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 ~~September 30, 2022~~March 31, 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 ~~September 30, 2022:~~March 31, 2023:

Common Stock, $0.01 par value – ~~58,166,674~~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 Comprehensive Income		6
Condensed Consolidated Statements of Changes in Stockholders’ Equity	Condensed Consolidated Statements of Changes in Stockholders’ Equity		7	Condensed Consolidated Statements of Changes in Stockholders’ Equity		7
Condensed Consolidated Statements of Cash Flows	Condensed Consolidated Statements of Cash Flows		8	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	9	1	Basis of Presentation	9
2	2	Basis of Presentation	10	2	Coronavirus Aid, Relief, and Economic Security Act	9
3	3	Impact of the COVID-19 Pandemic	14	3	Revenue	9
4	4	Revenue	15	4	Earnings per Share	12
5	5	Earnings per Share	17	5	Aircraft	12
6	6	Aircraft	18	6	Asset Acquisitions	14
7	7	Debt	20	7	Debt	15
8	8	Fuel Derivatives and Risk Management	22	8	Investments	18
9	9	Investments	23	9	Fair Value Measurements	18
10	10	Fair Value Measurements	23	10	Income Taxes	19
11	11	Income Taxes	24	11	Stockholders' Equity	19
12	12	Special Items, net	25	12	Commitments and Contingencies	20
13	13	Commitments and Contingencies	25	13	Operating Segments	21
14	14	Operating Segments	26	14	Subsequent Events	21
15		Subsequent Events	26

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		28	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		60	Item 3. Quantitative and Qualitative Disclosures About Market Risk		39
Item 4. Controls and Procedures	Item 4. Controls and Procedures		60	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		62	Item 1. Legal Proceedings		41
Item 1A. Risk Factors	Item 1A. Risk Factors		62	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		63	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3. Defaults Upon Senior Securities	Item 3. Defaults Upon Senior Securities		63	Item 3. Defaults Upon Senior Securities		48
Item 4. Mine Safety Disclosures	Item 4. Mine Safety Disclosures		63	Item 4. Mine Safety Disclosures		48
Item 5. Other Information	Item 5. Other Information		63	Item 5. Other Information		48
Item 6. Exhibits	Item 6. Exhibits		63	Item 6. Exhibits		49

Signatures	Signatures		65	Signatures		50

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Table of Contents

PART I. Financial Information

ITEM 1. FINANCIAL STATEMENTS

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS

Current Assets:	Current Assets:					Current Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	$	131,912	$	309,338	Cash and Cash Equivalents	$	71,587	$	92,086
Restricted Cash	Restricted Cash	14,163		8,447		Restricted Cash	22,776		10,842
Investments	Investments	135,170		6,283		Investments	171,638		178,936
Accounts Receivable, net of an allowance for credit losses of $175 and $250, respectively		31,628		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	1,211		5,505		Short-term Lessor Maintenance Deposits	1,279		1,241
Inventory, net of a reserve for obsolescence of $1,255 and $1,275, respectively		7,280		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	11,692		8,511		Prepaid Expenses	11,621		11,423
Other Current Assets	Other Current Assets	4,684		1,798		Other Current Assets	4,823		8,179
Total Current Assets	Total Current Assets	337,740		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	628,375		447,319		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	33,809		20,876		Ground Equipment and Leasehold Improvements	37,664		35,948
Computer Hardware and Software	Computer Hardware and Software	10,402		8,785		Computer Hardware and Software	9,327		10,831
Finance Lease Assets	Finance Lease Assets	262,060		209,457		Finance Lease Assets	261,991		261,991
Rotable Parts	Rotable Parts	13,992		9,150		Rotable Parts	13,318		17,059
Total Property & Equipment	Total Property & Equipment	948,638		695,587		Total Property & Equipment	1,058,851		962,413
Accumulated Depreciation & Amortization	Accumulated Depreciation & Amortization	(159,779)		(117,069)		Accumulated Depreciation & Amortization	(190,580)		(176,746)
Total Property & Equipment, net	Total Property & Equipment, net	788,859		578,518		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		86,110		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	23,919		61,658		Operating Lease Right-of-use Assets	21,929		22,182
Aircraft Deposits	Aircraft Deposits	9,128		10,021		Aircraft Deposits	9,374		9,134
Long-term Lessor Maintenance Deposits	Long-term Lessor Maintenance Deposits	29,714		20,346		Long-term Lessor Maintenance Deposits	35,253		32,433
Deferred Tax Asset	Deferred Tax Asset	14,734		17,608		Deferred Tax Asset	2,389		12,956
Other Assets	Other Assets	9,017		5,495		Other Assets	10,185		9,217
Total Other Assets	Total Other Assets	394,845		426,461		Total Other Assets	387,462		393,255
Total Assets	Total Assets	$	1,521,444	$	1,380,422	Total Assets	$	1,581,726	$	1,524,412

