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, ~~2022~~2023


☐			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~~Filer ☐	Accelerated ~~filer~~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, ~~2022:~~2023:

Common Stock, $0.01 par value – ~~57,964,320~~56,241,005 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			Item 1. Financial Statements
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 Comprehensive Income				Condensed Consolidated Statements of Comprehensive Income		6
Condensed Consolidated Statements of Changes in Stockholders’ Equity	Condensed Consolidated Statements of Changes in Stockholders’ Equity		6	Condensed Consolidated Statements of Changes in Stockholders’ Equity		7
Condensed Consolidated Statements of Cash Flows	Condensed Consolidated Statements of Cash Flows		7	Condensed Consolidated Statements of Cash Flows		8

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

1	1	Company Background	8	1	Basis of Presentation	9
2	2	Basis of Presentation	9	2	Coronavirus Aid, Relief, and Economic Security Act	9
3	3	Impact of the COVID-19 Pandemic	10	3	Revenue	9
4	4	Revenue	11	4	Earnings per Share	12
5	5	Earnings per Share	13	5	Aircraft	12
6	6	Aircraft	14	6	Asset Acquisitions	14
7	7	Debt	16	7	Debt	15
8	8	Fuel Derivatives and Risk Management	18	8	Investments	18
9	9	Fair Value Measurements	18	9	Fair Value Measurements	18
10	10	Income Taxes	19	10	Income Taxes	19
11	11	Special Items, net	20	11	Stockholders' Equity	19
12	12	Commitments and Contingencies	20	12	Commitments and Contingencies	20
13	13	Operating Segments	21	13	Operating Segments	21
14	14	Subsequent Events	21	14	Subsequent Events	21

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		22	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	Item 3. Quantitative and Qualitative Disclosures About Market Risk		41	Item 3. Quantitative and Qualitative Disclosures About Market Risk		39
Item 4. Controls and Procedures	Item 4. Controls and Procedures		41	Item 4. Controls and Procedures		39

Part II. Other Information	Part II. Other Information			Part II. Other Information
Item 1. Legal Proceedings	Item 1. Legal Proceedings		42	Item 1. Legal Proceedings		41
Item 1A. Risk Factors	Item 1A. Risk Factors		42	Item 1A. Risk Factors		41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3. Defaults Upon Senior Securities	Item 3. Defaults Upon Senior Securities		42	Item 3. Defaults Upon Senior Securities		48
Item 4. Mine Safety Disclosures	Item 4. Mine Safety Disclosures		42	Item 4. Mine Safety Disclosures		48
Item 5. Other Information	Item 5. Other Information		42	Item 5. Other Information		48
Item 6. Exhibits	Item 6. Exhibits		42	Item 6. Exhibits		49

Signatures	Signatures		44	Signatures		50

~~- 2 -~~-2-

Table of Contents

PART I. Financial Information

ITEM 1. FINANCIAL STATEMENTS

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in ~~thousands)~~

~~(Unaudited)~~thousands, except per share and share amounts)


							March 31, 2023		December 31, 2022
		March 31, 2022		December 31, 2021			(Unaudited)
ASSETS	ASSETS					ASSETS

Current Assets:	Current Assets:					Current Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	$	272,402	$	309,338	Cash and Cash Equivalents	$	71,587	$	92,086
Restricted Cash	Restricted Cash	8,085		8,447		Restricted Cash	22,776		10,842
Investments	Investments	6,233		6,283		Investments	171,638		178,936
Accounts Receivable, net of an allowance for credit losses of $376 and $250, respectively		31,733		30,156
Accounts Receivable, net of an allowance for credit losses of $245 and $231, respectively						Accounts Receivable, net of an allowance for credit losses of $245 and $231, respectively	35,464		35,124
Short-term Lessor Maintenance Deposits	Short-term Lessor Maintenance Deposits	6,698		5,505		Short-term Lessor Maintenance Deposits	1,279		1,241
Inventory, net of a reserve for obsolescence of $1,366 and $1,275, respectively		5,624		5,405
Inventory, net of a reserve for obsolescence of $1,183 and $1,107, respectively						Inventory, net of a reserve for obsolescence of $1,183 and $1,107, respectively	6,805		7,659
Prepaid Expenses	Prepaid Expenses	10,166		8,511		Prepaid Expenses	11,621		11,423
Other Current Assets	Other Current Assets	8,302		1,798		Other Current Assets	4,823		8,179
Total Current Assets	Total Current Assets	349,243		375,443		Total Current Assets	325,993		345,490

Property & Equipment, net:	Property & Equipment, net:					Property & Equipment, net:
Aircraft and Flight Equipment	Aircraft and Flight Equipment	486,374		440,356		Aircraft and Flight Equipment	643,924		636,584
Aircraft and Flight Equipment Held for Operating Lease						Aircraft and Flight Equipment Held for Operating Lease	92,627		—
Ground Equipment and Leasehold Improvements	Ground Equipment and Leasehold Improvements	24,451		20,876		Ground Equipment and Leasehold Improvements	37,664		35,948
Computer Hardware and Software	Computer Hardware and Software	9,125		8,785		Computer Hardware and Software	9,327		10,831
Finance Lease Assets	Finance Lease Assets	275,547		209,457		Finance Lease Assets	261,991		261,991
Rotable Parts	Rotable Parts	9,271		9,150		Rotable Parts	13,318		17,059
Property & Equipment		804,768		688,624
Total Property & Equipment						Total Property & Equipment	1,058,851		962,413
Accumulated Depreciation & Amortization	Accumulated Depreciation & Amortization	(129,119)		(115,013)		Accumulated Depreciation & Amortization	(190,580)		(176,746)
Total Property & Equipment, net	Total Property & Equipment, net	675,649		573,611		Total Property & Equipment, net	868,271		785,667

Other Assets:	Other Assets:					Other Assets:
Goodwill	Goodwill	222,223		222,223		Goodwill	222,223		222,223
Other Intangible Assets, net		88,110		89,110
Other Intangible Assets, net of accumulated amortization of $19,890 and $18,890, respectively						Other Intangible Assets, net of accumulated amortization of $19,890 and $18,890, respectively	86,109		85,110
Operating Lease Right-of-use Assets	Operating Lease Right-of-use Assets	29,284		61,658		Operating Lease Right-of-use Assets	21,929		22,182
Aircraft Deposits	Aircraft Deposits	10,831		10,021		Aircraft Deposits	9,374		9,134
Long-term Lessor Maintenance Deposits	Long-term Lessor Maintenance Deposits	23,071		20,346		Long-term Lessor Maintenance Deposits	35,253		32,433
Deferred Tax Asset	Deferred Tax Asset	15,955		18,737		Deferred Tax Asset	2,389		12,956
Other Assets	Other Assets	5,226		5,495		Other Assets	10,185		9,217
Total Other Assets	Total Other Assets	394,700		427,590		Total Other Assets	387,462		393,255
Total Assets	Total Assets	$	1,419,592	$	1,376,644	Total Assets	$	1,581,726	$	1,524,412

See accompanying Notes to Condensed Consolidated Financial Statements

~~- 3 -~~-3-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in ~~thousands)~~

~~(Unaudited)~~thousands, except per share and share amounts)


							March 31, 2023		December 31, 2022
		March 31, 2022		December 31, 2021			(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts Payable	Accounts Payable	$	49,890	$	39,805	Accounts Payable	$	58,455	$	62,370
Accrued Salaries, Wages, and Benefits	Accrued Salaries, Wages, and Benefits	24,484		28,527		Accrued Salaries, Wages, and Benefits	28,523		26,521
Accrued Transportation Taxes	Accrued Transportation Taxes	14,098		12,736		Accrued Transportation Taxes	15,403		17,666
Air Traffic Liabilities	Air Traffic Liabilities	110,946		118,562		Air Traffic Liabilities	141,613		157,995
Over-market Liabilities		3,063		4,309
Finance Lease Obligations	Finance Lease Obligations	31,106		11,705		Finance Lease Obligations	18,506		17,990
Loyalty Program Liabilities	Loyalty Program Liabilities	11,490		11,451		Loyalty Program Liabilities	9,664		13,963
Operating Lease Obligations	Operating Lease Obligations	10,176		17,231		Operating Lease Obligations	6,578		6,296
Current Maturities of Long-term Debt		34,741		29,412
Current Maturities of Long-term Debt, net						Current Maturities of Long-term Debt, net	66,194		57,548
Income Tax Receivable Agreement Liability						Income Tax Receivable Agreement Liability	8,165		2,260
Other Current Liabilities	Other Current Liabilities	11,482		7,913		Other Current Liabilities	13,267		14,519
Total Current Liabilities	Total Current Liabilities	301,476		281,651		Total Current Liabilities	366,368		377,128

Long-term Liabilities:	Long-term Liabilities:					Long-term Liabilities:
Over-market Liabilities		4,730		10,428
Finance Lease Obligations	Finance Lease Obligations	239,035		180,450		Finance Lease Obligations	228,513		233,306
Loyalty Program Liabilities	Loyalty Program Liabilities	5,884		8,267		Loyalty Program Liabilities	4,135		1,474
Operating Lease Obligations	Operating Lease Obligations	23,864		58,810		Operating Lease Obligations	19,521		19,836
Long-term Debt		242,544		248,014
Long-term Debt, net						Long-term Debt, net	346,065		294,687
Income Tax Receivable Agreement Liability	Income Tax Receivable Agreement Liability	105,600		98,800		Income Tax Receivable Agreement Liability	92,855		101,540
Other Long-term Liabilities	Other Long-term Liabilities	3,168		3,413		Other Long-term Liabilities	3,262		3,729
Total Long-term Liabilities	Total Long-term Liabilities	624,825		608,182		Total Long-term Liabilities	694,351		654,572
Total Liabilities	Total Liabilities	926,301		889,833		Total Liabilities	1,060,719		1,031,700

Commitments and Contingencies (see Note 12)	Commitments and Contingencies (see Note 12)	0		0		Commitments and Contingencies (see Note 12)

Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common Stock
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,964,320 and 57,872,452 issued and outstanding at March 31, 2022 and December 31, 2021, respectively.		580		579
Preferred Stock
Preferred stock with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021.		—		—
Common stock, with $0.01 par value, 995,000,000 shares authorized, 58,364,752 and 58,217,647 issued and 56,241,005 and 57,325,238 outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, with $0.01 par value, 995,000,000 shares authorized, 58,364,752 and 58,217,647 issued and 56,241,005 and 57,325,238 outstanding at March 31, 2023 and December 31, 2022, respectively	584		582
Preferred stock, with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2023 and December 31, 2022						Preferred stock, with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2023 and December 31, 2022	—		—
Treasury stock, at cost, 2,123,747 and 892,409 shares held at March 31, 2023 and December 31, 2022, respectively						Treasury stock, at cost, 2,123,747 and 892,409 shares held at March 31, 2023 and December 31, 2022, respectively	(40,162)		(17,605)
Additional Paid-In Capital	Additional Paid-In Capital	488,480		485,638		Additional Paid-In Capital	500,627		488,494
Retained Earnings	Retained Earnings	4,231		594		Retained Earnings	60,376		22,048
Accumulated Other Comprehensive Loss						Accumulated Other Comprehensive Loss	(418)		(807)
Total Stockholders' Equity	Total Stockholders' Equity	493,291		486,811		Total Stockholders' Equity	521,007		492,712
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	1,419,592	$	1,376,644	Total Liabilities and Stockholders' Equity	$	1,581,726	$	1,524,412

See accompanying Notes to Condensed Consolidated Financial Statements

~~- 4 -~~-4-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Operating Revenues:	Operating Revenues:					Operating Revenues:
Passenger	Passenger	$	202,033	$	104,195	Passenger	$	267,269	$	202,033
Cargo	Cargo	21,053		21,585		Cargo	23,361		21,053
Other	Other	3,439		1,831		Other	3,485		3,439
Total Operating Revenue		226,525		127,611
Total Operating Revenues						Total Operating Revenues	294,115		226,525

Operating Expenses:	Operating Expenses:					Operating Expenses:
Aircraft Fuel	Aircraft Fuel	64,544		24,274		Aircraft Fuel	72,290		64,544
Salaries, Wages, and Benefits	Salaries, Wages, and Benefits	59,617		44,075		Salaries, Wages, and Benefits	75,430		59,617
Aircraft Rent	Aircraft Rent	3,186		5,599		Aircraft Rent	1,480		3,186
Maintenance	Maintenance	11,995		9,210		Maintenance	13,039		11,995
Sales and Marketing	Sales and Marketing	8,628		5,110		Sales and Marketing	9,929		8,628
Depreciation and Amortization	Depreciation and Amortization	15,328		12,615		Depreciation and Amortization	19,460		15,328
Ground Handling	Ground Handling	7,958		5,230		Ground Handling	11,038		7,958
Landing Fees and Airport Rent	Landing Fees and Airport Rent	10,286		8,785		Landing Fees and Airport Rent	12,051		10,286
Special Items, net		—		(26,871)
Other Operating, net	Other Operating, net	23,150		14,651		Other Operating, net	23,615		23,150
Total Operating Expenses	Total Operating Expenses	204,692		102,678		Total Operating Expenses	238,332		204,692
Operating Income	Operating Income	21,833		24,933		Operating Income	55,783		21,833

Non-operating Income (Expense):	Non-operating Income (Expense):					Non-operating Income (Expense):
Interest Income	Interest Income	24		15		Interest Income	2,741		24
Interest Expense	Interest Expense	(8,562)		(7,121)		Interest Expense	(8,630)		(8,562)
Other, net	Other, net	(6,876)		(5)		Other, net	(212)		(6,876)
Total Non-operating Income (Expense), net		(15,414)		(7,111)
Total Non-operating Expense, net						Total Non-operating Expense, net	(6,101)		(15,414)

Income Before Income Tax	Income Before Income Tax	6,419		17,822		Income Before Income Tax	49,682		6,419
Income Tax Expense	Income Tax Expense	2,782		5,406		Income Tax Expense	11,354		2,782
Net Income	Net Income	$	3,637	$	12,416	Net Income	$	38,328	$	3,637

Net Income per share to common stockholders:	Net Income per share to common stockholders:					Net Income per share to common stockholders:
Basic	Basic	$	0.06	$	0.26	Basic	$	0.68	$	0.06
Diluted	Diluted	$	0.06	$	0.24	Diluted	$	0.64	$	0.06
Shares used for computation:	Shares used for computation:					Shares used for computation:
Basic	Basic	57,907,655		48,496,077		Basic	56,630,656		57,907,655
Diluted	Diluted	61,731,942		52,508,186		Diluted	59,535,045		61,731,942

See accompanying Notes to Condensed Consolidated Financial Statements

~~- 5 -~~-5-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Net Income	$	38,328	$	3,637

Other Comprehensive Income:
Net unrealized gains on Available-for-Sale securities, net of deferred tax expense of $116 and $—, respectively	389		—
Other Comprehensive Income	389		—
Comprehensive Income	$	38,717	$	3,637

See accompanying Notes to Condensed Consolidated Financial Statements

-6-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

(Unaudited)

Three Months Ended March 31, 2021
Common Stock Loans to
Stockholders Additional
Paid-in Capital Retained
Earnings (Deficit) Total
Shares Amount
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, net 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


	Three Months Ended March 31, 2023
	Warrants	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
		Shares	Amount		Shares	Amount
December 31, 2022	2,402,268	58,217,647	$	582	892,409	$	(17,605)	$	488,494	$	22,048	$	(807)	$	492,712
Stock Issued for Stock-Based Awards	—	147,105	2		—	—		554		—		—		556
Net Stock Settlement of Stock-Based Awards	—	—	—		406	(8)		—		—		—		(8)
Common Stock Repurchases	—	—	—		1,230,932	(22,549)		7,501		—		—		(15,048)
Net Income	—	—	—		—	—		—		38,328		—		38,328
Amazon Warrants	189,652	—	—		—	—		1,400		—		—		1,400
Stock-based Compensation	—	—	—		—	—		2,678		—		—		2,678
Other Comprehensive Income	—	—	—		—	—		—		—		389		389
March 31, 2023	2,591,920	58,364,752	$	584	2,123,747	$	(40,162)	$	500,627	$	60,376	$	(418)	$	521,007


		Three Months Ended March 31, 2022														Three Months Ended March 31, 2022
		Common Stock			Additional Paid-in Capital				Retained Earnings				Total			Warrants				Common Stock			Additional Paid-in Capital		Retained Earnings		Total
		Shares	Amount												Shares					Amount
December 31, 2021	December 31, 2021	57,872,452	$	579			$	485,638			$	594					$	486,811	December 31, 2021	1,643,660	57,872,452		$	579	$	485,638	$	4,372	$	490,589
Stock Option Exercises		91,868	1		522				—				523
Stock Issued for Stock-Based Awards															Stock Issued for Stock-Based Awards	—				91,868	1		522		—		523
Net Income	Net Income	—	—		—				3,637				3,637		Net Income	—				—	—		—		3,637		3,637
Amazon Warrants	Amazon Warrants	—	—		1,400				—				1,400		Amazon Warrants	189,652				—	—		1,400		—		1,400
Stock-based Compensation	Stock-based Compensation	—	—		920				—				920		Stock-based Compensation	—				—	—		920		—		920
March 31, 2022	March 31, 2022	57,964,320	$	580	$	488,480			$	4,231			$	493,291	March 31, 2022	1,833,312				57,964,320	$	580	$	488,480	$	8,009	$	497,069

See accompanying Notes to Condensed Consolidated Financial Statements

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Net Income	Net Income	$	3,637	$	12,416	Net Income	$	38,328	$	3,637
Adjustments to reconcile Net Income to Cash from Operating Activities:	Adjustments to reconcile Net Income to Cash from Operating Activities:					Adjustments to reconcile Net Income to Cash from Operating Activities:
Depreciation and Amortization	Depreciation and Amortization	15,328		12,615		Depreciation and Amortization	19,460		15,328
Tax Receivable Agreement		6,800		—
Operating Lease Right-of-use Assets		2,989		5,401
Non-Cash Gain on Asset Transactions, net		(2)		(8,729)
Unrealized Gain on Fuel Derivatives		—		(2,386)
Amortization of Over-market Liabilities		(921)		(2,004)
Deferred Income Taxes	Deferred Income Taxes	2,782		5,406		Deferred Income Taxes	10,450		2,782
Amazon Warrants Vested		1,400		1,400
Stock-based Compensation Expense		920		2,870
Amortization of Debt Issuance Costs		270		272
Loss on Extinguishment of Debt		1,557		1,224

Other, net						Other, net	4,643		13,013
Changes in Operating Assets and Liabilities:	Changes in Operating Assets and Liabilities:					Changes in Operating Assets and Liabilities:
Accounts Receivable	Accounts Receivable	(1,577)		2,358		Accounts Receivable	(468)		(1,577)
Inventory	Inventory	(346)		(173)		Inventory	(305)		(346)
Prepaid Expenses	Prepaid Expenses	(1,655)		(3,676)		Prepaid Expenses	(198)		(1,655)
Lessor Maintenance Deposits	Lessor Maintenance Deposits	(3,919)		(2,219)		Lessor Maintenance Deposits	(2,858)		(3,919)
Aircraft Deposits	Aircraft Deposits	(1,044)		2,226		Aircraft Deposits	(187)		(1,044)
Other Assets	Other Assets	(6,262)		233		Other Assets	581		(6,262)
Accounts Payable	Accounts Payable	9,500		626		Accounts Payable	(288)		9,500
Accrued Transportation Taxes	Accrued Transportation Taxes	1,362		4,519		Accrued Transportation Taxes	(2,264)		1,362
Air Traffic Liabilities	Air Traffic Liabilities	(7,616)		(6,343)		Air Traffic Liabilities	(16,382)		(7,616)
Loyalty Program Liabilities	Loyalty Program Liabilities	(2,344)		(1,295)		Loyalty Program Liabilities	(1,638)		(2,344)
Operating Lease Obligations	Operating Lease Obligations	(3,240)		(10,722)		Operating Lease Obligations	(1,434)		(3,240)
Other Liabilities	Other Liabilities	594		1,820		Other Liabilities	421		594
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	18,213		15,839		Net Cash Provided by Operating Activities	47,861		18,213

Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Purchases of Property & Equipment	Purchases of Property & Equipment	(49,683)		(54,399)		Purchases of Property & Equipment	(104,978)		(49,683)
Proceeds from the Sale of Property & Equipment		5		—
Purchase of Investments		(3)		(337)
Proceeds from the Sale of Investments		53		184
Purchases of Investments						Purchases of Investments	(24,228)		(3)
Proceeds from the Maturities of Investments						Proceeds from the Maturities of Investments	32,840		—
Other, net						Other, net	1,129		58
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(49,628)		(54,552)		Net Cash Used in Investing Activities	(95,237)		(49,628)

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Cash Received from Stock Offering		—		235,894
Costs of Stock Offering		—		(7,226)
Proceeds from Stock Option and Warrant Exercises		523		—
Common Stock Repurchases						Common Stock Repurchases	(14,812)		—
Proceeds from Borrowings	Proceeds from Borrowings	77,986		68,000		Proceeds from Borrowings	71,280		77,986
Repayment of Finance Lease Obligations	Repayment of Finance Lease Obligations	(4,466)		(3,911)		Repayment of Finance Lease Obligations	(4,277)		(4,466)
Repayment of Borrowings	Repayment of Borrowings	(77,947)		(46,068)		Repayment of Borrowings	(10,122)		(77,947)
Debt Issuance Costs		(1,979)		(2,721)
Net Cash (Used In) Provided by Financing Activities		(5,883)		243,968
Other, net						Other, net	(3,258)		(1,456)
Net Cash Provided by (Used in) Financing Activities						Net Cash Provided by (Used in) Financing Activities	38,811		(5,883)

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash		(37,298)		205,255
Net Decrease in Cash, Cash Equivalents and Restricted Cash						Net Decrease in Cash, Cash Equivalents and Restricted Cash	(8,565)		(37,298)

Cash, Cash Equivalents and Restricted Cash--Beginning of the Period	Cash, Cash Equivalents and Restricted Cash--Beginning of the Period	317,785		70,363		Cash, Cash Equivalents and Restricted Cash--Beginning of the Period	102,928		317,785

Cash, Cash Equivalents and Restricted Cash--End of the Period	Cash, Cash Equivalents and Restricted Cash--End of the Period	$	280,487	$	275,618	Cash, Cash Equivalents and Restricted Cash--End of the Period	$	94,363	$	280,487

SUN COUNTRY AIRLINES HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)

		Three Months Ended March 31,
		2022		2021

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Lease Deposits Applied Against the Purchase of Aircraft		$	—	$	2,766
Aircraft and Flight Equipment Acquired through Finance Leases	Aircraft and Flight Equipment Acquired through Finance Leases	$	19,928	$	—	Aircraft and Flight Equipment Acquired through Finance Leases	$	—	$	19,928
Finance Lease Asset Modifications		$	46,311	$	—
Changes to Finance Lease Assets due to Operating and Finance Lease Modifications						Changes to Finance Lease Assets due to Operating and Finance Lease Modifications	$	—	$	46,311

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:					The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets:
		March 31, 2022		March 31, 2021			March 31, 2023		March 31, 2022
Cash and Cash Equivalents	Cash and Cash Equivalents	$	272,402	$	269,599	Cash and Cash Equivalents	$	71,587	$	272,402
Restricted Cash	Restricted Cash	8,085		6,019		Restricted Cash	22,776		8,085
Total Cash, Cash Equivalents and Restricted Cash	Total Cash, Cash Equivalents and Restricted Cash	$	280,487	$	275,618	Total Cash, Cash Equivalents and Restricted Cash	$	94,363	$	280,487

See accompanying Notes to Condensed Consolidated Financial Statements

~~- 7 -~~-8-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

1. ~~COMPANY BACKGROUND~~BASIS OF PRESENTATION

Sun Country Airlines Holdings, Inc. (together with its consolidated subsidiaries, "Sun Country" or the "Company") is the parent company of Sun Country, Inc., which is a certificated air carrier providing scheduled passenger service, air cargo service, charter air transportation and related services. Services are provided to the general public, 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”).

~~Equity Transactions~~

On April 11, 2018 (the "Acquisition Date"), certain investment funds (the “Apollo Funds”) managed by affiliates of Apollo Global Management, Inc. (“Apollo”) acquired Sun Country, Inc. For more information on the Company’s equity transactions, see ~~Note 1~~ of Notes to the Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the U.S. Securities and Exchange Commission (“2021 10-K”).

~~Initial Public Offering of Common Stock~~

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 $225,329 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 (the “Apollo Stockholder”), also completed a 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 two sales was based on an 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.

~~Secondary Offerings~~

~~During May 2021 and October 2021, the Apollo Stockholder and other selling stockholders sold 7,250,000 and 8,500,000 shares of the Company's common stock at the public offering prices~~of$34.50 and $32.50, respectively. Under both transactions, the underwriters were given options to purchase additional shares of the Company's common stock at the public offering price. During the May 2021 and October 2021 offerings, the underwriters elected to purchase 1,087,500 and 435,291 of the option shares, respectively. The Company incurred offering expenses of $1,763 in conjunction with the two secondary offerings~~, and did not receive any of the proceeds from these offerings.~~

~~For more information on the 2021 secondary offerings, see~~ ~~Note 1~~ ~~of Notes to the Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the 2021 10-K.~~

~~- 8 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~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”).

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. There were 632,183 warrants that vested upon execution of the ATSA and 63,217 warrants will vest for each milestone of $8,000 in qualifying payments made by Amazon to the Company. During the three months ended March 31, 2022 and 2021, 189,652 warrants vested in each respective period. As of March 31, 2022 and March 31, 2021, the cumulative vested warrants held by Amazon were 1,833,311 and 1,074,704, respectively. The exercise period of these warrants is through the eighth anniversary of the issue date.

~~2. BASIS OF PRESENTATION~~

The Company has prepared the unaudited Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (“GAAP”) and has included the accounts of Sun Country Airlines Holdings, Inc. and its subsidiaries. ~~The~~Certain information and footnote disclosures normally included in the audited annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for Form 10-Q. Therefore, 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 ~~2021 10-K.~~Company's Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC ("2022 10-K"). 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. ~~The Company reclassified certain prior period amounts to conform to the current period presentation.~~ All material intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in accordance with 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. During the three months ended March 31, 2022, there were no significant changes to the Company’s critical accounting policies.

Due to impacts from ~~the global coronavirus (“COVID-19”) pandemic,~~ seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, uncertainties in pilot staffing, the impact of macroeconomic conditions including inflationary pressures, and other factors, operating results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of operating results for future quarters or for the year ending December 31, 2022. 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.

~~Recently Adopted Accounting Standards~~

~~On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260),~~ Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or

~~- 9 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~exchange. On January 1, 2022, the Company adopted ASU 2021-04 on a prospective basis, as required by the Standard. There was no financial statement impact upon adoption.~~

~~In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832),~~ ~~Disclosures by Business Entities about Government Assistance~~. The new standard requires additional disclosures regarding government grants and money contributions. The standard requires disclosures on the nature of the transactions and related accounting policies, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transactions. The Company adopted this standard as of January 1, 2022, see ~~Note 3~~ ~~for additional information on COVID-19 related government assistance the Company has received.~~2023.

~~3. IMPACT OF THE COVID-19 PANDEMIC~~

The COVID-19 pandemic resulted in a dramatic decline in passenger demand across the U.S. airline industry. Sun Country experienced a significant decline in demand related to the COVID-19 pandemic, which caused a material decline in first quarter 2021 revenues as compared to pre-pandemic levels, and negatively impacted the Company’s financial condition and operating results.2. CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT

During the ~~first quarter of~~twelve months ended June 30, 2022, ~~Sun Country continued~~the compensation payable to ~~see recovery in demand from~~an executive officer temporarily exceeded the COVID-19 pandemic relative to demand in 2021, which may impact the comparability of results to prior periods. However, the ongoing impact of the COVID-19 pandemic on overall demand for air travel remains uncertain and cannot be predicted at this time.

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

During 2021 and 2020, the Company received certain funds from the CARES Act. The cash awarded to the Company through the CARES Act was accounted for as grants, debt, and tax credits based on the terms and nature of the funds awarded.

During the first quarter of 2021, the Company received and recognized as income within Special Items, net $32,208 from the Treasury under the Payroll Support Program Extension (“PSP2”). The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”) which is a refundable tax credit against certain employment taxes. During March 31, 2021, the Company recorded $334 related to the CARES Employee Retention Credit within Special Items, net. Under the CARES Act Loan Program, the Company received a $45,000 loan (the “CARES Act Loan”) from the Treasury, which was repaid in full on March 24, 2021 using proceeds from the IPO. For more information on funds awarded through the CARES act, see ~~Note 3~~ ~~of Notes to the Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the 2021 10-K.~~

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 requirement that certain levels of commercial air service be maintained until March 1, 2022, if ordered by the Department of Transportation ("DOT"); the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends until September 30, 2022; and restrictions on the payment of certain executive compensation ~~until April 1, 2023. As~~under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Once the issue was identified, the executive officer voluntarily rescinded the unvested portion of the equity grant that caused the executive’s compensation to exceed the CARES Act limit. At no point did the executive's cash compensation and equity awards that could be monetized exceed the CARES Act limit. The Company did not accrue any amounts related to this matter as of March 31, ~~2022,~~2023. To the ~~Company was~~extent we are deemed to have failed to remain in full compliance with ~~these provisions.~~

~~- 10 -~~

the CARES Act and the applicable rules and regulations thereunder, we may become subject to fines or other enforcement actions.

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

4.3. 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;~~as: baggage fees, seat selection fees, passenger interface fees and on-board sales. Cargo consists of revenue earned from flying cargo aircraft for Amazon.com Services, Inc. (together with its affiliates, “Amazon”) under the ~~ATSA.~~Air Transportation Services Agreement (the “ATSA”). Other

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

revenue consists primarily of revenue from services in connection with Sun Country Vacations ~~products.~~products and revenue related to certain transactions where the Company acts as a lessor. The amounts included in Other revenue are not material to the Company's results at the individual or aggregate level.

The significant categories comprising Operating Revenues are as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Scheduled Service	Scheduled Service	$	124,068	$	54,620	Scheduled Service	$	152,657	$	124,068
Charter Service	Charter Service	32,879		25,805		Charter Service	46,187		32,879
Ancillary	Ancillary	45,086		23,770		Ancillary	68,425		45,086
Passenger	Passenger	202,033		104,195		Passenger	267,269		202,033
Cargo	Cargo	21,053		21,585		Cargo	23,361		21,053
Other	Other	3,439		1,831		Other	3,485		3,439
Total Operating Revenue		$	226,525	$	127,611
Total Operating Revenues						Total Operating Revenues	$	294,115	$	226,525

The Company attributes and measures its Operating ~~Revenue~~Revenues by geographic region as defined by the ~~DOT~~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 Revenues by geographic region are as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Domestic	Domestic	$	208,591	$	119,312	Domestic	$	273,423	$	208,591
Latin America	Latin America	17,869		7,877		Latin America	20,255		17,869
Other	Other	65		422		Other	437		65
Total Operating Revenue		$	226,525	$	127,611
Total Operating Revenues						Total Operating Revenues	$	294,115	$	226,525

Contract Balances

The Company’s contract assets primarily relate to costs incurred to get Amazon cargo aircraft ready for service. The balances are included in Other Current Assets and Other Assets on the Condensed Consolidated Balance Sheets.~~These deferred up-front costs are being amortized into expense on a pro-rata basis over the initial six years of the ATSA.The amount expensed during the three months ended March 31, 2022 and 2021 was $161 and $138, respectively, and is included in Maintenance expense.~~

~~- 11 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

The Company’s significant contract liabilities are comprised ~~of,~~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 Current Liabilities and Other Long-term Liabilities on the Condensed Consolidated Balance Sheets).

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Contract Assets and Liabilities are as follows:


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Contract Assets	Contract Assets					Contract Assets
Costs to fulfill contract with Amazon	Costs to fulfill contract with Amazon	$	2,658	$	2,819	Costs to fulfill contract with Amazon	$	2,026	$	2,195
Total Contract Assets						Total Contract Assets	$	2,026	$	2,195

Contract Liabilities						Contract Liabilities
Air Traffic Liabilities	Air Traffic Liabilities	110,946		118,562		Air Traffic Liabilities	$	141,613	$	157,995
Loyalty Program Liabilities	Loyalty Program Liabilities	17,374		19,718		Loyalty Program Liabilities	13,799		15,437
Amazon Deferred Up-front Payment	Amazon Deferred Up-front Payment	3,959		4,200		Amazon Deferred Up-front Payment	3,019		3,271
Total Contract Liabilities	Total Contract Liabilities	$	132,279	$	142,480	Total Contract Liabilities	$	158,431	$	176,703

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 three months ended March 31, ~~2022, $87,982~~2023, $123,574 of revenue was recognized in Passenger revenue that was included in the Air Traffic Liabilities as of December 31, ~~2021.~~

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 Sheets. 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 months ended March 31, 2022 and 2021, $240 and $231 was amortized into Cargo revenue, respectively.2022.

Loyalty Program

The Sun Country Rewards program provides loyalty awards to program members based on accumulated loyalty points. ~~Loyalty~~The Company records a liability for loyalty points earned by passengers under the Sun Country Rewards program using two methods: 1) a liability for points that are earned ~~as a result~~by passengers on purchases of ~~travel and purchases using~~ the Company’s ~~co-branded credit card.~~services is established by deferring revenue based on the redemption value, net of estimated loyalty points that will expire unused, or breakage; and 2) a liability for points attributed to loyalty points issued to the Company’s Visa card holders is established by deferring a portion of payments received from the Company’s co-branded agreement. The balance of the Loyalty Program Liabilities fluctuates based on seasonal patterns, which impacts 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). Due to these reasons, the timing of loyalty point redemptions can vary significantly.

~~- 12 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

Changes in the Loyalty Program Liabilities are as follows:


		2022		2021			2023		2022
Balance – January 1	Balance – January 1	$	19,718	$	22,069	Balance – January 1	$	15,437	$	19,718
Loyalty Points Earned	Loyalty Points Earned	1,819		857		Loyalty Points Earned	2,294		1,819
Loyalty Points Redeemed (1)	Loyalty Points Redeemed (1)	(4,163)		(2,152)		Loyalty Points Redeemed (1)	(3,932)		(4,163)
Balance – March 31	Balance – March 31	$	17,374	$	20,774	Balance – March 31	$	13,799	$	17,374

______________________


(1)			Loyalty points are combined in one homogenous pool, that includes both air and non-air travel awards, and are not separately identifiable. As such, the revenue recognized is comprised of points that were part of the Loyalty Program Liabilities balance at the beginning of the period, as well as points that were earned during the period.

~~5. EARNINGS PER SHARE~~

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

Three Months Ended March 31,
2022 2021
Numerator:
  Net Income $ 3,637 $ 12,416
Denominator:
  Weighted Average Common Shares Outstanding - Basic 57,907,655 48,496,077
  Dilutive effect of Stock Options, RSUs and Warrants (1)
3,824,287 4,012,109
  Weighted Average Common Shares Outstanding - Diluted 61,731,942 52,508,186
Basic earnings per share $ 0.06 $ 0.26
Diluted earnings per share $ 0.06 $ 0.24

~~______________________~~


~~(1)~~			There were 3,550,810 and 3,557,432 performance-based stock options outstanding at March 31, 2022 and 2021, respectively. As a result of the Company’s initial public offering, 75% of these options are expected to meet the performance conditions and are included in the measure above to the extent they are dilutive at March 31, 2022 and 2021. In March 2022, 25% of the eligible outstanding performance-based stock options vested and were considered exercisable. The vested performance-based stock options are included in the measure above to the extent they are dilutive.

~~The Company's anti-dilutive shares for the periods presented were not material to the Condensed Consolidated Financial Statements.~~

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.

~~- 13 -~~-11-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

6.4. EARNINGS PER SHARE

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


	Three Months Ended March 31,
	2023		2022
Numerator:
Net Income	$	38,328	$	3,637

Denominator:
Weighted Average Common Shares Outstanding - Basic	56,630,656		57,907,655
Dilutive effect of Stock Options, RSUs and Warrants (1)	2,904,389		3,824,287
Weighted Average Common Shares Outstanding - Diluted	59,535,045		61,731,942

Basic earnings per share	$	0.68	$	0.06
Diluted earnings per share	$	0.64	$	0.06

______________________


(1)			There were 3,117,544 and 3,550,810 performance-based stock options outstanding at March 31, 2023 and 2022, respectively. As of March 31, 2023 and 2022, the Company expected approximately 64% and 75% of these options to vest, respectively. As of March 31, 2023, 43% of the eligible outstanding performance-based stock options have vested. These amounts are included in the measure above to the extent they are dilutive.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

5. AIRCRAFT

As of March 31, ~~2022,~~2023, Sun ~~Country operated a~~Country's fleet consisted of 5057 Boeing 737-NG aircraft, ~~consisting~~comprised of 4953 Boeing 737-800s, three Boeing 737-900ERs and 1one Boeing 737-700.

The following tables summarize the Company’s aircraft fleet activity for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively:


		December 31, 2021	Additions	Removals	March 31, 2022		December 31, 2022	Additions	Reclassifications	Removals	March 31, 2023
Passenger:	Passenger:					Passenger:
Owned	Owned	21	1	—	22	Owned	29	—	—	—	29
Finance leases	Finance leases	9	3	—	12	Finance leases	11	—	—	—	11
Operating leases	Operating leases	6	—	(2)	4	Operating leases	2	—	—	—	2
Sun Country Airlines’ Fleet	Sun Country Airlines’ Fleet	36	4	(2)	38	Sun Country Airlines’ Fleet	42	—	—	—	42
Cargo:	Cargo:					Cargo:
Aircraft Operated for Amazon	Aircraft Operated for Amazon	12	—	—	12	Aircraft Operated for Amazon	12	—	—	—	12
Total Aircraft Operated		48	4	(2)	50
Other owned:						Other owned:
Aircraft Held for Operating Lease						Aircraft Held for Operating Lease	—	3	—	—	3
Total Aircraft						Total Aircraft	54	3	—	—	57

		December 31, 2020	Additions	Removals	March 31, 2021		December 31, 2021	Additions	Reclassifications	Removals	March 31, 2022
Passenger:	Passenger:					Passenger:
Owned	Owned	14	5	—	19	Owned	21	1	—	—	22
Finance leases	Finance leases	5	—	—	5	Finance leases	9	1	2	—	12
Operating leases	Operating leases	12	—	(5)	7	Operating leases	6	—	(2)	—	4
Sun Country Airlines’ Fleet	Sun Country Airlines’ Fleet	31	5	(5)	31	Sun Country Airlines’ Fleet	36	2	—	—	38
Cargo:	Cargo:					Cargo:
Aircraft Operated for Amazon	Aircraft Operated for Amazon	12	—	—	12	Aircraft Operated for Amazon	12	—	—	—	12
Total Aircraft Operated		43	5	(5)	43
Total Aircraft						Total Aircraft	48	2	—	—	50

During the three months ended March 31, 2023, the Company entered into an agreement to acquire five 737-900ERs that are currently on lease to an unaffiliated airline ("Aircraft Held for Operating Lease"). As of March 31, 2023, three of the Aircraft Held for Operating Lease had been acquired. Subsequent to March 31, 2023, the transaction was completed resulting in the acquisition of the two remaining Aircraft Held for Operating Lease. The five Aircraft Held for Operating Lease were financed through a term loan arrangement. See Note 6 of these Condensed Consolidated Financial Statements for more information on this transaction. As of March 31, 2023, 29 of the owned aircraft and Aircraft Held for Operating Lease were financed and three aircraft were unencumbered.

During the three months ended March 31, 2022, the Company executed lease amendments to purchase 2two aircraft at the end of the lease term, which modified the lease classification from operating leases to

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

finance leases with expiration dates in fiscal year 2026. The Company also acquired ~~2 additional~~two incremental 737-800 aircraft, one of which was financed using proceeds from the issuance of Class A and Class B pass-through trust certificates (the "2022-1 EETC") and another through a finance lease arrangement that is set to expire in fiscal year 2030.

