 from the goodwill impairment test. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard was adopted and applied prospectively by the Company on April 1, 2020, and it did not have an impact on the Company’s Condensed Consolidated Financial Statements.

~~Financial Instruments—Credit Losses~~ ~~- In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses~~ ~~(Topic 326)~~~~: Measurement of Credit Losses on Financial Instruments~~. The update requires the use of an expected loss model on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, entities are required to estimate lifetime expected credit losses. This accounting standard was adopted prospectively on April 1, 2020, and it did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

3.	IMPACT OF THE COVID-19 PANDEMIC

~~All major~~On March 11, 2020 the World Health Organization declared COVID-19 a global pandemic causing a massive market disruption to the aviation industry. While U.S. domestic passenger ~~airlines were negatively impacted by~~volumes have increased to date, those levels are still down when compared to the ~~declining demand environment resulting from the COVID-19 pandemic.~~same time frame in 2019. The ~~U.S. Department of State has issued international travel advisories and restrictions and~~growth in the U.S. ~~federal government~~domestic air traffic since the trough in April 2020 has ~~also implemented enhanced screenings~~been led by leisure and ~~quarantine requirements~~visiting family and relatives (“VFR”) travelers as business travel remains more subdued with corporate workforces continuing to “work-from-home” and in-person meetings continuing to be conducted via videoconferencing and other virtual channels. Equity research analysts and other industry executives believe that the positive trends in ~~connection with~~leisure and VFR travel will continue as COVID-19 vaccines continue to become more widely distributed in 2021. COVID-19 vaccines have become widely available in the ~~outbreak. State and local governments may have additional restrictions that adversely impact travel. In addition,~~U.S. according to the ~~U.S.~~ Centers for Disease Control ~~has issued travel advisories for domestic travel within~~ and Prevention (“the United States. Certain Latin American countries where the Company operates scheduled passenger service have also restricted travel to residents only. Accordingly, the Company experienced a dramatic decline in flight bookings and an increase in cancellations beginning in March 2020, as a result of the outbreak. In addition, the federal government has encouraged social distancing efforts and limits on gathering size. Many popular tourist destinations have been closed, or operations are being curtailed, reducing the demand for leisure air travel.

The continued distribution of effective vaccines and the easing of travel advisories and restrictions has lead to growing customer confidence and increased demand. There have been fluctuations in the rate of infections during 2021 and the U.S. Food and Drug Administration has issued an emergency use authorization for COVID-19 vaccines.

~~The timing and pace of the recovery from the COVID-19 pandemic are uncertain as certain markets have reopened, some of which have since experienced a resurgence of COVID-19 cases, while others,~~CDC”).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~particularly~~The Company continues to see many countries impose strict international ~~markets, remain closed~~ travel restrictions, mandatory quarantines and/or ~~are enforcing extended quarantines for~~COVID testing upon return from international travel that replaces prior travel restrictions. The U.S. market has recovered significantly faster than most other countries as a result of widespread vaccine distribution igniting the leisure travel recovery. However, given the uncertainty regarding COVID-19 variants, including but not limited to the Delta variant, the demand recovery may be impacted in both international and domestic travel.

U.S. ~~residents.~~ ~~Federal, state,~~passenger airlines have taken significant measures in response to the COVID-19 pandemic to maintain the health and ~~local authorities~~safety of their employees and customers. Airlines have ~~at various times instituted measures~~added new pre-boarding, boarding and in-flight procedures such as ~~imposing self-quarantine requirements, issuing directives forcing businesses~~pre-flight health questionnaires and screenings, contactless check-in and luggage drop off, enhanced aircraft cleaning procedures, mandatory face masks for employees and passengers. These measures may have minimized the risk of infection while onboard and have increased customer confidence in safely returning to temporarily close, restricting international air travel, and issuing shelter-in-place and similar orders limiting the movement of individuals. Additionally, certain businesses have restricted non-essential travel for their employees.

~~The Company’s charter air transportation services have~~fly. Pre-and post-flight COVID-19 rapid testing has also been ~~impacted~~introduced as an additional tool to avoid mandatory quarantine periods for international and some domestic travel. This rapid testing, along with widely distributed vaccines, now mandated for airline workers, facilitate the recovery in air passenger traffic as travel restrictions are lifted across the globe.

Since the beginning of the COVID-19 pandemic, the air cargo market has experienced solid growth both in terms of volumes and yields. While the pandemic has caused a worldwide economic recession, e-commerce has thrived due to a ~~decline~~variety of factors. Air cargo operators have been in ~~international military charter service, the suspension or cancellation~~a unique position to meet e-commerce demands that require a high level of ~~major U.S. professional~~speed, reliability, and college sports, and the voluntary or mandated closing of casinos. In addition, the Company has experienced increased competition for domestic charters as competitors are now offering charter services with otherwise grounded aircraft due to a decline in their passenger service.

~~As the COVID-19 pandemic continues to evolve, the Company’s financial and operational outlook remains subject to change.~~ ~~Despite the pandemic’s impact on the Company’s passenger segment, the Company has continued to provide air cargo service under the ATSA as planned.~~security.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

On March 27, 2020, the CARES Act was passed by the U.S. Government. The provisions in the ~~act~~CARES Act provide for economic relief to eligible individuals and businesses affected by COVID-19. As a provider of scheduled passenger service, air cargo service, charter air transportation and related services, the Company is eligible for and has received certain benefits outlined in the CARES Act including but not limited to payroll tax breaks, government grants and government loans.

The grant amount recognized under the CARES Act Payroll Support Program for the year ended December 31, 2020 was $62,312 and was recorded in Special Items, net. During the first ~~quarter~~half of 2021, the Company received ~~and recognized as income $32,208~~$37,040 from the Department of Treasury ("Treasury") under the Payroll Support Program Extension (“PSP2”). ~~Subsequent to~~Further, in the first ~~quarter~~half of ~~2021, on April 22,~~ 2021, the Company received ~~an additional $4,831 from~~a grant of $34,547 under the American Rescue Plan Act of 2021 (“PSP3”) that was enacted on March 11, 2021, and authorizes the Treasury ~~as a top-off~~to provide additional assistance to passenger air carriers and contractors that received financial assistance under the CARES Act. During the three months ended September 30, 2021, 0 CARES Act grants were received. The grant amounts recognized in the nine months ended September 30, 2021 under ~~PSP2.~~the CARES Act of $71,587 were recorded in Special Items, net.

The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”) which is a refundable tax credit against certain employment taxes. During the year ended December 31, 2020, the Company recorded $2,328 related to the CARES Employee Retention Credit within Special Items, ~~net~~net. In the three and nine months ended September 30, 2021, an additional ~~$334~~$68 and $848, respectively, was recognized within Special Items, net. The $68 shown in the ~~first~~third quarter of ~~2021.~~2021 relates to a true-up of the second quarter 2021 credit.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Under the CARES Act Loan Program, the Company received a $45,000 loan (the “CARES Act Loan”) from the Treasury on October 26, 2020, which was repaid in full on March 24, ~~2021.~~

Further, the Company was notified on April 15, 2021 that it will receive a grant of approximately $34,547 under the American Rescue Plan Act of 2021 (“PSP3”) enacted on March 11, 2021, in which the Treasury is authorized to provide additional assistance to passenger air carriers and contractors that received financial assistance under the CARES Act. Of this grant amount, $17,274 was received on April 29, 2021.

In accordance with any grants and/or loans received under the CARES Act, the Company is required to comply with the relevant provisions of the CARES Act and the related implementing agreements which, among other things, include the following: the requirement to use the Payroll Support Payments exclusively for the continuation of payment of crewmember and employee wages, salaries and benefits; the

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

requirement that certain levels of commercial air service be maintained until March 1, 2021, or if ordered by the ~~DOT,~~U.S. Department of Transportation ("DOT"), March 1, 2022; the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends until ~~the later of March 31, which was extended to~~ September 30, ~~2022 under PSP3;~~2022; and restrictions on the payment of certain executive compensation until ~~the October 1, 2022, which was extended to~~ April 1, ~~2023 under PSP3.~~2023.

REVENUE

Sun Country is a certificated air carrier generating Operating Revenues from Scheduled service, Charter service, Ancillary, Cargo and Other revenue. Scheduled service revenue mainly consists of base fares. Charter service revenue is primarily generated through service provided to the U.S. Department of Defense, collegiate and professional sports teams and casinos. Ancillary revenues consist of revenue earned from air travel-related services such as baggage fees, seat selection fees and on-board sales. Cargo consists of revenue earned from flying cargo aircraft under the ATSA. Other revenue consists primarily of revenue from services in connection with Sun Country ~~Vacation~~Vacations products.

The significant categories comprising Operating Revenues are as follows:


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Scheduled service	$	54,620	$	114,228	$	80,212	$	26,954	$	201,905	$	159,063
Charter service		25,805		29,227		33,809		23,264		88,511		60,983
Ancillary		23,770		35,031		33,697		12,254		86,626		52,253
Passenger		104,195		178,486		147,718		62,472		377,042		272,299
Cargo		21,585		—		24,400		14,272		68,084		17,491
Other		1,831		1,844		1,545		1,229		5,338		3,889
Total Operating Revenue	$	127,611	$	180,330	$	173,663	$	77,973	$	450,464	$	293,679

The Company attributes and measures its Operating Revenue by geographic region as defined by the ~~Department of Transportation~~DOT for airline reporting based upon the origin of each passenger and cargo flight segment.

The Company’s operations are highly concentrated in the U.S. but include service to many international locations, primarily based on scheduled service to Latin America during the winter season and on military charter services.

~~Total Operating Revenue by geographic region are as follows:~~

Three Months Ended March 31,


2021

2020
Domestic

$
119,312

$
163,038
Latin America

7,877

17,076
Other

422

216
Total Operating Revenue

$
127,611

$
180,330

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Total Operating Revenues by geographic region are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Domestic	$	167,660	$	75,289	$	429,508	$	270,062
Latin America		5,447		2,500		19,870		23,289
Other		556		184		1,086		328
Total Operating Revenue	$	173,663	$	77,973	$	450,464	$	293,679

Contract Balances

The Company’s contract assets primarily relate to costs incurred to get the 12 Amazon cargo aircraft ready for service. The balances are included in Other Current Assets and Other Assets on the Condensed Consolidated Balance Sheets. The amount expensed during the three and nine months ended ~~March 31,~~September 30, 2021 was ~~$138~~$208 and $515, respectively, and is included in Maintenance expense. ~~There was nothing expensed in~~The expense for both the three and nine months ended ~~March 31,~~September 30, 2020 was $101, since ~~the~~Sun Country commenced flying for Amazon ~~cargo services had not started yet.~~in May 2020.

The Company’s significant contract liabilities are comprised of 1) ticket sales for transportation that has not yet been provided (reported as Air Traffic Liabilities on the Condensed Consolidated Balance Sheets), 2) outstanding loyalty points that may be redeemed for future travel and other non-air travel awards (reported as Loyalty Program Liabilities on the Condensed Consolidated Balance Sheets) and 3) the Amazon Deferred Up-front Payment received (reported within Other Liabilities on the Condensed Consolidated Balance Sheets).

Contract Assets and Liabilities are as follows:


	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Contract Assets
Costs to fulfill contract with Amazon	$	3,312	$	3,614	$	2,995	$	3,614

Air Traffic Liabilities	$	94,733	$	101,075	$	105,048	$	101,075
Loyalty Program Liabilities		20,774		22,068		20,311		22,069
Amazon Deferred Up-front Payment		5,010		5,240		4,462		5,240
Total Contract Liabilities	$	120,517	$	128,383	$	129,821	$	128,384

The balance in the Air Traffic Liabilities fluctuates with seasonal travel patterns. Most tickets can be purchased no more than twelve months in advance, therefore any revenue associated with tickets sold for future travel will be recognized within that timeframe. For the ~~period~~nine months ended ~~March 31,~~September 30, 2021, ~~$60,039~~$89,044 of revenue was recognized in Passenger revenue that was included in the Air Traffic Liabilities as of December 31, 2020.

As part of the ATSA executed in December 2019, Amazon paid the Company $10,300 toward start-up costs. Upon signing the ATSA, Amazon received 632,183 fully vested warrants to purchase the Company’s common stock, with a fair value of $4,667. This fair value was assigned to a portion of the $10,300 cash received from Amazon and the remaining $5,633 was recorded in Other Liabilities on the Company’s Condensed Consolidated Balance Sheet. This deferred up-front payment is being amortized into revenue on a pro-rata basis over the initial six years of the ATSA. For the three and nine months ended ~~March 31, 2021, $231 was amortized into Cargo revenue. Nothing was amortized for the three months ended March 31, 2020 as services did not begin until the second quarter of 2020.~~

~~Loyalty Program~~

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

September 30, 2021, $310 and $779 was amortized into Cargo revenue, respectively. For the three and nine months ended September 30, 2020, $146 and $184 was amortized into Cargo revenue, respectively.

Loyalty Program

The Sun Country Rewards program provides loyalty awards to program members based on accumulated loyalty points. Loyalty points are earned as a result of travel and purchases using the Company’s co- branded credit card. The balance of the Loyalty Program Liabilities fluctuates based on seasonal patterns, which impact the volume of loyalty points awarded through travel or issued to co-branded credit card and other partners (deferral of revenue) and loyalty points redeemed (recognition of revenue).

Changes in the Loyalty Program Liabilities are as follows:


	2021		2020		2021		2020
Balance - January 1	$	22,069	$	22,892
Balance – January 1					$	22,069	$	22,892
Loyalty Points Earned		857		1,635		3,058		3,124
Loyalty Points Redeemed⁽¹⁾		(2,152)		(2,206)		(4,816)		(3,892)
Balance - March 31	$	20,774	$	22,321
Balance – September 30					$	20,311	$	22,124

(1)

Principally relates to revenue recognized from the redemption of loyalty points for both air and non-air travel awards. Loyalty points are combined in one homogenous pool and are not separately identifiable. As such, the revenue recognized is comprised of points that were part of the ~~loyalty program deferred revenue~~Loyalty Program Liabilities balance at the beginning of the period, as well as points that were earned during the period.

The timing of loyalty point redemptions can vary significantly, however most new points, that are not left to expire, are redeemed within two years. Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and will adjust estimates in the future, which could be material.

5.	EARNINGS PER SHARE

Basic earnings per share, which excludes dilution, is computed by dividing Net Income available to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of incremental shares from the assumed issuance of shares relating to share based awards is calculated by applying the treasury stock method.

~~The following table shows the computation of basic and diluted earnings per share:~~

Three Months Ended March 31,


2021

2020
Numerator:




Net Income

$
12,416

$
7,251

Denominator:




Weighted Average Common Shares Outstanding - Basic

48,496,077

46,805,951
Dilutive effect of Stock Options and Warrants⁽¹⁾

4,012,109

1,419,652
Weighted Average Common Shares Outstanding - Diluted

52,508,186

48,225,603

Basic earnings per share

$
0.26

$
0.16
Diluted earnings per share

$
0.24

$
0.15

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The following table shows the computation of basic and diluted earnings per share:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net Income	$	13,903	$	2,927	$	78,072	$	4,138

Denominator:
Weighted Average Common Shares Outstanding - Basic		57,355,104		46,805,950		54,368,231		46,805,950
Dilutive effect of Stock Options, RSUs and Warrants ⁽¹⁾		4,357,274		1,544,993		4,331,760		1,544,993
Weighted Average Common Shares Outstanding - Diluted		61,712,378		48,350,943		58,699,991		48,350,943

Basic earnings per share	$	0.24	$	0.06	$	1.44	$	0.09
Diluted earnings per share	$	0.23	$	0.06	$	1.33	$	0.09

(1)

There were ~~3,557,432~~3,626,851 and ~~3,646,690~~3,815,215 performance-based stock options outstanding at ~~March 31,~~September 30, 2021 and 2020, respectively. As a result of the Company’s initial public offering, ~~75 percent~~75% of these options are expected to meet the performance conditions and are included in dilutive options at ~~March 31,~~September 30, 2021. At ~~March 31,~~September 30, 2020, these options were excluded from the calculation of diluted EPS since the performance conditions were not considered likely to be met.

Prior to their exercise on January 31, 2020, all 40,005,885 warrants held by the Apollo Stockholder were included in basic and diluted weighted average shares outstanding as they were equity classified, had an exercise price of approximately $0.0005, and all necessary conditions for issuance were met.

Warrants held by Amazon are included in dilutive weighted average shares outstanding as of the date the warrants vest. The unvested warrants held by Amazon have not been included in dilutive shares as their performance condition had not been satisfied.

6.	AIRCRAFT ~~– Owned and Leased~~

Aircraft Fleet

~~The following tables summarize the Company’s~~As of September 30, 2021, Sun Country operated a fleet of 47 Boeing 737-NG aircraft, ~~fleet activity for the three months ended March 31, 2021~~consisting of 46 Boeing 737-800s and ~~2020, respectively:~~

December 31, 2020

Additions

Removals

March 31, 2021
Passenger:

Owned

14

5

—

19
Finance leases

5

—

—

5
Operating leases

12

—

(5)

7
Sun Country Airlines' Fleet

31

5

(5)

31
Cargo:

Aircraft Operated for Amazon

12

—

—

12
Total Aircraft Operated

43

5

(5)

43

~~The 5 aircraft purchased during the three months ended March 31, 2021 were financed through the Delayed Draw Term Loan Facility (see Note 7). All 5 of these were previously under operating leases.~~

December 31, 2019

Additions

Removals

March 31, 2020
Passenger:

Owned

5

3

—

8
Finance leases

10

—

—

10
Operating leases

14

—

(1)

13
Seasonal leases

2

—

(1)

1
Sun Country Airlines' Fleet

31

3

(2)

32

The 3 aircraft purchased during the three months ended March 31, 2020 were financed through equipment trust certificates (see Note 7). NaN of these aircraft was previously under an operating lease and the other 2 aircraft were new to the Company’s fleet. In addition, the Company refinanced 3 previously owned and financed aircraft in January 2020 utilizing equipment trust certificates (see Note 7).1 Boeing 737-700.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The ~~Accumulated Depreciation on owned assets was $57,950 and $52,048 as of March 31, 2021 and December 31, 2020, respectively. Depreciation expense was $8,800 and $5,121~~following tables summarize the Company’s aircraft fleet activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, ~~respectively.~~respectively:


	December 31, 2020	Additions	Removals	September 30, 2021
Passenger:
Owned	14	7	—	21
Finance leases	5	3	—	8
Operating leases	12	—	(6)	6
Sun Country Airlines’ Fleet	31	10	(6)	35
Cargo:
Aircraft Operated for Amazon	12	—	—	12
Total Aircraft Operated	43	10	(6)	47

NaN of the aircraft purchased during the nine months ended September 30, 2021 were financed through the Delayed Draw Term Loan Facility (see Note 7). All 6 of these were previously under operating leases. The remaining purchased aircraft was new to the Company’s fleet. During June and July 2021, the Company obtained an additional 3 aircraft under finance leases.


	December 31, 2019	Additions	Removals	September 30, 2020
Passenger:
Owned	5	9	—	14
Finance leases	10	—	(5)	5
Operating leases	14	—	(2)	12
Seasonal leases	2	—	(2)	—
Sun Country Airlines’ Fleet	31	9	(9)	31
Cargo:
Aircraft Operated for Amazon	—	10	—	10
Total Aircraft Operated	31	19	(9)	41

The ~~Accumulated Amortization on Finance Lease Assets was $18,517 and $13,018 as of March 31, 2021 and December 31, 2020, respectively. Amortization Expense was $2,692 and $4,290 for~~9 passenger aircraft purchased during the ~~three~~nine months ended ~~March 31,~~September 30, 2020 were financed through equipment trust certificates (see Note 7). NaN of these aircraft were previously under operating leases, 5 were previously under finance leases, and the other 2 aircraft were new to the Company’s fleet.

In addition to the 9 purchases discussed above, the Company refinanced 3 previously owned aircraft in January 2020 utilizing equipment trust certificates (see Note 7).

The 10 cargo aircraft added through September 30, 2020 relate to the Amazon Agreement (see Note 1).

During the nine months ended September 30, 2021, the Company executed lease agreements to add 3 incremental aircraft to its passenger fleet. The lease expiration dates range from fiscal year 2026 to fiscal year 2029 and ~~2020, respectively.~~these leases have been classified as finance leases. During the first twelve to eighteen months of the lease term, monthly lease payments are determined based on aircraft utilization, subject to limits set forth in the lease agreements. Monthly lease payments during the remainder of the lease term consist of fixed and variable amounts as set forth in the lease agreements.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Depreciation, amortization, and rent expense on aircraft is as follows:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Aircraft Status	Expense Type	2021		2020		2021		2020
Owned	Depreciation	$	8,603	$	7,835	$	25,085	$	17,469
Finance Leased	Amortization		2,977		2,478		7,846		10,917
Operating Leased	Aircraft Rent		3,925		6,410		13,339		23,376
		$	15,505	$	16,723	$	46,270	$	51,762

Depreciation expense on owned ~~assets~~aircraft and amortization expense on ~~Finance Lease Assets~~finance leased aircraft are ~~each~~both classified in Depreciation and Amortization on the Condensed Consolidated Statements of Operations.

Aircraft Lease Payment Deferrals

During the year ended December 31, 2020 the Company negotiated rent payment deferrals with a majority of its aircraft lessors due to COVID-19 cash flow impacts. ~~The amount~~There were 0 amounts deferred as of ~~March 31,~~September 30, 2021 ~~was $975, consisting~~since the final payments were made in the second quarter of ~~$533 under finance leases and $442 under operating leases.~~2021. The amount deferred as of December 31, 2020 was $7,569, consisting of $2,133 under finance leases and $5,436 under operating leases. These deferrals ~~are~~were classified within the current portion of the respective lease liabilities on the Condensed Consolidated Balance ~~Sheets.~~Sheet as of December 31, 2020.