See accompanying Notes to Condensed Consolidated Financial Statements

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts Payable	Accounts Payable	$	49,969	$	39,805	Accounts Payable	$	58,455	$	62,370
Accrued Salaries, Wages, and Benefits	Accrued Salaries, Wages, and Benefits	25,900		28,527		Accrued Salaries, Wages, and Benefits	28,523		26,521
Accrued Transportation Taxes	Accrued Transportation Taxes	11,000		12,736		Accrued Transportation Taxes	15,403		17,666
Air Traffic Liabilities	Air Traffic Liabilities	132,830		118,562		Air Traffic Liabilities	141,613		157,995
Over-market Liabilities		1,535		4,309
Finance Lease Obligations	Finance Lease Obligations	17,484		11,705		Finance Lease Obligations	18,506		17,990
Loyalty Program Liabilities	Loyalty Program Liabilities	13,045		11,451		Loyalty Program Liabilities	9,664		13,963
Operating Lease Obligations	Operating Lease Obligations	6,281		17,231		Operating Lease Obligations	6,578		6,296
Current Maturities of Long-term Debt		45,535		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	2,260		—		Income Tax Receivable Agreement Liability	8,165		2,260
Other Current Liabilities	Other Current Liabilities	14,850		7,913		Other Current Liabilities	13,267		14,519
Total Current Liabilities	Total Current Liabilities	320,689		281,651		Total Current Liabilities	366,368		377,128

Long-term Liabilities:	Long-term Liabilities:					Long-term Liabilities:
Over-market Liabilities		1,423		10,428
Finance Lease Obligations	Finance Lease Obligations	237,644		180,450		Finance Lease Obligations	228,513		233,306
Loyalty Program Liabilities	Loyalty Program Liabilities	3,272		8,267		Loyalty Program Liabilities	4,135		1,474
Operating Lease Obligations	Operating Lease Obligations	21,508		58,810		Operating Lease Obligations	19,521		19,836
Long-term Debt		324,662		248,014
Long-term Debt, net						Long-term Debt, net	346,065		294,687
Income Tax Receivable Agreement Liability	Income Tax Receivable Agreement Liability	101,540		98,800		Income Tax Receivable Agreement Liability	92,855		101,540
Other Long-term Liabilities	Other Long-term Liabilities	2,701		3,413		Other Long-term Liabilities	3,262		3,729
Total Long-term Liabilities	Total Long-term Liabilities	692,750		608,182		Total Long-term Liabilities	694,351		654,572
Total Liabilities	Total Liabilities	1,013,439		889,833		Total Liabilities	1,060,719		1,031,700

Commitments and Contingencies (see Note 13)
Commitments and Contingencies (see Note 12)						Commitments and Contingencies (see Note 12)

Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common stock, with $0.01 par value, 995,000,000 shares authorized, 58,168,497 and 57,872,452 issued at September 30, 2022 and December 31, 2021, respectively		582		579
Preferred stock, with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Treasury stock, at cost, 1,823 shares held at September 30, 2022 and no shares held at December 31, 2021		(52)		—
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	493,493		485,638		Additional Paid-In Capital	500,627		488,494
Retained Earnings	Retained Earnings	14,764		4,372		Retained Earnings	60,376		22,048
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	(782)		—		Accumulated Other Comprehensive Loss	(418)		(807)
Total Stockholders' Equity	Total Stockholders' Equity	508,005		490,589		Total Stockholders' Equity	521,007		492,712
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	1,521,444	$	1,380,422	Total Liabilities and Stockholders' Equity	$	1,581,726	$	1,524,412

See accompanying Notes to Condensed Consolidated Financial Statements

-4-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Operating Revenues:	Operating Revenues:									Operating Revenues:
Passenger	Passenger	$	195,360	$	147,718	$	592,753	$	377,042	Passenger	$	267,269	$	202,033
Cargo	Cargo	23,687		24,400		65,930		68,084		Cargo	23,361		21,053
Other	Other	2,653		1,545		8,607		5,338		Other	3,485		3,439
Total Operating Revenue		221,700		173,663		667,290		450,464
Total Operating Revenues										Total Operating Revenues	294,115		226,525

Operating Expenses:	Operating Expenses:									Operating Expenses:
Aircraft Fuel	Aircraft Fuel	64,843		36,647		206,334		90,631		Aircraft Fuel	72,290		64,544
Salaries, Wages, and Benefits	Salaries, Wages, and Benefits	58,661		43,424		178,576		129,815		Salaries, Wages, and Benefits	75,430		59,617
Aircraft Rent	Aircraft Rent	1,949		3,925		7,347		13,339		Aircraft Rent	1,480		3,186
Maintenance	Maintenance	11,018		9,660		35,794		30,170		Maintenance	13,039		11,995
Sales and Marketing	Sales and Marketing	6,827		5,470		23,336		16,402		Sales and Marketing	9,929		8,628
Depreciation and Amortization	Depreciation and Amortization	17,181		14,710		49,364		41,532		Depreciation and Amortization	19,460		15,328
Ground Handling	Ground Handling	8,669		7,873		24,838		19,654		Ground Handling	11,038		7,958
Landing Fees and Airport Rent	Landing Fees and Airport Rent	12,926		12,069		32,708		29,606		Landing Fees and Airport Rent	12,051		10,286
Special Items, net		—		(65)		—		(72,419)
Other Operating, net	Other Operating, net	24,235		18,629		68,401		50,026		Other Operating, net	23,615		23,150
Total Operating Expenses	Total Operating Expenses	206,309		152,342		626,698		348,756		Total Operating Expenses	238,332		204,692
Operating Income	Operating Income	15,391		21,321		40,592		101,708		Operating Income	55,783		21,833

Non-operating Income (Expense):	Non-operating Income (Expense):									Non-operating Income (Expense):
Interest Income	Interest Income	1,610		28		2,166		52		Interest Income	2,741		24
Interest Expense	Interest Expense	(7,493)		(6,286)		(23,097)		(19,487)		Interest Expense	(8,630)		(8,562)
Other, net	Other, net	3,422		456		(5,156)		18,505		Other, net	(212)		(6,876)
Total Non-operating Expense, net	Total Non-operating Expense, net	(2,461)		(5,802)		(26,087)		(930)		Total Non-operating Expense, net	(6,101)		(15,414)