~~Subsequent to March 31, 2022, the Company committed to lease an aircraft for a period of six years at approximately~~ ~~$2,220~~ per year. The Company expects to take delivery of the aircraft during fiscal year 2022. The Company also purchased an aircraft that was previously under a finance lease before the end of the lease term for a purchase price of $16,784 and took delivery of 4 incremental aircraft for a total purchase price of approximately $75,000. The Company financed these purchases using incremental 2022-1 EETC funds that were drawn upon subsequent to March 31, 2022.

~~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 additions were previously accounted for as operating leases.~~

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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 are as follows:


			Three Months Ended March 31,						Three Months Ended March 31,
Aircraft Status	Aircraft Status	Expense Type	2022		2021		Aircraft Status	Expense Type	2023		2022
Owned	Owned	Depreciation	$	8,673	$	7,830	Owned	Depreciation	$	11,872	$	8,673
Finance Leased	Finance Leased	Amortization	4,069		2,435		Finance Leased	Amortization	4,683		4,069
Operating Leased	Operating Leased	Aircraft Rent (1)	3,186		5,599		Operating Leased	Aircraft Rent (1)	1,480		3,186
			$	15,928	$	15,864			$	18,035	$	15,928


(1)			Aircraft Rent expense includes credits for the amortization of over-market liabilities established at the Acquisition Date.

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

~~Aircraft Maintenance Deposits Contra-Assets~~6. ASSET ACQUISITIONS

As of the Acquisition Date, the Company established a maintenance deposit contra-asset to offset the acquired maintenance deposits assets included in Short-term Lessor Maintenance Deposits on the Condensed Consolidated Balance Sheets. The assets represent funds paid by the previous owners of the Company to the lessor that were kept as funds on deposit for maintenance events and the contra-assets represent the Company’s obligation to perform planned maintenance events on leased aircraft held as of the Acquisition date. As reimbursable maintenance events are performed and Maintenance Expense is incurred, a portion of the contra-asset is recognized as a reduction to Maintenance Expense on the Condensed Consolidated Statements of Operations due to the fact that the previously acquired maintenance deposit is partially funding the maintenance event. As of March 31, 2022 and December 31, 2021, the remaining balance of the contra-asset was $22,348.

~~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. The over-market lease liability is recorded as a contra-asset offsetting the corresponding lease asset. The remaining unamortized balance of this contra-asset as of March 31, 2022 and December 31, 2021 was $383 and $10,363, respectively and is recorded within the Operating Lease Right-of-Use Assets. During the three months ended March 31, ~~2022,~~2023, the Company ~~executed lease amendments which modified 2 aircraft from operating leases~~entered into an agreement to ~~finance leases. As a result~~acquire five Aircraft Held for Operating Lease for approximately $158,000. On March 29, 2023, the Company acquired three of the ~~modifications,~~Aircraft Held for Operating Lease. The table below reflects the cumulative balances recognized upon acquisition of the three aircraft on March 29, 2023:


Asset	Balance Sheet Classification
Aircraft Held for Operating Lease	Aircraft and Flight Equipment Held for Operating Lease	$	67,959
Maintenance Rights Asset	Aircraft and Flight Equipment Held for Operating Lease	24,668
Over-Market Asset	Other Intangible Assets, net	2,004
Total		$	94,631

The purchase price was assigned to the assets based upon their relative fair values as of the acquisition date. The Company estimated the fair value of the Aircraft Held for Operating Lease principally based on market appraisals. The appraisals were based on an analysis of the economic conditions impacting both the airline industry and broader economy, the current fuel price environment, aircraft order data, passenger traffic levels, and qualitative and quantitative characteristics impacting the value of the acquired aircraft.

The fair value of the Maintenance Rights Asset was determined using a discounted cash flow method based on aircraft utilization levels at the time of the acquisition and the applicable rates as specified within the lease agreements.

The fair value of the Over-Market Asset was determined using a discounted cash flow model that involves the comparison of contractual lease cash flows to the estimated at-market lease payments for an aircraft of the same type and age.

On April 4, 2023, the Company ~~reclassified $9,687~~completed the transaction resulting in the acquisition of the ~~over-market lease liability from~~two additional Aircraft Held for Operating Lease ~~Right-of-Use Assets to Finance Lease Assets. The resulting reclassification reduces the Depreciation and Amortization~~ for the ~~related Finance Lease Assets.~~

Asremaining consideration of approximately $63,000. The acquisition cost of the ~~Acquisition Date, Sun Country’s existing leases included payments~~aircraft will be allocated between Aircraft Held for ~~maintenance reserves in addition to the stated aircraft lease payments. For~~Operating Lease, Maintenance Rights, and Over-Market Assets on 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 similar leases. The remaining balance of this liability at March 31, 2022 and December 31, 2021 was $7,793 and $14,737, respectively. Of the $6,944 reduction in the over-market maintenance reserve liabilities during the three months ended March 31, 2022, $6,023 was incorporated into the Finance Lease Assets in accordance with the terms of the executed lease amendments, as described above.relative fair value basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

As of March 31, 2023, the Company's restricted cash balance also included $13,103 that was deposited in relation to the purchase of the two remaining Aircraft Held for Operating Lease. Upon acquisition, the deposited amounts were remitted to the seller.

The purchase of the Aircraft Held for Operating Lease was financed primarily using the proceeds from a term loan credit facility with a face amount of $119,200 and the Company's cash. As of March 31, 2023, $71,280 of the term loan credit facility was outstanding with respect to three Aircraft Held for Operating Lease acquired during the three months ended March 31, 2023. The remaining $47,920 of financing available under the term loan credit facility was drawn on April 4, 2023 related to the purchase of the two remaining Aircraft Held for Operating Lease. For more information on the term loan credit facility, see Note 7 of these Condensed Consolidated Financial Statements.

Aircraft Held for Operating Lease

The Company obtained outright ownership of the Aircraft Held for Operating Lease upon purchase and assumed the position of lessor until the end of the lease terms. The Company is entitled to fixed payments over the remaining lease term for each aircraft, which expire at various dates between the fourth quarter of 2024 and the fourth quarter of 2025. On each lease expiry date, the Aircraft Held for Operating Lease will be redelivered to Sun Country and is expected to be inducted into the Company’s fleet. The rental revenue associated with the Aircraft Held for Operating Lease is recognized as it is earned and is included in Other revenue. The rental revenue was not material to the Company's results of operations for the three months ended March 31, 2023.

Maintenance Rights Asset

Upon purchase of the Aircraft Held for Operating Lease, the Company recognized a Maintenance Rights Asset which represents the Company’s contractual right to receive the aircraft in a specified maintenance condition at the end of the lease. The acquired leases contain an end of lease compensation clause whereby the lessee is required to remit a cash payment as a means to true-up the aircraft’s maintenance condition to full-life or perform the maintenance tasks needed to physically restore the airframe and engines to such a condition. The asset represents the difference between the Aircraft Held for Operating Lease’s physical maintenance condition as of the purchase date and the contractual return condition at the end of the lease term. The Maintenance Rights Asset is not depreciated over the lease term, nor will it accrete as additional life is consumed on the aircraft.

Over-Market Asset

Upon purchase of the Aircraft Held for Operating Lease, the Company recognized an intangible asset representing lease terms which are favorable to the lessor (unfavorable to the lessee) as compared with market terms of similar leases. The asset will be amortized over the remaining lease terms for the respective aircrafts, which ranges from approximately 1.7-2.7 years. The amortization will be recognized as a contra-revenue, offsetting the rental revenue associated with the Aircraft Held for Operating Lease included in Other revenue.

7. DEBT

Credit Facilities –

On February 10, 2021, the Company executed a five-year credit agreement (the “Credit Agreement”) with a group of ~~lenders that replaced the Company’s prior $25,000 asset-based revolving credit facility.~~lenders. The Credit Agreement includes a $25,000 Revolving Credit Facility (the "Revolving Credit Facility") and a $90,000 Delayed Draw Term Loan Facility (“DDTL”), which are collectively referred to as the ~~“Credit~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

“Credit Facilities.” The interest rate in effect as of March 31, 2022 was 6%, which is the minimum interest rate allowed under the Credit Agreement. Borrowings are subject to a possible interest rate adjustment in June 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, whereas the proceeds from the DDTL ~~are~~were to be used solely to finance the acquisition of aircraft or engines to be registered in the United States. The Credit Agreement includes financial covenants that require a minimum trailing 12-month EBITDAR ($87,700 as of March 31, 2022 and beyond) and minimum liquidity of $30,000 at the close of any business day. The Company was in compliance with these covenants as of March 31, ~~2022.~~2023.

During 2021, the Company drew $80,500 on the DDTL to purchase 6six aircraft, which were previously under operating leases.~~The~~ During 2022, the Company repaid the outstanding balance of the DDTL in full ~~as of March 31, 2022~~ using proceeds it received from the 2022-1 EETC, which terminated the DDTL. As a result, no amounts under the DDTL were available to the Company as of March 31, ~~2022.~~2023. The Company recorded a $1,557 loss on extinguishment of debt ~~related to~~during the ~~refinancing~~three months ended March 31, 2022 in connection with the repayment of the DDTL, which represents the write-off of the unamortized deferred financing costs. As of March 31, ~~2022,~~2023, the Company had $24,650 of financing available through the Revolving Credit Facility, ~~remained undrawn and available~~as $350 had been pledged to ~~the Company.~~support a letter of credit.

Long-term Debt–

Term Loan Credit Facility

During the three months ended March 31, 2023, the Company executed a term loan credit facility with a face amount of $119,200 for the purpose of financing the five Aircraft Held for Operating Lease. The loan is to be repaid monthly over 7 years. During the lease term, payments collected from the lessee will be applied directly to the repayment of principal and interest on the term loan credit facility. The Aircraft Held for Operating Lease, as well as the related lease payments received from the lessee, are pledged as collateral. During the three months ended March 31, 2023, the Company received gross proceeds of $71,280 with respect to three of the Aircraft Held for Operating Lease. An incremental $47,920 of gross proceeds were received subsequent to March 31, 2023 upon the completion of the transaction resulting in the acquisition of two additional Aircraft Held for Operating Lease. During the three months ended March 31, 2023, the Company recorded $1,388 in debt issuance costs associated with the term loan credit facility.

Pass-Through Trust Certificates

In March 2022, the Company arranged for the issuance of the 2022-1 EETC in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft.

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.

In March 2022, the Company arranged for the issuance of the 2022-1 EETC in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft. The Company recorded $1,979 in debt issuance costs associated with the 2022-1 EETC. NaN of the 13 aircraft were owned fleet assets previously financed by the DDTL, 2 of the aircraft were owned outright, 5 of the aircraft were acquired during the beginning of the second quarter of 2022, and the remaining aircraft is currently under lease and is expected to be purchased from the lessor later in 2022. The Company received gross proceeds of $77,986 with respect to 7 of the aircraft on March 31, 2022, and an incremental $94,521 subsequent to March 31, 2022 with respect to 5 of the aircraft. The remaining $15,770 of gross proceeds is expected to be received on or before September 15, 2022 in connection with purchasing the thirteenth aircraft from the lessor. The Company is required to make semi-annual principal and interest payments each March and September beginning with the first payment on September 15, 2022. The 2022-1 EETC will be secured by a lien on the financed or refinanced aircraft and will be cross-collateralized by the other aircraft financed through the issuance. Total appraised value of the 12 aircraft was approximately $237,936 as of the original date of the agreement.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Long-term Debt includes the following:

March 31, 2022 December 31, 2021
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 between 4.13% and 6.95% and the weighted average interest rate is 4.76% as of March 31, 2022. $ 202,984 $ 202,984
Notes payable under the Company's 2022-1 EETC agreement dated March 2022, with a face amount of $188,277 payable in bi-annual installments, in March and September, through March 2031. These notes bear interest at an annual rate between 4.84% and 5.75% and the weighted average interest rate is 5.06% as of March 31, 2022. 77,986 —
Delayed Draw Term Loan Facility (see terms and conditions above) — 77,481
Other Notes payable. These notes bear interest at an annual rate of approximately 5.00% and were repaid in full in February 2022. — 466
Total Debt 280,970 280,931
Less: Unamortized debt issuance costs (3,685) (3,505)
Less: Current Maturities of Long-term Debt (34,741) (29,412)
Total Long-term Debt $ 242,544 $ 248,014


	March 31, 2023		December 31, 2022
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 between 4.13% and 6.95% and the weighted average interest rate is 4.73% as of March 31, 2023.	$	176,697	$	176,697
Notes payable under the Company's 2022-1 EETC agreement dated March 2022, with a face amount of $188,277 payable in bi-annual installments, in March and September, through March 2031. These notes bear interest at an annual rate between 4.84% and 5.75% and the weighted average interest rate is 5.06% as of March 31, 2023.	168,897		179,019
Term Loan Credit Facility (see terms and conditions on pg 16)	71,280		—
Total Debt	416,874		355,716
Less: Unamortized debt issuance costs	(4,615)		(3,481)
Less: Current Maturities of Long-term Debt	(66,194)		(57,548)
Total Long-term Debt, net	$	346,065	$	294,687

Future maturities of the outstanding Debt are as follows:


		Debt Principal Payments		Amortization of Debt Issuance Costs		Net Debt			Debt Principal Payments		Amortization of Debt Issuance Costs		Net Debt
Remainder of 2022		$	30,917	$	(613)	$	30,304
2023		47,534		(757)		46,777
Remainder of 2023								Remainder of 2023	$	55,025	$	(982)	$	54,043
2024	2024	49,173		(633)		48,540		2024	69,623		(1,097)		68,526
2025	2025	54,257		(518)		53,739		2025	74,216		(872)		73,344
2026	2026	34,684		(348)		34,336		2026	55,142		(637)		54,505
2027								2027	58,280		(468)		57,812
Thereafter	Thereafter	64,405		(816)		63,589		Thereafter	104,588		(559)		104,029
Total as of March 31, 2022		$	280,970	$	(3,685)	$	277,285
Total as of March 31, 2023								Total as of March 31, 2023	$	416,874	$	(4,615)	$	412,259

The fair value of ~~debt~~Debt was ~~$271,837~~$390,948 as of March 31, ~~2022~~2023 and ~~$272,004~~$324,059 as of December 31, ~~2021.~~2022. 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 estimated incremental borrowing rate for similar obligations. The estimates were primarily based on Level 3 inputs.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

8. ~~FUEL DERIVATIVES AND RISK MANAGEMENT~~ INVESTMENTS

~~The Company’s operations are inherently dependent upon the price~~A summary 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. debt securities by major security type:


	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-Sale Securities: (1)
Municipal Debt Securities	$	27,601	$	5	$	(132)	$	27,474
Corporate Debt Securities	89,045		—		(386)		88,659
U.S. Government Agency Securities	49,174		69		(99)		49,144
Total	$	165,820	$	74	$	(617)	$	165,277


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-Sale Securities: (1)
Municipal Debt Securities	$	47,897	$	16	$	(258)	$	47,655
Corporate Debt Securities	93,460		1		(683)		92,778
U.S. Government Agency Securities	32,326		2		(126)		32,202
Total	$	173,683	$	19	$	(1,067)	$	172,635


(1)			The Company also holds Certificates of Deposit that are included in Investments on the Condensed Consolidated Balance Sheets totaling $6,361 and $6,301 as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, ~~2022~~2023, the Company's investments that have unrealized losses have been in a continuous unrealized loss position for less than 12 months. The unrealized losses were the result of increases in market interest rates and ~~December~~were not the result of a deterioration in the credit quality of the securities. As of March 31, ~~2021,~~2023, the Company ~~had no outstanding fuel derivative contracts.~~

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. Derivatives where the payment due date is greater than one year from the balance sheet date are classified as long-term. Fuel derivative gains andbelieves that any unrealized losses are ~~classified in Aircraft Fuel on~~recoverable prior to the ~~Condensed Consolidated Statements of Operations.~~

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

Three Months Ended March 31,
2022 2021
Balance - January 1 $ — $ (1,174)
Non-cash Gains — 2,386
Contract Settlements — (7)
Balance - March 31 $ — $ 1,205

~~Fuel Derivative Gains consist of~~investment's conversion to cash. Therefore, the ~~following:~~

Three Months Ended March 31,
2022 2021
Non-cash Gains $ — $ 2,386
Cash Premiums Paid — —
Total Fuel Derivative Gains $ — $ 2,386
Company believes these losses to be temporary and no impairments have been recognized.

9. FAIR VALUE MEASUREMENTS

~~For a description of~~The following table summarizes the ~~methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see~~ ~~Note 12~~ ~~of the Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2021 10-K.~~

~~Excluding the items discussed below, there were no additional~~ assets ~~or liabilities~~ measured at fair value on a recurring ~~basis as of March 31, 2022 or December 31, 2021.~~basis:

~~Financial Instruments~~ – Financial instruments including Cash and Cash Equivalents, Restricted Cash, Investments, Accounts Receivable, Accounts Payable and all other Current Liabilities have carrying values that approximate fair value.

~~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.


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Cash & Cash Equivalents	$	71,587	$	—	$	—	$	71,587
Available-for-Sale Securities:
Municipal Debt Securities	—		27,474		—		27,474
Corporate Debt Securities	—		88,659		—		88,659
U.S. Government Agency Securities	—		49,144		—		49,144
Total Available-for-Sale Securities	—		165,277		—		165,277
Total Assets Measured at Fair Value on a Recurring Basis	$	71,587	$	165,277	$	—	$	236,864

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

~~Non-Financial Assets~~ – Certain assets are measured at fair value on a nonrecurring basis. The Company’s non-financial assets, which primarily consist of Property & 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 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.

~~Debt~~ ~~– See~~ ~~Note 7~~ ~~for more information on the Company's debt financings and related fair values.~~


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Cash & Cash Equivalents	$	73,727	$	18,359	$	—	$	92,086
Available-for-Sale Securities:
Municipal Debt Securities	—		47,655		—		47,655
Corporate Debt Securities	—		92,778		—		92,778
U.S. Government Agency Securities	—		32,202		—		32,202
Total Available-for-Sale Securities	—		172,635		—		172,635
Total Assets Measured at Fair Value on a Recurring Basis	$	73,727	$	190,994	$	—	$	264,721

10. INCOME TAXES

The Company's effective tax rate for the three months ended March 31, 2023 and 2022 was 22.9% and ~~2021 was~~ 43.3% ~~and 30.3%~~, 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~~20.4% decrease in the effective tax rate iswas primarily due to athe $6,800 non-deductible ~~expense~~adjustment to increase the tax receivable liability related to the Tax Receivable Agreement (the "Tax Receivable Agreement" or "TRA") ~~liability,~~in the prior period, partially offset by stock compensation benefits.

Tax Receivable Agreement

In connection with the Company’s IPO, the Company entered into the TRA with our pre-IPO stockholders (the “TRA holders”). The TRA 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.

Upon the closing of the IPO in the first quarter of 2021, 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 TRA, with an offset to Stockholders’ Equity. The TRA balance as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$105,600~~$101,020 and ~~$98,800,~~$103,800, respectively. The TRA liability is an estimate and actual amounts payable under the Tax Receivable Agreement could differ from this estimate. During the three months ended March 31, 2023, the Company recorded an immaterial adjustment to the estimated TRA liability. During the three months ended March 31, 2022, the Company recorded an adjustment to the estimated TRA liability of $6,800. ~~Adjustments~~During the three months ended March 31, 2023, the Company made a payment of $2,425 to the ~~TRA are recorded in Other, net Non-Operating Income (Expense)~~pre-IPO stockholders (the “TRA holders”), which includes certain members of the Company's management and certain of the Company's Board of Directors. The payment is included within Financing Activities on the ~~Company’s~~ Condensed Consolidated Statements of ~~Operations.~~

~~For more information on~~Cash Flows. Payments will be made in future periods as attributes that existed at the ~~TRA, see~~ ~~Note 13~~time of the ~~Notes~~IPO (the “Pre-IPO Tax Attributes”) are utilized.