Aircraft Maintenance Deposits Contra-Assets

AtOn April 11, 2018, ~~(the “Acquisition Date”),~~ the Company established a deposit contra-asset to represent the Company’s obligation to perform planned maintenance events on leased aircraft held as of ~~the Acquisition Date.~~that date. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the remaining balance of the contra-asset was ~~$26,512~~$22,348 and $36,729, respectively. Of the ~~$10,217~~$14,381 reduction in the contra-asset during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~$9,880~~$12,749 related to the purchase of ~~5 aircrafts~~6 aircraft previously leased, whereupon the contra-assets and related maintenance deposits were written-off concurrently to Aircraft lease buy-out expense in Special Items, net (see Note 11). For the three months ended ~~March 31,~~September 30, 2021 and 2020, the Company recognized ~~NaN~~$444 and ~~$425,~~$864, respectively, of the contra-asset as a reduction to Maintenance expense on the accompanying Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2021 and 2020, the Company recognized $1,295 and $1,192, respectively, of the contra-asset as a reduction to Maintenance expense.

Over-market Liabilities

At the Acquisition Date, the Company acquired liabilities related to its over-market lease rates and over-market maintenance reserve payments.

As of the Acquisition Date, the Company recognized a liability representing lease terms which are unfavorable compared with market terms of similar leases. Upon adopting ASU 2016-02, Leases (Topic 842) effective January 1, 2019, this liability was reclassified as an offset to the Operating Lease Right-of-use Assets. The remaining unamortized balance of this contra-asset as of ~~March 31,~~September 30, 2021 and December 31, 2020 was ~~$12,891~~$10,904 and $16,501, respectively and is recorded within Operating Lease ~~Right-of-Use~~Right-

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

of-Use Assets. ~~The purchase of 5~~During the nine months ended September 30, 2021, the Company purchased 6 aircraft ~~in March 2021 contributed $2,858~~which were previously under leases with unfavorable terms, contributing to $3,765 of the decrease.

As of the Acquisition Date, Sun Country’s existing leases included payments for maintenance reserves in addition to the stated aircraft lease payments. For a substantial portion of these maintenance reserve payments, the Company does not expect to be reimbursed by the lessor. Therefore, a liability was established representing over-market maintenance reserve lease terms compared to market terms of

~~- 16 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

similar leases. The remaining balance of this liability at ~~March 31,~~September 30, 2021 and December 31, 2020 was ~~$21,600~~$15,815 and $37,409, respectively. Of the ~~$15,809~~$21,594 reduction in the over-market maintenance reserve liabilities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~$13,805~~$17,435 related to the purchase of ~~5 aircrafts~~6 aircraft previously ~~leased, whereupon the~~leased. The over-market liabilities for those aircraft are included in Aircraft lease buy-out expense in Special Items, net (see Note 11).

Aircraft Rent expense for the three months ended ~~March 31,~~September 30, 2021 and 2020, includes credits of ~~$2,755~~$1,618 and ~~$4,103,~~$3,140, respectively, for the amortization of over-market liabilities established at the Acquisition Date related to lease rates and maintenance reserves. The Aircraft Rent expense credits for the nine months ended September 30, 2021 and 2020 were $5,992 and $10,970, respectively.

DEBT

Lines of Credit – On February 10, 2021, the Company executed a ~~new~~ five-year credit agreement with a group of lenders that replaced the Company’s prior $25,000 asset-based revolving credit facility (the “ABL Facility”). The ~~new~~ agreement provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility, which are collectively referred to as the “Credit Facilities.” The interest rate on borrowings is ~~based on the greatest of~~determined by various alternative base rates ~~with a minimum of 2%,~~ plus an applicable margin ofranging from 4% to 5%. ~~There~~The interest rate currently in effect on the Delayed Draw Term Loan facility is 6%, which is the minimum interest rate allowed under the Credit Facilities agreement. Borrowings on the Delayed Draw Term Loan Facility are subject to possible interest rate adjustment in February 2022. In addition, there is a commitment fee on the unused Revolving Credit Facility of 0.5%. The proceeds from the Revolving Credit Facility can be used for general corporate purposes. The proceeds from the Delayed Draw Term Loan Facility are to be used solely to finance the acquisition of aircraft or engines to be registered in the U.S. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company drew ~~$68,000~~$80,500 on the Delayed Draw Term Loan Facility to purchase ~~5 aircrafts. On April~~ 6 ~~2021, the Company drew an additional $12,500 for the purchase of an additional~~ aircraft, which ~~was~~were previously under operating ~~lease as~~leases. Principal payments of ~~March 31, 2021.~~$1,006 are due on a quarterly basis. As of September 30, 2021 , the Credit Facilities had an outstanding principal balance of $78,488. The Credit Facilities have financial covenants that require a minimum trailing 12 month EBITDAR (ranging from $62,100 ~~to $87,700)~~as of September 30, 2021, $78,100 as of December 31, 2021, and $87,700 as of March 31, 2022 and beyond) and a minimum liquidity of $30,000 at the close of any business day.

Long-term Debt – In December 2019, the Company arranged for the issuance of Class A, Class B and Class C pass-through trust certificates Series 2019-1 (the “2019-1 EETC”), in an aggregate face amount of $248,587 for the purpose of financing or refinancing 13 used aircraft, which was completed in 2020. The Company is required to make semi-annual principal and interest payments each June and December. The outstanding principal balance as of September 30, 2021 was $211,605. The 13 aircraft serve as security for the loan and the total appraised value of these aircraft as of December 2019 was approximately $292,450.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Under the CARES Act Loan Program, on October 26, 2020, the Company was awarded a $45,000 loan, which was secured by the Company’s loyalty program and certain cash deposit accounts. The loan bore interest at a rate per annum equal to the Adjusted LIBO Rate plus 6.50% and was due to be repaid on the earlier of (i) October 24, 2025 or (ii) six months prior to the expiration date of any material loyalty program securing the loan. On March 24, 2021, the CARES Act Loan was repaid in full, including outstanding principal and accrued interest for a total repayment amount of $46,260.

The Company was in compliance with all covenants in its debt agreements at September 30, 2021.

Long-term Debt includes the following:


	September 30, 2021		December 31, 2020
Notes payable under the Company's 2019-1 EETC agreement dated December 2019, with original loan amounts of $248,587 payable in bi-annual installments, in June and December, through December 2027. These notes bear interest at an annual rate of between 4.13% and 6.95% and the weighted average interest rate is 4.78%.	$	211,605	$	227,347

Delayed Draw Term Loan Facility (see terms and conditions above)		78,488		—

U. S. Department of the Treasury CARES Act Loan (see terms and conditions above)		—		45,419

Notes payable to Wilmington Trust Company. Notes bear interest at an annual rate of 8.45% and were scheduled to mature Nov. 2023 to Feb. 2024. In April 2021, these notes were repaid.		—		12,506

Other Notes payable. These notes bear interest at an annual rate of approximately 5.0% and mature March 2029.		479		529

Total Debt		290,572		285,801

Less: Unamortized debt issuance costs		(3,752)		(3,338)

Less: Current Maturities of Long-term Debt		(19,835)		(26,118)
Total Long-term Debt	$	266,985	$	256,345

- 1719 -

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~The Company was in compliance with all covenants in its debt agreements at March 31, 2021.~~

~~Long-term Debt included the following:~~

March 31, 2021

December 31, 2020
Notes payable under the Company's 2019-1 EETC agreement dated December 2019, with original loan amounts of $248,587 payable in bi-annual installments through December 2027. These notes bear interest at an annual rate of between 4.13% and 6.95% and are secured by the equipment for which the loan was used.

$
227,347

$
227,347

Delayed Draw Term Loan Facility

68,000

—
(see terms and conditions above)





U. S. Department of the Treasury CARES Act Loan

—

45,419
(see terms and conditions above)





Notes payable to Wilmington Trust Company. Notes bear interest at an annual rate of 8.45% and mature Nov. 2023 to Feb. 2024.

11,880

12,506

Other Notes payable. These notes bear interest at an annual rate of approximately 5.0% and mature March 2029.

505

529

Total Debt

307,732

285,801

Less: Unamortized debt issuance costs

(4,391)

(3,338)

Less: Current Maturities of Long-term Debt

(29,232)

(26,118)

Total Long-term Debt

$
274,109

$
256,345

Future maturities of the outstanding Debt are as follows:


	Debt Principal		Amortization of Debt				Debt Principal		Amortization of Debt
March 31, 2021	Payments		Issuance Costs		Net Debt
							Payments		Issuance Costs		Net Debt
Remainder of 2021	$	28,799	$	(775)	$	28,024	$	9,641	$	(248)	$	9,393
2022		32,059		(983)		31,076		30,367		(956)		29,411
2023		44,900		(908)		43,992		42,358		(881)		41,477
2024		43,962		(785)		43,177		44,000		(758)		43,242
2025		45,062		(670)		44,392		49,087		(643)		48,444
Thereafter		112,950		(270)		112,680		115,119		(266)		114,853
Total	$	307,732	$	(4,391)	$	303,341
Total as of September 30, 2021							$	290,572	$	(3,752)	$	286,820

~~- 18 -~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

The table below presents the Company’s debt measured at fair value:


	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Carrying Amount	$	307,732	$	285,801	$	290,572	$	285,801
Fair Value	$	301,513	$	279,119	$	283,641	$	279,119

The fair value of the Company’s debt was based on the discounted amount of future cash flows using the Company’s end-of-period incremental borrowing rate for similar obligations. The estimates were primarily based on Level 3 inputs.

8.	FUEL DERIVATIVES AND RISK MANAGEMENT

The Company’s operations are inherently dependent upon the price of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into fuel option and swap contracts. The Company does not apply hedge accounting to its fuel derivative contracts, nor does it hold or issue them for trading purposes.

Fuel derivative contracts are recognized at fair value on the Condensed Consolidated Balance Sheets as Derivative Assets, if the fair value is in an asset position, or as Derivative Liabilities, if the fair value is in a liability position. The Company did not have any collateral held by counterparties to these agreements as of ~~March 31,~~September 30, 2021 and December 31, 2020. Derivatives where the payment due date is greater than one year from the balance sheet date are classified as long-term.

Changes in Derivative Assets (Liabilities) ~~were~~are as follows:


	Three Months Ended March 31,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance - January 1	$	(1,173)	$	2,233	$	(1,174)	$	2,233
Non-cash Gains (Losses)		2,386		(21,752)		3,527		(15,766)
Contract Settlements		(8)		65		(2,105)		7,531
Balance - March 31	$	1,205	$	(19,454)
Balance - September 30					$	248	$	(6,002)

~~Fuel Derivative Gains (Losses) consisted of the following:~~

Three Months Ended March 31,

2021

2020
Non-cash Gains (Losses)

$
2,386

$
(21,752)
Cash Premiums Paid

—

(284)
Total Fuel Derivative Gains (Losses)

$
2,386

$
(22,036)

The gain in the quarter ended March 31, 2021 was primarily due to an increase in oil prices. The loss in the quarter ended March 31, 2020 was primarily due to the significant decline in oil prices. There were fuel derivative gains in the second, third and fourth quarters of 2020, primarily due to the partial recovery of oil prices following the decline during the first quarter of 2020. Fuel derivative gains and losses are classified in Aircraft Fuel on the Condensed Consolidated Statements of Operations.

- 1920 -

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~As of March 31, 2021, the Company had outstanding fuel derivative contracts covering 12.7 million gallons of crude oil and jet fuel that will settle between April 2021 and September 2021.~~

Fuel Derivative Gains (Losses) consist of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Non-cash Gains (Losses)	$	(72)	$	290	$	3,527	$	(15,766)
Cash Premiums Paid		—		(53)		—		(1,954)
Total Fuel Derivative Gains (Losses)	$	(72)	$	237	$	3,527	$	(17,720)

Fuel derivative gains and losses are classified in Aircraft Fuel on the Condensed Consolidated Statements of Operations.

As of September 30, 2021, the Company had 0 outstanding fuel derivative contracts, but there were $248 of matured contracts that had not yet settled.

9.	FAIR VALUE MEASUREMENTS

Accounting standards define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Under GAAP, there are three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices for identical assets or liabilities in active markets.

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company uses the following valuation methodologies for financial instruments measured at fair value on a recurring basis.

Derivative Instruments – Derivative instruments are accounted for as either assets or liabilities and are carried at fair value. The fair value for fuel derivative options and swaps is determined utilizing an option pricing model that uses inputs that are readily available in active markets or can be derived from information available in active markets and are classified within Level 2.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

The following table summarizes the assets and liabilities measured at fair value on a recurring basis:


	March 31, 2021								September 30, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Fuel Derivative Contracts	$	—	$	1,205	$	—	$	1,205	$	—	$	248	$	—	$	248
Total Assets measured at fair value on a recurring basis	$	—	$	1,205	$	—	$	1,205	$	—	$	248	$	—	$	248


	December 31, 2020								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities
Fuel Derivative Contracts	$	—	$	1,173	$	—	$	1,173	$	—	$	1,174	$	—	$	1,174
Total Liabilities measured at fair value on a recurring basis	$	—	$	1,173	$	—	$	1,173	$	—	$	1,174	$	—	$	1,174

Certain assets are measured at fair value on a nonrecurring basis. The Company’s non-financial assets, which primarily consist of property and equipment, goodwill and other intangible assets are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, on a periodic

~~- 20 -~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial assets are assessed for impairment and, if applicable, written down to fair value using significant unobservable inputs, classified as Level 3.

The Company’s debt portfolio consists of 2019-1 EETC certificates, borrowings under the Delayed Draw Term Loan Facility, and fixed-rate notes payable. See Note 7 for debt fair values.

10.	INCOME TAXES

The ~~Company’s~~Company's effective tax rate for the three and nine months ended ~~March 31,~~September 30, 2021 was 14.2% and 18.0%, respectively. The effective tax rate for the three and nine months ended September 30, 2020 was ~~30.3%~~24.0% and ~~25.2%~~26.2%, respectively. The effective tax rate represents a blend of federal and state taxes and includes the impact of certain nondeductible or nontaxable items. The ~~increase~~decrease in the three-month rate is primarily due to a favorable permanent benefit related to ~~an unfavorable~~stock compensation. The decrease in the nine-month rate is primarily due to favorable permanent ~~difference and discrete items~~differences related to ~~executive~~the Tax Receivable Agreement and stock compensation ~~disallowed under Internal Revenue Code Section 162(m), partially offset by the reduction in meals and entertainment disallowed expenses during the current year.~~deductions.

Tax Receivable Agreement

In connection with the Company’s IPO, wethe Company entered into an income ~~tax receivable agreement~~Tax Receivable Agreement (the “Tax Receivable Agreement” or “TRA”)) with our pre-IPO stockholders (the “TRA holders”). The Tax Receivable Agreement provides for the payment by the Company to the TRA holders of 85% of the amount of cash savings, if any, in U.S. federal, state, local, and foreign income tax that the Company actually realizes (or are deemed to realize in certain circumstances) as a result of certain tax attributes that existed at the time of the IPO (the “Pre-IPO Tax Attributes”). The Company will retain the benefit of the remaining 15% of these cash savings.

Payments under the Tax Receivable Agreement will not begin until at least 12 months after the closing of the Company’s IPO. In the event that the Company is prohibited from making payments under the Tax Receivable Agreement for tax benefits utilized during any periods pursuant to the CARES Act or other

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

governmental programs, the Company is not required to make payments under the Tax Receivable Agreement for Pre-IPO Tax Attributes utilized in such periods. Based on ~~our~~the Company's current participation in the CARES Act ~~Loan~~ Program, the Company does not expect to make payments under the Tax Receivable Agreement until ~~2023.~~2023, and thus is presented in "Long-term Liabilities" on the Condensed Consolidated Balance Sheet.

If the Company does not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then it would not be required to make the related TRA payments. Upon the closing of the IPO, the Company recognized a non-current liability of $115,200 which represented undiscounted aggregate payments that were expected to be paid to the TRA holders under the Tax Receivable Agreement, with an offset to Stockholders' Equity. Subsequent changes in the measurement of the liability are being adjusted through the Consolidated Statements of Operations. The Tax Receivable Agreement liability is an estimate and actual amounts payable under the Tax Receivable Agreement could differ from this estimate based on, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement, (ii) the Company’s participation in future government programs, (iii) stock option activity during periods prior to the commencement of payments under the Tax Receivable Agreement and (iv) future changes in tax laws. These factors could result in an increase or decrease in the related liability which would be recognized in the Company’s earnings in the period of such change. In ~~April~~the second quarter of 2021, the Company reduced the TRA liability balance by $18,700, from $115,200 to $96,500. The offsetting credit was ~~notified that it is~~recorded in Other Non-operating Income. The decrease in the TRA liability was mainly due to ~~receive a~~the receipt of the PSP3 grant of ~~approximately~~ $34,547, ~~under the American Rescue Plan Act of 2021,~~ which ~~will result in a decrease to the Tax Receivable Agreement liability in Q2 2021. This TRA liability decrease is due to an extension in~~extended the time period in which distributions made to shareholders are ~~restricted. If we do not generate sufficient taxable income~~restricted from March 31, 2022 to September 30, 2022, and also resulted in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA Payments. Upon the closing of the IPO, the Company recognized a non-current liability of $115,200 which represents undiscounted aggregate

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars~~an increase in ~~thousands, except per share amounts)~~

~~(Unaudited)~~forecasted 2021 pre-tax income.

~~payments that we expect~~An additional $1,100 reduction in the liability was made during the three months ended September 30, 2021, due to ~~pay~~actual financial results exceeding forecasted results used in the valuation of the TRA. Since recording the initial estimate and through September 30, 2021, the Company has reduced the TRA ~~holders under the Tax Receivable Agreement and is presented in “Long-term Liabilities” on the Condensed Consolidated Balance Sheet as of March 31, 2021, with an offset~~liability balance by $19,800, from $115,200 to ~~Stockholders’ Equity. Subsequent changes in the measurement of the liability will be adjusted through the Consolidated Statements of Operations.~~$95,400.

11.	SPECIAL ITEMS, NET

Special Items, net on the Condensed Consolidated Statements of Operations ~~consisted~~consist of the following:


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
CARES Act grant recognition ⁽¹⁾	$	(32,208)	$	—	$	—	$	(30,796)	$	(71,587)	$	(62,312)
CARES Act employee retention credit ⁽²⁾		(334)		—		(68)		(2,069)		(848)		(2,069)
Aircraft lease buy-out expense ⁽³⁾		5,664		—		—		—		6,963		—
Other		7		—		3		13		16		48
Total Special Items, net	$	(26,871)	$	—	$	(65)	$	(32,852)	$	(65,456)	$	(64,333)

(1)

InDuring the ~~quarter ended March 31,~~first half of 2021, the Treasury awarded the Company grants totaling $37,040 under PSP2. Further, during the first half of 2021, the Company received a grant of $34,547 under ~~PSP2.~~

~~(2)~~

~~Relates to a credit~~PSP3. The grant amount recognized under the CARES Act Payroll Support Program for the nine months ended September 30, 2020 was $62,312, of which $31,516 was recognized in the second quarter and $30,796 was recognized in the third quarter.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

(2)

The CARES Act Employee Retention credit ~~which is~~relates to a refundable tax credit against certain employment taxes. The $68 shown in the third quarter of fiscal year 2021 relates to a true-up of the second quarter 2021 credit.

(3)

NaN aircraft were purchased in March 2021 that were previously under operating leases. NaN additional aircraft was purchased in April 2021 that was previously under an operating lease. Aircraft lease buy-out expense represents the net costs incurred to terminate the leases on those 56 aircraft. This includes the associated lease termination costs, write-off of previously capitalized maintenance deposits, and the write-off of over-market liabilities (see Note 6).

12.	COMMITMENTS AND CONTINGENCIES

The Company has contractual obligations and commitments primarily with regard to lease arrangements, repayment of debt (see Note 7) and probable future purchases of aircraft.

Sun Country also has a contractual obligation to pay its pre-IPO stockholders under the terms of the income Tax Receivable Agreement (see Note 10).

The Company is subject to various legal proceedings in the normal course of business and expenses legal costs as incurred. Management ~~believes~~does not believe these proceedings will ~~not~~ have a materially adverse effect on the Company.

13.	OPERATING SEGMENTS

Operating segments are defined as components of an enterprise about which separate financial information is both available ~~that is~~and evaluated regularly by the ~~chief operating decision maker~~Chief Operating Decision Maker and is used in resource allocation and performance assessments. The Company’s ~~chief operating decision maker~~Chief Operating Decision Maker is considered to be the Company’s Chief Executive Officer. The Company’s ~~chief operating decision maker~~Chief Operating Decision Maker makes resource allocation decisions to maximize the Company’s consolidated financial results. Substantially all the Company’s tangible assets are located in the U.S. or relate to flight equipment, which is mobile across geographic markets. The Company has 2 operating segments: Passenger and Cargo.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

The Company’s Passenger segment has 2 internal passenger groups (Scheduled and Charter), but since ~~they share~~ resources are shared and expenses are combined, they are considered one Passenger operating segment. The Company’s Passenger operations are highly concentrated in the U.S., but include service to many international locations, primarily based on scheduled service to Latin America during the winter season and on military charter services. All goodwill is related to the Passenger Operating Segment.

The Cargo segment began providing air cargo services under the ATSA in May 2020. Fuel consumed in Cargo operations is directly reimbursed by Amazon and therefore aircraft fuel revenue is presented net of such reimbursements on the Condensed Consolidated Statements of Operations. Fuel consumed in Cargo maintenance activities is included in the Cargo segment. Certain operating expenses are directly attributable to ~~this~~the Cargo operating segment.

Certain operating expenses are allocated between the operating segments. Non-Fuel operating expenses are allocated based on metrics such as block hours, fleet count and departures, which best align with the

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

nature of the respective expense. CARES Act credits, included in Special Items, net, are allocated based on the respective segment salaries, wages, and benefits.

The following ~~table presents~~tables present financial information for the Company’s 2 operating segments: Passenger and Cargo. Assets by segment are not reviewed by the Chief Operating Decision Maker and have not been presented herein.