Income Before Income Tax	Income Before Income Tax	12,930		15,519		14,505		100,778		Income Before Income Tax	49,682		6,419
Income Tax Expense	Income Tax Expense	2,253		2,140		4,113		18,444		Income Tax Expense	11,354		2,782
Net Income	Net Income	$	10,677	$	13,379	$	10,392	$	82,334	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	$	0.18	$	0.23	$	0.18	$	1.51	Basic	$	0.68	$	0.06
Diluted	Diluted	$	0.18	$	0.22	$	0.17	$	1.40	Diluted	$	0.64	$	0.06
Shares used for computation:	Shares used for computation:									Shares used for computation:
Basic	Basic	58,146,606		57,355,104		58,039,201		54,368,231		Basic	56,630,656		57,907,655
Diluted	Diluted	60,793,516		61,712,378		61,372,735		58,699,991		Diluted	59,535,045		61,731,942

See accompanying Notes to Condensed Consolidated Financial Statements

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net Income $ 10,677 $ 13,379 $ 10,392 $ 82,334
Other Comprehensive Loss:
Net unrealized loss on Available-for-Sale securities, net of deferred tax benefit of $244, $—, $309 and $—, respectively (562) — (782) —
Other Comprehensive Loss (562) — (782) —
Comprehensive Income $ 10,115 $ 13,379 $ 9,610 $ 82,334


	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

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

(Unaudited)

Nine Months Ended September 30, 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 — — — — 16,778 16,778
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 $ (60,098) $ 414,322
Initial Public Offering Expense Adjustment — — — 349 — 349
Exercise of Stock Options 5,000 — — 27 — 27
Net Income — — — — 52,177 52,177
Amazon Warrants — — — 1,400 — 1,400
Stock-based Compensation — — — 744 — 744
June 30, 2021 57,158,467 $ 572 $ — $ 476,368 $ (7,921) $ 469,019
Exercise of Stock Options 393,274 4 — 2,376 — 2,380
Net Income — — — — 13,379 13,379
Amazon Warrants — — — 1,400 — 1,400
Stock-based Compensation — — — 964 — 964
September 30, 2021 57,551,741 $ 576 $ — $ 481,108 $ 5,458 $ 487,142


	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


		Nine Months Ended September 30, 2022																				Three Months Ended March 31, 2022
		Common Stock			Treasury Stock			Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Loss				Total				Warrants				Common Stock						Additional Paid-in Capital				Retained Earnings				Total
		Shares	Amount		Shares	Amount											Shares						Amount
December 31, 2021	December 31, 2021	57,872,452	$	579	—	$	—			$	485,638					$	4,372			$	—			$	490,589		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			$	8,009	$	—			$	497,069		March 31, 2022	1,833,312				57,964,320			$	580		$	488,480			$	8,009			$	497,069
Stock Issued for Stock-Based Awards		181,404	1		—	—		1,037				—		—				1,038
Net Stock Settlement of Stock-Based Awards		—	—		1,823	(52)		—				—		—				(52)
Net Loss		—	—		—	—		—				(3,922)		—				(3,922)
Amazon Warrants		—	—		—	—		1,400				—		—				1,400
Stock-based Compensation		—	—		—	—		575				—		—				575
Other Comprehensive Loss		—	—		—	—		—				—		(220)				(220)
June 30, 2022		58,145,724	$	581	1,823	$	(52)	$	491,492			$	4,087	$	(220)			$	495,888
Stock Issued for Stock-Based Awards		22,773	1		—	—		114				—		—				115
Net Income		—	—		—	—		—				10,677		—				10,677
Amazon Warrants		—	—		—	—		1,400				—		—				1,400
Stock-based Compensation		—	—		—	—		487				—		—				487
Other Comprehensive Loss		—	—		—	—		—				—		(562)				(562)
September 30, 2022		58,168,497	$	582	1,823	$	(52)	$	493,493			$	14,764	$	(782)			$	508,005