11. STOCKHOLDERS' EQUITY

Equity Transactions

Secondary Offerings

On February 15, 2023, the Company announced the commencement of a secondary public offering of 5,250,000 shares of its Common Stock by an affiliate of certain investment funds managed by affiliates of Apollo Global Management, Inc. (“Apollo”). The underwriters were given an option to purchase an additional 787,500 shares of Common Stock. In connection with the offering, the underwriters agreed to sell to the ~~Consolidated Financial Statements~~Company, and the Company agreed to purchase from the underwriters, an aggregate of 750,000 shares of Common Stock at a price of $19.75 per share, the same price at which the underwriters purchased the Common Stock from the selling stockholder, for a total of $14,812. The Company incurred offering expenses of $528 in ~~Part II, Item 8, “Financial Statements” in~~connection to this offering and did not receive any of the ~~2021 10-K.~~

proceeds.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

~~11. SPECIAL ITEMS, NET~~Common Stock Repurchases

~~Special Items, net reflects expenses, or credits~~On October 31, 2022, the Company’s Board of Directors authorized a $50,000 stock repurchase program. During the fourth quarter of 2022, the Company entered into a $25,000 Accelerated Share Repurchase Program. The Company received an initial delivery of 890,586 shares at an average price of $19.65 per share during the fourth quarter of 2022. The settlement of the program occurred during January 2023, upon which the Company received an additional 480,932 shares. In total, the Company repurchased 1,371,518 shares at an average price of $18.23 per share.

The Company also repurchased $14,812 of its Common Stock as part of the secondary offering by the selling stockholder. See above for more details.

As of March 31, 2023, the Company had $10,188 of Board authorization remaining to ~~expense, that are not representative~~repurchase additional shares of ~~our ongoing costs for the period presented~~its Common Stock. The stock repurchase program has no expiration date and may ~~vary from~~be modified, suspended, or terminated at any time.

Amazon Agreement

On December 13, 2019, the Company signed a six-year contract (with two, two-year extension options, for a maximum term of 10 years) with Amazon to provide cargo services under the ATSA. 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. During the three months ended March 31, 2023 and March 31, 2022, 189,652 warrants vested in each respective period. As of March 31, 2023 and March 31, 2022, the cumulative vested warrants held by Amazon were 2,591,920 and 1,833,312, respectively. The exercise period ~~to period in nature, frequency, and amount.~~

~~Special Items, net on~~of these warrants is through the ~~Condensed Consolidated Statements of Operations consist~~eighth anniversary of the ~~following:~~

Three Months Ended March 31,
2022 2021
CARES Act grant recognition (see Note 3)
$ — $ (32,208)
CARES Act employee retention credit (See Note 3)
— (334)
Aircraft lease buy-out expense (1)
— 5,664
Other — 7
Total Special Items, net $ — $ (26,871)


~~(1)~~			NaN aircraft were purchased in March 2021 that were previously under operating leases. Aircraft lease buy-out expense represents the net costs incurred to terminate the leases on those 5 aircraft. This includes the associated lease termination costs, write-off of previously capitalized maintenance deposits, and the write-off of over-market liabilities.

issue date.

12. COMMITMENTS AND CONTINGENCIES

The Company has contractual obligations and commitments primarily with regard to lease arrangements, repayment of debt (see Note 7), payments under the TRA (see Note 10), and probable future purchases of aircraft.

During the second quarter of 2022, an owned aircraft was retired due to the aircraft sustaining damage beyond economic repair. The best estimate of this event was recorded during 2022. The contingency has been finalized and the impact of the retirement was not material to the Company's Condensed Consolidated Results of Operations.

As of March 31, ~~2022,~~2023 the Company had a commitment to lease three aircraft with deliveries spanning the fourth quarter of 2023 and the first quarter of 2024. The leases will each have annual lease payments of approximately ~~$75,000~~$2,000 for six years.

As of March 31, 2023, the Company had a commitment to purchase 4an incremental aircraft ~~using proceeds from~~for approximately $24,500. The Company is expected to take delivery of the ~~2022-1 EETC, which were delivered~~aircraft in the second quarter of 2022. A deposit totaling $7,500 was remitted to the seller during the first quarter of 2022 and has been accounted for within Other Current Assets on the Condensed Consolidated Balance Sheets as of March 31, 2022. The remaining purchase amount was financed using incremental proceeds from the 2022-1 EETC and were remitted to the seller upon delivery of the aircraft.

During the first quarter of 2022, the Company executed an agreement to purchase a flight simulator at a total purchase price of $9,745. An initial installment of $2,934 was remitted to the seller during the first quarter of 2022 and is accounted for within Property & Equipment on the Condensed Consolidated Balance Sheets as of March 31, 2022. The remaining purchase price is to be remitted upon shipment of the simulator.2023.

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

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

13. OPERATING SEGMENTS

The following tables present financial information for the Company’s 2two operating segments: Passenger and Cargo. ~~For more information on the Company’s segments, see~~ ~~Note 17~~ ~~of the Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2021 10-K.~~


		Three Months Ended March 31, 2022						Three Months Ended March 31, 2021							Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
		Passenger		Cargo		Consolidated		Passenger		Cargo		Consolidated			Passenger		Cargo		Consolidated		Passenger		Cargo		Consolidated
Operating Revenues	Operating Revenues	$	205,472	$	21,053	$	226,525	$	106,026	$	21,585	$	127,611	Operating Revenues	$	270,754	$	23,361	$	294,115	$	205,472	$	21,053	$	226,525
Non-Fuel Operating Expenses	Non-Fuel Operating Expenses	120,810		19,338		140,148		87,205		18,070		105,275		Non-Fuel Operating Expenses	140,637		25,405		166,042		120,810		19,338		140,148
Aircraft Fuel	Aircraft Fuel	64,544		—		64,544		24,253		21		24,274		Aircraft Fuel	72,266		24		72,290		64,544		—		64,544
Special Items, net		—		—		—		(18,206)		(8,665)		(26,871)
Total Operating Expenses	Total Operating Expenses	185,354		19,338		204,692		93,252		9,426		102,678		Total Operating Expenses	212,903		25,429		238,332		185,354		19,338		204,692
Operating Income		$	20,118	$	1,715	21,833		$	12,774	$	12,159	24,933
Operating Income (Loss)														Operating Income (Loss)	$	57,851	$	(2,068)	55,783		$	20,118	$	1,715	21,833
Interest Income	Interest Income					24						15		Interest Income					2,741						24
Interest Expense	Interest Expense					(8,562)						(7,121)		Interest Expense					(8,630)						(8,562)
Other, net	Other, net					(6,876)						(5)		Other, net					(212)						(6,876)
Income Before Income Tax	Income Before Income Tax					$	6,419					$	17,822	Income Before Income Tax					$	49,682					$	6,419

14. SUBSEQUENT EVENTS

The Company evaluated subsequent events for the period from the Balance Sheet date through ~~May 6, 2022,~~April 28, 2023, the date that the Condensed Consolidated Financial Statements were available to be issued.

During the three months ended March 31, 2023, the Company entered into an agreement to acquire five Aircraft Held for Operating Lease. On April 4, 2023, the Company completed the transaction resulting in the acquisition of two Aircraft Held for Operating Lease for total consideration of approximately $63,000. The purchase price was primarily financed with the remaining $47,920 available under the term loan credit facility and $13,103 of the Company’s restricted cash that was previously deposited.

For more information on the subsequent events, see Note 5, No te 6 ~~"Aircraft"~~, and Note 7 ~~"Debt"~~ of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this report.

* * * * * *

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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 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, the terms “Sun Country,” “we,” “us” and “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 is this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of the Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and 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 2021 10-K.~~

~~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 months ended March 31, ~~2022~~2023 and ~~2021.~~2022. Also discussed is our financial position as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. 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-Q and our audited Consolidated Financial Statements and related notes and discussion under the heading, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2021~~2022 10-K. 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” included in our ~~2021~~2022 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Business 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 high growth, high margins and strong cash flows with greater resilience than other passenger airlines. WeBased in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers and charter customers ~~as well as~~and providing crew, maintenance and insurance (“CMI”) services, ~~to Amazon,~~ with flights throughout the United States and to destinations in Canada, Mexico, Central America and the Caribbean. ~~Based in Minnesota, we operate an agile network that includes our scheduled service business, 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

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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)~~

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”)~~("ULCCs", which include Allegiant Travel Company, Frontier Airlines and Spirit Airlines) while maintaining lower Adjusted Cost per Available Seat Mile (“CASM”) than Low Cost Carriers ~~(“LCCs”)~~("LCCs", which include Southwest Airlines and JetBlue Airways), resulting in best-in-class unit profitability. Our business includes many cost characteristics of ULCCs, ~~(which 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 includes Southwest Airlines and JetBlue Airways).~~LCCs. 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.

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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)

Our charter business, which is one of the largest narrow body charter operations in the United States, is a key component of our strategy because it provides both inherent diversification and downside protection, and because it is synergistic with our other businesses. Our charter business has several favorable characteristics, 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,~~and collegiate and professional sports teams. 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 continue to 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. WeFlying under the ATSA began in May 2020 and 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~~passenger businesses. Our cargo business also enables us to leverage certain assets, capabilities, and fixed costs to enhance profitability and promote growth across our Company.

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 passenger experience, offering state-of-the-art interiors, free streaming of in-flight entertainment to passenger devices, seat reclining and seat-back power in all of our aircraft.

Pilot training throughput issues, fuel price increases due to geopolitical events, and the impact of macroeconomic conditions including inflationary pressures continue to impact the Company, as well as the industry. Airline travel demand has remained strong which has offset the additional costs associated with pilot training throughput issues, fuel price increases, and other inflationary pressures. Our flexible business model gives us the ability to adjust our services in response to these market conditions, which is targeted at producing the highest possible returns for Sun Country.

The ~~COVID-19 pandemic resulted in a dramatic decline in passenger demand across~~Company experienced challenging winter weather at our main hub, the U.S. airline industry. We experienced a significant decline in demand related to the COVID-19 pandemic, which caused a material decline in our first quarter 2021 as compared to pre-pandemic levels, and negatively impacted our financial condition and operating results.

~~During~~Minneapolis – St. Paul International Airport ("MSP") during the first quarter of ~~2022, we have continued to see recovery~~2023. A substantial portion of our business is focused on serving markets originating or ending in ~~demand from the COVID-19 pandemic relative to demand in 2021, which may impact the comparability of results presented. However, the ongoing impact~~MSP during this seasonal peak period. Minneapolis-St. Paul had one of the ~~COVID-19 pandemic~~top snowfalls on ~~overall demand~~record this year, which drove a number of operational challenges and resulted in additional costs for ~~air travel remains uncertain and cannot be predicted~~

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~~Table~~the Company. Two major storms shut down MSP airport during the first quarter 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)~~

~~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~~2023, which is rare. The resulting cancellations from these closures negatively impacted results ~~of operations~~ in the near term. While the COVID-19 pandemic-induced industry downturn has delayed our growth in 2020 and 2021, 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.quarter.

For more information on our business and strategic advantages, see the "Business" and “Management’s Discussion and Analysis of Operations” sections within Part I, Item 1 and Part II, Item 7, respectively, in our ~~2021~~2022 10-K.

Components of Operations

For a more detailed discussion on the nature of transactions included in the separate line items of our Condensed Consolidated Statement of Operations, see “Management’s Discussion and Analysis of Operations” in Part II, Item 7 in our ~~2021~~2022 10-K.

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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


		Three Months Ended March 31, 2022 (1)								Three Months Ended March 31, 2021 (1)									Three Months Ended March 31, 2023 (1)								Three Months Ended March 31, 2022 (1)
		Scheduled Service			Charter		Cargo	Total		Scheduled Service			Charter		Cargo	Total			Scheduled Service			Charter		Cargo	Total		Scheduled Service			Charter		Cargo	Total
Departures (2)	Departures (2)	6,227			1,620		2,574	10,487		4,323			1,511		2,565	8,452		Departures (2)	6,177			2,369		3,027	11,672		6,227			1,620		2,574	10,487
Block hours (2)	Block hours (2)	22,433			3,804		7,390	33,805		15,207			3,331		8,242	26,932		Block hours (2)	21,941			5,054		7,776	35,083		22,433			3,804		7,390	33,805
Aircraft miles (2)	Aircraft miles (2)	9,100,714			1,379,448		2,809,782	13,334,873		6,233,184			1,222,451		3,285,525	10,784,543		Aircraft miles (2)	8,740,473			1,725,753		2,840,370	13,401,208		9,100,714			1,379,448		2,809,782	13,334,873
Available seat miles (ASMs) (thousands) (2)	Available seat miles (ASMs) (thousands) (2)	1,684,532			235,705		—	1,928,149		1,158,012			211,721		—	1,376,796		Available seat miles (ASMs) (thousands) (2)	1,625,728			301,913			1,945,001		1,684,532			235,705			1,928,149
Total revenue per ASM (TRASM) (cents)	Total revenue per ASM (TRASM) (cents)	10.25			13.95			10.66		6.93			12.19			7.70		Total revenue per ASM (TRASM) (cents)	13.81			15.30			13.92		10.25			13.95			10.66
Average passenger aircraft during the period (3)	Average passenger aircraft during the period (3)							34.1								31.0		Average passenger aircraft during the period (3)							41.3								34.1
Passenger aircraft at end of period (3)	Passenger aircraft at end of period (3)							38								31		Passenger aircraft at end of period (3)							42								38
Cargo aircraft at end of period	Cargo aircraft at end of period							12								12		Cargo aircraft at end of period							12								12
Aircraft Held for Operating Lease																		Aircraft Held for Operating Lease							3								—
Average daily aircraft utilization (hours) (3)	Average daily aircraft utilization (hours) (3)							8.6								6.7		Average daily aircraft utilization (hours) (3)							7.3								8.6
Average stage length (miles)	Average stage length (miles)							1,336								1,278		Average stage length (miles)							1,225								1,336
Revenue passengers carried (4)	Revenue passengers carried (4)	922,652								553,032								Revenue passengers carried (4)	998,238								922,652
Revenue passenger miles (RPMs) (thousands) (4)	Revenue passenger miles (RPMs) (thousands) (4)	1,338,459								774,999								Revenue passenger miles (RPMs) (thousands) (4)	1,432,131								1,338,459
Load factor (4)	Load factor (4)	79.5		%						66.9		%						Load factor (4)	88.1		%						79.5		%
Average base fare per passenger (4)	Average base fare per passenger (4)	$	134.47							$	98.77							Average base fare per passenger (4)	$	152.93							$	134.47
Ancillary revenue per passenger (4)	Ancillary revenue per passenger (4)	$	48.87							$	42.98							Ancillary revenue per passenger (4)	$	68.55							$	48.87
Charter revenue per block hour (4)	Charter revenue per block hour (4)				$	8,643							$	7,747				Charter revenue per block hour (4)				$	9,139							$	8,643
Fuel gallons consumed (thousands) (2)	Fuel gallons consumed (thousands) (2)	17,401			2,758		—	20,245		11,557			2,357		—	13,993		Fuel gallons consumed (thousands) (2)	17,383			3,526			21,073		17,401			2,758			20,245
Fuel cost per gallon, excluding derivatives								$	3.20							$	1.91
Fuel cost per gallon, excluding indirect fuel credits																		Fuel cost per gallon, excluding indirect fuel credits							$	3.45							$	3.20
Employees at end of period	Employees at end of period							2,316								1,768		Employees at end of period							2,634								2,316
Cost per available seat mile (CASM) (cents) (5)	Cost per available seat mile (CASM) (cents) (5)							10.62								7.46		Cost per available seat mile (CASM) (cents) (5)							12.25								10.62
Adjusted CASM (cents) (6)	Adjusted CASM (cents) (6)							6.21								6.15		Adjusted CASM (cents) (6)							7.10								6.21

______________________

(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~~Service and ~~charter~~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 that are unrelated to our airline operations.

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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 Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022


		Three Months Ended March 31,				$ Change			% Change			Three Months Ended March 31,					$ Change		% Change
		2022		2021				2023					2022
Operating Revenues:	Operating Revenues:													Operating Revenues:
Scheduled Service	Scheduled Service	$	124,068	$	54,620	$	69,448		127	%	Scheduled Service	$	152,657		$	124,068	$	28,589	23	%
Charter Service	Charter Service	32,879		25,805		7,074			27	%	Charter Service	46,187			32,879		13,308		40	%
Ancillary	Ancillary	45,086		23,770		21,316			90	%	Ancillary	68,425			45,086		23,339		52	%
Passenger	Passenger	202,033		104,195		97,838			94	%	Passenger	267,269			202,033		65,236		32	%
Cargo	Cargo	21,053		21,585		(532)			(2)	%	Cargo	23,361			21,053		2,308		11	%
Other	Other	3,439		1,831		1,608			88	%	Other	3,485			3,439		46		1	%
Total Operating Revenues	Total Operating Revenues	226,525		127,611		98,914			78	%	Total Operating Revenues	294,115			226,525		67,590		30	%

Operating Expenses:	Operating Expenses:										Operating Expenses:
Aircraft Fuel	Aircraft Fuel	64,544		24,274		40,270			166	%	Aircraft Fuel	72,290			64,544		7,746		12	%
Salaries, Wages, and Benefits	Salaries, Wages, and Benefits	59,617		44,075		15,542			35	%	Salaries, Wages, and Benefits	75,430			59,617		15,813		27	%
Aircraft Rent	Aircraft Rent	3,186		5,599		(2,413)			(43)	%	Aircraft Rent	1,480			3,186		(1,706)		(54)	%
Maintenance	Maintenance	11,995		9,210		2,785			30	%	Maintenance	13,039			11,995		1,044		9	%
Sales and Marketing	Sales and Marketing	8,628		5,110		3,518			69	%	Sales and Marketing	9,929			8,628		1,301		15	%
Depreciation and Amortization	Depreciation and Amortization	15,328		12,615		2,713			22	%	Depreciation and Amortization	19,460			15,328		4,132		27	%
Ground Handling	Ground Handling	7,958		5,230		2,728			52	%	Ground Handling	11,038			7,958		3,080		39	%
Landing Fees and Airport Rent	Landing Fees and Airport Rent	10,286		8,785		1,501			17	%	Landing Fees and Airport Rent	12,051			10,286		1,765		17	%
Special Items, net		—		(26,871)		26,871			(100)	%
Other Operating, net	Other Operating, net	23,150		14,651		8,499			58	%	Other Operating, net	23,615			23,150		465		2	%
Total Operating Expenses	Total Operating Expenses	204,692		102,678		102,014			99	%	Total Operating Expenses	238,332			204,692		33,640		16	%
Operating Income	Operating Income	21,833		24,933		(3,100)			(12)	%	Operating Income	55,783			21,833		33,950		155	%

Non-operating Income (Expense):	Non-operating Income (Expense):										Non-operating Income (Expense):
Interest Income	Interest Income	24		15		9			60	%	Interest Income	2,741			24		2,717		NM
Interest Expense	Interest Expense	(8,562)		(7,121)		(1,441)			20	%	Interest Expense	(8,630)			(8,562)		(68)		1	%
Other, net	Other, net	(6,876)		(5)		(6,871)			NM		Other, net	(212)			(6,876)		6,664		(97)	%
Total Non-operating Income (Expense), net		(15,414)		(7,111)		(8,303)			117	%
Total Non-operating Expense, net											Total Non-operating Expense, net	(6,101)			(15,414)		9,313		(60)	%

Income Before Income Tax	Income Before Income Tax	6,419		17,822		(11,403)			(64)	%	Income Before Income Tax	49,682			6,419		43,263		674	%
Income Tax Expense	Income Tax Expense	2,782		5,406		(2,624)			(49)	%	Income Tax Expense	11,354			2,782		8,572		308	%
Net Income	Net Income	$	3,637	$	12,416	$	(8,779)		(71)	%	Net Income	$	38,328		$	3,637	$	34,691	954	%


~~(1)~~			"NM" stands for not meaningful

Total Operating Revenues increased ~~$98,914,~~$67,590, or ~~78%~~30%, to $294,115 for the three months ended March 31, 2023 from $226,525 for the three months ended March 31, ~~2022 from $127,611 for the three months ended March 31, 2021.~~2022. The increase was largely driven by an increase in demand for passenger service during the first quarter of 2023 as compared to the first quarter of 2022. The

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

(Dollars in thousands, except per share amounts)

(Unaudited)

increase in demand resulted in an increase to average total fare per passenger of $38.14, or 21%, to $221.48 for ~~passenger service during 2022~~the three months ended March 31, 2023 as compared to ~~2021, which was significantly impacted by a decline in passenger demand due to~~ the ~~COVID-19 pandemic.~~three months ended March 31, 2022.