	Three Months Ended March 31, 2021 ⁽¹⁾						Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Passenger		Cargo		Consolidated		Passenger		Cargo		Consolidated		Passenger		Cargo⁽¹⁾		Consolidated
Operating Revenues	$	106,026	$	21,585	$	127,611	$	149,263	$	24,400	$	173,663	$	63,701	$	14,272	$	77,973
Non-Fuel Operating Expenses		87,205		18,070		105,275		99,279		15,800		115,079		76,377		12,492		88,869
Aircraft Fuel		24,253		21		24,274		36,556		91		36,647		13,139		—		13,139
Special Items, net		(18,206)		(8,665)		(26,871)		(65)		—		(65)		(25,534)		(7,318)		(32,852)
Total Operating Expenses		93,252		9,426		102,678		135,770		15,891		151,661		63,982		5,174		69,156
Operating Income	$	12,774	$	12,159		24,933
Operating Income (Loss)							$	13,493	$	8,509		22,002	$	(281)	$	9,098		8,817
Interest Income						15						28						26
Interest Expense						(7,121)						(6,286)						(5,157)
Other, net						(5)						456						164
Income before Income Tax					$	17,822					$	16,200					$	3,850


	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Passenger		Cargo		Consolidated		Passenger		Cargo⁽¹⁾		Consolidated
Operating Revenues	$	382,380	$	68,084	$	450,464	$	276,188	$	17,491	$	293,679
Non-Fuel Operating Expenses		278,843		50,272		329,115		249,423		17,398		266,821
Aircraft Fuel		90,468		163		90,631		69,377		—		69,377
Special Items, net		(47,055)		(18,401)		(65,456)		(53,646)		(10,687)		(64,333)
Total Operating Expenses		322,256		32,034		354,290		265,154		6,711		271,865
Operating Income	$	60,124	$	36,050		96,174	$	11,034	$	10,780		21,814
Interest Income						52						340
Interest Expense						(19,487)						(16,215)
Other, net						18,505						(331)
Income before Income Tax					$	95,244					$	5,608

~~(1)~~

(1)

As air cargo operations commenced in May 2020, there ~~is no comparable prior period information.~~are limited Cargo amounts included in the three and nine month periods ended September 30, 2020.

14.	SUBSEQUENT EVENTS

The Company evaluated subsequent events for the period from the Balance Sheet date through ~~May 6,~~November 1, 2021, the date that the Condensed Consolidated Financial Statements were available to be issued.

On April 22, 2021, we received $4,831 from the Treasury as a top-off grant under PSP2. Further, the Company was notified on April 15, 2021 that it will receive a grant of approximately $34,547 under PSP3, of which $17,274 was received on April 29, 2021 (see Note 3).

******

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

ITEM 2. ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, the terms ~~"Sun~~“Sun Country,~~" "we," "us"~~” “we,” “us” and ~~"our"~~“our” refer to Sun Country Airlines Holdings, Inc., and its subsidiaries.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates discussed in our Final Prospectus dated March 16, 2021.

Recently Adopted Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recently adopted accounting pronouncements.

Forward-Looking Statements

The following discussion and analysis presents factors that had a material effect on our results of operations during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020. Also discussed is our financial position as of ~~March 31,~~September 30, 2021 and December 31, 2020. This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form ~~10-~~Q10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading ~~"Management's~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” for the fiscal year ended December 31, 2020 included in our Registration Statement on Form S-1 (File No. ~~333-~~~~252858)~~333-252858), as amended, including the final prospectus dated March 16, 2021 included therein (the “Final Prospectus”).This discussion contains forward-looking statements that involve risk, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions and forecasts. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this report titled “Risk Factors” and elsewhere in this report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Overview

Sun Country is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter, and cargo businesses. By doing so, we believe we are able to generate

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

high growth, high margins and strong cash flows with greater resilience than other passenger airlines. We focus on serving leisure and ~~visiting~~“visiting friends and ~~relatives~~relatives” (“VFR”) passengers and charter customers ~~and~~as well as providing crew, maintenance and insurance (“CMI”) services to Amazon, with flights throughout the United States and to destinations in Mexico, Central America and the Caribbean. Based in Minnesota, we operate an agile network that includes our scheduled service business, ~~and~~ our synergistic charter, and cargo businesses. We share resources, such as flight crews, across our scheduled service, charter, and cargo business lines with the objective of generating higher returns and margins and mitigating the seasonality of our route network. We optimize capacity allocation by market, time of year, day of week, and line of business by shifting flying to markets during periods of peak demand and away from markets during periods of low demand with far greater frequency than nearly all other large U.S. passenger airlines. We believe our flexible business model generates higher returns and margins while also providing greater resiliency to economic and industry downturns than a traditional scheduled service carrier.

Our scheduled service business combines low costs with a high quality product to generate higher Total Revenue per Available Seat Mile (“TRASM”) than Ultra Low-Cost Carriers (“ULCCs”) while maintaining lower Adjusted ~~CASM~~Cost per Available Seat Mile (“CASM”) than Low Cost Carriers (“LCCs”), resulting in best-in-class unit profitability. Our business includes many cost characteristics of ULCCs (which ~~include~~includes Allegiant Travel Company, Frontier Airlines and Spirit Airlines), such as an unbundled product (which means we offer a base fare and allow customers to purchase ancillary products and services for an additional fee), point-to-point service and a single-family fleet of Boeing 737-NG aircraft, which allow us to maintain a cost base comparable to these ULCCs. However, we offer a high quality product that we believe is superior to ULCCs and consistent with that of LCCs (which ~~include~~includes Southwest Airlines and JetBlue Airways). For example, our product includes more legroom than ULCCs, complimentary beverages, in-flight entertainment, and in-seat power, none of which are offered by ULCCs.

Our charter business, which is one of the largest narrow body charter operations in the United States, is a key component of our strategy both because it provides both inherent diversification and downside protection as well as because it is synergistic with our other businesses. Our charter business has several favorable characteristics, ~~including~~including: large repeat customers, more stable demand than scheduled service flying, and the ability to pass through certain costs, including fuel. Our diverse charter customer base includes casino operators, the U.S. Department of Defense, college ~~sports teams~~ and professional sports teams. We are the primary air carrier for the National Collegiate Athletic Association (“NCAA”) Division I National Basketball Tournament (known as “March Madness”), and weDivision I Men’s Ice Hockey Championship (known as the “Frozen Four”). We flew over ~~100~~70 college sports teams during ~~2019, but 2020~~the first nine months of 2021, which was lower than 2019 due to impacts of the COVID-19 pandemic. Our charter business includes ad hoc, repeat, short-term and long-term service contracts with pass through fuel arrangements and annual rate escalations. Most of our business is non-cyclical because the U.S. Department of Defense and sports teams still fly during normal economic downturns and our casino contracts are long-term in nature.

On December 13, 2019, we signed the ATSA with Amazon to provide air cargo services. Flying under the ATSA began in May 2020 and ~~as of the date of this filing,~~ we are currently flying 12 Boeing 737-800 cargo aircraft for Amazon. Our CMI service is asset-light from a Sun Country perspective as Amazon supplies the aircraft and covers many of the operating expenses, including fuel, and provides all cargo loading and unloading services. We are responsible for flying the aircraft under our air carrier certificate, crew, aircraft line maintenance and insurance, all of which allow us to leverage our existing operational expertise from our scheduled service and charter businesses. Our cargo

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

business also enables us to leverage certain assets, capabilities, and fixed costs to enhance profitability and promote growth across our Company.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Operations in Review

We believe a key component of our success is establishing Sun Country as a high growth, low-cost carrier in the United States by attracting customers with low fares and garnering repeat business by delivering a ~~high quality~~high-quality passenger experience, offering state-of-the-art interiors, free streaming of in-flight entertainment to passenger devices, seat ~~recline~~reclining and seat-back power in all of our aircraft.

The COVID-19 pandemic resulted in a dramatic decline in passenger demand across the U.S. airline industry. We have experienced a significant decline in demand related to the COVID-19 pandemic, which has caused a material decline in our 2020 and first ~~quarter~~nine months of 2021 revenues as compared to pre-pandemic levels, and has negatively impacted our financial condition and operating ~~results, which is likely~~results.

During 2021, we have continued to ~~continue for~~see recovery in demand from the ~~duration~~COVID-19 pandemic relative to demand in 2020. However, the ongoing impact of the ~~pandemic.~~COVID-19 pandemic on overall demand for air travel remains uncertain and cannot be predicted at this time. In addition, the impact of COVID-19 vaccine mandates and uncertainties in pilot staffing, as well as higher fuel prices, could impact our business and results of operations in the near term.

On February 10, 2021, Sun Country, Inc., our wholly-owned subsidiary (the “Borrower”), entered into a new Credit Agreement which provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility. We received CARES Act grants oftotaling $62,312 during 2020, and a CARES Act loan of $45,000 in October 2020. ~~On January 22,~~During the first half of 2021, we ~~were informed by the Treasury that we would receive a grant of $32,208~~received grants totaling $37,040 and $34,547 under the Payroll Support Program Extension under the Consolidated Appropriations Act of ~~2021. We received $16,104 on February 2,~~ 2021 (“PSP2”) and ~~we received~~ the ~~remaining $16,104 on March 26, 2021. On April 22,~~American Rescue Plan Act of 2021 ~~we received $4,831 from~~(“PSP3”), respectively. During the ~~Treasury as a top-off grant under PSP2. Further, we~~three months ended September 30, 2021, no CARES Act grants were ~~notified on April 15, 2021 that we would receive a grant of approximately $34,547 under PSP3, of which $17,274 was received on April 29, 2021.~~received.

While the COVID-19 pandemic induced industry downturn has delayed our growth in 2020 and 2021 to date, we believe that our investments have positioned us to profitably grow our business in the long term following a rebound in the U.S. airline industry.

Components of Operations

Operating Revenues

Scheduled ~~service~~Service. Scheduled service revenue consists of base fares ~~unused passenger credits~~ and expired passenger travel credits.

Charter ~~service~~Service. Charter service revenue consists of revenue earned from our charter ~~operations,~~business, primarily generated through our service to the U.S. Department of Defense, collegiate and professional sports teams, and casinos.

Ancillary. Ancillary revenue consists of revenue generated from air travel-related services such as baggage fees, seat selection and upgrade fees, itinerary service fees and on-board ~~sales and commissions on sales~~sales.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Cargo. Cargo revenue consists of air cargo transportation services under the ATSA with Amazon, primarily related to e-commerce delivery services.

Other. Other revenue consists primarily of revenue from services in connection with our Sun Country Vacations products, including organizing ground services, such as hotel, car and transfers. Other revenue also includes services not directly related to providing passenger services such as the advertising, marketing and brand

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

elements resulting from our co-branded credit card program. This component of our revenues also includes revenue from mail on regularly scheduled passenger aircraft.

Operating Expenses

Aircraft Fuel. Aircraft fuel expense includes jet fuel, federal and state taxes, other fees and the mark-to-market gains and losses associated with our fuel derivative contracts assince we do not apply hedge accounting. Aircraft fuel expense can be volatile, even between quarters, due to price changes and mark-to-market gains and losses in the value of the underlying derivative instruments as crude oil prices and refining margins increase or decrease.

Salaries, Wages, and Benefits. Salaries, wages, and benefits expense includes salaries, hourly wages, bonuses, equity-based compensation, and profit sharing paid to employees for their services, as well as related expenses associated with medical benefits, employee benefit plans, employer payroll taxes and other employee related costs.

Aircraft Rent. Aircraft rent expense consists of monthly lease charges for aircraft and spare engines under the terms of the related operating leases and is recognized on a straight-line basis. Aircraft rent expense also includes supplemental rent, which consists of maintenance reserves paid to aircraft lessors in advance of the performance of significant maintenance activities that are not probable of being reimbursed to us by the lessor during the lease term, as well as lease return costs, which consist of all costs that would be incurred at the return of the aircraft, including costs incurred to return the airframe and engines to the condition required by the lease. Aircraft rent expense is partially offset by the amortization of over-market liabilities related to unfavorable terms of our operating leases and maintenance reserves which existed as of the date of our acquisition by certain investment funds (the “Apollo Funds”) managed by affiliates of Apollo Global Management, Inc., which were established as part of the acquisition. See Note 6 to our ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for further information on the over-market liabilities.

Maintenance. Maintenance expense includes the cost of all parts, materials and fees for repairs performed by us and our third-party vendors to maintain our fleet. It excludes direct labor cost related to our own mechanics, which are included in salaries, wages, and benefits expense. It also excludes maintenance expenses, which are deferred based on the built-in overhaul method for owned and finance leased aircraft ~~and~~, which is subsequently amortized as a component of depreciation and amortization expense. Our maintenance expense is reduced due to recognizing a liability (or contra-asset) that offsets expenses for maintenance events incurred by the new owners of Sun Country, but paid for by the previous owners. For more information on these maintenance expense credits, see Note 6 to our ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Sales and Marketing. Sales and marketing expense includes credit card processing fees, travel agent commissions and related global distribution systems fees, advertising, sponsorship and distribution costs, such

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(Dollars in thousands, except per share amounts)

(Unaudited)

as the costs of our call centers, and costs associated with our loyalty program. It excludes related salary and wages of personnel, which are included in salaries, wages, and benefits expense.

Depreciation and Amortization. Depreciation and amortization expense includes depreciation of fixed assets we own and leasehold improvements, amortization of finance leased assets, as well as the amortization of finite-lived intangible assets. It also includes the depreciation of significant maintenance expenses we deferred under the built-in overhaul method for owned and certain finance leased aircraft.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Ground Handling.Ground handling includes ground ~~activities~~services at airports including baggage handling, ticket counter and other ground services.

Landing Fees and Airport Rent.Landing fees and airport rent includes aircraft landing fees and charges for the use of airport facilities.

Special Items, net.Special items, net reflects expenses, or credits to expense, that are not representative of our ongoing costs for the period presented and may vary from period to period in nature, frequency and amount.

Other Operating.Other operating expenses include crew and other employee travel, interrupted trip expenses, information technology, property taxes and insurance, including hull-liability insurance, supplies, legal and other professional fees, facilities and all other administrative and operational overhead expenses.

Non-operating Income (Expense)

Interest Income. Interest income includes interest on our cash, ~~and equivalent~~cash equivalents and investment balances. Interest income is generally immaterial to our results of operations, reflecting the current low interest rate ~~environment and our unrestricted cash balances.~~environment.

Interest Expense. Interest expense includes interest and fees related to our outstanding debt and our ~~finance/capital~~finance leases, as well as the amortization of debt financing costs.

Other, net. Other expenses include activities not classified in any other area of the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations,~~Operations, such as gain or loss on sale or retirement of assets and certain consulting expenses. The change in the TRA liability is also included here.

Income Taxes

~~We account~~Income taxes are accounted for ~~income taxes~~ using the asset and liability method. ~~We record a~~A valuation allowance is recorded to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. ~~We record deferred~~Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. In assessing our ability to utilize our deferred tax assets, ~~we consider~~there is consideration on whether it is more likely than not that some or all of the deferred tax assets will be realized. ~~We consider all~~All available evidence, both positive and negative, is considered in determining future taxable income on a jurisdiction by jurisdiction basis.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Operating Statistics

Key Operating Statistics and Metrics


	Three Months Ended March 31, 2021 ⁽¹⁾									Three Months Ended March 31, 2020 ⁽¹⁾								Three Months Ended September 30, 2021 ⁽¹⁾								Three Months Ended September 30, 2020 ⁽¹⁾
	Scheduled									Scheduled								Scheduled								Scheduled
	Service			Charter		Cargo	Maint.	Total		Service			Charter		Maint.	Total		Service			Charter		Cargo	Total		Service			Charter		Cargo	Total
Departures(2)		4,323			1,511	2,565	53		8,452		5,806			1,636	81		7,523		5,533			1,798	2,912		10,299		3,364			1,324	1,818		6,549
Block hours(2)		15,207			3,331	8,242	152		26,932		20,242			3,612	233		24,087		17,313			3,835	8,533		29,842		9,998			2,920	5,168		18,191
Aircraft miles(2)		6,233,184			1,222,451	3,285,525	43,383		10,784,543		8,157,586			1,311,533	65,441		9,534,560		7,046,575			1,423,300	3,376,084		11,897,035		4,104,095			1,126,392	2,119,442		7,381,323
Available seat miles (ASMs) (thousands)(2)		1,158,012			211,721	—	7,063		1,376,796		1,508,196			236,863	12,008		1,757,067		1,296,555			244,393	—		1,549,432		763,362			205,594	—		974,584
Total revenue per ASM (TRASM) (cents) ⁽²⁾⁽³⁾									7.70								10.26								9.63								6.54
Average passenger aircraft available for service ⁽²⁾									27.7								26.6
Average passenger aircraft during the period ⁽³⁾																									32.9								31.0
Passenger aircraft at end of period ⁽²⁾⁽³⁾									31								32								35								31
Cargo aircraft at end of period									12								—								12								10
Average daily aircraft utilization (hours) ⁽²⁾⁽³⁾									6.7								8.2								7.0								4.6
Average stage length (miles)									1,278								1,272								1,155								1,116
Revenue passengers carried ⁽³⁾⁽⁴⁾		553,032									813,938								785,348								337,887
Revenue passenger miles (RPMs) (thousands) ⁽³⁾⁽⁴⁾		774,999									1,149,906								1,011,936								418,223
Passenger revenue per ASM (PRASM) (cents) ⁽³⁾⁽⁴⁾		4.72									7.57								6.19								3.53
Load factor ⁽³⁾⁽⁴⁾		66.9	%								76.2	%							78.0	%							54.8	%
Average base fare per passenger ⁽³⁾⁽⁴⁾	$	98.77								$	140.34							$	102.14							$	79.77
Ancillary revenue per passenger ⁽³⁾⁽⁴⁾	$	42.98								$	43.04							$	42.91							$	36.27
Charter revenue per block hour				$	7,747								$	8,092							$	8,816							$	7,967
Fuel gallons consumed (thousands)(2)		11,557			2,357	—	79		13,993		15,751			2,700	120		18,571		13,475			2,760	—		16,321		7,403			2,098			9,558
Fuel cost per gallon, excluding derivatives								$	1.91							$	1.82							$	2.24							$	1.40
Employees at end of period									1,768								1,640								2,014								1,632
Cost per available seat mile (CASM) (cents) ⁽⁴⁾⁽⁵⁾									7.46								9.40								9.79								7.10
Adjusted CASM (cents) ⁽⁵⁾⁽⁶⁾									6.15								6.20								6.35								7.63

(1)	Certain operating statistics and metrics are not presented as they are not calculable or are not ~~utilized.~~utilized by management.

(2)	Total System operating statistics for Departures, Block hours, Aircraft miles, ASMs and Fuel gallons consumed include amounts related to flights operated for maintenance; therefore the Total System amounts are higher than the sum of Scheduled Service, Charter Service and Cargo amounts.

(3)	Scheduled service and charter service utilize the same fleet of aircraft. Aircraft counts and utilization metrics are shown on a system basis only.

~~(3)~~(4)

Passenger-related statistics and metrics are shown only for scheduled service. Charter service revenue is driven by flight statistics.

~~(4)~~(5)

CASM is a key airline cost metric. CASM is defined as operating expenses divided by total available seat miles.

~~(5)~~(6)

Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, special items, and certain other costs.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended March 31,

$

%


2021

2020

Change

Change

Operating Revenues:

Scheduled Service

$
54,620

$
114,228

$
(59,608)

(52)
%
Charter Service

25,805

29,227

(3,422)

(12)
%
Ancillary

23,770

35,031

(11,261)

(32)
%
Passenger

104,195

178,486

(74,291)

(42)
%
Cargo

21,585

—

21,585

na

Other

1,831

1,844

(13)

(1)
%
Total Operating Revenue

127,611

180,330

(52,719)

(29)
%
Operating Expenses:









Aircraft Fuel

24,274

55,561

(31,287)

(56)
%
Salaries, Wages, and Benefits

44,075

38,091

5,984

16
%
Aircraft Rent

5,599

11,032

(5,433)

(49)
%
Maintenance

9,210

6,478

2,732

42
%
Sales and Marketing

5,110

8,572

(3,462)

(40)
%
Depreciation and Amortization

12,615

10,527

2,088

20
%
Ground Handling

5,230

9,292

(4,062)

(44)
%
Landing Fees and Airport Rent

8,785

11,114

(2,329)

(21)
%
Special Items, net

(26,871)

—

(26,871)

na

Other Operating, net

14,651

14,433

218

2
%
Total Operating Expenses

102,678

165,100

(62,422)

(38)
%
Operating Income

24,933

15,230

9,703

64
%
Non-operating Income/(Expense):









Interest Income

15

251

(236)

(94)
%
Interest Expense

(7,121)

(5,616)

(1,505)

27
%
Other, net

(5)

(169)

164

(97)
%
Total Non-operating Expense, net

(7,111)

(5,534)

(1,577)

28
%
Income before Income Tax

17,822

9,696

8,126

84
%
Income Tax Expense

5,406

2,445

2,961

121
%
Net Income

$
12,416

$
7,251

$
5,165

71
%

Key Operating Statistics and Metrics


	Nine Months Ended September 30, 2021 ⁽¹⁾								Nine Months Ended September 30, 2020 ⁽¹⁾
	Scheduled								Scheduled
	Service			Charter		Cargo	Total		Service			Charter		Cargo	Total
Departures ⁽²⁾		14,777			5,036	8,229		28,196		10,546			3,480	2,231		16,396
Block hours ⁽²⁾		48,420			10,822	24,973		84,648		34,416			7,853	6,244		48,882
Aircraft miles ⁽²⁾		19,758,087			4,005,794	9,884,576		33,780,294		13,971,834			2,964,186	2,574,422		19,616,211
Available seat miles (ASMs) (thousands) ⁽²⁾		3,653,335			693,837	—		4,368,972		2,589,606			540,284	—		3,149,189
Total revenue per ASM (TRASM) (cents) ⁽³⁾								8.75								8.77
Average passenger aircraft during the period ⁽³⁾								31.7								31.4
Passenger aircraft at end of period ⁽³⁾								35								31
Cargo aircraft at end of period								12								10
Average daily aircraft utilization (hours) ⁽³⁾								6.9								5.0
Average stage length (miles)								1,199								1,207
Revenue passengers carried ⁽⁴⁾		2,038,399								1,273,747
Revenue passenger miles (RPMs) (thousands) ⁽⁴⁾		2,705,969								1,721,227
Passenger revenue per ASM (PRASM) (cents) ⁽⁴⁾		5.53								6.14
Load factor ⁽⁴⁾		74.1	%							66.5	%
Average base fare per passenger ⁽⁴⁾	$	99.05							$	124.88
Ancillary revenue per passenger ⁽⁴⁾	$	42.50							$	41.02
Charter revenue per block hour				$	8,179							$	7,765
Fuel gallons consumed (thousands) ⁽²⁾		37,299			7,739	—		45,269		26,182			5,744	—		32,120
Fuel cost per gallon, excluding derivatives							$	2.08							$	1.62
Employees at end of period								2,014								1,632
Cost per available seat mile (CASM) (cents) ⁽⁵⁾								8.11								8.63
Adjusted CASM (cents) ⁽⁶⁾								6.29								7.75

(1)	Certain operating statistics and metrics are not presented as they are not calculable or are not utilized by management.