See accompanying Notes to Condensed Consolidated Financial Statements

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SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Net Income	Net Income	$	10,392	$	82,334	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	49,364		41,532		Depreciation and Amortization	19,460		15,328
Tax Receivable Agreement Adjustment		5,000		(19,800)
Operating Lease Right-of-use Assets		(199)		12,920
Non-Cash (Gain) Loss on Asset Transactions, net		(318)		2
Unrealized (Gain) on Fuel Derivatives		—		(3,527)
Amortization of Over-market Liabilities		(2,453)		(4,159)
Deferred Income Taxes	Deferred Income Taxes	3,183		18,340		Deferred Income Taxes	10,450		2,782
Amazon Warrants Vested		4,200		4,200
Stock-based Compensation Expense		1,981		4,577
Amortization of Debt Issuance Costs and Debt Securities		467		963
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	(88)		34		Accounts Receivable	(468)		(1,577)
Inventory	Inventory	(1,402)		(456)		Inventory	(305)		(346)
Prepaid Expenses	Prepaid Expenses	(3,188)		(3,153)		Prepaid Expenses	(198)		(1,655)
Lessor Maintenance Deposits	Lessor Maintenance Deposits	(10,256)		(5,464)		Lessor Maintenance Deposits	(2,858)		(3,919)
Aircraft Deposits	Aircraft Deposits	(2,569)		1,162		Aircraft Deposits	(187)		(1,044)
Other Assets	Other Assets	(5,478)		2,297		Other Assets	581		(6,262)
Accounts Payable	Accounts Payable	8,674		2,257		Accounts Payable	(288)		9,500
Accrued Transportation Taxes	Accrued Transportation Taxes	(1,736)		2,999		Accrued Transportation Taxes	(2,264)		1,362
Air Traffic Liabilities	Air Traffic Liabilities	14,269		3,972		Air Traffic Liabilities	(16,382)		(7,616)
Loyalty Program Liabilities	Loyalty Program Liabilities	(3,401)		(1,759)		Loyalty Program Liabilities	(1,638)		(2,344)
Operating Lease Obligations	Operating Lease Obligations	(61)		(32,651)		Operating Lease Obligations	(1,434)		(3,240)
Other Liabilities	Other Liabilities	3,733		8,514		Other Liabilities	421		594
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	71,671		116,358		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	(177,658)		(118,016)		Purchases of Property & Equipment	(104,978)		(49,683)
Proceeds from the Sale of Property & Equipment		777		—
Proceeds from Insurance Settlements		8,865		—
Purchases of Investments	Purchases of Investments	(130,529)		(1,436)		Purchases of Investments	(24,228)		(3)
Proceeds from the Sale of Investments		935		1,062
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	(297,610)		(118,390)		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		—		(8,706)
Proceeds from Stock Option and Warrant Exercises		1,656		2,407
Taxes Paid for Net Stock Settlement of Stock-Based Awards		(31)		—
Common Stock Repurchases						Common Stock Repurchases	(14,812)		—
Proceeds from Borrowings	Proceeds from Borrowings	188,277		80,500		Proceeds from Borrowings	71,280		77,986
Repayment of Finance Lease Obligations	Repayment of Finance Lease Obligations	(37,842)		(9,113)		Repayment of Finance Lease Obligations	(4,277)		(4,466)
Repayment of Borrowings	Repayment of Borrowings	(95,305)		(75,728)		Repayment of Borrowings	(10,122)		(77,947)
Debt Issuance Costs		(2,526)		(2,560)
Net Cash Provided by Financing Activities		54,229		222,694
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		(171,710)		220,662
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	$	146,075	$	291,025	Cash, Cash Equivalents and Restricted Cash--End of the Period	$	94,363	$	280,487

Non-cash transactions:						Non-cash transactions:
Aircraft and Flight Equipment Acquired through Finance Leases						Aircraft and Flight Equipment Acquired through Finance Leases	$	—	$	19,928
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:
							March 31, 2023		March 31, 2022
Cash and Cash Equivalents						Cash and Cash Equivalents	$	71,587	$	272,402
Restricted Cash						Restricted Cash	22,776		8,085
Total Cash, Cash Equivalents and Restricted Cash						Total Cash, Cash Equivalents and Restricted Cash	$	94,363	$	280,487