Scheduled Service. Scheduled service revenue increased by ~~$69,448,~~$28,589, or ~~127%~~23%, to $152,657 for the three months ended March 31, 2023 from $124,068 for the three months ended March 31, ~~2022 from $54,620 for the three months ended March 31, 2021.~~2022. The table below presents select operating data for scheduled service, expressed as ~~quarter-over-quarter~~year-over-year changes:


		Three Months Ended March 31,						Change					% Change			Three Months Ended March 31,									Change				% Change
		2022			2021							2023					2022
Departures	Departures	6,227			4,323						1,904					44		%	Departures	6,177				6,227				(50)			(1)	%
Passengers	Passengers	922,652			553,032			369,620					67	%	Passengers	998,238					922,652				75,586				8	%
Average base fare per passenger	Average base fare per passenger	$	134.47		$	98.77		$	35.70				36	%	Average base fare per passenger	$	152.93				$	134.47			$	18.46			14	%
RPMs (thousands)	RPMs (thousands)	1,338,459			774,999			563,460					73	%	RPMs (thousands)	1,432,131					1,338,459				93,672				7	%
ASMs (thousands)	ASMs (thousands)	1,684,532			1,158,012			526,520					45	%	ASMs (thousands)	1,625,728					1,684,532				(58,804)				(3)	%
TRASM (cents)	TRASM (cents)	10.25			6.93			3.32					48	%	TRASM (cents)	13.81					10.25				3.56				35	%
Passenger load factor	Passenger load factor	79.5		%	66.9		%	12.6		pts			N/A		Passenger load factor	88.1		%			79.5		%		8.6		pts		N/A

The ~~significant quarter-over-quarter~~year-over-year increases in ~~all~~certain scheduled service operating data ~~was~~were primarily the result of ~~the continued recovery~~an increase in demand ~~from the COVID-19 pandemic~~ in the first quarter of ~~2022~~2023 relative to the same period in ~~2021.~~2022. The ~~quarter-over-quarter~~year-over-year increase in demand is demonstrated by a ~~44% increase in departures, a 67% increase in passengers, and a 36%~~14% increase in the average base fare per ~~passenger.~~passenger, 8.6 percentage points increase in passenger load factor, and a 8% increase in passengers, as year-over-year ASMs decreased by 3%. The year-over-year revenue increase is slightly offset by the introduction of an Ancillary product during the second quarter of 2022, which reclassified approximately $17,224 of revenue from Scheduled Service to Ancillary during the three months ended March 31, 2023.

Charter Service. Charter service revenue increased ~~$7,074,~~$13,308, or ~~27%~~40%, to $46,187 for the three months ended March 31, 2023, from $32,879 for the three months ended March 31, ~~2022, from $25,805~~2022. Charter revenue per block hour was $9,139 for the three months ended March 31, ~~2021. Charter revenue per block hour was~~2023, as compared to $8,643 for the three months ended March 31, 2022, ~~as compared to $7,747 for the three months ended March 31, 2021,~~ for an increase of ~~12%~~6%. The increase in Charter service revenue was driven by ~~the increase in rates~~a 46% and ~~a 14%~~33% increase in Charter departures and block hours, respectively, primarily due to ~~the continued recovery from the COVID-19 pandemic and a~~ new charter agreement with Caesars Entertainment, Inc. that began operations in the first quarter of 2022. Rates in 2021 suffered from significant competitive pressure because other carriers had excess aircraft, crew, and resources to operate charter capacity.agreements.

Ancillary. Ancillary revenue increased by ~~$21,316,~~$23,339, or ~~90%~~52%, to $68,425 for the three months ended March 31, 2023, from $45,086 for the three months ended March 31, ~~2022, from $23,770 for~~2022. Ancillary revenue was $68.55 per passenger in the three months ended March 31, ~~2021.~~2023, up $19.68, or 40%, from the three months ended March 31, 2022. Ancillary revenue benefited from the introduction of an Ancillary product during the second quarter of 2022, which reclassified approximately $17,224 of revenue from Scheduled Service to Ancillary during the three months ended March 31, 2023. The ~~67%~~ increase in scheduled passengers and passenger load factor of 8% and 8.6 percentage points, respectively, during the period resulted in greater sales of air travel-related services, such ~~as;~~as baggage fees, seat selection and upgrade fees, priority check-in and boarding fees, itinerary service fees and on-board sales. Ancillary revenue was $48.87 per passenger in the three months ended March 31, 2022, up $5.89, or 14%, from the three months ended March 31, 2021. The increase in ancillary revenue per passenger was due to increased demand for air-travel related services.

Cargo. Revenue from cargo services ~~slightly decreased~~increased by ~~$532,~~$2,308, or 2%11%, to $23,361 for the three months ended March 31, 2023, from $21,053 for the three months ended March 31, ~~2022, from $21,585 for~~2022. The increase was primarily driven by a 18% and 5% increase in departures and block hours, respectively. Revenue during the three months ended March 31, ~~2021. The number of departures were materially consistent quarter-over-quarter; however, block hours declined 10% over~~2023 also benefited from the ~~same period due to~~annual rate escalation included in the ~~timing of planned heavy maintenance events.~~

~~Other~~. Other revenue was $3,439 for the three months ended March 31, 2022, as compared to $1,831 for the three months ended March 31, 2021. The increase was primarily driven by an increase in revenue from Sun Country Vacations as a result of higher quarter-over-quarter bookings due to more scheduled service passengers.ATSA, which went into effect on December 13, 2022.

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

(Dollars in thousands, except per share amounts)

(Unaudited)

Other. Other revenue was $3,485 for the three months ended March 31, 2023, as compared to $3,439 for the three months ended March 31, 2022. Other revenue will benefit in future periods from the rental revenue associated with the five Aircraft Held for Operating Lease acquired in March and April of 2023.

Operating Expenses

Aircraft Fuel. We believe Aircraft Fuel ~~expenses,~~expense, excluding ~~derivatives and other items,~~indirect fuel credits, is the best measure of the effect of fuel prices on our business as it consists solely of ~~items associated with~~direct fuel ~~for~~expenses that are related to our operations and is consistent with how management analyzes our operating performance. This measure is defined as GAAP Aircraft Fuel expense, excluding ~~gains~~indirect fuel credits that are recognized within Aircraft Fuel expense, but are not directly related to ~~fuel hedge derivative contracts and other items not individually significant.~~our Fuel Cost per Gallon.

The primary components of Aircraft Fuel expense are shown in the following table:

Three Months Ended March 31, Change %
Change
2022 2021
Total Aircraft Fuel Expenses $ 64,544 $ 24,274 $ 40,270 166 %
Exclude: Fuel Derivative Gains — 2,386 (2,386) (100) %
Other Excluded Items 318 66 252 382 %
Aircraft Fuel Expenses, Excluding Derivatives and Other Items $ 64,862 $ 26,726 $ 38,136 143 %
Fuel Gallons Consumed (thousands) 20,245 13,993 6,252 45 %
Fuel Cost per Gallon, Excluding Derivatives and Other Items $ 3.20 $ 1.91 $ 1.29 68 %


	Three Months Ended March 31,				Change		% Change
	2023		2022
Total Aircraft Fuel Expense	$	72,290	$	64,544	$	7,746	12	%
Indirect Fuel Credits	440		318		122		38	%
Aircraft Fuel Expense, Excluding Indirect Fuel Credits	$	72,730	$	64,862	$	7,868	12	%
Fuel Gallons Consumed (thousands)	21,073		20,245		828		4	%
Fuel Cost per Gallon, Excluding Indirect Fuel Credits	$	3.45	$	3.20	$	0.25	8	%

~~The increase was mainly driven~~

Aircraft Fuel expense increased by ~~the 68%~~12% year-over-year primarily due to a 8% increase in the average ~~price~~fuel cost per gallon and a 4% increase in consumption. The price of fuel ~~and a 45% increase in fuel gallons consumed resulting from a recovery in demand as demonstrated~~continues to be impacted by ~~a 42% increase in passenger service block hours.~~global geopolitical events.

Salaries, Wages, and Benefits. Salaries, ~~wages,~~Wages, and ~~benefits~~Benefits expense increased ~~$15,542,~~$15,813, or ~~35%~~27%, to $75,430 for the three months ended March 31, 2023, as compared to $59,617 for the three months ended March 31, ~~2022, as compared to $44,075 for the three months ended March 31, 2021.~~2022. The increase in Salaries, Wages, and Benefits was ~~driven by the new Collective Bargaining Agreement ("CBA") for our pilots, which went into effect in the beginning of 2022, and~~primarily due to an increase in ~~passenger service related block hours.~~headcount, as well as per unit costs for pilots to support the current flight schedule. The employee headcount as of March 31, ~~2022~~2023 was ~~2,316,~~2,634, as compared to ~~1,768~~2,316 as of March 31, ~~2021,~~2022, for an increase of ~~548,~~318, or ~~31%~~14%. ~~The increase in employee headcount was to support all lines of business during the ongoing recovery from the impacts of the COVID-19 pandemic.~~

Aircraft Rent. Aircraft Rent expense decreased ~~$2,413,~~$1,706, or ~~43%~~54%, to $1,480 for the three months ended March 31, 2023, as compared to $3,186 for the three months ended March 31, ~~2022, as compared to $5,599 for the three months ended March 31, 2021.~~2022. Aircraft Rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases ~~(the expense~~(expense is recorded within Aircraft Rent) to owned aircraft or finance leases (expense is recorded through Depreciation and Amortization and Interest Expense). ~~Specifically, in the first three months~~As of ~~2022, we executed lease amendments which modified two aircraft from operating leases to finance leases. For the three months ended~~ March 31, ~~2022~~2023 and ~~2021,~~2022, there were ~~four~~two and ~~seven~~four aircraft under operating leases, respectively.

Maintenance. Maintenance ~~materials and repair~~ expense increased ~~$2,785,~~$1,044, or ~~30%~~9%, to $13,039 for the three months ended March 31, 2023, as compared to $11,995 for the three months ended March 31, ~~2022, as compared to $9,210 for the three months ended March 31, 2021.~~2022. The increase in maintenance expense was primarily driven by the year-over-year increase in the size of our fleet, as well as increased total system departures and block ~~hours across the Passenger segment. Additionally, the cost of~~hours. These amounts were partially offset by fewer landing gear events and heavy ~~checks increased quarter-over-quarter due to the timing of required~~ maintenance ~~events.~~checks.

Sales and Marketing. Sales and Marketing expense increased ~~$3,518,~~$1,301, or ~~69%~~15%, to $9,929 for the three months ended March 31, 2023, as compared to $8,628 for the three months ended March 31, ~~2022, as compared to $5,110 for the three months ended March 31, 2021. Passenger revenue~~2022. The year-over-year

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

(Dollars in thousands, except per share amounts)

(Unaudited)

~~increased 94% between these two periods leading to a $2,808~~increase was driven by approximately $1,500 increase in credit card processing, ~~and~~partially offset by a decrease in global distribution system ~~fees.~~expenses due to a new direct distribution method that has shifted the mix of direct and indirect sales.

Depreciation and Amortization. Depreciation and Amortization expense increased ~~$2,713,~~$4,132, or ~~22%~~27%, to $19,460 for the three months ended March 31, 2023, as compared to $15,328 for the three months ended March 31, ~~2022, as compared to $12,615 for the three months ended March 31, 2021.~~2022. The increase was primarily due to the impact of a change in the composition of our aircraft fleet tothat results in an increased number of owned aircraft and aircraft under finance leases (the expense is recorded as Depreciation and Amortization and Interest Expense). ~~For the three months ended~~As of March 31, ~~2022~~2023 and ~~2021,~~2022, there were 2243 and 1934 aircraft that were owned ~~aircraft and 12 and five~~or under finance leases, respectively.

Ground Handling. Ground Handling expense increased ~~$2,728,~~$3,080, or ~~52%~~39%, to $11,038 for the three months ended March 31, 2023, as compared to $7,958 for the three months ended March 31, ~~2022, as compared to $5,230 for the three months ended March 31, 2021.~~2022. The increase was primarily driven by the 46% increase in Charter departures, as well as rate increases due to ~~the 44% increase in scheduled departures during the same time periods.~~inflationary and market pressures.

Landing Fees and Airport Rent. Landing Fees and Airport Rent increased ~~$1,501,~~$1,765, or 17%, to $12,051 for the three months ended March 31, 2023, as compared to $10,286 for the three months ended March 31, ~~2022,~~2022. The increase was primarily driven by the 46% increase in Charter departures, as ~~compared~~well as rate increases due to ~~$8,785~~inflationary and market pressures.

Other Operating, net. Other operating, net increased $465, or 2%, to $23,615 for the three months ended March 31, ~~2021. The increase was primarily driven by the 44% increase in scheduled departures~~2023, as compared to $23,150 for the three months ended March 31, 2022, mainly due to increased departures within Charter, which resulted in higher crew travel costs and catering expenses, as well as an increase in other operational overhead costs. These increases were partially offset by an increase in Charter recovery costs as a result of the 46% increase in departures.

Non-operating Income (Expense)

Interest Income. Interest income was $2,741 for the three months ended March 31, 2023 primarily due to the change in investment strategy which led to the purchase of debt securities during the second quarter of 2022. Interest income for the three months ended March 31, 2022 was nominal.

~~Special Items, net~~Interest Expense. ~~There were no Special Items recorded~~Interest expense increased $68, or 1%, to $8,630 for the three months ended March 31, 2023, as compared to $8,562 for the three months ended March 31, 2022. ~~Special Items had~~The increase was primarily due to a ~~net benefit~~larger mix of ~~$26,871 for~~owned aircraft that were financed or refinanced with the proceeds from new debt, partially offset by a $1,557 loss on extinguishment of debt in the three months ended March 31, ~~2021. The net benefit was primarily driven by~~2022 related to the ~~payroll support received under~~repayment of the ~~CARES Act,~~DDTL. Interest expense will be impacted in future periods from the additional debt incurred to complete the acquisition of ~~which the Cargo segment was allocated $8,665. These credits within the Cargo segment results were based on the respective segment salaries, wages,~~five Aircraft Held for Operating Lease in March and ~~benefits.~~April of 2023. For more information on ~~Special Items,~~the Company's Debt, see Note 117 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Other, ~~Operating,~~ net. Other, ~~operating,~~net was a net expense ~~increased $8,499, or 58%,~~of $212 for the three months ended March 31, 2023, as compared to ~~$23,150~~a net expense of $6,876 for the three months ended March 31, 2022, as compared to $14,651 for the three months ended March 31, 2021, mainly due to increased departures within the Passenger segment, which resulted in higher crew and other employee travel costs, catering expenses, and other operational overhead costs.

~~Non-operating Income (Expense)~~

~~Interest Expense~~a decrease of $6,664, or 97%. ~~Interest expense increased $1,441, or 20%, to $8,562 for the three months ended March 31, 2022, as compared to $7,121 for the three months ended March 31, 2021.~~ The ~~increase~~decrease was ~~primarily due to a larger mix of owned aircraft and aircraft accounted for as finance leases during the three months ended March 31, 2022.~~

~~Other, net. Other, net for the three months ended March 31, 2022 was a net expense of $6,876~~ primarily due to the $6,800 adjustment to increase the estimated TRA liability ~~see~~ N ~~ote 10~~in the prior year, partially offset by offering expenses of $528 in connection to the ~~Condensed Consolidated Financial Statements included in Part I, Item I of this report. Other, net for~~Company's secondary offering during the three months ended March 31, ~~2021, was not significant.~~

~~Income Tax Expense.~~ The Company's effective tax rate for the three months ended March 31, 2022 was 43.3% compared to 30.3% for the three months ended March 31, 2021. The increase in the effective tax rate was primarily due to the non-deductible expense related to the adjustment of the TRA liability, partially offset by stock compensation benefits.2023.

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

(Dollars in thousands, except per share amounts)

(Unaudited)

Income Tax. The Company's effective tax rate for the three months ended March 31, 2023 was 22.9% compared to 43.3% for the three months ended March 31, 2022. The decrease in the effective tax rate was primarily due to the $6,800 non-deductible adjustment of the TRA liability in the prior period, partially offset by stock compensation benefits. For more information on the TRA liability, see Note 10 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Segments

For the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022


		Three Months Ended March 31, 2022						Three Months Ended March 31, 2021							Three Months Ended March 31, 2023									Three Months Ended March 31, 2022
		Passenger		Cargo		Total		Passenger		Cargo		Total			Passenger			Cargo			Total			Passenger			Cargo			Total
Operating Revenues	Operating Revenues	$	205,472	$	21,053	$	226,525	$	106,026	$	21,585	$	127,611	Operating Revenues	$	270,754		$	23,361		$	294,115		$	205,472		$	21,053		$	226,525

Operating Expenses:	Operating Expenses:													Operating Expenses:
Aircraft Fuel	Aircraft Fuel	64,544		—		64,544		24,253		21		24,274		Aircraft Fuel	72,266			24			72,290			64,544			—			64,544
Salaries, Wages, and Benefits	Salaries, Wages, and Benefits	47,531		12,086		59,617		32,839		11,236		44,075		Salaries, Wages, and Benefits	58,808			16,622			75,430			47,531			12,086			59,617
Aircraft Rent	Aircraft Rent	3,186		—		3,186		5,599		—		5,599		Aircraft Rent	1,480			—			1,480			3,186			—			3,186
Maintenance	Maintenance	9,103		2,892		11,995		6,603		2,607		9,210		Maintenance	9,482			3,557			13,039			9,103			2,892			11,995
Sales and Marketing	Sales and Marketing	8,628		—		8,628		5,110		—		5,110		Sales and Marketing	9,929			—			9,929			8,628			—			8,628
Depreciation and Amortization	Depreciation and Amortization	15,302		26		15,328		12,589		26		12,615		Depreciation and Amortization	19,430			30			19,460			15,302			26			15,328
Ground Handling	Ground Handling	7,954		4		7,958		5,230		—		5,230		Ground Handling	11,038			—			11,038			7,954			4			7,958
Landing Fees and Airport Rent	Landing Fees and Airport Rent	10,171		115		10,286		8,655		130		8,785		Landing Fees and Airport Rent	11,950			101			12,051			10,171			115			10,286
Special Items, net		—		—		—		(18,206)		(8,665)		(26,871)
Other Operating, net	Other Operating, net	18,935		4,215		23,150		10,580		4,071		14,651		Other Operating, net	18,520			5,095			23,615			18,935			4,215			23,150
Total Operating Expenses	Total Operating Expenses	185,354		19,338		204,692		93,252		9,426		102,678		Total Operating Expenses	212,903			25,429			238,332			185,354			19,338			204,692
Operating Income		$	20,118	$	1,715	$	21,833	$	12,774	$	12,159	$	24,933
Operating Income (Loss)														Operating Income (Loss)	$	57,851		$	(2,068)		$	55,783		$	20,118		$	1,715		$	21,833

Adjustment for Special Items, net		—		—		—		(18,206)		(8,665)		(26,871)

Operating Income, Excluding Special Items, net		$	20,118	$	1,715	$	21,833	$	(5,432)	$	3,494	$	(1,938)

Operating Margin %, Excluding Special Items, net		10%		8%		10%		(5)%		16%		(2)%
Operating Margin %														Operating Margin %	21.4		%	(8.9)		%	19.0		%	9.8		%	8.1		%	9.6		%

Passenger. Passenger ~~operating income~~Operating Income increased by ~~$7,344~~$37,733 to $57,851 for the three months ended March 31, 2023 from $20,118 for the three months ended March 31, ~~2022 from $12,774~~2022. The Operating Margin Percentage for the three months ended March 31, ~~2021.~~2023 increased by 11.6 percentage points, as compared to the three months ended March 31, 2022. The increase in Passenger Operating Income and Operating Margin was primarily driven by an increase in demand for passenger service during the first quarter of 2023, as compared to the first quarter of 2022, resulting in higher per unit revenues for both scheduled service and charter. These revenue increases more than offset increases in expenses. For more information on the changes in the components of ~~operating income~~Operating Income for the Passenger segment, refer to the ~~Condensed Consolidated~~ Results of Operations discussion above.