(2)	Total System operating statistics for Departures, Block hours, Aircraft miles, ASMs and Fuel gallons consumed include amounts related to flights operated for maintenance; therefore the Total System amounts are higher than the sum of Scheduled Service, Charter Service and Cargo amounts.

(3)	Scheduled service and charter service utilize the same fleet of aircraft. Aircraft counts and utilization metrics are shown on a system basis only.

(4)	Passenger-related statistics and metrics are shown only for scheduled service. Charter service revenue is driven by flight statistics.

(5)	CASM is a key airline cost metric. CASM is defined as operating expenses divided by total available seat miles.

(6)	Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, special items, and certain other costs.

Total operating revenues decreased by $52,719, or 29%, to $127,611 for the three months ended March 31, 2021 from $180,330 for the three months ended March 31, 2020. The dramatic decline is due to a significant decline in passenger service demand as a result of the COVID-19 pandemic.

~~Scheduled Service.~~ Scheduled service revenue decreased by $59,608, or 52%, to $54,620 for the three months ended March 31, 2021 from $114,228 for the three months ended March 31, 2020. The decrease in scheduled service revenue was driven by a dramatic decline in passenger demand due to government travel restrictions and quarantine requirements related to the COVID-19 pandemic.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Statement of Operations Analysis

Results of Operations

For the Three Months Ended September 30, 2021 and 2020


	Three Months Ended September 30,				$		%
	2021		2020		Change		Change
Operating Revenues:
Scheduled Service	$	80,212	$	26,954	$	53,258	198	%
Charter Service		33,809		23,264		10,545	45	%
Ancillary		33,697		12,254		21,443	175	%
Passenger		147,718		62,472		85,246	136	%
Cargo		24,400		14,272		10,128	71	%
Other		1,545		1,229		316	26	%
Total Operating Revenues		173,663		77,973		95,690	123	%

Operating Expenses:
Aircraft Fuel		36,647		13,139		23,508	179	%
Salaries, Wages, and Benefits		43,424		36,348		7,076	19	%
Aircraft Rent		3,925		6,410		(2,485)	(39)	%
Maintenance		9,660		6,338		3,322	52	%
Sales and Marketing		5,470		2,921		2,549	87	%
Depreciation and Amortization		14,029		12,929		1,100	9	%
Ground Handling		7,873		4,880		2,993	61	%
Landing Fees and Airport Rent		12,069		8,596		3,473	40	%
Special Items, net		(65)		(32,852)		32,787	(100)	%
Other Operating, net		18,629		10,447		8,182	78	%
Total Operating Expenses		151,661		69,156		82,505	119	%
Operating Income		22,002		8,817		13,185	150	%

Non-operating Income (Expense):
Interest Income		28		26		2	8	%
Interest Expense		(6,286)		(5,157)		(1,129)	22	%
Other, net		456		164		292	178	%
Total Non-operating Income (Expense), net		(5,802)		(4,967)		(835)	17	%

Income before Income Tax		16,200		3,850		12,350	321	%
Income Tax Expense		2,297		923		1,374	149	%
Net Income	$	13,903	$	2,927	$	10,976	375	%

Total Operating Revenues increased $95,690, or 123%, to $173,663 for the three months ended September 30, 2021 from $77,973 for the three months ended September 30, 2020. The increase is due to a significantly lower demand for passenger service in 2020 as a result of the COVID-19 pandemic, and growth in cargo services compared to one year ago.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Scheduled Service. Scheduled service revenue increased by $53,258, or 198%, to $80,212 for the three months ended September 30, 2021 from $26,954 for the three months ended September 30, 2020. The increase in scheduled service revenue was largely driven by a decline in demand for passenger service during the three months ended September 30, 2020 due to government travel restrictions, quarantine requirements, and reduced passenger demand related to the COVID-19 pandemic.

The table below presents select operating data for scheduled service, expressed as quarter-over-quarter changes:


	Three Months Ended March 31,						Increase	%		Three Months Ended September 30,							%
	2021			2020			(Decrease)	Change		2021			2020			Increase	Change
Departures											5,533			3,364		2,169	64	%
Passengers		553,032			813,938		(260,906)	(32)	%		785,348			337,887		447,461	132	%
Average base fare per passenger	$	98.77		$	140.34		(41.57)	(30)	%	$	102.14		$	79.77		22.37	28	%
RPMs (thousands)		774,999			1,149,906		(374,907)	(33)	%		1,011,936			418,223		593,713	142	%
ASMs (thousands)		1,158,012			1,508,196		(350,184)	(23)	%		1,296,555			763,362		533,193	70	%
PRASM (cents)		4.72			7.57		(2.85)	(38)	%		6.19			3.53		2.66	75	%
Passenger load factor		66.9	%		76.2	%	(9.3) pts	na			78.0	%		54.8	%	23.2 pts	N/A

The ~~32% decline~~132% increase in the number of scheduled service passengers in the three months ended ~~March 31,~~September 30, 2021, as compared to the three months ended ~~March 31,~~September 30, 2020, was primarily due to COVID-19 pandemic related demand ~~reductions.~~reductions in the prior year period. For the three months ended ~~March 31,~~September 30, 2021, our average base fare was ~~$98.77,~~$102.14, compared to ~~$140.34~~$79.77 for the three months ended ~~March 31,~~September 30, 2020. The ~~30% reduction in average base fare was due~~increase is the result of strong demand, coupled with a favorable capacity environment, that enabled Sun Country to ~~lower prices~~achieve much stronger fares than in the ~~airline industry due to significantly lower demand and fewer higher priced international passengers.~~third quarter of 2020.

Charter ~~Service.~~ Service.Charter service revenue ~~decreased by $3,422,~~increased $10,545, or ~~12%~~45%, to ~~$25,805~~$33,809 for the three months ended ~~March 31,~~September 30, 2021, from ~~$29,227~~$23,264 for the three months ended ~~March 31,~~September 30, 2020. The COVID-19 pandemic drove a decrease in our ~~casino~~third quarter of 2020 charter service ~~revenue of 62.5% due to~~revenue. There was a ~~delayed recovery in demand. This was offset by an~~31% increase in ~~our custom charters service revenue of 47.4%, driven by increase in NCAA operations, other custom charters, and U.S. Department of Defense.~~block hours for the 2021 third quarter as compared to the 2020 third quarter. Charter revenue per block hour was ~~$7,747~~$8,816 for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~$8,092~~$7,967 for the three months ended ~~March 31,~~September 30, 2020, for ~~a decrease~~an increase of 4%11%. This revenue per block hour increase is due to the ongoing recovery from the impacts of COVID-19.

Ancillary~~Ancillary.~~ .Ancillary revenue ~~decreased~~increased by ~~$11,261,~~$21,443, or ~~32%~~175%, to ~~$23,770~~$33,697 for the three months ended ~~March 31,~~September 30, 2021, from ~~$35,031~~$12,254 for the three months ended ~~March 31,~~September 30, 2020. The ~~number of scheduled service~~132% increase in passengers ~~was 553 thousand in~~during the ~~three months ended March 31, 2021, down 32% from 814 thousand in the three months ended March 31, 2020. The decline in passenger demand due to the COVID-19 pandemic~~period resulted in ~~a corresponding decline in~~greater sales of air travel-related services such as baggage fees, seat selection and upgrade fees, and on-board sales. ~~Specifically, ancillary~~Ancillary revenue was ~~$42.98~~$42.91 per passenger in the three months ended ~~March 31,~~September 30, 2021, ~~down~~up from ~~$43.04~~$36.27 per passenger in the three months ended ~~March 31,~~September 30, 2020.

Cargo~~Cargo.~~ .Revenue from cargo services was ~~$21,585~~$24,400 for the three months ended ~~March 31,~~September 30, 2021, ~~with no comparative revenue~~as compared to $14,272 for the three months ended ~~March 31,~~September 30, 2020. All of our ~~2021~~ cargo service revenue ~~related~~relates to the ~~commencement of~~ air cargo transportation services under the ATSA with Amazon that commenced in May 2020.

~~Other.~~ ~~Other revenue at $1,831 for~~ For the three months ended March 31, 2021 was flat to the three months ended March 31, 2020. There was an observed decrease in co-brand credit card revenue from lower card spending and lower mail revenue due to decreased flights, offset by increased Sun Country Vacations revenue.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~Operating Expenses~~

~~Aircraft Fuel~~~~. Aircraft fuel expense decreased by $31,287, or 56%,~~three months ended September 30, 2021, departures increased to ~~$24,274~~2,912, as compared to 1,818 for the three months ended ~~March 31, 2021, as compared~~September 30, 2020, due to ~~$55,561~~the timing of when the aircraft were brought into service in 2020.

Other. Other revenue was $1,545 for the three months ended ~~March 31, 2020. The decrease was largely driven by a $24,422 change in the mark-to-market gains/losses from our fuel derivative contracts, consisting of a $2,386 gain in~~September 30, 2021, as compared to $1,229 for the three months ended ~~March 31, 2021 compared~~September 30, 2020. This was mainly the result of an increase in revenue from Sun Country Vacations due to ~~a $22,036 loss~~improved bookings and an increase in co-branded marketing revenue related to our Sun Country VISA card.

Operating Expenses

Aircraft Fuel. Aircraft fuel expense was $36,647 for the three months ended ~~March 31,~~September 30, 2021, as compared to $13,139 for the three months ended September 30, 2020. The ~~decrease~~increase was ~~further~~mainly driven by a ~~25% decrease~~71% increase in fuel gallons consumed ~~due to our decreased level of operations as~~resulting from a ~~result of reduced~~recovery in demand ~~relating to the COVID-19 pandemic,~~ as demonstrated by a ~~20% decrease~~64% increase in passenger service block ~~hours. Partially offsetting these decreases was~~hours, as well as a 5%60% increase in the average price per gallon of fuel.

Salaries, Wages, and Benefits. Salaries, wages, and benefits expense increased ~~by $5,984,~~$7,076, or ~~16%~~19%, to ~~$44,075~~$43,424 for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~$38,091~~$36,348 for the three months ended ~~March 31,~~September 30, 2020. A portion of the increase was primarily due to insourcing MSP ground handling operations in April 2020, resulting in approximately $1,200 in higher salaries, wages and benefits, along with increased pilot pay and per diems to support operations under the ATSA. Since the probability of partial vesting was triggered by our IPO, we expensed $2,496 for our performance-based stock optionsThe average headcount for the three months ended ~~March 31, 2021. No expense~~September 30, 2021 was ~~recorded in~~1,915, as compared to 1,646 for the three months ended ~~March 31,~~September 30, 2020. A significant portion of the headcount increase was due to a ramp up in the insourcing of MSP ground handling, which was in transition from April 2020 ~~for performance-based stock options.~~to early 2021. Our ~~cargo~~Cargo segment was responsible for ~~$11,236~~$9,805 of the consolidated salaries, wages, and benefits expense for the three months ended ~~March 31,~~September 30, 2021, ~~and was~~as compared to $8,378 for the three months ended September 30, 2020. The $1,427 increase over the prior year third quarter is driven by additional headcount to support the operations and the timing of when the Amazon aircraft were brought into service in 2020. The Cargo segment began in May 2020, driving additional headcount required to support the ramp up of operations and aircraft under the ATSA.

Aircraft Rent. Aircraft rent expense decreased ~~by $5,433,~~$2,485, or ~~49%~~39%, to ~~$5,599~~$3,925 for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~$11,032~~$6,410 for the three months ended ~~March 31,~~September 30, 2020. Aircraft rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (for which expense is recorded within aircraft rent) to owned ~~aircraft.~~aircraft (for which expense is recorded through depreciation and interest expense). Specifically, in the ~~year ended December 31, 2020~~first six months of 2021, we purchased ~~two~~six aircraft previously under operating ~~lease~~leases. For the three months ended September 30, 2021 and ~~leased two fewer seasonal aircraft. In addition, in late Q1 2021, we purchased five~~2020, there was an average of six and twelve aircraft ~~previously~~ under operating ~~lease. Additionally, a 20% decrease in passenger service block hours resulted in a decrease in supplemental rent.~~leases, respectively.

Maintenance. Maintenance materials and repair expense increased ~~by $2,732,~~$3,322, or ~~42%~~52%, to ~~$9,210~~$9,660 for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~$6,478~~$6,338 for the three months ended ~~March 31,~~September 30, 2020. There were three landing gear events in the three months ended September 30, 2021 versus one during the three months ended September 30, 2020, resulting in a cost increase of $1,090. There was also a $1,592 increase in costs, including wheels, brakes, consumables, and expendables, driven by increased departures. Partially offsetting these increases, the cost of heavy checks decreased $945, due to two heavy checks performed in the three months ended September 30, 2021, as compared to three in the three months ended September 30, 2020. Our ~~cargo~~Cargo segment was responsible for ~~$2,607~~$2,485 of the consolidated maintenance expense for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~none~~$1,602 for the prior year third quarter ~~since cargo segment shipments did not begin until May~~due to

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

the timing of when the Amazon aircraft were brought into service in 2020. The ~~cargo~~Cargo segment expense primarily relates to line maintenance since heavy maintenance is reimbursed under the ATSA.

Sales and Marketing. Sales and marketing expense ~~decreased by $3,462,~~increased $2,549, or ~~40%~~87%, to ~~$5,110~~$5,470 for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~$8,572~~$2,921 for the three months ended ~~March 31,~~September 30, 2020. The passenger revenue ~~decrease~~increase between these two periods was ~~40%~~136%, and was primarily ~~due to~~responsible for a ~~$1,980 reduction~~$1,736 increase in credit card processing fees ~~related to lower sales on our scheduled service. The remaining $1,482 reduction relates to lower advertising costs,~~and a $580 increase in global distribution system ~~fees~~fees. The remaining increase primarily relates to higher advertising costs and travel agent ~~commissions, all due to the COVID-19 pandemic.~~commissions.

Depreciation and Amortization. Depreciation and amortization expense increased ~~by $2,088,~~$1,100, or ~~20%~~9%, to ~~$12,615~~$14,029 for the three months ended ~~March 31,~~September 30, 2021, as compared to ~~$10,527~~$12,929 for the three months ended

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~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~March 31,~~ September 30, 2020. The increase was primarily due to the impact of a change in the composition of our aircraft fleet to an increased number of owned aircraft and aircraft under finance leases (for which expense is recorded as amortization and interest expense). During the three months ended September 30, 2021, the Company also purchased three engines and a flight simulator. For the three months ended September 30, 2021 and 2020, there was an average of 20 and 14 owned aircraft, respectively. For the same three-month periods, the average number of finance lease aircraft increased to seven in 2021 from five in 2020.

Ground Handling. Ground handling expense increased $2,993, or 61%, to $7,873 for the three months ended September 30, 2021, as compared to $4,880 for the three months ended September 30, 2020. The increase was primarily due to the 64% increase in scheduled departures during the same time periods. Additionally, a minor increase in rates in the 2021 third quarter as compared to the 2020 third quarter contributed $388 of additional expense.

Landing Fees and Airport Rent. Landing fees and airport rent increased $3,473, or 40%, to $12,069 for the three months ended September 30, 2021, as compared to $8,596 for the three months ended September 30, 2020. The increase was driven by the 64% increase in scheduled departures for the three months ended September 30, 2021. Additionally, a decrease in rates in the 2021 third quarter as compared to the 2020 third quarter offset $1,031 against the departure volume increase.

Special Items, net. Special items, net was a contra-expense of $65 for the three months ended September 30, 2021 and $32,852 for the three months ended September 30, 2020. For the three months ended September 30, 2021, Special items, net included $68 in refundable tax credits related to employee retention under the CARES Act, which was a true-up of the amount recognized in the 2021 second quarter. For the three months ended September 30, 2020, Special items, net included $30,796 of contra-expense related to funds received under the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits, and $2,069 in refundable tax credits related to employee retention under the CARES Act. Our Cargo segment had no impact on Special items, net for the three months ended September 30, 2021 and $7,318 for the three months ended September 30, 2020. These credits were driven by allocated amounts received under the CARES Act, based on the respective segment salaries, wages, and benefits.

Other Operating, net. Other operating, net expense increased $8,182, or 78%, to $18,629 for the three months ended September 30, 2021, as compared to $10,447 for the three months ended September 30, 2020, mainly due to increased departures. The Passenger segment increase of $7,237 was primarily driven by the higher level of operations which resulted in higher crew and other employee travel costs, catering expenses, and other operational overhead costs. There was also an additional cost of approximately $1,105 due to becoming a

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

public company, primarily related to insurance, legal and consulting fees. Our Cargo segment was responsible for $3,364 and $2,418 of our consolidated other operating, net expense for the three months ended September 30, 2021 and 2020, respectively, driven by overhead expenses as well as crew and employee travel costs.

Non-operating Income (Expense)

Interest Expense. Interest expense increased $1,129, or 22%, to $6,286 for the three months ended September 30, 2021, as compared to $5,157 for the three months ended September 30, 2020. The increase was primarily due to debt issued for the acquisition of new aircraft, including new debt incurred in connection with ~~our~~the 2019-1 EETC, and the Delayed Draw Term Loan Facility.

Other, net. Other, net for the three months ended September 30, 2021 was a net income of $456 primarily due to a credit of $1,100 for the adjustment of our Tax Receivable Agreement liability. The decrease in the TRA liability was mainly due to an increase in forecasted 2021 pre-tax income. Partially offsetting this income was $641 in expenses related to a secondary stock offering that closed in October 2021. Other, net for the three months ended September 30, 2020, was a net income of $164, primarily due to a vendor settlement.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Results of Operations

For the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30,

$

%


2021

2020

Change

Change

Operating Revenues:

Scheduled Service

$
201,905

$
159,063

$
42,842

27
%
Charter Service

88,511

60,983

27,528

45
%
Ancillary

86,626

52,253

34,373

66
%
Passenger

377,042

272,299

104,743

38
%
Cargo

68,084

17,491

50,593

289
%
Other

5,338

3,889

1,449

37
%
Total Operating Revenues

450,464

293,679

156,785

53
%

Operating Expenses:









Aircraft Fuel

90,631

69,377

21,254

31
%
Salaries, Wages, and Benefits

129,815

106,923

22,892

21
%
Aircraft Rent

13,339

23,376

(10,037)

(43)
%
Maintenance

30,170

15,242

14,928

98
%
Sales and Marketing

16,402

13,123

3,279

25
%
Depreciation and Amortization

40,103

35,631

4,472

13
%
Ground Handling

19,654

15,786

3,868

25
%
Landing Fees and Airport Rent

29,606

22,377

7,229

32
%
Special Items, net

(65,456)

(64,333)

(1,123)

2
%
Other Operating, net

50,026

34,363

15,663

46
%
Total Operating Expenses

354,290

271,865

82,425

30
%
Operating Income

96,174

21,814

74,360

341
%

Non-operating Income (Expense):









Interest Income

52

340

(288)

(85)
%
Interest Expense

(19,487)

(16,215)

(3,272)

20
%
Other, net

18,505

(331)

18,836

NM
%
Total Non-operating Income (Expense), net

(930)

(16,206)

15,276

(94)
%

Income before Income Tax

95,244

5,608

89,636

1,598
%
Income Tax Expense

17,172

1,470

15,702

1,068
%
Net Income

$
78,072

$
4,138

$
73,934

1,787
%

Variance percentage is not meaningful (“NM”)
Total Operating Revenues increased $156,785, or 53%, to $450,464 for the nine months ended September 30, 2021, from $293,679 for the nine months ended September 30, 2020. The increase is due to a significantly lower demand for passenger service in 2020 as a result of the COVID-19 pandemic, and growth in cargo services compared to one year ago.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Scheduled Service. Scheduled service revenue increased by $42,842, or 27%, to $201,905 for the nine months ended September 30, 2021, from $159,063 for the nine months ended September 30, 2020. The increase in scheduled service revenue was driven by a decline in passenger demand in the prior year due to government travel restrictions and quarantine requirements related to the COVID-19 pandemic.

The table below presents select operating data for scheduled service:

Nine Months Ended September 30,

Increase

%


2021

2020

(Decrease)

Change

Departures

14,777

10,546

4,231

40
%
Passengers

2,038,399

1,273,747

764,652

60
%
Average base fare per passenger

$
99.05

$
124.88

(25.83)

(21)
%
RPMs (thousands)

2,705,969

1,721,227

984,742

57
%
ASMs (thousands)

3,653,335

2,589,606

1,063,729

41
%
PRASM (cents)

5.53

6.14

(0.61)

(10)
%
Passenger load factor

74.1
%

66.5
%
7.6
pts
N/A

The 60% increase in the number of scheduled service passengers in the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to COVID-19 pandemic related lower demand in 2020. For the nine months ended September 30, 2021, our average base fare was $99.05, compared to $124.88 for the nine months ended September 30, 2020. The net change is the result of a strong start to 2020 with higher average fares followed by a significant drop in passengers due to COVID-19. This significant drop in passengers resulted in only a minimal impact on the nine months ending September 30, 2020 average base fare.
Charter Service. Charter service revenue increased $27,528, or 45%, to $88,511 for the nine months ended September 30, 2021, from $60,983 for the nine months ended September 30, 2020. There was a 38% increase in charter service block hours for the nine months ended September 30, 2021 vs 2020. This block hour increase is due to the ongoing recovery from the impacts of COVID-19. Charter revenue per block hour was $8,179 for the nine months ended September 30, 2021, as compared to $7,765 for the nine months ended September 30, 2020, for an increase of 5%.
Ancillary. Ancillary revenue increased $34,373, or 66%, to $86,626 for the nine months ended September 30, 2021, from $52,253 for the nine months ended September 30, 2020. This revenue relates to sales of air travel-related services such as baggage fees, seat selection and upgrade fees, and on-board sales. The increase was mainly due to a 60% increase in scheduled service passengers between periods. Additionally, there was a small increase in ancillary revenue per passenger from $42.50 per passenger in the nine months ended September 30, 2021, up from $41.02 per passenger in the nine months ended September 30, 2020.
Cargo. Revenue from cargo services was $68,084 for the nine months ended September 30, 2021, as compared with $17,491 for the nine months ended September 30, 2020. All of the 2021 and 2020 cargo service revenue is related to flights operated under the ATSA with Amazon. Cargo service began in May of 2020, so the increase is due to the year-over-year ramp up of operations. Cargo service departures were 8,229 in the nine months ended September 30, 2021, as compared to 2,231 for the nine months ended September 30, 2020.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Other. Other revenue was $5,338 for the nine months ended September 30, 2021 compared to $3,889 for the nine months ended September 30, 2020. This increase was mainly the result of higher revenue from Sun Country Vacations due to improved bookings and an increase in mail revenue due to increased departures.