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

Nine Months Ended September 30,
2022 2021
Non-cash transactions:
Lease Deposits Applied Against the Purchase of Aircraft $ 1,085 $ 3,296
Aircraft and Flight Equipment Acquired through Finance Leases 40,480 71,856
Finance Lease Asset Modifications 46,311 —
Aircraft Acquired From Exercise of Finance Lease Purchase Option, net of Accumulated Depreciation 28,012 —
Derecognition of Operating Lease Right-of-Use Assets, net 8,674 41,135
Derecognition of Operating Lease Obligations 8,674 44,726
The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets:
September 30, 2022 September 30, 2021
Cash and Cash Equivalents $ 131,912 $ 275,332
Restricted Cash 14,163 15,693
Total Cash, Cash Equivalents and Restricted Cash $ 146,075 $ 291,025
See accompanying Notes to Condensed Consolidated Financial Statements

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share 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, schools, companies and other individual entities 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" 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 a~~nd 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.~~

~~-9-~~

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~~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 two, 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 nine months ended September 30, 2022 and September 30, 2021, 568,956 warrants vested in each respective period. As of September 30, 2022 and September 30, 2021, the cumulative vested warrants held by Amazon were 2,212,615 and 1,454,008, 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 nine months ended September 30, 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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 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.2023.

~~Revision of Previously Issued Consolidated Financial Statements~~

2. CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT

During the second quarter of 2022, the Company identified an immaterial misstatement in its Condensed Consolidated Financial Statements for the quarter and year-to-date interim periods in the year ended December 31, 2021 (the "previously issued financial statements"). The error related to the improper

~~-10-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~application of Accounting Standards Codification (ASC) Topic 842,~~ ~~Leases~~ regarding the treatment of the incremental difference between the net purchase price of the leased aircraft and the net operating lease recorded on the balance sheet immediately prior to the transaction. This difference should have been capitalized as part of the acquisition costs incurred to purchase the aircraft off the operating lease. The Company incorrectly expensed this amount as incurred within Special Items, net on the Condensed Consolidated Statements of Operations. The error resulted in an understatement of the benefit within Special Items, net, partially offset by incremental Depreciation and Amortization Expense for the three and ninetwelve months ended ~~September 30, 2021, and an understatement of Aircraft and Flight Equipment.~~

~~The Company assessed the materiality of the errors on the prior period financial statements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 99,~~ ~~Materiality, codified in ASC 250,~~ ~~Presentation of Financial Statements. Management concluded it was immaterial to the Company's previously issued annual or interim financial statements.~~

The Company has revised the previously issued financial statements as presented in these Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. In addition, the immaterial error has and will continue to be corrected in the comparative amounts presented in the Company’s subsequent quarterly and annual filings.

~~The impact of the revision on the Company's previously issued Consolidated Balance Sheets as of December 31, 2021 are as follows:~~

December 31, 2021
As Previously Issued Correction As Revised
Assets
Aircraft and Flight Equipment $ 440,356 $ 6,963 $ 447,319
Total Property & Equipment 688,624 6,963 695,587
Accumulated Depreciation & Amortization (115,013) (2,056) (117,069)
Total Property & Equipment, net 573,611 4,907 578,518
Deferred Tax Asset 18,737 (1,129) 17,608
Total Other Assets 427,590 (1,129) 426,461
Total Assets 1,376,644 3,778 1,380,422
Stockholder's Equity
Retained Earnings 594 3,778 4,372
Total Stockholders' Equity 486,811 3,778 490,589
Total Liabilities and Stockholders' Equity 1,376,644 3,778 1,380,422

~~-11-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~The impact of the revision on the Company's previously issued Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2021 are as follows:~~