Cargo.Cargo ~~operating income decreased by $10,444~~had an Operating Loss of $2,068 for the three months ended March 31, 2023, as compared to Operating Income of $1,715 for the three months ended March 31, 2022, ~~as compared to $12,159~~a decrease of $3,783. Operating Margin Percentage for the three months ended March 31, ~~2021.~~2023 decreased by 17.0 percentage points, as compared to the three months ended March 31, 2022. The decrease was primarily driven by ~~the allocated payroll support received under the CARES Act during the first quarter of 2021, recognized within Special Items, net, and quarter-over-quarter~~a year-over-year increase in Salaries, Wages, and Benefits ~~driven by the new CBA~~due to an increase in head count, as well as per unit costs for pilots

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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)

~~for our pilots that went into effect in the beginning of 2022.~~to support operations. For more information on the components of ~~operating income~~Operating Income for the Cargo segment, refer to the ~~Condensed Consolidated~~ Results of Operations discussion above, where we describe the cargo expenses embedded within each financial statement line item.

Non-GAAP Financial Measures

We sometimes use information that is derived from the Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this ~~report~~Report to the most directly comparable GAAP financial measures.

Adjusted Operating Income, Adjusted Operating Income Margin, ~~and~~ Adjusted Net Income and Adjusted EBITDA

Adjusted Operating Income, Adjusted Operating Income Margin, ~~and~~ Adjusted Net Income, and Adjusted EBITDA are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of ~~operating income~~Operating Income and ~~net income~~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~~The measures described above 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~~they do not reflect the impact of certain cash and non-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~~these non-GAAP measures 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~~the following non-GAAP measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP and may not be the same as or comparable to similarly titled measures presented by other companies due to the possible differences in the method of calculation and in the items being adjusted.

For the foregoing reasons, Adjusted Operating Income, Adjusted Operating Income Margin, ~~and~~ Adjusted Net Income and Adjusted EBITDA have significant limitations which affect their use as indicators of our ~~profitability and valuation.~~profitability. Accordingly, readers are cautioned not to place undue reliance on this information.

~~- 31 -~~

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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 following table presents the reconciliation of Operating Income to Adjusted Operating Income, and Adjusted Operating Income Margin for the periods presented below.


		Three Months Ended March 31,							Three Months Ended March 31,
		2022			2021				2023			2022
Adjusted Operating Income Margin Reconciliation:	Adjusted Operating Income Margin Reconciliation:							Adjusted Operating Income Margin Reconciliation:
Operating Revenue	Operating Revenue	$	226,525		$	127,611		Operating Revenue	$	294,115		$	226,525
Operating Income	Operating Income	21,833			24,933			Operating Income	55,783			21,833

Special Items, net (a)		—			(26,871)
Stock compensation expense		920			2,870
TRA expenses (b)		—			264
Stock Compensation Expense								Stock Compensation Expense	2,678			920
Adjusted Operating Income	Adjusted Operating Income	$	22,753		$	1,196		Adjusted Operating Income	$	58,461		$	22,753

Operating Income Margin	Operating Income Margin	9.6		%	19.5		%	Operating Income Margin	19.0		%	9.6		%
Adjusted Operating Income Margin	Adjusted Operating Income Margin	10.0		%	0.9		%	Adjusted Operating Income Margin	19.9		%	10.0		%

The following table presents the reconciliation of Net Income to Adjusted Net Income for the periods presented below.


	Three Months Ended March 31,
	2023		2022
Adjusted Net Income Reconciliation:
Net Income	$	38,328	$	3,637

Stock Compensation Expense	2,678		920
Gain on Asset Transactions, net (a)	—		(2)
Loss on refinancing credit facility	—		1,557
Secondary offering costs	528		—
TRA adjustment (b)	(357)		6,800
Income tax effect of adjusting items, net (c)	(737)		(568)
Adjusted Net Income	$	40,440	$	12,344

_________________________


(a)			~~The~~Due to changes in the Company’s operations, Management determined that, beginning in the fourth quarter of 2022, certain asset transactions will no longer be included as adjustments ~~include Special Items, net, as presented~~to Adjusted Net Income because these transactions are part of our recurring operations. This change was made prospectively beginning in ~~Note 11~~the fourth quarter of ~~the Company's Condensed Consolidated Financial Statements.~~2022, and no prior period amounts have been adjusted.
(b)			This represents the ~~one-time costs~~adjustment to ~~establish~~ the TRA ~~liability with our~~for the period, which is recorded in Non-Operating Income (Expense).
(c)			The tax effect of adjusting items, net is calculated at the Company's statutory rate for the applicable period. The TRA ~~holders. See~~ ~~Note 10~~ ofadjustment is not included within the ~~Company’s Condensed Consolidated Financial Statements.~~income tax effect calculation.

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

Three Months Ended March 31,
2022 2021
Adjusted Net Income (Loss) Reconciliation:
Net Income $ 3,637 $ 12,416
Special Items, net (a)
— (26,871)
Stock Compensation Expense 920 2,870
Gain on Asset Transactions, net (2) —
Early pay-off of US Treasury loan — 842
Loss on refinancing credit facility 1,557 382
TRA expenses (b)
— 264
TRA adjustment (c)
6,800 —
Income tax effect of adjusting items, net (d)
(568) 5,178
Adjusted Net Income (Loss) $ 12,344 $ (4,919)


	Three Months Ended March 31,
	2023		2022
Adjusted EBITDA Reconciliation:
Net Income	$	38,328	$	3,637
Stock Compensation Expense	2,678		920
Gain on Asset Transactions, net (a)	—		(2)
Secondary offering costs	528		—
TRA adjustment (b)	(357)		6,800
Interest Income	(2,741)		(24)
Interest Expense	8,630		8,562
Provision for Income Taxes	11,354		2,782
Depreciation and Amortization	19,460		15,328
Adjusted EBITDA	$	77,880	$	38,003

_________________________


(a)			~~The~~Due to changes in the Company’s operations, Management determined that, beginning in the fourth quarter of 2022, certain asset transactions will no longer be included as adjustments ~~include Special Items, net, as presented~~to Adjusted Net Income because these transactions are part of our recurring operations. This change was made prospectively beginning in ~~Note 11~~the fourth quarter of ~~the Company's Condensed Consolidated Financial Statements.~~2022, and no prior period amounts have been adjusted.
(b)			~~This represents the one-time costs to establish the TRA liability with our TRA holders. See~~ ~~Note 10~~ ~~of the Company’s Condensed Consolidated Financial Statements.~~
~~(c)~~			~~This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense).~~
~~(d)~~			~~The tax effect of adjusting items, net is calculated at the Company's statutory rate for the applicable period. The TRA adjustment is not included within the income tax effect calculation.~~

~~Adjusted EBITDAR~~

Adjusted 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 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 of Adjusted EBITDAR include: it does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our

~~- 33 -~~

~~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)~~

ongoing operations; does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; does not reflect changes in, or cash requirements for, our working capital needs; it does not reflect the interest 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 it 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 table presents the reconciliation of Net Income to Adjusted EBITDAR for the periods presented below.~~

Three Months Ended March 31,
2022 2021
Adjusted EBITDAR Reconciliation:
Net Income $ 3,637 $ 12,416
Special Items, net (a)
— (26,871)
Stock Compensation Expense 920 2,870
Gain on Asset Transactions, net (2) —
TRA expenses (b)
— 264
TRA adjustment (c)
6,800 —
Interest Income (24) (15)
Interest Expense 8,562 7,121
Provision for Income Taxes 2,782 5,406
Depreciation and Amortization 15,328 12,615
Aircraft Rent 3,186 5,599
Adjusted EBITDAR $ 41,189 $ 19,405

~~_________________________~~


~~(a)~~			~~The adjustments include Special Items, net, as presented in~~ ~~Note 11~~ ~~of the Company's Condensed Consolidated Financial Statements.~~
~~(b)~~			~~This represents the one-time costs to establish the TRA liability with our TRA holders. See~~ ~~Note 10~~ ~~of the Company’s Condensed Consolidated Financial Statements.~~
~~(c)~~			This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense).

CASM and Adjusted CASM

~~Cost per Available Seat Mile (“CASM”)~~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, stock-based compensation, certain commissions and other costs of selling our 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

~~- 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)~~

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.

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 segment in the “Segment Information” table presented above, due to several items that are included in the Cargo segment, but have been captured in other line items used in the Adjusted CASM calculation. Adjusted CASM further excludes special items and other adjustments, as defined in the relevant reporting period, that are not

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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)

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 period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any period.

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~~aforementioned reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Accordingly, readers are cautioned not to place undue reliance on this information.

The following tables present the reconciliation of CASM to Adjusted CASM.


		Three Months Ended March 31,							Three Months Ended March 31,
		2022			2021				2023			2022
		Operating Expenses		Per ASM (in cents)	Operating Expenses		Per ASM (in cents)		Operating Expenses		Per ASM (in cents)	Operating Expenses		Per ASM (in cents)
CASM	CASM	$	204,692	10.62	$	102,678	7.46	CASM	$	238,332	12.25	$	204,692	10.62
Less:	Less:							Less:
Aircraft Fuel	Aircraft Fuel	64,544		3.35	24,274		1.76	Aircraft Fuel	72,290		3.72	64,544		3.35
Stock Compensation Expense	Stock Compensation Expense	920		0.05	2,870		0.21	Stock Compensation Expense	2,678		0.13	920		0.05
Special Items, net (a)		—		—	(26,871)		(1.95)
TRA expense (b)		—		—	264		0.02
Cargo expenses, not already adjusted above	Cargo expenses, not already adjusted above	19,112		0.99	17,195		1.25	Cargo expenses, not already adjusted above	24,812		1.28	19,112		0.99
Sun Country Vacations	Sun Country Vacations	402		0.02	214		0.02	Sun Country Vacations	436		0.02	402		0.02
Adjusted CASM	Adjusted CASM	$	119,714	6.21	$	84,732	6.15	Adjusted CASM	$	138,116	7.10	$	119,714	6.21

ASM		1,928,149			1,376,796
ASM (thousands)								ASM (thousands)	1,945,001			1,928,149

~~_________________________~~


~~(a)~~			~~The adjustments include Special Items, net, as presented in~~ ~~Note 11~~ ~~of the Company's Condensed Consolidated Financial Statements.~~
~~(b)~~			~~This represents the one-time costs to establish the TRA liability with our TRA holders. See~~ ~~Note 10~~ ~~of the Company’s Condensed Consolidated Financial Statements.~~

~~- 35 -~~

~~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)~~

Liquidity and Capital Resources

The airline business is capital intensive. Our ability to successfully execute our business strategy is largely dependent on the continued availability of capital onwith attractive terms and ~~to maintain~~maintaining 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, and debt financing.

Our primary sources of liquidity as of March 31, ~~2022~~2023 included our existing cash and cash equivalents of ~~$272,402~~$71,587 and short-term investments of ~~$6,233,~~$171,638, our expected cash generated from operations, and ~~our $25,000~~the $24,650 of available funds from the Revolving Credit Facility. In addition, we had restricted cash of ~~$8,085~~$22,776 as of March 31, ~~2022~~2023, which generally 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 the charter transportation is provided. As of March 31, 2023, the Company's restricted cash balance also included $13,103 that was deposited in relation to the purchase of the two remaining Aircraft Held for Operating Lease. Upon acquisition, the deposited amounts were remitted to the seller.

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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)

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

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 twelve months. However, we cannot predict what the effect on our business and financial position might be from a change in the competitive 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.

Aircraft – As of March 31, ~~2022, we operated a~~2023, our fleet consisted of 5057 Boeing 737-NG aircraft. This includes 3842 aircraft in the passenger fleet, ~~and~~ 12 of cargo operated aircraft through the ~~ATSA. We plan~~ATSA, and three Aircraft Held for Operating Lease.

During the three months ended March 31, 2023, the Company entered into an agreement to ~~grow~~acquire five Aircraft Held for Operating Lease. On March 29, 2023, the ~~passenger fleet to an estimated 50 aircraft by~~Company acquired three of the Aircraft Held for Operating Lease for total consideration of approximately $95,000. On April 4, 2023, the Company completed the transaction resulting in the acquisition of the two additional Aircraft Held for Operating Lease for total consideration of approximately $63,000. Upon purchase, the Company obtained outright ownership of the Aircraft Held for Operating Lease and assumed the position of lessor until the end of ~~2023.~~ the lease terms. On each lease expiry date, the Aircraft Held for Operating Lease will be redelivered to Sun Country and is expected to be inducted into the Company’s fleet.

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. For more information on our fleet, see Note 65 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

~~Subsequent to March 31, 2022, the Company committed to lease an aircraft for a period of six years at approximately~~ ~~$2,220~~ per year. The Company expects to take delivery of the aircraft during fiscal year 2022. The Company also purchased an aircraft that was previously under a finance lease before the end of the lease term for a purchase price of $16,784 and took delivery of four incremental aircraft for a total purchase price of approximately $75,000. The Company financed these purchases using incremental 2022-1 EETC funds that were drawn upon subsequent to March 31, 2022.

Maintenance Deposits - In addition to funding the acquisition of aircraft, we are required by certain of 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 on our Condensed Consolidated Balance Sheets. AAs of March 31, 2023, we had $36,532 of total Lessor Maintenance Deposits.

Investments -The Company invests its cash and cash equivalents in highly liquid securities with strong credit ratings. As of March 31, 2023, the Company held $165,277 of debt securities, all of which are classified as current assets because of their highly liquid nature and availability to be converted into cash to fund current operations. Given the significant portion of our ~~deposits is therefore unavailable until after~~portfolio held in cash and cash equivalents and the high credit quality of our debt security investments, we do not anticipate fluctuations in the aggregate fair value of our investments to have ~~completed~~a material impact on our liquidity or capital position.

The Company also holds $6,361 of Certificates of Deposit that are included in Investments on the ~~scheduled maintenance in accordance with the terms~~Condensed Consolidated Balance Sheets as of ~~the aircraft leases.~~March 31, 2023.

CARES Act - During ~~2021, we received grants totaling $71,587 from~~ the ~~Treasury under PSP2 and PSP3. We also received a CARES Act Loan~~twelve months ended June 30, 2022, the compensation payable to an executive officer temporarily exceeded the restrictions on the payment of ~~$45,000 in October 2020, which was repaid in full on March 24, 2021 using the proceeds from the IPO.~~

~~In accordance with the $71,587 of grants received~~certain executive compensation under the CARES ~~Act, we are required~~Act. Once the issue was identified, the executive officer voluntarily rescinded the unvested portion of the equity grant that caused the executive’s compensation to ~~comply with the relevant provisions of~~exceed the CARES Act ~~and~~limit. At no point did the ~~related implementing agreements. We were in compliance with~~executive's cash

~~- 36 -~~-34-

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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)

compensation and equity awards that could be monetized exceed the CARES Act ~~provisions~~limit. The Company did not accrue any amounts related to this matter as of March 31, ~~2022. For more information on~~2023. To the extent we are deemed to have failed to remain in full compliance with the CARES Act ~~provisions, see~~ ~~Note 3~~ ofand the ~~Consolidated Financial Statements included in Part II, Item 8 of the 2021 10-K.~~

applicable rules and regulations thereunder, we may become subject to fines or other enforcement actions.

Credit Facilities - The Company uses its Credit Facilities to provide liquidity support for general corporate purposes and to finance the acquisition of aircraft. ~~On February 10, 2021, we entered into a Credit Agreement which includes a~~

As of March 31, 2023, the Company had $24,650 of the $25,000 Revolving Credit Facility available due to $350 being pledged to support a letter of credit, and a $90,000 DDTL. The proceeds from the Revolving Credit Facility can be used for general corporate purposes, whereas the proceeds from the DDTL are to be used solely to finance the acquisition of aircraft or engines to be registered in the United States.no balance drawn. The Credit Agreement includes financial covenants that require a minimum trailing 12-month EBITDAR ($87,700 as of March 31, 2022 and beyond) and a minimum liquidity of $30,000 at the close of any business day. The Company was in compliance with ~~this covenant~~these covenants as of March 31, ~~2022.~~

~~During 2021, the Company drew $80,500 on the DDTL to purchase six aircraft, which were previously under operating leases.~~The Company repaid the outstanding balance for the DDTL in full in March 2022 using proceeds it received from the 2022-1 EETC. No amounts under the DDTL are available to the Company as of March 31, 2022. As of March 31, 2022, the Revolving Credit Facility had no balance drawn, leaving a total of $25,000 undrawn.2023.

Debt - At our discretion, we obtain debt financing through the issuance of pass-through trust certificates to purchase, or refinance, aircraft. In December 2019, we issued the 2019-1 EETC, for the purpose of financing or refinancing 13 used aircraft.

In March 2022, the Company ~~arranged for the issuance of~~issued the 2022-1 EETC ~~in an aggregate face amount of $188,277~~ for the purpose of financing or refinancing 13 aircraft. As

During the three months ended March 31, 2023, the Company executed a term loan credit facility with a face amount of $119,200 for the ~~date~~purpose of ~~this report,~~financing the five Aircraft Held for Operating Lease. The loan is to be repaid monthly over 7 years. During the lease term, payments collected from the lessee will be applied directly to the repayment of principal and interest on the term loan credit facility. The Aircraft Held for Operating Lease, as well as the related lease payments received from the lessee, are pledged as collateral. During the three months ended March 31, 2023, the Company received gross proceeds of ~~$172,507~~$71,280 with respect to three of the Aircraft Held for Operating Lease. An incremental $47,920 of gross proceeds were received subsequent to March 31, 2023 upon the completion of the transaction resulting in the acquisition of two additional Aircraft Held for Operating Lease.

The interest rate on the term loan credit facility is determined by using a base rate, which resets monthly, plus an applicable margin, and a fixed credit spread adjustment of 0.1%. The applicable margin during the lease term is fixed at 3.75%, and is subsequently reduced to 3.25% once the aircraft have been redelivered to the Company at the end of the lease term and a LTV ratio calculation is completed. The interest rate in effect as of March 31, 2023 on the term loan was 8.6%. To the extent that the LTV exceeds 75%, a principal prepayment will be required in order to ~~finance or refinance 12~~reduce the ratio to 75%. Amounts received under the end of lease maintenance compensation clause may be applied towards the 13 aircraft, and expects to receive an additional $15,770 of gross proceeds in respect to the thirteenth aircraft on or before September 15, 2022. The 2022-1 EETC will be secured by a lien on the financed or refinanced aircraft and will be cross collateralized by the other aircraft financed through the issuance. Total appraised value of the 12 aircraft was approximately $237,936 as of the original date of the agreement.LTV payment.