Operating Expenses

Aircraft Fuel. Aircraft fuel expense increased $21,254, or 31%, to $90,631 for the nine months ended September 30, 2021, as compared to $69,377 for the nine months ended September 30, 2020. The increase in fuel expense was mainly due to a 41% increase in fuel gallons consumed, due to our increased level of operations as demonstrated by a 40% increase in passenger service block hours, as well as a 29% increase in the average price per gallon of fuel. Partially offsetting this increase was a decrease caused by the impact of fuel derivatives in each period. There was a $21,247 change in the mark-to-market gains/losses from our fuel derivative contracts, consisting of a $3,527 gain in the nine months ended September 30, 2021 compared to a $17,720 loss in the nine months ended September 30, 2020.

Salaries, Wages, and Benefits. Salaries, wages, and benefits expense increased $22,892, or 21%, to $129,815 for the nine months ended September 30, 2021, as compared to $106,923 for the nine months ended September 30, 2020. The increase was mainly due to an increase in headcount between periods. The average headcount for the nine months ended September 30, 2021 was 1,813, as compared to 1,627 for the nine months ended September 30, 2020. Approximately $2,100 of the dollar increase relates to insourcing MSP ground handling operations starting in April 2020. Approximately $3,272 of the dollar increase is attributable to 2021 performance-based stock-compensation expense as a result of our IPO making it probable that a portion of our performance-based stock options would vest over a specific timeframe. No expense was recorded in the nine months ended September 30, 2020 for performance-based stock options. Our Cargo segment was responsible for $31,200 of the consolidated salaries, wages, and benefits expense for the nine months ended September 30, 2021, compared to a $11,745 in the nine months ended September 30, 2020. There has been increased pilot pay and per diems to support operations under the ATSA. The Cargo segment began in May 2020, driving additional headcount required to support the ramp up of operations and aircraft under the ATSA.

Aircraft Rent. Aircraft rent expense decreased $10,037, or 43%, to $13,339 for the nine months ended September 30, 2021, as compared to $23,376 for the nine months ended September 30, 2020. Aircraft rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (for which expense is recorded within aircraft rent) to owned aircraft (for which expense is recorded in depreciation and interest expense). Specifically, in the first six months of 2021, we purchased six aircraft previously under operating leases. There were also two aircraft acquisitions completed in 2020 that reduced aircraft rent in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. For the nine months ended September 30, 2021 and 2020, there was an average of eight and thirteen aircraft under operating leases, respectively.

Maintenance. Maintenance materials and repair expense increased $14,928, or 98%, to $30,170 for the nine months ended September 30, 2021, as compared to $15,242 for the nine months ended September 30, 2020. The cost of heavy checks increased $3,085 due to eleven heavy checks performed in the nine months ended September 30, 2021, as compared to four for the nine months ended September 30, 2020. The cost of landing gear events increased $2,375 due to eight events performed in the nine months ended September 30, 2021, as compared to one for the nine months ended September 30, 2020. There was also a $3,049 increase in costs, including wheels, brakes, consumables, and expendables, driven by increased departures, as well as an $864 increase in the cost of servicing auxiliary power units. Our Cargo segment was responsible for $7,753 of

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

the consolidated maintenance expense for the nine months ended September 30, 2021, as compared to $2,111 for the prior year nine-month period since Cargo segment service did not begin until May 2020. The Cargo segment expense primarily relates to line maintenance, since heavy maintenance is reimbursed under the ATSA.

Sales and Marketing. Sales and marketing expense increased $3,279, or 25%, to $16,402 for the nine months ended September 30, 2021, as compared to $13,123 for the nine months ended September 30, 2020. The passenger revenue increase between these two periods was 38%, which drove a $1,441 increase in credit card processing fees and a $1,909 increase in global distribution system fees.

Depreciation and Amortization. Depreciation and amortization expense increased $4,472, or 13%, to $40,103 for the nine months ended September 30, 2021, as compared to $35,631 for the nine months ended September 30, 2020. The increase was primarily due to the impact of a change in the composition of our aircraft fleet from operating leases (for which expense is recorded within aircraft rent) to an increased number of owned aircraft and aircraft under finance leases (for which expense is recorded within depreciation, amortization and ~~amortization)~~interest expense). For the nine months ended September 30, 2021 and 2020, there was an average of 18 and 10 owned aircraft, respectively. For the same periods, the average number of finance lease aircraft declined to six in 2021 from eight in 2020.

Ground Handling. Ground handling expense ~~decreased by $4,062,~~increased $3,868, or ~~44%~~25%, to ~~$5,230~~$19,654 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, as compared to ~~$9,292~~$15,786 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. ~~The decrease~~There was an increase of $5,708, primarily due to the ~~26% decline~~40% increase in scheduled departures during the same time periods. ~~Additionally,~~However, we insourced our MSP operations in April 2020, contributing to a reduction of ~~$2,200~~approximately $1,839 in ground handling expenses for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, compared to ~~March 31,~~September 30, 2020, but ~~resulting~~resulted in higher salaries, wages, and benefits.

Landing Fees and Airport Rent. Landing fees and airport rent ~~decreased by $2,329,~~increased $7,229, or ~~21%~~32%, to ~~$8,785~~$29,606 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, as compared to ~~$11,114~~$22,377 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. ~~The decrease~~There was a $7,532 increase driven by the ~~26% reduction~~40% increase in scheduled departures for the ~~three~~nine months ended ~~March 31, 2021.~~September 30, 2021, as compared to the same period in 2020. There was also a rate increase of approximately $891 for the nine months of 2021 versus nine months of 2020. During the nine months ended September 30, 2021, we also received a $1,416 MSP terminal user fee airline relief credit, which partially offset these increases.

Special Items, net. Special items, net was a contra-expense of ~~$26,871~~$65,456 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~zero~~$64,333 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, Special items, net included ~~a $32,208~~$71,587 of ~~income~~contra-expense related to funds received under PSP2 and PSP3 of the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits, and ~~$334~~$848 in refundable tax credits related to employee retention under the CARES Act. This was partially offset by a ~~$5,664~~$6,963 net ~~loss on representing lease termination costs on~~charge relating to the purchase of ~~five~~six aircraft ~~during the quarter~~ that were previously under operating leases. For the nine months ended September 30, 2020, Special items, net included $62,312 of contra-expense related to funds received under the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits, and $2,069 in refundable tax credits related to employee retention under the CARES Act. Our ~~cargo~~Cargo segment was responsible for ~~$8,665~~$18,401 of the consolidated income from Special items, net for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~driven by allocated amounts received under~~and $10,687 for the ~~CARES Act,~~nine months ended September 30, 2020. The segment allocation of these credits is based on the respective segment salaries, wages, and benefits.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Other Operating, net. Other operating, net expense increased ~~by $218,~~$15,663, or 2%46%, to ~~$14,651~~$50,026 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, as compared to ~~$14,433~~$34,363 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. A ~~passenger~~Passenger segment ~~decrease~~increase of ~~$3,853~~$8,186 was primarily driven by our ~~lower~~higher level of operations ~~related to the COVID-19 pandemic~~for 2021, which resulted in ~~reduced~~increased crew and other employee travel costs, ~~interrupted trip expenses,~~ catering expenses, and other operational overhead costs. There was also an additional cost of approximately $2,680 due to becoming a public company, primarily related to insurance, filing fees, legal and consulting fees. Our ~~cargo~~Cargo segment was responsible for ~~$4,071~~$10,862 and $3,385 of our consolidated ~~other operating,~~Other Operating, net expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, driven by overhead expenses as well as crew and employee travel costs.

Non-operating Income (Expense)

Interest Expense. Interest expense increased ~~by $1,505,~~$3,272, or ~~27%~~20%, to ~~$7,121~~$19,487 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, as compared to ~~$5,616~~$16,215 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The increase was primarily due to debt issued for the acquisition of new aircraft, ~~and spare engines,~~ including new debt incurred in connection with the 2019-1 ~~EETC.~~EETC, and the Delayed Draw Term Loan Facility. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Company expensed $1,224 of debt financing costs due to the $46,260 pay-off of the ~~$45,000~~ CARES Act Loan and the replacement of the $25,000 ABL Facility.

Other, net. Other, net for the nine months ended September 30, 2021 was $18,505 and includes a credit of $19,800 for the adjustment of our Tax Receivable Agreement liability, which is partially offset by $1,281 in expenses for secondary stock offerings by Apollo and other stockholders. The decrease in the TRA liability was mainly due to the receipt of the PSP3 grant of $34,547, which extended the time period in which distributions made to shareholders are restricted from March 31, 2022 to September 30, 2022, and increases in forecasted 2021 pre-tax income. The $331 Other, net expense for the nine months ended September 30, 2020 was primarily due to $381 in losses on asset retirements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Segment Information

Three Months Ended

Three Months Ended March 31, 2021 ⁽¹⁾

March 31, 2020


Passenger

Cargo

Total

Passenger

$ Change
Operating Revenues

$
106,026

$
21,585

$
127,611

$
180,330

(74,304)
Operating Expenses:

Aircraft Fuel

24,253

21

24,274

55,561

(31,308)
Salaries, Wages, and Benefits

32,839

11,236

44,075

38,091

(5,252)
Aircraft Rent

5,599

—

5,599

11,032

(5,433)
Maintenance

6,603

2,607

9,210

6,478

125
Sales and Marketing

5,110

—

5,110

8,572

(3,462)
Depreciation and Amortization

12,589

26

12,615

10,527

2,062
Ground Handling

5,230

—

5,230

9,292

(4,062)
Landing Fees and Airport Rent

8,655

130

8,785

11,114

(2,459)
Special Items, net

(18,206)

(8,665)

(26,871)

—

(18,206)
Other Operating, net

10,580

4,071

14,651

14,433

(3,853)
Total Operating Expenses

93,252

9,426

102,678

165,100

(71,848)
Operating Income

$
12,774

$
12,159

$
24,933

$
15,230

$
(2,456)

Adjustment for Special Items

(18,206)

(8,665)

(26,871)

Adjusted Operating Income (Loss)

$
(5,432)

$
3,494

$
(1,938)

Adjusted Operating Margin %

(5)
%

16
%

(2)
%

For the Three Months Ended September 30, 2021 and 2020

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020 ⁽¹⁾


Passenger

Cargo

Total

Passenger

Cargo

Total

Operating Revenues

$
149,263

$
24,400

$
173,663

$
63,701

$
14,272

$
77,973

Operating Expenses:

Aircraft Fuel

36,556

91

36,647

13,139

—

13,139

Salaries, Wages, and Benefits

33,619

9,805

43,424

27,970

8,378

36,348

Aircraft Rent

3,925

—

3,925

6,410

—

6,410

Maintenance

7,175

2,485

9,660

4,736

1,602

6,338

Sales and Marketing

5,470

—

5,470

2,921

—

2,921

Depreciation and Amortization

14,003

26

14,029

12,949

(20)

12,929

Ground Handling

7,873

—

7,873

4,880

—

4,880

Landing Fees and Airport Rent

11,949

120

12,069

8,482

114

8,596

Special Items, net

(65)

—

(65)

(25,534)

(7,318)

(32,852)

Other Operating, net

15,266

3,364

18,629

8,029

2,418

10,447

Total Operating Expenses

135,770

15,891

151,661

63,982

5,174

69,156

Operating Income (Loss)

$
13,493

$
8,509

$
22,002

$
(281)

$
9,098

$
8,817

Adjustment for Special Items

(65)

—

(65)

(25,534)

(7,318)

(32,852)

Operating Income (Loss), Excluding Special Items

$
13,428

$
8,509

$
21,937

$
(25,815)

$
1,780

$
(24,035)

Operating Margin %, Excluding Special Items

9
%

35
%

13
%

(41)
%

12
%

(31)
%
(1) ~~As air~~Air cargo operations with Amazon commenced in May ~~2020, there is no comparable prior period information.~~2020.
Passenger.Passenger operating income ~~decreased~~increased by ~~$2,456, or 16%,~~$13,774 to ~~$12,774~~$13,493 for the three months ended ~~March 31,~~September 30, 2021 from ~~$15,230~~a loss of $281 for the three months ended ~~March 31,~~September 30, 2020. For more information on the changes in the components of operating income for the ~~passenger~~Passenger segment, refer to the consolidated results of operations discussion above.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Cargo. Cargo operating income was ~~$12,159~~$8,509 for the three months ended ~~March 31, 2021.~~September 30, 2021, as compared to $9,098 for the three months ended September 30, 2020. As Amazon air cargo operations commenced in May 2020, the ~~cargo~~Cargo segment ~~had no comparable~~was ramping up operations during 2020. The increased operating revenues for ~~any other prior period presented.~~2021 were largely offset by the lack of a CARES Act credit in Q3 2021, compared to a CARES Act credit of $7,318 in Q3 2020. For more information on the components of operating income for the ~~cargo~~Cargo segment, refer to the consolidated results of operations discussion above, where we more fully describe the cargo expenses embedded within each financial statement line item.

For the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020 ⁽¹⁾


Passenger

Cargo

Total

Passenger

Cargo

Total

Operating Revenues

$
382,380

$
68,084

$
450,464

$
276,188

$
17,491

$
293,679

Operating Expenses:

Aircraft Fuel

90,468

163

90,631

69,377

—

69,377

Salaries, Wages, and Benefits

98,615

31,200

129,815

95,178

11,745

106,923

Aircraft Rent

13,339

—

13,339

23,376

—

23,376

Maintenance

22,417

7,753

30,170

13,131

2,111

15,242

Sales and Marketing

16,402

—

16,402

13,123

—

13,123

Depreciation and Amortization

40,024

79

40,103

35,631

—

35,631

Ground Handling

19,654

—

19,654

15,786

—

15,786

Landing Fees and Airport Rent

29,228

378

29,606

22,220

157

22,377

Special Items, net

(47,055)

(18,401)

(65,456)

(53,646)

(10,687)

(64,333)

Other Operating, net

39,164

10,862

50,026

30,978

3,385

34,363

Total Operating Expenses

322,256

32,034

354,290

265,154

6,711

271,865

Operating Income

$
60,124

$
36,050

$
96,174

$
11,034

$
10,780

$
21,814

Adjustment for Special Items

(47,055)

(18,401)

(65,456)

(53,646)

(10,687)

(64,333)

Operating Income (Loss), Excluding Special Items

$
13,069

$
17,649

$
30,718

$
(42,612)

$
93

$
(42,519)

Operating Margin %, Excluding Special Items

3
%

26
%

7
%

(15)
%

1
%

(14)
%
(1) Air cargo operations with Amazon commenced in May 2020.
Passenger. Passenger operating income increased $49,090, or 445%, to $60,124 for the nine months ended September 30, 2021 from $11,034 for the nine months ended September 30, 2020. For more information on

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

the changes in the components of operating income for the Passenger segment, refer to the consolidated results of operations discussion above.

Cargo. Cargo operating income was $36,050 for the nine months ended September 30, 2021, as compared to $10,780 for the nine months ended September 30, 2020. As air cargo operations commenced in May 2020, the Cargo segment was ramping up operations during 2020. For example, two additional aircraft were not added until the fourth quarter of 2020. For more information on the components of operating income for the Cargo segment, refer to the consolidated results of operations discussion above, where we more fully describe the cargo expenses embedded within each financial statement line item.

Non-GAAP Financial Measures

We sometimes use information that is derived from the 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

~~- 34 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

guidance. The tables below show a reconciliation of non-GAAP financial measures used in this report to the most directly comparable GAAP financial measures.

Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income

Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of operating income and net income are well recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry.

Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income have limitations as analytical tools. Some of the limitations applicable to these measures include: Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and other companies in our industry may calculate Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

As a derivation of Adjusted Operating Income Margin, Adjusted Net Income is not determined in accordance with GAAP, such measure is susceptible to varying calculations and not all companies calculate the measure in the same manner. As a result, derivations of net income, including Adjusted Operating Income Margin and Adjusted Net Income, as presented may not be directly comparable to similarly titled measures presented by other companies. For the foregoing reasons, ~~each of~~ Adjusted Operating Income Margin and Adjusted Net Income ~~has~~ have

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

significant limitations which affect its use as an indicator of our profitability and valuation. Accordingly, ~~you~~readers are cautioned not to place undue reliance on this information.

The following table presents the reconciliation of Operating Income (Loss) to Adjusted Operating Income (Loss), Adjusted Operating Income Margin (Loss) for the periods presented below.

Three Months Ended March 31,


2021

2020

Adjusted Operating Income Margin reconciliation:

Operating Revenue

$
127,611

$
180,330

Operating Income

24,933

15,230

Special Items, net ^(a)

(26,871)

—

Stock compensation expense

2,870

369

Tax Receivable Agreement expense ^(b)

264

—

Adjusted Operating Income

$
1,196

$
15,599

Operating Income Margin

19.5
%

8.4
%
Adjusted Operating Income Margin

0.9
%

8.7
%

Three Months Ended September 30,

Nine Months Ended September 30,


2021

2020

2021

2020

Adjusted Operating Income Margin (Loss) reconciliation:

Operating Revenue

$
173,663

$
77,973

$
450,464

$
293,679

Operating Income

22,002

8,817

96,174

21,814

Special Items, net ^(a)

(65)

(32,852)

(65,456)

(64,333)

Stock compensation expense

964

496

4,577

1,253

Voluntary leave expense ^(b)

—

1,890

—

4,431

TRA expenses ^{(c )}

25

—

340

—

Adjusted Operating Income (Loss)

$
22,926

$
(21,649)

$
35,635

$
(36,835)

Operating Income Margin

12.7
%

11.3
%

21.3
%

7.4
%
Adjusted Operating Income Margin (Loss)

13.2
%

(27.8)
%

7.9
%

(12.5)
%
(a)
~~For the quarter ended March 31, 2021, the~~
The adjustments include Special Items, net, as presented in Note 11 of the Company’s Condensed Consolidated Financial Statements.
(b)
This represents expenses related to a voluntary employee leave program in response to the COVID-19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of Special Items, net.
(c)
This represents the one-time costs to establish the Tax Receivable Agreement (“TRA”) with our pre-IPO ~~stockholders.~~stockholders, plus the quarterly cost to revalue the liability balance. See Note 10 of the Company’s Condensed Consolidated Financial Statements.

- 3546 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

The following ~~tables present~~table presents the reconciliation of Net Income to Adjusted Net Income (Loss) for the periods presented below.

Three Months Ended March 31,


2021

2020
Adjusted Net Income (Loss) reconciliation:




Net Income

$
12,416

$
7,251
Special Items, net ^(a)

(26,871)

—
Stock compensation expense

2,870

369
Loss on asset transactions, net

—

72
Early pay-off of US Treasury loan

842

—
Tax Receivable Agreement expense ^(b)

264

—
Loss on refinancing credit facility

382

—
Income tax effect of adjusting items, net ^(c)

5,178

(101)
Adjusted Net Income (Loss)

$
(4,919)

$
7,591

Three Months Ended September 30,

Nine Months Ended September 30,


2021

2020

2021

2020
Adjusted Net Income (Loss) reconciliation:








Net Income

$
13,903

$
2,927

$
78,072

$
4,138

Special Items, net ^(a)

(65)

(32,852)

(65,456)

(64,333)
Stock compensation expense

964

496

4,577

1,253
Voluntary leave expense ^(b)

—

1,890

—

4,431
Loss on asset transactions, net

3

—

3

381
Early pay-off of US Treasury loan

—

—

842

—
Loss on refinancing credit facility

—

—

382

—
Secondary Offering Costs

641

—

1,281

—
TRA expenses ^(c)

25

—

340

—
TRA adjustment ^(d)

(1,100)

—

(19,800)

—
Income tax effect of adjusting items, net ^(e)

(361)

7,007

13,347

13,402
Adjusted Net Income (Loss)

$
14,010

$
(20,532)

$
13,588

$
(40,728)
(a)
~~For the quarter ended March 31, 2021, the~~
The adjustments include Special Items, net, as presented in Note 11 of the Company’s Condensed Consolidated Financial Statements.
(b)
This represents expenses related to a voluntary employee leave program in response to the COVID-19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of Special Items, net.
(c)
This represents the one-time costs to establish the Tax Receivable Agreement (“TRA”) with our pre-IPO ~~stockholders.~~stockholders, plus the quarterly cost to revalue the liability balance. See Note 10 of the Company’s Condensed Consolidated Financial Statements.
~~(c)~~
(d)
~~The tax effect of adjusting items, net is calculated at~~
This represents the ~~Company’s statutory rate~~adjustment to the TRA for the ~~applicable period.~~period, which is recorded in Non-operating Income (Expense).
(e)The tax effect of adjusting items, net is calculated at the Company’s statutory rate for the applicable period.
Adjusted EBITDAR
Adjusted ~~EBITDAR~~Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("Adjusted EBITDAR") is a non-GAAP measure included as supplemental disclosure because we believe it is a valuation measure commonly used by investors, securities analysts, and other interested parties in the industry to compare airline companies and derive valuation estimates without consideration of airline capital structure or aircraft ownership methodology. We believe that while items excluded from Adjusted EBITDAR may be recurring in nature and should not be disregarded in evaluation of our earnings performance, Adjusted EBITDAR is useful because its

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

calculation isolates the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by finance lease or by operating lease, each of which is presented differently for accounting purposes), and income taxes, which may vary significantly between periods and for different companies for reasons unrelated to overall operating performance. Adjusted EBITDAR should not be viewed as a measure of overall performance or considered in isolation or as an alternative to net income because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. We have historically incurred substantial rent expense due to our legacy fleet of operating leased aircraft, which are currently being transitioned to owned aircraft.

Adjusted EBITDAR has limitations as an analytical tool. Some of the limitations applicable to this measure include: Adjusted EBITDAR does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; Adjusted EBITDAR does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; Adjusted EBITDAR does not reflect changes in, or cash requirements for, our working capital needs; it does not reflect the interest

~~- 36 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

expense, or the cash requirements necessary to service interest or principal payments, on our debt; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDAR does not reflect any cash requirements for such replacements; and other companies in our industry may calculate Adjusted EBITDAR differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

The following ~~tables present~~table presents the reconciliation of Net Income ~~(Loss)~~ to Adjusted EBITDAR for the periods presented below.