For more information on our credit facilities or debt, see Note 7 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

~~The table below presents~~TRA Liability - During the ~~major indicators~~three months ended March 31, 2023, the Company made a payment of ~~financial condition and liquidity:~~

March 31, 2022 December 31, 2021
Cash and Cash Equivalents $ 272,402 $ 309,338
Amount Available Under Revolving Credit Facility 25,000 25,000
Long-term Debt 277,285 277,426
Finance Lease Obligations 270,141 192,155
Operating Lease Obligations 34,040 76,041
Total Debt and Lease obligations $ 581,466 $ 545,622
Stockholders' Equity 493,291 486,811
Total Invested Capital $ 1,074,757 $ 1,032,433
Debt-to-Capital 0.54 0.53
$2,425 to the TRA holders. Payments will be made in future periods as Pre-IPO Tax Attributes are utilized. For more information on the TRA liability, see Note 10 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

~~- 37 -~~-35-

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


	March 31, 2023		December 31, 2022
Cash and Cash Equivalents	$	71,587	$	92,086
Available-for-Sale Securities	165,277		172,635
Amount Available Under Revolving Credit Facility	24,650		24,650
Total Liquidity	$	261,514	$	289,371

	March 31, 2023		December 31, 2022
Total Debt, net	$	412,259	$	352,235
Finance Lease Obligations	247,019		251,296
Operating Lease Obligations	26,099		26,132
Total Debt, net, and Lease Obligations	685,377		629,663
Stockholders' Equity	521,007		492,712
Total Invested Capital	$	1,206,384	$	1,122,375

Debt-to-Capital	0.57		0.56

Sources and Uses of Liquidity


		Three Months Ended March 31,					Three Months Ended March 31,				$		%
		2022		2021			2023		2022		Change		Change
Total Operating Activities	Total Operating Activities	$	18,213	$	15,839	Total Operating Activities	$	47,861	$	18,213	$	29,648	163	%

Investing Activities:	Investing Activities:					Investing Activities:
Purchases of Property & Equipment	Purchases of Property & Equipment	(49,683)		(54,399)		Purchases of Property & Equipment	(104,978)		(49,683)		(55,295)		111	%
Purchases of Investments						Purchases of Investments	(24,228)		(3)		(24,225)		NM
Proceeds from the Maturities of Investments						Proceeds from the Maturities of Investments	32,840		—		32,840		NM
Other, net	Other, net	55		(153)		Other, net	1,129		58		1,071		NM
Total Investing Activities	Total Investing Activities	(49,628)		(54,552)		Total Investing Activities	(95,237)		(49,628)		(45,609)		92	%

Financing Activities:	Financing Activities:					Financing Activities:
Cash Received from Stock Offering, net		—		228,668
Proceeds from Stock Option and Warrant Exercises		523		—
Common Stock Repurchases						Common Stock Repurchases	(14,812)		—		(14,812)		NM
Proceeds from Borrowings	Proceeds from Borrowings	77,986		68,000		Proceeds from Borrowings	71,280		77,986		(6,706)		(9)	%
Repayment of Finance Lease Obligations	Repayment of Finance Lease Obligations	(4,466)		(3,911)		Repayment of Finance Lease Obligations	(4,277)		(4,466)		189		(4)	%
Repayment of Borrowings	Repayment of Borrowings	(77,947)		(46,068)		Repayment of Borrowings	(10,122)		(77,947)		67,825		(87)	%
Debt Issuance Costs		(1,979)		(2,721)
Other, net						Other, net	(3,258)		(1,456)		(1,802)		124	%
Total Financing Activities	Total Financing Activities	(5,883)		243,968		Total Financing Activities	38,811		(5,883)		44,694		(760)	%

Net (Decrease) Increase in Cash		$	(37,298)	$	205,255
Net Decrease in Cash						Net Decrease in Cash	$	(8,565)	$	(37,298)	$	28,733	(77)	%

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

"NM" stands for not meaningful

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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 Cash Flow Activities

Operating activities in the three months ended March 31, ~~2022~~2023 provided ~~$18,213,~~$47,861, as compared to providing ~~$15,839 in~~$18,213 during the three months ended March 31, ~~2021.~~2022. During the ~~first quarter~~three months ended March 31, 2023 and 2022, ~~and 2021,~~our Net Income was $38,328 and $3,637, ~~and $12,416, respectively, as Net Income in the first quarter of 2021 was benefited by a number of one-time transactions that are adjusted for operating cash flow purposes.~~respectively.

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 typically increase during the fall and early winter months as advanced ticket sales grow prior to the late winter and spring peak travel season and decrease during the summer months.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 three months ended March 31, 2023, $123,574 of revenue recognized in Passenger revenue was included in the $157,995 of Air Traffic Liabilities as of December 31, 2022. The balance of Air Traffic Liabilities increased year-over-year by 28% to $141,613 as of March 31, 2023. This is due to increased demand for passenger services, which has also resulted in higher per unit revenues.

Aircraft Fuel. Aircraft Fuel expense represented approximately ~~32%~~30% and ~~24%~~32% of our total operating expense for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. Fuel consumption increased by 4% during the ~~first quarter of 2022~~three months ended March 31, 2023 compared to prior ~~year, consistent with increased passengers as the impact of the pandemic subsides.~~year. Additionally, the cost per gallon increased by ~~68% year-over-year.~~8% year-over-year due to current market conditions, which continue to be impacted by global geopolitical events. We expect jet fuel ~~costs~~prices to ~~be higher year over year~~remain volatile throughout 2023.

Investing Cash Flow Activities

CapitalExpenditures. Our capital expenditures were $104,978 and $49,683 for ~~comparable periods.~~the three months ended March 31, 2023 and 2022, respectively. Our capital expenditures during the three months ended March 31, 2023 primarily included the purchase of three Aircraft Held for Operating Lease and one spare engine. Our capital expenditures during the three months ended March 31, 2022 primarily included the purchase of one incremental aircraft, the purchase of three spare engines, the first installment payment to purchase a flight simulator, and other miscellaneous projects.

Investments. During three months ended March 31, 2023, the Company's net investment activity resulted in cash inflows of $8,612. This was the result of a change in investment strategy during the second quarter of 2022, which led to the purchase of debt securities. Proceeds from maturing securities exceeded purchases during the three months ended March 31, 2023.

Financing Cash Flow Activities

Debt. During the three months ended March 31, 2023, the Company executed a term loan credit facility with a face amount of $119,200 for the purpose of financing the five Aircraft Held for Operating Lease. The Company received gross proceeds of $71,280 with respect to three of the Aircraft Held for Operating Lease during the three months ended March 31, 2023. In March 2022, the Company arranged for the issuance of the 2022-1 EETC in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft. Five of these aircraft were owned fleet assets previously financed by the DDTL, which was repaid with the proceeds from the 2022-1 EETC.

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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~~Finance Leases. The year-over-year decrease was impacted by the change in the composition of our fleet that resulted in a decrease in the number of aircraft operated under finance leases. As of March 31, 2023 and 2022, there were 11 and 12 finance leases, respectively.

Common Stock Repurchases. ~~Act.~~During the three months ended March 31, ~~2022 we did not receive any funding from~~2023 the ~~CARES Act. During the three months ended March 31, 2021 we received $32,208 in CARES Act grants and $334 in employee retention tax credits.~~

~~Investing Cash Flow Activities~~

~~CapitalExpenditures.~~ Our capital expenditures were $49,683 and $54,399 for the three months ended March 31, 2022 and 2021, respectively. Our capital expenditures during the three months ended March 31, 2022 primarily included the purchaseCompany repurchased 750,000 shares of one aircraft, the purchase of three spare engines, the first installment payment to purchase a flight simulator, and other miscellaneous projects. Our capital expenditures during the three months ended March 31, 2021 were primarily related to the purchases of five existing aircraft previously under operating leases. Subsequent to March 31, 2022, we used incremental 2022-1 EETC financing to purchase an aircraft previously under a finance lease for a purchase price $16,784 and took delivery of four incremental aircraft forits Common Stock at a total ~~purchase price~~cost of ~~approximately $75,000.~~

~~Financing Cash Flow Activities~~

~~IPO.~~ ~~In March 2021, we completed our IPO. In total, 10,454,545 shares were issued and the net proceeds to the Company were $225,329 after deducting underwriting discounts and commissions, and other~~$14,812, or $19.75 per share. The repurchase was part of a secondary public offering ~~expenses. The proceeds from the IPO were immediately used to repay our $45,000 loan with the Treasury, plus interest.~~

~~Debt. In the three months ended March 31, 2022, the Company arranged for the issuance~~ of the ~~2022-1 EETC in~~Company's shares by an ~~aggregate face amount~~affiliate of ~~$188,277 for~~certain investment funds managed by affiliates of Apollo. For more information on the purpose of financing or refinancing 13 aircraft. We obtained $77,986 in gross proceeds during the first quarter of 2022 for the purpose of refinancing seven aircraft. Subsequent to March 31, 2022, we issued an incremental $94,521 of 2022-1 EETC proceeds for the purpose of financing five aircraft, which were received in the second quarter of 2022. The remaining $15,770 of gross proceeds is expected to be received on or before September 15, 2022 in connection with purchasing the thirteenth aircraft from the lessor. Five of these aircraft were owned fleet assets previously financed by the DDTL, which was repaid with the proceeds from the 2022-1 EETC.

~~For additional information regarding these financing arrangements,~~stock repurchase program and this purchase, see Note 711 of ~~the Notes to~~ the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Other. During the three months ended March 31, 2023, the Company made a payment of $2,425 to the TRA holders.

Off Balance Sheet Arrangements

~~Indemnities. Our aircraft, equipment and other leases and certain operating agreements typically contain provisions requiring us, as~~For a detailed discussion on 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~~nature of the ~~aircraft or such other equipment. We believe that our insurance covers most~~Company's Off Balance Sheet Arrangements, see “Management’s Discussion and Analysis 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 and 2022-1 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 interestsOperations” 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. We use these certificates to finance or refinance aircraft purchases utilizing these certificates and the obligations are listed inPart II, ~~Note~~Item 7 ofin our 2022 10-K. There have been no material changes to the Condensed Consolidated Financial Statements. As of March 31, 2022, $94,521 of financing was available to us through the 2022-1 EETC, but was not reported on our Condensed Consolidated Balance Sheets because we had not issued

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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)~~

~~equipment notes as of the~~Company's Off Balance Sheet date. As of the date of this report, the remaining $94,521 had been drawn upon for the purpose of financing the purchase of five aircraft, which were received in the second quarter of 2022. Accordingly, no additional off balance sheet amounts exist relatedArrangements as compared to the ~~2022-1 EETC.~~

~~Fuel Consortia~~2022 10-K.. 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 agreements are not reflected on our Condensed 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~~See Note 6 and ~~supplemental maintenance reserves, payments of debt, interest, other lease arrangements, and the TRA.~~

As of March 31, 2022, the Company had a commitment of approximately $75,000 to purchase four aircraft using proceeds from the 2022-1 EETC, which were delivered in the second quarter of 2022. A deposit totaling $7,500 was remitted to the seller during the first quarter of 2022. The remaining purchase amount was financed using incremental proceeds from the 2022-1 EETC and were remitted to the seller upon delivery of the aircraft.

During the first quarter of 2022, the Company executed an agreement to purchase a flight simulator at a total purchase price of $9,745. An initial installment of $2,934 was remitted to the seller during the first quarter of 2022. The remaining purchase price is to be remitted upon shipment of the simulator.

~~For additional information, refer to~~ Note 12 ~~Commitments and Contingencies~~ to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form ~~10-Q. Except as described herein,~~10-Q for more information regarding commitments and contractual obligations.

Recently Adopted Accounting Pronouncements

During the three months ended March 31, 2023, there were no recently adopted accounting standards that had a material impact to the Company.

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 the Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and 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. For more information on our critical accounting policies, see “Management’s Discussion and Analysis of Operations” sections within Part II, Item 7, respectively, in our 2022 10-K.

There have been no material changes into our ~~contractual obligations~~critical accounting policies and ~~commitments other than in~~estimates as compared to the ~~ordinary course of business since our fiscal year ended December 31, 2021.~~

2022 10-K.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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. Accordingly, actual results may differ from the information provided below.

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 had no hedges in place at March 31, ~~2022.~~2023. We do not hold or issue option or swap contracts for trading purposes. We currently do not expect to enter into these types of contracts prospectively, although significant changes in market conditions could affect our decisions. Based on our forecasted scheduled service and charter fuel consumption for the second quarter of ~~2022,~~2023, we estimate that a one cent per gallon increase in the average aircraft fuel price would increase aircraft fuel expense by approximately ~~$177~~$193 excluding ~~any impact associated with~~reimbursed fuel ~~derivative instruments held~~from cargo and ~~reimbursed cargo fuel.~~certain charter customers.

Interest Rates. We have exposure to market risk associated with changes in interest rates related to the interest expense from our variable-rate ~~debt.~~debt and our short-term investment securities. A change in market interest rates would impact interest expense under the ~~Revolving Credit Facility, totaling $25,000 in principal capacity. During~~$119,200 term loan credit facility used to finance the quarter, we repaid the outstanding balance of the DDTL using proceeds from the 2022-1 EETC, which terminated the DDTL. We are unable to draw any additional amounts from the DDTL and no longer face any exposure to market risk on this portion of our Credit Facilities. Assuming the Revolving Credit Facility is fully drawn, aAircraft Held for Operating Lease. A 100 basis point increase in interest rates on the term loan would result in a corresponding increase in interest expense of approximately ~~$250~~$1,192 annually. As of the date of this filing, the entire term loan credit facility had been drawn. The Company also maintains a $25,000 Revolving Credit Facility with a variable interest rate that is impacted by market conditions. As of March 31, 2023, the Company had $24,650 of financing available through the Revolving Credit Facility, as $350 had been pledged to support a letter of credit. As of March 31, 2023, no amounts on the Revolving Credit Facility had been drawn.

Our short-term investment securities are primarily comprised of fixed-rate debt investments. An increase in market interest rates decreases the market value of fixed-rate investments. Conversely, a decrease in market interest rates increases the market value. The fair market value of our short-term investments with exposure to interest rate risk was $165,277 as of March 31, 2023. These investments are highly liquid and are available to be quickly converted into known amounts of cash to fund current operations. The Company limits its investments to investment grade quality securities. Given these factors and that a significant portion of our portfolio is held in cash and cash equivalents, we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of ~~March 31, 2022,~~Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the ~~supervision~~Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our Management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our ~~management, including our chief executive officer (“CEO”)~~Chief Executive Officer and ~~chief financial officer (“CFO”), we~~Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) ofunder the ~~Securities~~ Exchange ~~Act of 1934, as amended, or the “Exchange Act”)~~Act) as of ~~the end~~March 31, 2023.

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Table of ~~the period covered by this report.~~ Contents

Based on ~~that~~the evaluation ~~management, including~~of our ~~CEO~~disclosure controls and ~~CFO, has~~procedures as of March 31, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures ~~are designed, and are~~were not 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 communicatedas of March 31, 2023, due to the ~~Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.~~material weakness described below.

~~Changes~~

Material Weakness in Internal Control over Financial Reporting

~~During~~

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the ~~three months ended March~~Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We previously disclosed in our Annual Report on Form 10-K as of December 31, 2022, wethat Management identified a material weakness in internal control over financial reporting. Specifically, Management's controls over the accounting for complex, non-routine transactions were not designed or implemented to operate with a sufficient level of precision. This included controls addressing the application of ASC Topic 842, Leases, to the purchase of aircraft subject to an existing operating lease.

This control deficiency did not result in a material misstatement of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q or our prior period consolidated annual or interim financial statements. However, the control deficiency created a reasonable possibility that a material misstatement to the annual or interim consolidated financial statements would not have been prevented or detected on a timely basis. Accordingly, Management has concluded that this control deficiency constituted a material weakness.

Remediation Plan

Management is continuing to supplement the system of internal control over financial reporting with the following actions:

•Hired a technical accounting specialist after the material weakness occurred;

•Provided additional training on how to utilize external technical accounting research resources;

•Reviewed all existing internal accounting policies and accounting guidance memos for completeness and the appropriate accounting guidance, including those surrounding leases;

•Established a policy to provide additional guidance surrounding the use of third-party specialists;

•Enhanced the design of financial reporting controls, specifically sub-certifications and review of non-routine transactions;

•Engaging third-party specialists, as necessary, to review Management’s conclusions on the accounting for non-routine transactions involving the application of complex accounting standards; and

•Continuing to review and make ~~any~~necessary changes to the overall design of our risk assessment and review controls over accounting for complex, non-routine transactions, including lease-related transactions.

We have made significant progress in accordance with our remediation plan since the filing of our Annual Report on Form 10-K for the year ended December 31, 2022 as follows:

•Continued to engage third-party specialists to review Managements conclusions on the accounting for non-routine transactions occurring in the first quarter of 2023; and

•Re-designed the overall design of our risk assessment process with utilization of a new third-party tool

•Established a policy and internal controls surrounding transactions related to a new lessor relationship

The material weakness will not be considered remediated until a sustained period of time has passed to allow management to test the design and operational effectiveness of the corrective actions. We believe that our

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remediation plan will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting. However, as we continue to evaluate and work to improve our internal control over financial reporting, Management may determine that ~~have~~additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, we cannot assure you when the Company will remediate the material weakness identified above, nor can we be certain that additional actions will not be required and what the costs of any such additional actions may be. Moreover, we cannot assure you that additional material weaknesses will not arise in the future.

Despite the existence of this material weakness, our management believes that the Condensed Consolidated Financial Statements included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Changes in Internal Control Over Financial Reporting

Other than the changes made as part of the remediation plan described above, there has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2023 that has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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.

ITEM 1A. RISK FACTORS

We have disclosed under the heading “Risk Factors” in our ~~2021~~2022 10-K, 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 our 2022 10-K and the risk factors presented 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 also may materially adversely affect our business, financial condition and/or operating results.

Risks Related to Our Business

Major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions, could adversely affect our business, financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank (“SVB”) and appointed Federal Deposit Insurance Corporation (the “FDIC”) receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although depositors at SVB received access to their funds, uncertainty and liquidity concerns in the broader financial services industry remain. Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. The U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments. However, widespread demands for customer withdrawals or other needs of financial institutions for immediate liquidity may exceed the capacity of such program. There is no guarantee that the U.S. Department

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of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions in a timely fashion or at all. The ultimate outcome of these events, and whether further regulatory actions will be taken, cannot be predicted.

We would face certain risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. In particular, in the event of a major bank or credit card failure, we could be unable to process credit card transactions. In such a case, or if financial liquidity deteriorates for other reasons, our ability to operate our business and our financial condition and results of operations could be significantly harmed.

Lessee defaults could materially adversely affect our business, financial condition and results of operations.

Investors should expect some lessees to experience payment difficulties, particularly in difficult economic or operating environments. As a result of their financial condition and lack of liquidity, lessees may be significantly in arrears in their rental or maintenance payments.The airline industry is cyclical, economically sensitive and highly competitive, and our lessees are affected by several factors over which we and they have limited control, including: air passenger demand; changes in fuel costs, interest rates, foreign currency, inflation, labor difficulties, including pilot shortages, wage negotiations or other labor actions; increases in other operating costs, such as increased insurance costs, general economic conditions and governmental regulation and associated fees affecting the air transportation business. In recent years, the airline industry has been substantially impacted by the COVID-19 pandemic. In addition, geopolitical events such as changes in national policy or the imposition of sanctions, including new sanctions, trade barriers or tariffs, as well as events leading to political or economic instability such as war, prolonged armed conflict and acts of terrorism; epidemics, pandemics and natural disasters; availability of financing, including availability of governmental support; and airline financial health may also have an impact. Finally, our lessees may also be affected by aircraft accidents, in particular a loss if the aircraft is damaged or destroyed by an event specifically excluded from insurance policies such as dirty bombs, biohazardous materials and electromagnetic pulsing. These factors could cause our lessees to incur higher costs and to generate lower revenues which could adversely affect their ability to make lease payments or perform their maintenance obligations under the leases. In addition, lease default levels will likely increase over time if economic conditions deteriorate.

We may not correctly assess the credit risk of a lessee or that risk could change over time. We may not be able to charge risk-adjusted lease rates, and lessees may not be able to continue to perform their financial and other obligations under our leases in the future.

Many airlines received lease deferrals or other accommodations during the COVID-19 pandemic and we may agree to deferrals, restructurings and terminations in the ordinary course of our business with lessees in the future. If a lessee delays, reduces, or fails to make lease payments when due and if we are unable to agree on a lease payment deferral or lease restructuring and we elect to terminate the lease, we may not receive all or any payments still outstanding. While deferrals generally shift the timing of payments to a later period, restructurings and terminations generally permanently reduce lease revenue, and the associated reduction in lease revenue could negatively affect our business.

In the event that a lessee defaults under a lease, any security deposit paid or letter of credit provided by the lessee may not be sufficient to cover the lessee’s outstanding or unpaid lease obligations and required maintenance and transition expenses.

Significant costs resulting from lease defaults could have a material adverse effect on our business.

Although we have the right to repossess the aircraft and to exercise other remedies upon a lessee default, repossession of an aircraft would likely lead to significant costs for us. Those costs include legal and other expenses of court or other governmental proceedings, particularly if the lessee is contesting the proceedings, and costs to obtain possession and/or deregistration of the aircraft and flight and export permissions. Delays resulting from these proceedings would increase the period of time during which the aircraft is not generating revenue. We may incur maintenance, refurbishment or repair costs that a defaulting lessee has failed to incur or pay and that are necessary to put the aircraft in suitable condition for re-lease, sale, or induction into the

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Company��s fleet. We may also incur storage costs associated with aircraft that we repossess and are unable to sell, induct into our fleet, or place immediately with another lessee. We may be required to pay off liens, claims, taxes and other governmental charges to obtain clear possession,including, in some cases, liens that the lessee might have incurred in connection with the operation of its other aircraft. We could also incur other costs in connection with the physical possession of the aircraft.

We may suffer other adverse consequences due to a lessee default and the repossession of the aircraft. Our rights upon a lessee default vary significantly depending upon the jurisdiction and may include the need to obtain a court order for repossession of the aircraft and/or consents for deregistration or re-export of the aircraft. When a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply. Certain jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a third party, or entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or without performing all of the obligations under the lease. There can be no assurance that jurisdictions that have adopted the Cape Town Convention, which provides for uniformity and certainty for repossession of aircraft, will enforce it as written. Our efforts to repossess our aircraft could be further complicated for lessees that are owned in whole or in part by, or are subsidized by, government-related entities. Accordingly, we may be delayed in, or prevented from, enforcing our rights under a lease and in re-leasing, inducting into our fleet, or selling the affected aircraft.

If we repossess an aircraft, we may not be able to export or deregister and profitably redeploy the aircraft in a timely manner or at all. Before an aviation authority will register an aircraft that has previously been registered in another country, it must receive confirmation that the aircraft has been deregistered by that country’s aviation authority. In order to deregister an aircraft, the lessee must comply with applicable laws and regulations, and the relevant governmental authority must enforce these laws and regulations. For instance, where a lessee or other operator flies only domestic routes in the jurisdiction in which the aircraft is registered, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to resist deregistration. We may also incur significant costs in retrieving or recreating aircraft records required for registration of the aircraft, and in obtaining a certificate of airworthiness for an aircraft. Upon a lessee default, we may incur significant costs in connection with repossessing our aircraft and we may be delayed in repossessing our aircraft or may be unable to obtain possession of our aircraft, which could have a materially adverse impact on our future revenue and cash flows.

Lessee defaults and reorganizations, bankruptcies or similar proceedings may result in lost revenue and additional costs.

From time to time, an airline may seek reorganization or protection from creditors under its local laws or may go into liquidation. Lessees may default on their lease obligations or file for bankruptcy or otherwise seek protection from creditors (collectively referred to as “bankruptcy”). Based on historical rates of airline defaults and bankruptcies, it’s possible that we will experience lessee defaults and bankruptcies.

If a lessee defaults on its lease or files for bankruptcy, the lessee may not make lease payments or may return aircraft to us before the lease expires. If a lessee files for bankruptcy with the intent of reorganizing its business, we may agree to adjust our lease terms, including reducing lease payments by a significant amount. Certain jurisdictions give rights to the trustee in a bankruptcy to assume or reject the lease or to assign it to a third party, or entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or performing all or some of the obligations under the relevant lease. If one or more airline bankruptcies result in a larger number of aircraft being available for purchase or lease over a short period of time, aircraft values and aircraft lease rates may be depressed, and additional grounded aircraft and lower market values could adversely affect our ability to sell our aircraft or lease or remarket our aircraft at favorable rates or at all.

As a result of the time and process involved with lessee reorganizations, bankruptcies or similar proceedings as described above, which can vary by airline and jurisdiction among other factors, we may experience lost revenue and additional costs.

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If our lessees encounter financial difficulties and we decide to restructure our leases with those lessees, this could result in less favorable leases and in significant reductions in our cash flow.

If a lessee is late in making payments or fails to make payments in full, we may elect to or be required to restructure the lease. Restructuring may involve anything from a simple rescheduling of payments to the termination of a lease without receiving all the past due amounts. If requests for payment restructuring or rescheduling are granted, reduced or deferred rental payments may be payable over all or some part of the remaining term of the lease, and the terms of any revised payment schedules may be unfavorable or such payments may not be made. We may be unable to agree upon acceptable terms for any requested restructurings and as a result may be forced to exercise our remedies under those leases and we may be unable to repossess our aircraft on a timely basis.

The terms and conditions of payment restructurings or reschedulings may adversely affect our cash flows.

Our lessees may fail to adequately insure our aircraft or fulfill their indemnity obligations, or we may not be able to adequately insure our aircraft, which may result in increased costs and liabilities.

When an aircraft is on lease, we do not directly control its operation. Nevertheless, because we hold title to the aircraft, we could be sued or held strictly liable for losses resulting from the operation of such aircraft, or may be held liable for losses on other legal theories or claims may be made against us as the owner of an aircraft requiring us to expend resources in our defense. As a result, we separately purchase contingent liability insurance and contingent hull insurance on all aircraft in our owned fleet. While we believe our insurance is adequate both as to coverages and amounts based on industry standards in the current market, we cannot assure you that we are adequately insured against all risks and in all territories in which our aircraft operate. For example, following the Russia-Ukraine conflict, Russia, Ukraine and Belarus are now generally excluded from coverage in our contingent liability, contingent hull and contingent hull war insurance consistent with insurance market terms available at the time these policies were last renewed.

We also separately require our lessees to obtain specified levels of insurance customary in the aviation industry and indemnify us for, and insure against, liabilities arising out of the lessee’s use and operation of the aircraft. Lessees are also required to maintain all risks hull insurance, all risks property insurance, and war risks hull insurance on the aircraft at agreed upon levels. Lessees may fail to maintain adequate insurance coverage during a lease term, which, although in contravention of the lease terms, could necessitate our taking some corrective action such as terminating the lease or securing insurance for the aircraft. Moreover, even if our lessees retain specified levels of insurance, and indemnify us for, and insure against, liabilities arising out of their use and operation of the aircraft, we cannot assure you that we will not have any liability.

In addition, there are certain risks or liabilities that we or our lessees may face, for which insurers may be unwilling to provide coverage for, or the cost to obtain such coverage may be prohibitively expensive. For example, following the terrorist attacks of September 11, 2001, aviation insurers significantly reduced the amount of insurance coverage available for claims resulting from acts of terrorism, war, dirty bombs, biohazardous materials, electromagnetic pulsing or similar events, and increased the premiums for such third-party war risk and terrorism liability insurance and coverage in general. Similarly, following the Russia-Ukraine conflict, aviation insurers have, in some cases, reduced the scope of insurance coverage provided by policies and increased insurance premiums. Accordingly, our or our lessees’ insurance coverage could be insufficient to cover all claims that could be asserted against us arising from the operation of our aircraft. Inadequate insurance coverage or default by lessees in fulfilling their indemnification or insurance obligations will reduce the proceeds that would be received by us if we are sued and are required to make payments to claimants. Moreover, our lessees’ insurance coverage is dependent on the financial condition of insurance companies, which might not be able to pay claims.

Our or our lessees’ failure to adequately insure our aircraft, or our lessees’ failure to fulfill their indemnity obligations to us, could reduce insurance proceeds otherwise payable to us in certain cases, and may result in increased costs and liabilities for our business.

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A lessee’s failure to obtain required licenses, consents and approvals could negatively affect our ability to remarket, sell, or induct such aircraft into our fleet.

Airlines are subject to extensive regulation in the jurisdictions in which they are registered and operate. As a result, we expect some of our leases will require licenses, consents or approvals, including consents from governmental or regulatory authorities for certain payments under our leases and for the import, export or deregistration of aircraft. Subsequent changes in applicable law or administrative practice may require additional licenses and consents or result in revocation of prior licenses and consents.

Furthermore, consents needed in connection with our repossession or sale of an aircraft may be withheld. Any of these events could negatively affect our ability to remarket, sell, or induct such aircraft into our fleet.

Events outside of our control, including the threat or realization of epidemic diseases such as the COVID-19 pandemic, natural disasters, terrorist attacks, war or armed hostilities between countries or non-state actors, may adversely affect the financial condition of our lessees and of the aviation industry more broadly, and may ultimately impact our business.

Air travel has historically been disrupted, sometimes severely, by the occurrence of unexpected events outside of our and our lessees’ control. The COVID-19 pandemic has recently impacted air travel and our results of operations. We may still experience other impacts from COVID-19 or another disease, such as weaker demand for used aircraft, lessee defaults, bankruptcies or reorganizations, delays in delivery of aircraft, and increased costs of borrowing. We cannot currently reasonably estimate the extent to which these events will impact our business, results of operations and financial condition.

In addition to the recent COVID-19 pandemic, passenger demand for air travel has also been negatively impacted in the past by other epidemic diseases, such as severe acute respiratory syndrome, bird flu, swine flu, the Zika virus, and Ebola. Future epidemic diseases and other diseases, or the fear of such events, could provoke responses that negatively affect passenger air travel. Air travel has also been disrupted in the past by terrorist attacks, war or armed hostilities between countries or non-state actors, including the fear of such events, and the occurrence of natural disasters and other natural phenomena, such as extreme weather conditions, floods, earthquakes, and volcanic eruptions, which may become more frequent or severe as a result of climate change.

The occurrence of any such event, or multiple such events, could cause our lessees to experience decreased passenger demand, to incur higher costs and to generate lower revenues, which could adversely affect their ability to make lease payments to us, fulfill their maintenance obligations, or to obtain the types and amounts of insurance we require. This, in turn, could lead to lease restructurings and repossessions, impair our ability to remarket or otherwise dispose of aircraft on favorable terms or at all, or reduce the proceeds we receive for our aircraft in a disposition which may ultimately impact our business.

Export restrictions and tariffs may impact where we can place and deliver our aircraft and negatively impact our earnings and cash flows.

Existing export restrictions impact where we can place and deliver our aircraft. New export restrictions, including those implemented quickly or as a result of geopolitical events, may impact where we can place and deliver our aircraft or the ability of our lessees to operate our aircraft in certain jurisdictions, which may negatively impact our earnings and cash flows. For example, in early 2022, in connection with the ongoing conflict between Russia and Ukraine, the United States, European Union, United Kingdom and others imposed economic sanctions and export controls against certain industry sectors and parties in Russia. These sanctions include closures of airspace for aircraft operated by Russian airlines, bans on the leasing or sale of aircraft to Russian controlled entities, bans on the export and re-export of aircraft and aircraft components to Russian controlled entities or for use in Russia, and corresponding prohibitions on providing technical assistance, brokering services, insurance and reinsurance, as well as financing or financial assistance.

Tariffs can also impact our ability to place and deliver aircraft. Our leases are primarily structured as triple net leases, whereby the lessee is responsible for all operating costs. As a result, increased tariffs will result in a higher cost for imported aircraft that our lessees may not be willing to assume and which could adversely impact

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demand for aircraft, creating an oversupply of aircraft and potentially placing downward pressure on lease rates and aircraft market values.

For example, in October 2019, the Office of the U.S. Trade Representative announced a 10% tariff on new aircraft imported from Europe, including Airbus aircraft. In March 2020, the tariffs on aircraft were raised to 15%. In November 2020, the E.U. announced a 15% tariff on new aircraft imported into the E.U. from the U.S., including Boeing aircraft. In June 2021, the U.S. and the E.U. agreed to temporarily suspend all retaliatory tariffs related to new aircraft imports for five years.

We cannot predict what further actions may ultimately be taken with respect to export controls, tariffs or trade relations between the U.S. and other countries. Accordingly, it is difficult to predict exactly how, and to what extent, such actions may impact our business, or the business of our lessees or aircraft manufacturers. Any unfavorable government policies on international trade, such as export controls, capital controls or tariffs, may affect the demand for aircraft, increase the cost of aircraft components, delay production, or impact the competitive position of certain aircraft manufacturers. In turn, this may impact where we can place and deliver our aircraft, which may negatively impact our earnings and cash flows.

Changes in fuel costs could negatively affect our lessees, and by extension, the demand for our aircraft, which may negatively impact our earnings and cash flows.

Historically, fuel prices have fluctuated widely depending primarily on international market conditions, geopolitical and environmental events, and currency exchange rates. The cost of fuel represents a major expense that is not within the control of airlines, and significant increases in fuel costs or hedges that inaccurately assess the direction of fuel costs can adversely affect our and other airlines’ operating results. Due to the competitive nature of the aviation industry, operators may be unable to pass on increases in fuel prices to their customers by increasing fares in a manner that fully offsets increased fuel costs. In addition, operators may not be able to manage this risk by appropriately hedging their exposure to fuel price fluctuations. Airlines that do hedge their fuel costs can also be adversely affected by swift movements in fuel prices if such airlines are required as a result to post cash collateral under hedge agreements. Therefore, if fuel prices materially increase or show significant volatility, our lessees are likely to incur higher costs or generate lower revenues, which may affect their ability to meet their obligations to us. A sustained period of lower fuel costs may also adversely affect regional economies that depend on oil revenue, including those in which certain of our lessees operate. Should changes in fuel costs negatively affect our lessees or demand for our aircraft, our earnings and cash flows may be negatively impacted.

The appreciation of the U.S. dollar could negatively impact our lessees’ ability to honor the terms of their leases, which are denominated in U.S. dollars, and may result in lost revenues and reduced net income.

Lessees are exposed to currency risk due to the fact that they earn revenues in their local currencies while a significant portion of their liabilities and expenses are denominated in U.S. dollars, including their lease payments to us, as well as fuel, debt service, and other expenses. The ability of our lessees to make lease payments to us in U.S. dollars may be adversely impacted in the event of an appreciating U.S. dollar. This is particularly true for non-U.S. airlines whose operations are primarily domestic. Shifts in foreign exchange rates can be significant, are difficult to predict, and can occur quickly as evidenced by the significant appreciation of the U.S. dollar in 2022. Should our lessees be unable to honor the terms of their leases due to the appreciation of the U.S. dollar, we may experience lost revenues and reduced net income.

Income and other taxes could negatively affect our business and operating results due to our multi-jurisdictional operations.

We operate in multiple jurisdictions and may become subject to a wide range of income and other taxes. If we are unable to execute our business in jurisdictions with favorable tax treatment, our operations may be subject to significant income and other taxes. Moreover, as our aircraft are operated by our lessees in multiple jurisdictions, we may have nexus or taxable presence as a result of our aircraft landings in various jurisdictions. Such landings may result in us being subject to various taxes in such jurisdictions. Further, any changes in tax laws in any of the jurisdictions that subject us to income or other taxes, such as increases in tax rates or

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limitations on our ability to deduct certain expenses from taxable income, such as depreciation expense and interest expense, could materially affect our tax obligations and effective tax rate.

Environmental, social and governance (“ESG”) matters may impose additional costs and expose us to new risks.

Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders, regulatory agencies and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable. We may also face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards set by our investors, shareholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third party rating services.

Risks and requirements related to transacting business in foreign countries may result in increased liabilities, including penalties and fines as well as reputational harm.

Our international business exposes us to trade and economic sanctions and other restrictions imposed by the United States or other governments or organizations. The U.S. Departments of Justice, Commerce, State and Treasury, and other foreign authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act (“FCPA”) and other federal statutes and regulations, including the International Traffic in Arms Regulations and those established by the Office of Foreign Assets Control (“OFAC”), and similar or more restrictive foreign laws, rules and regulations, which may also apply to us. Under these laws and regulations, the government may require export licenses, or impose restrictions that would require modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities, and modifications to compliance programs, which may increase compliance costs. Failure to implement changes may subject us to fines, penalties and other sanctions.

We have in place Company policies related to FCPA, OFAC, export controls and similar laws and regulations, but we cannot assure you that our employees, consultants, sales agents, or associates will not engage in unlawful conduct for which we may be held responsible or that our business partners will not engage in conduct that could affect their ability to perform their contractual obligations and result in our being held liable for such conduct. Violation of laws or regulations may result in increased liabilities including penalties and fines as well as reputational harm.

The Company’s business has been, and in the future may again be, materially and adversely impacted by extreme weather events. An inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography has adversely and materially impacted, and in the future could again adversely and materially impact, the Company’s business, results of operations, and financial condition.

Depending on location, the Company’s assets, including aircraft on lease, and route network are or could be exposed to ongoing risks arising from a variety of adverse weather conditions or localized natural or manmade disasters such as earthquakes, volcanoes, wildfires, hurricanes, tropical storms, tornadoes, floods, sea-level rise, severe winter weather, sustained or extreme cold or heat, drought, or other disturbances, actual or threatened. Extreme weather conditions, including increases in the frequency, severity, or duration of severe weather events (whether or not caused by anthropogenic climate change), can disrupt air travel from time to time, ground planes, damage equipment and increase maintenance costs, cause delays and cancellations or other network disruptions, require implementation of weight limitations due to increased temperatures, increase turbulence-related injuries, cause increases in fuel consumption to avoid such weather, disrupt the Company’s

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supply chains (including fuel, parts, and service provider disruptions), and otherwise adversely affect the Company’s assets, operations, and infrastructure. These events can decrease revenue, increase costs, and adversely impact the Company’s financial condition. Prolonged interruptions or disruptions at airports can and do also adversely impact the Company’s business and results of operations. The Company also may incur significant costs to reestablish or relocate affected business functions, aircraft, and employees. Moreover, any resulting economic dislocations could adversely affect demand for the Company’s services, resulting in an adverse effect on our business, results of operations, and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~The following table summarizes the Company's repurchases of Common Stock for the quarter ended March 31, 2023. All stock repurchases during the quarter reflect shares repurchased pursuant to the Company's stock repurchase program and shares withheld from employees to satisfy the taxes due in connection with grants of stock under the Company's equity incentive plans. The shares of Common Stock withheld and tax withholding obligations are considered to be "issuer purchases" of shares that are required to be disclosed pursuant to this Item, but are not considered to be part of the Company's $50,000 stock repurchase program. For more information on the Company's stock repurchase program, see Note 11 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.


	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value ($ in thousands) of Shares that May Yet be Purchased Under Plan
January 1-31, 2023	480,932	$	—	(1)	480,932	$	25,000
February 1-28, 2023	750,406	19.75			750,000	10,188
March 1-31, 2023	—	—			—	—
Total	1,231,338	$	—		1,230,932	$	10,188

_________________________


(1)			During the fourth quarter of 2022, the Company entered into a $25,000 Accelerated Share Repurchase Program. The Company received an initial delivery of 890,586 shares at an average price of $19.65 per share during the fourth quarter of 2022. The settlement of the program occurred during January 2023, upon which the Company received an additional 480,932 shares. In total, the Company repurchased 1,371,518 shares at an average price of $18.23 per share.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a)Exhibits


~~4.1~~10.1*			~~Trust Supplement No. 2022-1A,~~Employment Letter, dated as of ~~March 29,~~July 5, 2022, by and between ~~Wilmington Trust, National Association, as trustee, and~~ Sun Country, Inc.~~, to Pass Through Trust Agreement, dated as of December 9, 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on April 5, 2022)~~ and Rose Neale

~~4.2~~10.2*			Trust Supplement No. 2022-1B, dated as of March 29, 2022, between Wilmington Trust, National Association, as trustee, and Sun Country, Inc., to Pass Through Trust Agreement, dated as of December 9, 2019 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on April 5, 2022)

~~4.3~~			~~Intercreditor~~Term Loan Facility Agreement, dated as of March ~~29, 2022,~~21, 2023, by and among ~~Wilmington Trust,~~Sun Country Airlines Holdings, Inc., Sun Country, Inc. (D/B/A Sun Country Airlines), the lenders party thereto and UMB Bank, National Association, as ~~pass through~~facility agent, security trustee ~~under the pass through trusts,~~ and ~~Wilmington Trust, National Association, as subordination agent (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on April 5, 2022)~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~


~~4.4~~			Note Purchase Agreement, dated as of March 29, 2022, among Sun Country, Inc., Wilmington Trust, National Association, as pass through trustee under the pass through trusts, and Wilmington Trust, National Association, as subordination agent (incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on April 5, 2022)

~~4.5~~			Form of Participation Agreement (Participation Agreement between Sun Country, Inc. and Wilmington Trust, National Association, not in its individual capacity but solely as mortgagee, subordination agent under the Intercreditor Agreement and pass through trustee under the pass through trusts) (Exhibit B to Note Purchase Agreement) (included in Exhibit 4.4)

~~4.6~~			Form of Indenture (Trust Indenture and Mortgage between Sun Country, Inc. and Wilmington Trust, National Association, not in its individual capacity, except as expressly stated therein, but solely as mortgagee) (Exhibit C to Note Purchase Agreement) (included in Exhibit 4.4)

~~4.7~~			~~Form of Sun Country, Inc. Pass Through Certificate, Series 2022-1A (included in Exhibit 4.1)~~

~~4.8~~			~~Form of Sun Country, Inc. Pass Through Certificate, Series 2022-1B (included in Exhibit 4.2)~~account bank

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, ~~2022~~2023

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, ~~2022~~2023

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, ~~2022~~2023

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)



*			Filed herewith

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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, 2022~~April 28, 2023

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	Three Months Ended March 31, 2021
	Common Stock			Loans to Stockholders		Additional Paid-in Capital		Retained Earnings (Deficit)		Total
	Shares	Amount
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, net	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