Three Months Ended March 31,


2021

2020
Adjusted EBITDAR Reconciliation:

Net Income

$
12,416

7,251
Special Items, net ^(a)

(26,871)

—
Loss on asset transactions, net

—

72
Interest expense

7,121

5,616
Stock Compensation expense

2,870

369
Tax Receivable Agreement expense ^(b)

264

—
Interest Income

(15)

(251)
Provision for income taxes

5,406

2,445
Depreciation and Amortization

12,615

10,527
Aircraft rent

5,599

11,032
Adjusted EBITDAR

$
19,405

$
37,061

Three Months Ended September 30,

Nine Months Ended September 30,


2021

2020

2021

2020
Adjusted EBITDAR Reconciliation:

Net Income

$
13,903

$
2,927

$
78,072

$
4,138
Special Items, net ^(a)

(65)

(32,852)

(65,456)

(64,333)
Stock Compensation expense

964

496

4,577

1,253
Voluntary leave expense ^(b)

—

1,890

—

4,431
Loss on asset transactions, net

3

—

3

381
Secondary Offering Costs

641

—

1,281

—
TRA expenses ^(c)

25

—

340

—
TRA adjustment ^(d)

(1,100)

—

(19,800)

—
Interest Income

(28)

(26)

(52)

(340)
Interest expense

6,286

5,157

19,487

16,215
Provision for income taxes

2,297

923

17,172

1,470
Depreciation and Amortization

14,029

12,929

40,103

35,631
Aircraft rent

3,925

6,410

13,339

23,376
Adjusted EBITDAR

$
40,880

$
(2,146)

$
89,066

$
22,222
(a)
~~For the quarter ended March 31, 2021, the~~
The adjustments include Special Items, net, as presented in Note 11 of the Company’s Condensed Consolidated Financial Statements.

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

(b)	This represents expenses related to a voluntary employee leave program in response to the COVID-19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of Special Items, net.

~~(b)~~

(c)

This represents the one-time costs to establish the Tax Receivable Agreement with our pre-IPO ~~stockholders.~~stockholders, plus the quarterly cost to revalue the liability balance. See Note 10 of the Company’s Condensed Consolidated Financial Statements.

(d)	This represents the adjustment to the TRA for the period, which is recorded in Non-operating Income (Expense).

CASM and Adjusted CASM

~~CASM~~Cost per Available Seat Mile (“CASM”) is a key airline cost metric defined as operating expenses divided by total available seat miles. Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations (starting in 2020 when we launched our cargo operations), certain commissions and other costs of selling our ~~vacations product~~vacation products from this measure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is an important measure used by management and by our board of directors in assessing quarterly and annual cost performance. Adjusted CASM is commonly used by industry analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain other costs in their calculation of Adjusted CASM. The measure is also the subject of frequent questions from investors.

Adjusted CASM excludes fuel costs. By excluding volatile fuel expenses that are outside of our control from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost

~~- 37 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact and trends in company-specific cost drivers, such as labor rates, aircraft costs and maintenance costs, and productivity, which are more controllable by management.

Starting in 2020 when we launched our cargo operations, we have excluded costs related to the cargo operations as these operations do not create ASMs. The cargo expenses in the reconciliation below are different from the total operating expenses for our ~~cargo~~Cargo segment in the “Segment Information” table presented above, due to several items that are included in the ~~cargo~~Cargo segment but have been captured in other line items used in the Adjusted CASM calculation. We also exclude certain commissions and other costs of selling our ~~vacations product~~vacation products from Adjusted CASM as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM further excludes special items and other adjustments, as defined in the relevant reporting period, that are not representative of the ongoing costs necessary to our airline operations and may improve comparability between periods. We also exclude stock compensation expense when computing Adjusted CASM. The Company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives and is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period. ~~Adjusted CASM is one~~

- 49 -

Table of ~~the most important measures used by management and by our board of directors~~Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in ~~assessing quarterly and annual cost performance.~~thousands, except per share amounts)

(Unaudited)

As derivations of Adjusted CASM are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of Adjusted CASM as presented may not be directly comparable to similarly titled measures presented by other companies. Adjusted CASM should not be considered in isolation or as a replacement for CASM. For the foregoing reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Accordingly, ~~you~~readers are cautioned not to place undue reliance on this information.

~~- 38 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

The following ~~table presents~~tables present the reconciliation of CASM to Adjusted CASM.

Three Months Ended March 31,

2021

2020

In

Per ASM

In

Per ASM


thousands

(in cents)

thousands

(in cents)
CASM

$
102,678

7.46

$
165,100

9.40
Less:

Aircraft fuel

24,274

1.76

55,561

3.17
Stock Compensation expense

2,870

0.21

369

0.02
Special items, net ^(a)

(26,871)

(1.95)

—

—
Tax Receivable Agreement Expense^(b)

264

0.03

—

—
Cargo expenses, not already adjusted above

17,195

1.25

—

—
Sun Country Vacations

214

0.02

188

0.01
Adjusted CASM

$
84,732

6.15

$
108,982

6.20
Available Seat Miles (ASMs)

1,376,796



1,757,067



Three Months Ended September 30,

2021

2020

Operating

Per ASM

Operating

Per ASM


Expenses

(in cents)

Expenses

(in cents)
CASM

$
151,661

9.79

$
69,156

7.10
Less:

Aircraft fuel

36,647

2.37

13,139

1.35
Stock Compensation expense

964

0.06

496

0.05
Special items, net ^(a)

(65)

(0.00)

(32,852)

(3.37)
Voluntary leave expense ^(b)

—

—

1,890

0.20
TRA Expenses^(c)

25

0.00

—

—
Cargo expenses, not already adjusted above

15,544

1.00

12,008

1.23
Sun Country Vacations

176

0.01

112

0.01
Adjusted CASM

$
98,370

6.35

$
74,363

7.63

Available Seat Miles (ASMs)

1,549,432



974,584



Nine Months Ended September 30,

2021

2020

Operating

Per ASM

Operating

Per ASM


Expenses

(in cents)

Expenses

(in cents)
CASM

$
354,290

8.11

$
271,865

8.63
Less:

Aircraft fuel

90,631

2.07

69,377

2.21
Stock Compensation expense

4,577

0.11

1,253

0.04
Special items, net ^(a)

(65,456)

(1.50)

(64,333)

(2.04)
Voluntary leave expense ^(b)

—

—

4,431

0.14
TRA Expenses^(c)

340

0.01

—

—
Cargo expenses, not already adjusted above

48,923

1.12

16,531

0.52
Sun Country Vacations

563

0.01

444

0.01
Adjusted CASM

$
274,712

6.29

$
244,162

7.75

Available Seat Miles (ASMs)

4,368,972



3,149,189


(a)
~~For the quarter ended March 31, 2021, the~~
The adjustments include Special Items, net, as presented in Note 11 of the Company’s Condensed Consolidated Financial Statements.

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

(b)	This represents expenses related to a voluntary employee leave program in response to the COVID-19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of Special Items, net.

~~(b)~~

(c)

Liquidity and Capital Resources

The airline business is capital intensive and our ability to successfully execute our business strategy is largely dependent on the continued availability of capital on attractive terms and our ability to maintain sufficient liquidity. We have historically funded our operations and capital expenditures primarily through cash from operations, proceeds from stockholders’ capital contributions, the issuance of promissory notes, our 2019-1 EETC financing, and ~~our 2019- 1 EETC financing.~~the Delayed Draw Term Loan Facility. In March 2021, the Company offered 9,090,909 shares of common stock to the public at $24.00 per share. The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised. In total, all 10,454,545 shares were issued and the net proceeds to the ~~company~~Company were ~~$224,657~~$225,006 after deducting underwriting discounts and commissions, and other offering expenses.

Our primary sources of liquidity as of ~~March 31,~~September 30, 2021 included our existing cash and cash equivalents of ~~$269,599~~$275,332 and short-term investments of ~~$5,777,~~$5,997, our expected cash generated from operations and our $25,000 Revolving Credit Facility, which ~~had availability of $25,000~~was undrawn as of ~~March 31,~~September 30, 2021. In addition, we had restricted cash of ~~$6,019~~$15,693 as of ~~March 31,~~September 30, 2021, which consists of cash received as prepayment for chartered flights that is maintained in separate escrow accounts in accordance with DOT regulations requiring that charter revenue receipts received prior to the date of transportation are maintained in a separate third-party escrow account. The restrictions are released once transportation is provided.

We received a total of $62,312 in assistance from the Treasury in 2020 as part of the Payroll Support Program under the CARES Act in response to the extensive impact of the COVID-19 pandemic on the U.S. airline industry. During the first half of 2021, we received grants totaling $37,040 under PSP2. All funds provided by the Treasury to PSP2 participants may only be used for the continuation of payment of employee wages, salaries, and benefits. Further, during the second quarter of 2021, we received a grant of $34,547 under PSP3. During the three months ended September 30, 2021, no CARES Act grants were received. In accordance with any grants and/or loans received under the CARES Act, we are required to comply with the relevant provisions of the CARES Act and the related implementing agreements which, among other

~~- 39 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

things, include the following: the requirement to use the Payroll Support Payments exclusively for the continuation of payment of crewmember and employee wages, salaries and benefits; the requirement that certain levels of commercial air service be maintained until March 1, 2021, or if ordered by the DOT, March 1, 2022; the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends until ~~the later of March 31, which was extended to~~ September 30, 2022 under PSP3; and restrictions on the payment of certain executive compensation until ~~the October 1, 2022, which was extended to~~ April 1, 2023 under PSP3. A portion of the proceeds from our initial public offering was used to repay in full all amounts outstanding under the CARES Act Loan.

During the first quarter of 2021, we received a grant of $32,208 under PSP2. On April 22, 2021, we received a PSP2 top-off grant of $4,831. All funds provided by Treasury to PSP2 participants may only be used for the continuation of payment of employee wages, salaries, and benefits. Further, we were notified on April 15, 2021 that we would receive a grant of approximately $34,547 under PSP3, of which $17,274 was received on April 29, 2021.

On February 10, 2021, Sun Country, Inc., our wholly-owned subsidiary (the “Borrower”), entered into the Credit Agreement, which provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Facility, which we refer to collectively as the “Credit Facilities,” and repaid in full all borrowings outstanding under the ABL Facility. The Revolving Credit Facility matures on the earlier of (i) February 10, 2026 and (ii) to the extent the sum of (x) the amount unused commitments under the Delayed Draw Term Loan Facility and (y) the amount of loans under the Delayed Draw Term Loan Facility exceeds $25,000 on such date, the date that is 180 days prior to February 10, 2026. The Delayed Draw Term Loan Facility matures on February 10, 2026. The Delayed Draw Term Loan Facility is available only to finance the acquisition of aircraft and engines and is not available for working capital or other general corporate purposes. Only the $25,000 Revolving Credit Facility portion of the Credit Facilities is available for general corporate purposes and as a general source of liquidity. During the six months ended June 30, 2021, we drew $80,500 on the Delayed Draw Term Loan Facility. Nothing was drawn during the three months ended September 30, 2021, and $78,488 remained outstanding on September 30, 2021.

In December 2019, Sun Country arranged for the issuance of Class A, Class B and Class C pass through trust certificates, Series 2019-1 (the “2019-1 EETC”), in an aggregate face amount of $248,587 (the “Certificates”) for the purpose of financing or refinancing 13 used aircraft. The Certificates were issued to certain institutional investors, and the 2019-1 EETC face amount of the Certificates were funded by the purchase price paid by such investors for its Certificates on four funding dates from December 2019 through June 2020.

Our primary uses of liquidity are for operating expenses, capital expenditures, lease rentals and maintenance reserve deposits, debt repayments and working capital requirements. Our single largest capital expenditure requirement relates to the acquisition of aircraft, which we have historically acquired through operating ~~and~~leases, finance leases, and debt.

We plan to grow the passenger fleet to an estimated 50 aircraft by the end of 2023. We may finance additional aircraft through debt financing or finance leases based on market conditions, our prevailing level of liquidity and capital market availability. We may also enter into new operating leases on an opportunistic basis.

In addition to funding the acquisition of aircraft, we are required by our aircraft lessors to fund reserves in cash in advance for scheduled maintenance to act as collateral for the benefit of lessors. Qualifying payments that are expected to be recovered from lessors are recorded as ~~lessor maintenance deposits~~Lessor Maintenance Deposits on our Condensed Consolidated Balance Sheet. A portion of our deposits is therefore unavailable until after we have completed the scheduled maintenance in accordance with the terms of the aircraft leases.

We believe that our unrestricted cash and cash equivalents, short-term investments, and availability under our Revolving Credit Facility, combined with expected future cash flows from operations, will be sufficient to fund our operations and meet our debt payment obligations for at least the next 12twelve months. However, we cannot predict what the effect on our business and financial position might be from a change in the competitive

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

environment in which we operate or from events beyond our control, such as volatile fuel prices, economic conditions, pandemics, weather-related disruptions, the impact of airline bankruptcies, restructurings or consolidations, U.S. military actions, regulations, or acts of terrorism.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

The table below presents the major indicators of financial condition and liquidity:

March 31, 2021

December 31, 2020
Cash and Equivalents

$
269,599

$
62,028
Investments

5,777

5,624
Long-term Debt

303,341

282,463
Finance Lease Obligations

103,288

107,170
Capitalized Operating Leases

98,512

147,199
Total Debt and Lease obligations

$
505,141

$
536,832
Stockholders' Equity

409,960

283,817
Total Invested Capital

$
915,101

$
820,649
Debt-to-Capital

0.55

0.65


September 30, 2021

December 31, 2020
Cash and Cash Equivalents

$
275,332

$
62,028
Investments

5,997

5,624

Long-term Debt

286,820

282,463
Finance Lease Obligations

174,642

107,170
Operating Lease Obligations

80,492

147,199
Total Debt and Lease obligations

$
541,954

$
536,832
Stockholders' Equity

482,880

283,817
Total Invested Capital

$
1,024,834

$
820,649

Debt-to-Capital

0.53

0.65

Sources and Uses of Liquidity
Cash Flow Activity


Nine Months Ended September 30,

2021

2020
Total Operating Activities

$
109,395

$
3,553
Investing Activities:

Purchases of Property & Equipment

(111,053)

(94,307)
Other

(374)

96
Total Investing Activities

(111,427)

(94,211)

Financing Activities:

Cash from Stock Offering, net

227,188

—
Proceeds from Stock Option Exercises

2,407

—
Proceeds from Borrowings

80,500

220,307
Repayment of Finance Leases

(9,113)

(84,742)
Repayment of Borrowings

(75,728)

(55,594)
Debt Issuance Costs

(2,560)

(3,279)
Other

—

21
Total Financing Activities

222,694

76,713

Net Increase (Decrease) in Cash

$
220,662

$
(13,945)

"Cash" consists of Cash, Cash Equivalents and Restricted Cash

Operating Cash Flow Activities
Operating activities in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 provided ~~$15,839~~$109,395, as compared to providing ~~$13,858~~$3,553 in the ~~three~~nine months ended ~~March 31,~~September 30, 2020. During those two nine-month periods, Net Income was $78,072 and $4,138, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Our operating cash flow is primarily impacted by the following factors:

Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in ~~air traffic liabilities.~~ Air ~~traffic liabilities~~Traffic Liabilities. Air Traffic Liabilities typically increase during the winter and spring months as advanced ticket sales grow prior to the summer peak travel season and decrease during the summer and fall months. ~~The outlook for the remainder of the year is unclear, but we are currently planning for modest demand recovery to continue in the fourth quarter of 2021.~~

Fuel. Fuel expense represented approximately ~~24% and 34%~~26% of our total operating expense for both the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~2020, respectively.~~2020. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. We expect fuel consumption to increase through the end of 2021 compared to prior year periods, consistent with increased passengers as the impact of the pandemic subsides.

CARESAct.During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 we received ~~$32,208~~$71,587 in CARES Act grants. ~~We did not receive a grant~~During the nine months ended September 30, 2020 we received $62,312 in ~~the first quarter of 2020.~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~CARES Act grants.

Investing Cash Flow Activities

CapitalExpenditures. Our capital expenditures were ~~$54,399~~$111,053 and ~~$75,250~~$94,307 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Our capital expenditures during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 were primarily related to the purchases of six existing aircraft ~~and technology enhancements. We~~previously under operating leases that were financed through draws on the Delayed Draw Term Loan Facility. Overall, we invested ~~$52,810~~$97,297 to purchase ~~five~~seven aircraft (including the six noted above) and three engines in the first ~~quarter~~nine months of 2021, as compared to investing ~~$72,519~~$88,561 on ~~three~~four aircraft and one engine in the first ~~quarter~~nine months of 2020.

~~As of March 31,~~ During the nine months ended September 30, 2021, we were in the process of closing on the purchase of one additional aircraft, which closed on April 6, 2021. To finance this purchase, we drew down an additional $12,500 the Delayed Draw Term Loan Facility.also purchased a flight simulator for $4,909.

Financing Cash Flow Activities

IPO. On March 16, 2021, the Company offered 9,090,909 shares of common stock to the public at $24.00 per share. The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised. In total, all 10,454,545 shares were issued and the net proceeds to the ~~company~~Company were ~~$224,657~~$225,006 after deducting underwriting discounts and commissions, and other offering expenses.

Debt. In the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we incurred ~~$68,000~~$80,500 in new debt under the $90,000 Delayed Draw Term Loan Facility, primarily to purchase ~~five aircraft.~~six aircraft, which were previously under operating leases. In the first ~~quarter~~nine months of 2020 we incurred ~~$108,777~~$220,307 in debt under the 2019-1 EETC, primarily to purchase ~~three~~two aircraft ~~and~~new to the Company, purchase two aircraft which were previously under operating leases, purchase five aircraft which were previously under finance leases, as well as to refinance three ~~others.~~other owned aircraft. In the first quarter of 2021, we repaid our $45,000 loan with the Treasury, plus accrued interest. In addition, during the first nine months of 2021, we also repaid $30,309 of other debt. In the first ~~quarter~~nine months of 2020, we paid $84,742 toward finance lease obligations, primarily related to the buy-out of five aircraft. In the first nine months of 2020 we repaid ~~$47,255 in~~$55,594 of outstanding debt, primarily related to the refinancing of three aircraft.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

For additional information regarding these financing arrangements, see Note 7 of the Notes to the Condensed Consolidated Financial Statements.

Undrawn Lines of Credit

On February 10, 2021, we executed a new five-year credit agreement that provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility, which are collectively referred to as the “Credit Facilities.” During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~the Company~~we drew ~~$68,000~~$80,500 on the Delayed Draw Term Loan Facility to purchase ~~five~~six aircraft. These activities resulted in approximately ~~$47,000~~$34,500 undrawn on the Credit Facilities as of ~~March 31,~~September 30, 2021. The Delayed Draw Term Loan Facility is available only to finance the acquisition of aircraft and engines and is not available for working capital or other general corporate purposes. Only the $25,000 Revolving Credit Facility portion of the Credit Facilities is available for general corporate purposes and as a general source of liquidity.

Covenants

For a description of certain covenants of our debt agreements, see Note 7 of the Notes to the Condensed Consolidated Financial Statements. We were in compliance with all covenants in these debt agreements ~~at March 31,~~as of September 30, 2021.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Off Balance Sheet Arrangements

Indemnities. Our aircraft, equipment and other leases and certain operating agreements typically contain provisions requiring us, as the lessee, to indemnify the other parties to those agreements, including certain of those parties’ related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or such other equipment. We believe that our insurance ~~would cover~~covers most of our exposure to liabilities and related indemnities associated with the leases described above.

Pass-Through Trusts. We have equipment notes outstanding issued under the 2019-1 EETC. Generally, the structure of the EETC financings consists of pass-through trusts created by us to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and are not obligations of Sun Country. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued by us and secured by our aircraft. The payment obligations under the equipment notes are those of Sun Country. Through June 2020, we purchased or refinanced 13 aircraft utilizing these certificates and the obligations are listed in Note 7 – Debt.

Fuel Consortia. We currently participate in fuel consortia at Minneapolis-Saint Paul International Airport, Las Vegas International Airport, Dallas-Fort Worth International Airport, San Diego International Airport, Los Angeles International Airport, Seattle Tacoma International Airport, Portland International Airport, Phoenix Sky Harbor International Airport, Orlando International Airport and Southwest Florida International Airport and we expect to expand our participation with other airlines in fuel consortia and fuel committees at our airports where economically beneficial. These agreements generally include cost-sharing provisions and environmental indemnities that are generally joint and several among the participating airlines. Consortia that are governed by interline agreements are either (i) not variable interest entities (“VIEs”) because they are not legal entities or (ii) are variable interest entities but the Company is not deemed the primary beneficiary. Therefore, these

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

agreements are not reflected on our consolidated balance sheets. There are no assets or liabilities on our balance sheets related to these VIEs, since our participation is limited to purchasing aircraft fuel.

We have no other off-balance sheet arrangements.

Commitments and Contractual Obligations

We have contractual obligations comprised of aircraft leases and supplemental maintenance reserves, payment of debt and interest and other lease arrangements. As of ~~March 31,~~September 30, 2021, we also have a contractual obligation to pay our pre-IPO stockholders under the terms of the Tax Receivable ~~Agreement.~~Agreement (see below).

For additional information, refer to Note 12 Commitments and Contingencies to our unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. Except as described herein, there have been no material ~~change~~changes in our contractual obligations and commitments other than in the ordinary course of business since our fiscal year ended December 31, 2020. Also, see our Final Prospectus for additional information regarding our contractual obligations.

In connection with the Company’s IPO, we entered into an income ~~tax receivable agreement~~Tax Receivable Agreement with our pre-IPO stockholders. The agreement provides for the payment by the Company to the pre-IPO stockholders of 85% of the amount of cash savings, if any, in U.S. federal, state, local, and foreign income tax that the Company ~~realizes.~~realizes as a result of certain tax attributes that existed at the time of the IPO. For additional information regarding this agreement, see Note 710 of the Notes to the Condensed Consolidated Financial Statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to market risks in the ordinary course of our business. These risks include commodity price risk, specifically with respect to aircraft fuel, as well as interest rate risk. The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.
Aircraft Fuel. Unexpected pricing changes of aircraft fuel could have a material adverse effect on our business, results of operations and financial condition. To hedge the economic risk associated with volatile aircraft fuel prices, we periodically enter into fuel collars, which allows us to reduce the overall cost of hedging, but may prevent us from participating in the benefit of downward price movements. In the past, we have also entered into fuel option and swap contracts. We ~~have~~had no hedges in place ~~for approximately 37%~~at September 30, 2021. We had hedges in place during the nine months ended September 30, 2021, but the last of ~~our projected fuel requirements for scheduled service operations~~these hedges expired in ~~2021, with all of our existing options expected to be exercised or expire by the end of~~September 2021. We do not hold or issue option or swap contracts for trading purposes. We currently do not expect ~~to continue~~ to enter into these types of contracts prospectively, although significant changes in market conditions could affect our decisions. Based on our ~~2021~~ forecasted scheduled service and charter fuel consumption asfor the fourth quarter of ~~December 31, 2020,~~2021, we estimate that a one cent per gallon increase in the average aircraft fuel price would increase ~~our 2021 annual~~ aircraft fuel expense by ~~$600,~~approximately $156 excluding any impact associated with fuel derivative instruments held and reimbursed cargo fuel.
Interest Rates. We have exposure to market risk associated with changes in interest rates related to the interest expense from our variable-rate debt. A change in market interest rates would impact interest expense under the Credit ~~Facilities.~~Facilities, totaling $115,000 principal capacity. Assuming the Credit Facilities are fully drawn, a 100 basis point increase in interest rates would result in a corresponding increase in interest expense of approximately ~~$1,200~~$1,150 annually.

ITEM 4. CONTROLS AND PROCEDURES
As of ~~March 31,~~September 30, 2021, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.
During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. We currently believe that the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on our financial position, liquidity or results of operations.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

ITEM 1A. RISK FACTORS
We have disclosed under the heading “Risk Factors” in our Registration Statement on Form S-1 (File No. 333-252858), as amended, and the Final Prospectus included therein, the risk factors which materially affect our business, financial condition or results of operations. ~~There~~Except for the updated risk factors set forth below, there have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Registration Statement and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also ~~may~~ materially adversely affect our business, financial condition and/or operating results.
Risks Related to Our Industry
The global pandemic resulting from the novel coronavirus has had an adverse impact that has been material to our business, operating results, financial condition and liquidity, and the duration and spread of the pandemic could result in additional adverse impacts. A worsening of the outbreak of another disease or similar public health threat in the future could also have an adverse effect on our business, operating results, financial condition and liquidity.
On March 11, 2020, the World Health Organization (the "WHO") declared COVID-19 a global pandemic causing a massive market disruption to the aviation industry. Measures such as travel restrictions, including testing regimes, "stay at home" and quarantine orders, limitations on public gatherings, cancellation of public events and many others have resulted in a decline in demand for air travel.
While most restrictions have been removed in the United States, leading to a recovery in the domestic airline industry, additional governmental and other restrictions and regulations that may be implemented in the future in response to further outbreaks of COVID-19 include additional travel restrictions (including expanded restrictions on domestic air travel within the United States), quarantines of additional populations (including our personnel), limitations on aircraft capacity, testing requirements and restrictions on our ability to access our facilities or aircraft or requirements to collect additional passenger data. In addition, governments, non-governmental organizations and entities in the private sector may issue non-binding advisories or recommendations regarding air travel or other physical distancing measures, including limitations on the number of persons that should be present at public gatherings, which may significantly reduce demand. These restrictions and regulations have had, and will continue to have, a material adverse impact on our business, operating results, financial condition and liquidity.
We began experiencing a significant decline in demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through September 2021. The decline in demand caused a material deterioration in our revenues. We plan to proactively manage capacity for the foreseeable future, which has a negative impact on our revenue. We expect to continue our proactive management of costs, but decreased demand can lead to higher unit costs. In addition, actual or perceived risk of infection on our flights could have

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a material adverse effect on the public's demand for and willingness to use air travel, which could harm our reputation and business. Demand for scheduled service business is negatively correlated to case counts in Minnesota and the destinations of our scheduled flights and to the extent that variants cause higher case counts, we could see further reductions in demand. Furthermore, historically, unfavorable U.S. economic conditions have driven changes in travel patterns, including significantly and materially reduced spending for both leisure and business travel. Unfavorable economic conditions, when low fares are often used to stimulate traffic, have also historically hampered the ability of airlines to raise fares to counteract any increases in fuel, labor and other costs. Any significant increases in unemployment in the United States would likely continue to have a negative impact on passenger bookings, especially when the customers we serve are paying with their own money, and these effects could exist for an extensive period of time. Even once the pandemic and fears of travel subside, demand for air travel may remain weak for a significant period of time. Apart from the decrease in demand, passenger bookings have been on average much closer to the date of service during pandemic than in prior periods, which has reduced our visibility into future revenue.

In addition to the schedule reductions discussed above, we continue to focus on reducing expenses and managing our liquidity and we expect to continue to modify our cost management structure, liquidity-raising efforts and capacity as the timing of demand recovery becomes more certain.

On April 20, 2020, we entered into a Payroll Support Program Agreement under the CARES Act with Treasury governing our participation in the Payroll Support Program and, on January 29, 2021, we entered into a second Payroll Support Program Agreement under the CARES Act. Under the Payroll Support Program, Treasury provided us with an aggregate of $62.3 million in grants from April 21, 2020 to October 1, 2020 and an additional $16.1 million in grants on February 2, 2021, an additional $16.1 million in grants on March 26, 2021 and an additional $4.8 million in grants on April 22, 2021 (collectively, the "Payroll Support Payments"). Further, we were notified on April 15, 2021 that we would receive a grant of approximately $34.5 million under Payroll Support Program 3. Of this grant amount, $17.3 million was received on April 29, 2021 and the remaining $17.2 million was received on May 27, 2021. In addition, on October 26, 2020, we entered into a loan and guarantee agreement (the "CARES Act Loan Agreement") with Treasury under the aviation direct loan program of the CARES Act, pursuant to which Treasury agreed to extend loans to us in an aggregate principal amount of $45.0 million, subject to specified terms, which was due to be repaid on the earlier of (i) October 24, 2025 or (ii) six months prior to the expiration date of any material loyalty program securing the loan. We used a portion of the proceeds from our initial public offering to repay in full all amounts outstanding under the CARES Act Loan. The substance and duration of restrictions to which we are subject under the grants and/or loans under the CARES Act, including, but not limited to, those outlined below could materially affect our operations, and we may not be successful in managing these impacts. Further, these restrictions could limit our ability to take actions that we otherwise might have determined to be in the best interest of our company and our stockholders. In particular, limitations on executive compensation may impact our ability to attract and retain senior management or attract other key employees during this critical time. Additionally, limitations on dividends and buybacks may diminish investor interest in our stock.

Our operations may be further impacted in the event of additional instances of actual or perceived risk of infection among our employees, suppliers or business partners, and this impact may have a material adverse effect if we are unable to maintain a suitably skilled and sized workforce and address related employee matters. In addition, supply chain disruptions may impede our cargo customers' ability to deliver freight to the airports we serve, which could reduce their need for our services and thus have a material adverse effect on our business, results of operations and financial condition.

The industry may also be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, which requirements may be costly and take a significant amount of time to implement.

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We may take additional actions to improve our financial position, including measures to improve liquidity, such as the issuance of unsecured and secured debt securities, equity securities and equity-linked securities, the sale of assets and/or the entry into additional bilateral and syndicated secured and/or unsecured credit facilities. There can be no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all. Any such actions may be material in nature and could result in significant additional borrowing. Our reduction in expenditures, measures to improve liquidity or other strategic actions that we may take in the future in response to COVID-19 may not be effective in offsetting decreased demand, and we will not be permitted to take certain strategic actions as a result of the CARES Act, which could result in a material adverse effect on our business, operating results, liquidity and financial condition.

The full extent of the ongoing impact of COVID-19 on our longer-term operational and financial performance will depend on future developments, many of which are outside of our control, including the effectiveness of the mitigation strategies discussed above, the duration, spread, severity and recurrence of COVID-19 and any COVID-19 variants and related travel advisories and restrictions, the efficacy of COVID-19 vaccines, the impact of COVID-19 on overall long-term demand for air travel, including after the pandemic subsides, the impact of COVID-19 on the financial health and operations of our business partners, future governmental actions, including their duration and scope, and our access to capital, all of which are highly uncertain and cannot be predicted.

In addition, an outbreak of another disease or similar public health threat, or fear of such an event, that affects travel demand, travel behavior, travel restrictions or adversely affects supply chains, which would impact our cargo business, could have a material adverse impact on our business, operating results, liquidity and financial condition. Outbreaks of other diseases could also result in increased government restrictions and regulation, such as those actions described above or otherwise, which could adversely affect our business, operating results, financial condition and liquidity.

Even after the COVID-19 pandemic has moderated and the enhanced screenings, quarantine requirements, and travel restrictions have eased, we may continue to experience similar adverse effects to our business, operating results, financial condition and liquidity resulting from a recessionary or depressed economic environment that may persist, including increases in unemployment, and our business and operating results may not return to pre-COVID-19 pandemic levels on a timely basis or at all. The impact that the COVID-19 pandemic will have on our businesses, operating results, financial condition and liquidity could exacerbate the other risks identified in this prospectus.

We are depending upon continued uptake of the COVID-19 vaccine by the general public in order to normalize economic conditions, the airline industry and our business operations and to realize our planned financial and growth plans and business strategy. The failure of a vaccine, significant unplanned adverse reactions to the vaccine, politicization of the vaccine or general public distrust of the vaccine could have an adverse effect on our business, results of operations, financial condition and prospects.

Our financial and operating results and business operations for our scheduled service and charter businesses for the year ended December 31, 2020 were materially and adversely impacted as a result of the COVID-19 pandemic, which impact is likely to continue during the duration of the COVID-19 pandemic. We are depending upon an efficient distribution and sufficient supply of the COVID-19 vaccine, and continued uptake by the general public in order to normalize economic conditions, the airline industry and our business operations and to realize our financial and growth plans and business strategy. To date, COVID-19 vaccinations have been widespread, but many remain unvaccinated, as the long-term efficacy of the vaccines, including against variants, remains uncertain. The failure of a vaccine, including to the extent it is not effective against any COVID-19 variants, significant unplanned adverse reactions to the vaccine, politicization of the vaccine or

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general public distrust of the vaccine could have an adverse effect on our business, results of operations, financial condition and prospects.

Our business has been and in the future may be materially adversely affected by the price and availability of aircraft fuel. Unexpected increases in the price of aircraft fuel or a shortage or disruption in the supply of aircraft fuel could have a material adverse effect on our business, results of operations and financial condition.

The cost of aircraft fuel is highly volatile and in recent years has been our largest individual operating expense, accounting for approximately 21.7%, 26.6% and 30.1% of our operating expenses for the years ended December 31, 2020, 2019 and 2018, respectively. High fuel prices or increases in fuel costs (or in the price of crude oil) could have a material adverse effect on our business, results of operations and financial condition, including as a result of legacy network airlines and LCCs adapting more rapidly or effectively to higher fuel prices through new-technology aircraft that is more fuel efficient than our aircraft. Over the past several years, the price of aircraft fuel has fluctuated substantially and prices continue to be highly volatile and have recently increased significantly. In addition, prolonged low fuel prices could limit our ability to differentiate our product and low fares from those of the legacy network airlines and LCCs, as prolonged low fuel prices could enable such carriers to, among other things, substantially decrease their costs, fly longer stages or utilize older aircraft.

Our business is also dependent on the availability of aircraft fuel (or crude oil), which is not predictable. Weather-related events, natural disasters, terrorism, wars, political disruption or instability involving oil-producing countries, changes in governmental or cartel policy concerning crude oil or aircraft fuel production, labor strikes or other events affecting refinery production, transportation, taxes or marketing, environmental concerns, market manipulation, price speculation, changes in currency exchange rates and other unpredictable events may drive actual or perceived fuel supply shortages. Shortages in the availability of, or increases in demand for, crude oil in general, other crude oil-based fuel derivatives and aircraft fuel in particular could result in increased fuel prices and could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to increase ticket prices sufficiently to cover increased fuel costs, particularly when fuel prices rise quickly. We sell a significant number of tickets to passengers well in advance of travel, and, as a result, fares sold for future travel may not reflect increased fuel costs. In addition, our ability to increase ticket prices to offset an increase in fuel costs is limited by the competitive nature of the airline industry and the price sensitivity associated with air travel, particularly leisure travel, and any increases in fares may reduce the general demand for air travel. Additionally, our cargo and charter customers may choose to refuse fuel pass-through contracts, which could drive down the profitability of those agreements.

From time to time, we may enter into fuel derivative contracts in order to mitigate the risk to our business from future volatility in fuel prices but such contracts may not fully protect us from all related risks. As of September 30, 2021, we had no outstanding call options. Generally speaking, our charter and cargo operations have pass-through provisions for fuel costs, and as such we do not hedge our fuel requirements for that portion of our business. Our hedges in place at the end of 2020 consisted of collars and call options and the underlying commodities consisted of both Gulf Coast Jet Fuel contracts as well as West Texas Intermediate Crude Oil contracts.

We may enter into derivatives that do not qualify for hedge accounting, which can impact our results of operations and increase the volatility of our earnings due to recognizing the mark-to-market impact of our hedge portfolio as a result of changes in the forward markets for oil and/or jet fuel. We cannot assure you our fuel hedging program will be effective or that we will maintain a fuel hedging program. Even if we are able to hedge portions of our future fuel requirements, we cannot guarantee that our hedge contracts will provide an adequate level of protection against increased fuel costs or that the counterparties to our hedge contracts will be able to

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perform. Additionally, our ability to realize the benefit of declining fuel prices will be limited by the impact of any fuel hedges in place, we may incur additional expenses in connection with entering into derivative contracts and we may record significant losses on fuel hedges during periods of declining prices. A failure of our fuel hedging strategy, potential margin funding requirements, overpaying for fuel through the use of hedging arrangements or our failure to maintain a fuel hedging program could prevent us from adequately mitigating the risk of fuel price increases and could have a material adverse effect on our business, results of operations and financial condition.

Airlines are often affected by factors beyond their control including: air traffic congestion at airports; air traffic control inefficiencies; government shutdowns or mandates; FAA grounding of aircraft; major construction or improvements at airports; adverse weather conditions, such as hurricanes or blizzards; increased security measures; new travel-related taxes; or the outbreak of disease, any of which could have a material adverse effect on our business, results of operations and financial condition.

Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, major construction or improvements at airports at which we operate, increased security measures, new travel-related taxes and fees, adverse weather conditions, natural disasters and the outbreak of disease. Factors that cause flight delays frustrate passengers and increase costs and decrease revenues, which in turn could adversely affect profitability. The federal government controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The air traffic control system, which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. and foreign air traffic controllers often rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect routes resulting in delays. The federal government also controls airport security. In addition, there are proposals before Congress that would treat a wide range of consumer protection issues, which could increase the costs of doing business. Further, implementation of the Next Generation Air Transport System, or NextGen, by the FAA would result in changes to aircraft routings and flight paths that could lead to increased noise complaints and lawsuits, resulting in increased costs. In addition, federal government shutdowns can affect the availability of federal resources necessary to provide air traffic control and airport security. Furthermore, a federal government grounding of our aircraft type could result in flight cancellations and adversely affect our business. Governmental mandates requiring certain behaviors from employees, including COVID-19 vaccine mandates, could limit our ability to staff to meet demand because employees may choose to resign or decide not to apply for or accept open positions. Specifically, President Biden's recent Executive Order mandating that employers who maintain government contracts must require all employees to be fully vaccinated applies to our business and could have a negative impact on our ability to retain employees or hire new employees, which may adversely impact our business.

Adverse weather conditions and natural disasters, such as hurricanes, thunderstorms, winter snowstorms or earthquakes, can cause flight cancellations or significant delays, and in the past have led to Congressional demands for investigations. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than other, larger airlines that may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers. Because of our day of week, limited schedule and optimized utilization and point-to-point network, operational disruptions can have a disproportionate impact on our ability to recover. In addition, many airlines reaccommodate their disrupted passengers on other airlines at prearranged rates under flight interruption manifest agreements. We have been unsuccessful in procuring any of these agreements with our peers, which makes our recovery from disruption more challenging than for larger airlines that have these agreements in place. Similarly, outbreaks of pandemic or contagious diseases, such as ebola, measles, avian flu, severe acute respiratory syndrome (SARS), COVID-19, H1N1 (swine) flu, pertussis (whooping cough) and zika virus, or their respective variants, could result in significant decreases in passenger traffic and the

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imposition of government restrictions in service and could have a material adverse impact on the airline industry. Any increases in travel-related taxes could also result in decreases in passenger traffic. Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations and financial condition. Moreover, U.S. federal government shutdowns may cause delays and cancellations or reductions in discretionary travel due to longer security lines, including as a result of furloughed government employees or reductions in staffing levels, including air traffic controllers. U.S. government shutdowns may also impact our ability to take delivery of aircraft and commence operations in new domestic stations. Another extended shutdown like the one in December 2018-January 2019 may have a negative impact on our operations and financial results.

The industry is experiencing higher than normal number of pilot retirements, more stringent duty time regulations, increased flight hour requirement for commercial airline pilots, reductions in the number of military pilots entering the commercial workforce, increased training requirements and other factors that may lead to a shortage of pilots, which could materially adversely affect our business.

Large numbers of pilots in the industry are approaching the FAA's mandatory retirement age of 65 or have otherwise accepted an early retirement during the COVID-19 pandemic. Commercial airline pilots are subject to rigorous certification standards and must adhere to flight time and rest requirements. Commencing in 2013, the minimum flight hour requirement to achieve a commercial pilot's license in the United States increased from 250 to 1,500 hours, thereby significantly increasing the time and cost commitment required to become licensed to fly a commercial aircraft. Additionally, the number of military pilots being trained by the U.S. armed forces and available as commercial pilots upon their retirement from military service has been decreasing. These and other factors may lead to a shortage of qualified, entry-level pilots and increased compensation costs, particularly at carriers other than the large legacy carriers. The foregoing factors may lead to additional competition from carriers attempting to meet their hiring needs. If a shortage of pilots materializes, airlines may be unable to hire adequate numbers of pilots to meet their needs, resulting in a reduction in the number of flights offered, disruptions, increased costs of operations, financial difficulties and other adverse effects, and these circumstances may become more severe in the future and thereby cause a material adverse effect on our business.

Risks Related to Our Business

The COVID-19 pandemic has materially disrupted our strategic operating and growth plans in the near-term, and there are risks to our business, operating results, liquidity and financial condition associated with executing our strategic operating and growth plans in the long-term.

The COVID-19 pandemic has materially disrupted our strategic operating and growth plans in the near-term, and there are risks to our business, operating results and financial condition associated with executing our strategic operating and growth plans in the long-term. In developing our strategic operating and growth plans, we make certain assumptions, including, but not limited to, those related to customer demand, competition, staffing and hiring, market consolidation, the availability of aircraft and the global economy. Actual economic, market and other conditions have been and may continue to be different from our assumptions. If we do not successfully execute or adjust our strategic operating and growth plans in the long-term, or if actual results continue to vary significantly from our prior assumptions or vary significantly from our future assumptions, our business, operating results and financial condition could be materially and adversely impacted.

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Unauthorized use, incursion or breach of our information technology infrastructure could compromise the personally identifiable information of our passengers, prospective passengers or personnel and other sensitive information and expose us to liability, damage our reputation and have a material adverse effect on our business, results of operations and financial condition.

In the processing of our customer transactions and as part of our ordinary business operations, we and certain of our third-party providers collect, process, transmit and store a large volume of personally identifiable information, including email addresses and home addresses and financial data such as credit and debit card information. This data is increasingly subject to legislation and regulation, such as the Fair Accurate Credit Transparency Act, Payment Card Industry legislation, the California Consumer Privacy Act and the European Union's General Data Protection Regulation typically intended to protect the privacy of personal data that is collected, processed, stored and transmitted. The security of the systems and network where we and our third-party providers store this data is a critical element of our business, and these systems and our network may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including computer viruses, hackers, enemy state actors, denial-of-service attacks, employee theft or misuse, natural or man-made disasters, telecommunications failures, power loss and other disruptive sources and events.

As the cyber-threat landscape evolves, attacks are growing in frequency, sophistication and intensity, and are becoming increasingly difficult to detect. We have in the past, and may in the future, experience such cybersecurity threats. We and the vendors who service us may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Attacks may be targeted at us, our customers (including the U.S. Department of Defense) and our providers, including air navigation service providers, or others who have entrusted us with information, including regulators such as the U.S. Department of Defense, FAA and DOT. In addition, attacks not targeted at us, but targeted solely at providers, may cause disruption to our computer systems or a breach of the data that we maintain on customers, employees, providers and others. Recently, several high profile consumer-oriented companies have experienced significant data breaches, which have caused those companies to suffer substantial financial and reputational harm. We cannot assure you that the precautions we have taken to avoid an unauthorized incursion of our computer systems are either adequate or implemented properly to prevent a data breach and its adverse financial and reputational consequences to our business.

A significant cybersecurity incident could result in a range of potentially material negative consequences for us, including lost revenue; unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data; theft of sensitive, regulated or confidential data, such as personal identifying information or our intellectual property; the loss of functionality of critical systems through ransomware, denial of service or other attacks; and business delays, service or system disruptions, damage to equipment and injury to persons or property. The costs and operational consequences of defending against, preparing for, responding to and remediating an incident may be substantial. Further, we could be exposed to litigation, regulatory enforcement or other legal action as a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, as well injunctive relief requiring costly compliance measures. A cybersecurity incident could also impact our brand, harm our reputation and adversely impact our relationship with our customers, employees and stockholders.

Additionally, any material failure by us or our third-party providers to maintain compliance with the Payment Card Industry security requirements or to rectify a data security issue may result in fines and restrictions on our ability to accept credit and debit cards as a form of payment. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants, or costs incurred in connection with the notifications to customers, employees, providers or the general public as part of our notification obligations to the various governments that govern our business. In addition, data and security breaches can also occur as a result of

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non-technical issues, including breaches by us or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information.

We are subject to increasing legislative, regulatory and customer focus on privacy issues and data security in the United States and abroad. In addition, a number of our commercial partners, including credit card companies, have imposed data security standards on us, and these standards continue to evolve. We will continue our efforts to meet our privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase our costs. Additionally, we must manage evolving cybersecurity risks. The loss, disclosure, misappropriation of or access to the information of our customers, personnel or business partners or any failure by us to meet our obligations could result in legal claims or proceedings, liability or regulatory penalties.

Increased labor costs, union disputes, employee strikes and other labor-related disruption may adversely affect our business, results of operations and financial condition.

Our business is labor intensive, with labor costs representing approximately 36.9%, 22.6% and 23.2% of our total operating costs for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, approximately 52% of our workforce was represented by labor unions. We cannot assure you that our labor costs going forward will remain competitive or that any new agreements into which we enter will not have terms with higher labor costs or that the negotiations of such labor agreements will not result in any work stoppages. In addition, one or more of our competitors may significantly reduce their labor costs, thereby providing them with a competitive advantage over us. New entrants to the market may not have unionized workforces and therefore may have substantially lower costs or better labor efficiencies. Furthermore, our labor costs may increase in connection with our growth, especially if we needed to hire more pilots in order to grow our cargo business. We cannot guarantee that our cargo business will grow and that hiring of additional pilots will be required. We may also become subject to additional collective bargaining agreements in the future as non-unionized workers may unionize.

Relations between air carriers and labor unions in the United States are governed by the Railway Labor Act, or the RLA. Under the RLA, collective bargaining agreements generally contain "amendable dates" rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board, or the NMB. This process continues until either the parties have reached agreement on a new collective bargaining agreement, or the parties have been released to "self-help" by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.

On December 3, 2019 our dispatchers approved a new contract. The amendable date of the collective bargaining agreement is November 14, 2024. Our collective bargaining agreement with our flight attendants is currently amendable. Negotiations with the union representing this group commenced in November of 2019. By mutual consent, the negotiations were paused in March 2020 due to the COVID-19 pandemic. We restarted negotiations in October of 2021. Our collective bargaining agreement with our pilots was amendable on October 31, 2020. Neither party chose to serve notice to the other party to make changes by the amendable date; therefore, the new amendable date is October 31, 2021, although the collective bargaining agreement provides for an "early open" 180 days in advance of such date. The pilots have since served notice to the Company and we have begun negotiations with our pilots; however, the contract remains in status quo until there is a newly ratified contract. The outcome of our collective bargaining negotiations cannot presently be determined and the terms and conditions of our future collective bargaining agreements may be affected by the results of collective bargaining negotiations at other airlines that may have a greater ability, due to larger scale, greater efficiency or other factors, to bear higher costs than we can. In addition, if we are unable to reach agreement with any of our unionized work groups in current or future negotiations regarding the terms of their collective bargaining

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agreements, we may be subject to work interruptions, stoppages or shortages. Any such action or other labor dispute with unionized employees could disrupt our operations, reduce our profitability or interfere with the ability of our management to focus on executing our business strategies. As a result, our business, results of operations and financial condition may be materially adversely affected based on the outcome of our negotiations with the unions representing our employees.

If we are unable to attract and retain qualified personnel at reasonable costs or fail to maintain our company culture, our business could be harmed.

Our business is labor intensive. We require large numbers of pilots, flight attendants, maintenance technicians and other personnel. We compete against other U.S. airlines for pilots, mechanics and other skilled labor and certain U.S. airlines offer wage and benefit packages exceeding ours. The airline industry has from time to time experienced a shortage of qualified personnel. In particular, as more pilots in the industry approach mandatory retirement age, the U.S. airline industry may be affected by a pilot shortage. We and other airlines may also face shortages of qualified aircraft mechanics and dispatchers. As is common with most of our competitors, we have faced considerable turnover of our employees. As a result of the foregoing, we may not be able to attract or retain qualified personnel or may be required to increase wages and/or benefits in order to do so. In addition, we may lose employees due to the impact of COVID-19 on aviation or as a result of restrictions imposed under the CARES Act, or other governmental requirements placed on employees, which may further impede our ability to attract and retain skilled labor. If we are unable to hire, train and retain qualified employees, our business could be harmed and we may be unable to implement our growth plans.

In addition, as we hire more people and grow, we believe it may be increasingly challenging to continue to hire people who will maintain our company culture. Our company culture, which we believe is one of our competitive strengths, is important to providing dependable customer service and having a productive, accountable workforce that helps keep our costs low. As we continue to grow, we may be unable to identify, hire or retain enough people who meet the above criteria, including those in management or other key positions. Our company culture could otherwise be adversely affected by our growing operations and geographic diversity. If we fail to maintain the strength of our company culture, our competitive ability and our business, results of operations and financial condition could be harmed.

We have a significant amount of aircraft and other fixed obligations that could impair our liquidity and thereby harm our business, results of operations and financial condition.

The airline business is capital intensive. As of December 31, 2020, our 31 passenger aircraft fleet consisted of 12 aircraft financed under operating leases, 5 aircraft financed under finance leases and 14 aircraft financed under secured debt arrangements. As of December 31, 2020, we had future aircraft and real estate operating lease obligations of approximately $163.4 million, future debt principal obligations of $285.8 million and future finance lease obligations of approximately $139.1 million. During 2021, based on our aircraft leases and debt structure as of December 31, 2020, we expect to incur obligations of $42.0 million related to operating leases, $26.9 million related to debt principal obligations and $17.6 million related to finance lease obligations. Additionally, we made payments for maintenance reserves of $20.7 million for 2020 and expect to make significant payments for maintenance reserves in the future. Our ability to pay the fixed costs associated with our contractual obligations will depend on our operating performance, cash flow, availability under the Revolving Credit Facility and our ability to secure adequate future financing, which will in turn depend on, among other things, the success of our current business strategy and our future financial and operating performance, competitive conditions, fuel price volatility, any significant weakening or improving in the U.S. economy, availability and cost of financing, as well as general economic and political conditions and other factors that

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are, to some extent, beyond our control. The amount of our aircraft-related fixed obligations could have a material adverse effect on our business, results of operations and financial condition and could:

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require a substantial portion of cash flow from operations be used for operating lease and maintenance deposit payments and interest expense, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

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limit our ability to obtain additional financing to support our expansion plans and for working capital and other purposes on acceptable terms or at all;

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make it more difficult for us to pay our other obligations as they become due during adverse general economic and market industry conditions because any related decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled payments;

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reduce our flexibility in planning for, or reacting to, changes in our business and the airline industry and, consequently, place us at a competitive disadvantage to our competitors with lower fixed payment obligations; and

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cause us to lose access to one or more aircraft and forfeit our maintenance and other deposits if we are unable to make our required aircraft lease rental payments and our lessors exercise their remedies under the lease agreement, including cross-default provisions in certain of our leases.

There can be no assurance that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all. A failure to pay our operating lease, debt and other fixed cost obligations or a breach of our contractual obligations, including the Credit Agreement, could result in a variety of adverse consequences, including the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that we would be able to cure our breach, fulfill our obligations, make required lease payments or otherwise cover our fixed costs and our secured lenders could foreclose against the assets securing the indebtedness owing to them, which would have a material adverse effect on our business, results of operations and financial condition.

Reduction in demand for air transportation, or governmental reduction or limitation of operating capacity, in the domestic United States, Canada, Mexico or Caribbean markets, or a reduction in demand for our charter or cargo operations, could harm our business, results of operations and financial condition.

A significant portion of our operations are conducted to and from the domestic United States, Canada, Mexico or Caribbean markets. Our business, results of operations and financial condition could be harmed if we lose our authority to fly to these markets, by any circumstances causing a reduction in demand for air transportation, or by governmental reduction or limitation of operating capacity, in these markets, such as adverse changes in local economic or political conditions, public health restrictions, including testing or vaccination requirements associated with COVID-19, negative public perception of these destinations, unfavorable weather conditions, public health concerns, civil unrest, violence or terrorist-related activities. Furthermore, our business could be harmed if jurisdictions that currently limit competition allow additional airlines to compete on routes we serve. In addition, a reduction in demand from our charter customers, including as a result of decreased U.S. Department of Defense troop movements or fewer sports events and related travel, or from Amazon under the ATSA could have a material and adverse effect on our business, results of operations and financial condition.

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Risks Related to this Offering and Ownership of Our Common Stock

The Apollo Stockholder has significant influence over us, and Apollo's interests may conflict with our interests and the interests of other stockholders.

Following this offering, the Apollo Stockholder will beneficially own approximately 43.6% of the voting power of our outstanding common equity (or approximately 42.0% if the underwriters exercise their option to purchase additional shares in full). As a result, although the Apollo Stockholder will beneficially own less than 50% of our outstanding common equity, individuals affiliated with Apollo will continue to have significant influence over the outcome of votes on all matters requiring approval by our stockholders, including the election of directors, entering into significant corporate transactions such as mergers, tender offers, and the sale of all or substantially all of our assets and issuance of additional debt or equity. The interests of Apollo and its affiliates, including the Apollo Funds and the Apollo Stockholder, could conflict with or differ from our interests or the interests of our other stockholders. For example, the concentration of ownership held by the Apollo Stockholder could delay, defer, or prevent a change in control of our company or impede a merger, takeover, or other business combination which may otherwise be favorable for us. Additionally, Apollo and its affiliates are in the business of making investments in companies and may, from time to time, acquire and hold interests in or provide advice to businesses that compete directly or indirectly with us, or are suppliers or customers of ours. Apollo and its affiliates may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Any such investment may increase the potential for the conflicts of interest discussed in this risk factor. So long as the Apollo Stockholder continues to directly or indirectly beneficially own a significant amount of our equity, even if such amount is less than 50%, the Apollo Stockholder will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions. The Apollo Stockholder also has a right to nominate a number of directors comprising a percentage of our board of directors in accordance with Apollo and its affiliates' beneficial ownership of the voting power of our outstanding common stock (rounded up to the nearest whole number).

Our future earnings and earnings per share, as reported under GAAP, could be adversely impacted by the warrants granted to Amazon. If Amazon exercises its right to acquire shares of our common stock pursuant to the 2019 Warrants, this will dilute the ownership interests of our then-existing stockholders and could adversely affect the market price of our common stock.

The warrants granted to Amazon in 2019 increase the number of diluted shares reported, which has an effect on our diluted earnings per share to the extent the warrants actually vest. The warrants have an exercise price of approximately $15.17 per share, approximately 15.3% of which had vested as of September 30, 2021. A portion of the 2019 Warrants will vest incrementally based on aggregate global payments by Amazon to the Company or its affiliates pursuant to the ATSA. In addition, vesting can occur immediately in certain circumstances, including upon a change of control (as defined in the 2019 Warrant) or certain transfers of 30% or more of the voting power in the Company to a new person or group (other than any equity offering by the Company or the Apollo Stockholder pursuant to an effective registration statement so long as no person or group (within the meaning of the Exchange Act) acquires more than 50% of the voting power of the Company in such offering). If additional 2019 Warrants vest and Amazon exercises its right to acquire shares of our common stock pursuant to the 2019 Warrants, it will dilute the ownership interests of our then-existing stockholders and reduce our earnings per share. In addition, to the extent the common stock issued upon exercise of the 2019 Warrants is transferred to non-U.S. citizens, it will further limit the amount of our common stock that may be owned or controlled by other non-U.S. citizens. Furthermore, any sales in the public market of any common stock issuable upon the exercise of the 2019 Warrants could adversely affect prevailing market prices of our common stock.

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You may be diluted by the future issuance of additional common stock or convertible securities in connection with our incentive plans, acquisitions or otherwise, which could adversely affect our stock price.

As of September 30, 2021, we had 937,448,259 shares of common stock authorized but unissued. Our certificate of incorporation authorizes us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. As of September 30, 2021, we had approximately 5,592,191 options outstanding, which are exercisable into approximately 5,592,191 shares of common stock, 7,634 shares of common stock that may be issued upon the vesting of outstanding RSUs and the 2019 Warrants outstanding, which are exercisable for 9,482,606 shares of common stock, subject to vesting requirements. Of the 2019 Warrants, approximately 15.3% have vested as of September 30, 2021 and the remainder will vest incrementally based on aggregate global payments by Amazon to the Company or its affiliates pursuant to the ATSA. We have reserved approximately 3,600,000 shares for grant under our Omnibus Incentive Plan. See "Executive Compensation-Equity Compensation Plans-2021 Omnibus Incentive Plan." Any common stock that we issue, including under our Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, as well as under outstanding options or warrants would dilute the percentage ownership held by the investors who purchase common stock in this offering.

From time to time in the future, we may also issue additional shares of our common stock or securities convertible into common stock pursuant to a variety of transactions, including acquisitions. Our issuance of additional shares of our common stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.

Future sales of our common stock in the public market, or the perception in the public market that such sales may occur, could reduce our stock price.

As of September 30, 2021, we had 57,551,741 shares of common stock outstanding, warrants to purchase 9,482,606 shares of common stock outstanding, options to purchase 5,592,191 shares of common stock outstanding and 7,634 shares of common stock that may be issued upon the vesting of outstanding RSUs. Following this offering the number of outstanding shares of common stock will include approximately 30 million outstanding shares that are "restricted securities," as defined under Rule 144 under the Securities Act, and eligible for sale in the public market subject to the requirements of Rule 144. We, the Apollo Stockholder and all of our executive officers and directors have agreed that, for a period of 60 days after the date of this prospectus, we and they will not, without the prior written consent of Barclays Capital Inc. and Morgan Stanley & Co. LLC on behalf of the underwriters, dispose of any shares of common stock or any securities convertible into or exchangeable for our common stock, subject to certain exceptions. Following the expiration of the applicable lock-up period, all of the issued and outstanding shares of our common stock will be eligible for future sale, subject to the applicable volume, manner of sale, holding periods, and other limitations of Rule 144. Barclays Capital Inc. and Morgan Stanley & Co. LLC on behalf of the underwriters may, in their sole discretion, release all or any portion of the shares subject to lock-up agreements at any time and for any reason. In addition, certain of our existing stockholders, including the Apollo Stockholder and Amazon, have certain rights to require us to register the sale of common stock held by them including in connection with underwritten offerings. Additionally, we filed a registration statement in respect of all shares of common stock that we may issue under the Omnibus Incentive Plan and the SCA Acquisition Equity Plan. After registration, these shares can be freely sold in the public market upon issuance. Sales of significant amounts of stock in the public market upon expiration of lock-up agreements, the perception that such sales may occur, or early release of any lock-up agreements, could adversely affect prevailing market prices of our common stock or make it more difficult for you to sell your shares of common stock at a time and price that you deem appropriate.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
During the three months ended ~~March 31,~~September 30, 2021, we did not conduct any sales of equity securities that were not registered under the Securities Act of 1933, as amended.
Use of Proceeds
The Registration Statement on Form S-1 (File No. 333-252858) for our initial public offering (“IPO”) of our common stock, par value $0.01 per share was declared effective by the SEC on March 16, 2021, pursuant to which we issued and sold 10,454,545 shares of our common stock at $24.00 per share, which included 1,363,636 shares issued upon the exercise of the underwriters’ over-allotment option to purchase additional shares. We received net proceeds of ~~$224,657~~$225,006 after deducting underwriting discounts and commissions, and other offering expenses. The managing underwriters for our IPO were Barclays Capital Inc. and Morgan Stanley & Co. LLC. Shares of our common stock began trading on the NASDAQ on March 17, 2021. We used approximately $46,260 of the proceeds from the IPO to repay all amounts outstanding under the CARES Act Loan. A portion of the proceeds were used to pay fees and expenses in connection with the IPO and the remainder will be used for general corporate purposes, including the acquisition of additional aircraft. ~~At March 31, 2021, $1,829 of expenses incurred in connection with our IPO had not yet been paid.~~
Our management team will retain broad discretion to allocate the net proceeds of the IPO for general corporate purposes. Pending use as described above, we may invest the net proceeds from the IPO in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.
Issuer Purchases of Equity Securities
The Company does not have a share repurchase program and no shares were repurchased during the three months ended ~~March 31,~~September 30, 2021. Under the CARES Act, we are restricted from conducting certain share repurchases through ~~the later of March 31, 2022 and one year following repayment.~~September 30, 2022.
~~On February 5, 2021, we accepted 140,737 total shares from two stockholders, valued at $24.87 per share, in settlement of $3,500 principal outstanding under promissory notes.~~
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable

ITEM 5. OTHER INFORMATION
None

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SUN COUNTRY AIRLINES HOLDINGS, INC

ITEM 6. EXHIBITS
(a) Exhibits

~~10.1~~
Payroll Support Program Extension Agreement, dated as of January 29, 2021, by and between Sun Country, Inc. and the Department of the Treasury (incorporated by reference to Exhibit 10.8 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-~~252858)).~~

~~10.2~~
Credit Agreement, dated as of February 10, 2021, among SCA Acquisition, LLC, Sun Country, Inc., the lenders and issuing banks party thereto and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.47 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-252858)).

~~10.3~~
Securities Purchase Agreement, dated March 7, 2021, among Sun Country Airlines Holdings, Inc., SCA Horus Holdings, LLC and PAR Investment Partners, L.P. (incorporated by reference to Exhibit 10.48 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-~~252858)).~~

~~10.4~~
Securities Purchase Agreement, dated March 7, 2021, among Sun Country Airlines Holdings, Inc., SCA Horus Holdings, LLC and the Blackrock Entities party thereto (incorporated by reference to Exhibit 10.49 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-252858)).

~~10.6~~
Registration Rights Agreement, dated as of March 19, 2021, among Sun Country Airlines Holdings, Inc. and the Holders party thereto (incorporated by reference to Exhibit 10.1 to Sun Country Airlines Holdings, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2021).

~~10.5~~
Third Amended and Restated Stockholders’ Agreement, dated as of March 19, 2021, by and among Sun Country Airlines Holdings, Inc. and the stockholders party thereto (incorporated by reference to Exhibit 10.2 to Sun Country Airlines Holdings, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2021).

~~10.7~~
Income Tax Receivable Agreement, dated as of March 19, 2021, by and among Sun Country Airlines Holdings, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.3 to Sun Country Airlines Holdings, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2021).

~~10.8~~
~~Sun Country Airlines Holdings, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.2 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-8 (File No. 333-254371)).~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~


31.1	Certification by Sun Country's Chief Executive Officer with respect to Sun Country's Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2021

31.2	Certification by Sun Country’s President and Chief Financial Officer with respect to Sun Country's Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2021

32	Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Sun Country Airlines Holdings, Inc.’s Chief Executive Officer and President and Chief Financial Officer with respect to Sun Country's Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2021

101.INS	Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data Files (formatted as inline XBRL and contained in Exhibit 101)

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SUN COUNTRY AIRLINES HOLDINGS, INC

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Sun Country Airlines Holdings, Inc.

(Registrant)

/s/ Dave Davis

Dave Davis

President and Chief Financial Officer

(Principal Financial and Accounting Officer)
~~May 6,~~November 1, 2021

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Three Months Ended March 31, 2020
		Common Stock			Loans to		Additional		Retained
	Warrants	Shares	Amount		Stockholders		Paid-In Capital		Earnings		Total
December 31, 2019	40,005,885	6,800,065	$	68	$	(3,500)	$	244,928	$	42,228	$	283,724
Exercise of Apollo Warrants	(40,005,885)	40,005,885		400		—		(379)		—		21
Net Income	—	—		—		—		—		7,251		7,251
Stock-based Compensation	—	—		—		—		369		—		369
March 31, 2020	—	46,805,950	$	468	$	(3,500)	$	244,918	$	49,479	$	291,365


Three Months Ended March 31, 2021
		Common Stock			Loans to		Additional		Retained
	Warrants	Shares	Amount		Stockholders		Paid-In Capital		Earnings		Total
December 31, 2020	—	46,839,659	$	468	$	(3,500)	$	248,525	$	38,324	$	283,817
Shares Surrendered by Stockholders	—	(140,737)		(1)		3,500		(3,499)		—		—
Initial Public Offering	—	10,454,545		105		—		224,552		—		224,657
Net Income	—	—		—		—		—		12,416		12,416
Income Tax Receivable Agreement	—	—		—		—		—		(115,200)		(115,200)
Amazon Warrants	—	—		—		—		1,400		—		1,400
Stock-based Compensation	—	—		—		—		2,870		—		2,870
March 31, 2021	—	57,153,467	$	572	$	—	$	473,848	$	(64,460)	$	409,960


~~10.1~~	Payroll Support Program Extension Agreement, dated as of January 29, 2021, by and between Sun Country, Inc. and the Department of the Treasury (incorporated by reference to Exhibit 10.8 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-~~252858)).~~

~~10.2~~	Credit Agreement, dated as of February 10, 2021, among SCA Acquisition, LLC, Sun Country, Inc., the lenders and issuing banks party thereto and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.47 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-252858)).

~~10.3~~	Securities Purchase Agreement, dated March 7, 2021, among Sun Country Airlines Holdings, Inc., SCA Horus Holdings, LLC and PAR Investment Partners, L.P. (incorporated by reference to Exhibit 10.48 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-~~252858)).~~

~~10.4~~	Securities Purchase Agreement, dated March 7, 2021, among Sun Country Airlines Holdings, Inc., SCA Horus Holdings, LLC and the Blackrock Entities party thereto (incorporated by reference to Exhibit 10.49 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-1 (File No. 333-252858)).

~~10.6~~	Registration Rights Agreement, dated as of March 19, 2021, among Sun Country Airlines Holdings, Inc. and the Holders party thereto (incorporated by reference to Exhibit 10.1 to Sun Country Airlines Holdings, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2021).

~~10.5~~	Third Amended and Restated Stockholders’ Agreement, dated as of March 19, 2021, by and among Sun Country Airlines Holdings, Inc. and the stockholders party thereto (incorporated by reference to Exhibit 10.2 to Sun Country Airlines Holdings, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2021).

~~10.7~~	Income Tax Receivable Agreement, dated as of March 19, 2021, by and among Sun Country Airlines Holdings, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.3 to Sun Country Airlines Holdings, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2021).

~~10.8~~	~~Sun Country Airlines Holdings, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.2 to Sun Country Airlines Holdings, Inc.’s Registration Statement on Form S-8 (File No. 333-254371)).~~

		Sun Country Airlines Holdings, Inc.
		(Registrant)

		/s/ Dave Davis
		Dave Davis
		President and Chief Financial Officer
		(Principal Financial and Accounting Officer)
~~May 6,~~November 1, 2021