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
As Previously Issued Correction As Revised As Previously Issued Correction As Revised
Operating Expenses
Depreciation and Amortization $ 14,029 $ 681 $ 14,710 $ 40,103 $ 1,429 $ 41,532
Special Items, net (65) — (65) (65,456) (6,963) (72,419)
Total Operating Expenses 151,661 681 152,342 354,290 (5,534) 348,756
Operating Income 22,002 (681) 21,321 96,174 5,534 101,708
Income Before Income Tax 16,200 (681) 15,519 95,244 5,534 100,778
Income Tax Expense 2,297 (157) 2,140 17,172 1,272 18,444
Net Income 13,903 (524) 13,379 78,072 4,262 82,334
Basic Income per share $ 0.24 $ (0.01) $ 0.23 $ 1.44 $ 0.07 $ 1.51
Diluted Income per share $ 0.23 $ (0.01) $ 0.22 $ 1.33 $ 0.07 $ 1.40

~~The revision also impacted the Company's previously issued Condensed Consolidated Statements of Changes in Stockholders Equity as follows:~~

For the Three Months Ended June 30, 2021 For the Three Months Ended March 31, 2021
As Previously Issued Correction As Revised As Previously Issued Correction As Revised
Net Income $ 51,753 $ 424 $ 52,177 $ 12,416 $ 4,362 $ 16,778

As of March 31, 2022 As of September 30, 2021
As Previously Issued Correction As Revised As Previously Issued Correction As Revised
Retained Earnings $ 4,231 $ 3,778 $ 8,009 $ 1,196 $ 4,262 $ 5,458
Total Stockholders' Equity 493,291 3,778 497,069 482,880 4,262 487,142
As of June 30, 2021 As of March 31, 2021
As Previously Issued Correction As Revised As Previously Issued Correction As Revised
Retained Earnings (Deficit) $ (12,707) $ 4,786 $ (7,921) $ (64,460) $ 4,362 $ (60,098)
Total Stockholders' Equity 464,233 4,786 469,019 409,960 4,362 414,322

The Company's Condensed Consolidated Statement of Changes Stockholders' Equity as of December 31, 2021 has been corrected to reflect the changes to the impacted Stockholders' Equity accounts as described above.

~~-12-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~The impact of the revision on the Company's previously issued Condensed Consolidated Statements of Cash Flow for the nine months ended September 30, 2021 is as follows:~~

Nine Months Ended September 30, 2021
As Previously Issued Correction As Revised
Operating Activities
Net Income $ 78,072 $ 4,262 $ 82,334
Depreciation and Amortization 40,103 1,429 41,532
Non-Cash (Gain) Loss on Asset Transaction, Net (12,666) 12,668 2
Deferred Income Taxes 17,068 1,272 18,340
Operating Lease Obligations (19,983) (12,668) (32,651)
Net Cash Provided by Operating Activities 109,395 6,963 116,358
Investing Activities
Purchases of Property & Equipment (111,053) (6,963) (118,016)
Net Cash Used in Investing Activities (111,427) (6,963) (118,390)

~~The revision had no impact on the Company's Net Cash Provided by Financing Activities for the nine months ended September 30, 2021.~~

~~Investments~~

Investments consist of debt securities and Certificates of Deposit. The Certificates of Deposit are recorded at cost, plus accrued interest. These certificates serve as collateral for letters of credit required by various airports and other vendors. All of the certificates have original maturities greater than 90 days.

~~During the nine months ended September~~June 30, 2022, the ~~Company purchased debt securities with original maturities of three months or greater. The investments are classified as Current Assets on~~compensation payable to an executive officer temporarily exceeded the Condensed Consolidated Balance Sheets because the securities are highly liquid and are available to be quickly converted into known amounts of cash to fund current operations. Most of the Company's Available-for-Sale securities will mature within one year. The Company limits its exposure to any one issuer or market sector, and largely limits its investments to investment grade quality securities.

The Company's investment securities are classified as Available-for-Sale and are reported at fair value on the Company's Condensed Consolidated Balance Sheets. Unrealized gains and losses on the Company's Available-for-Sale securities are excluded from net earnings and are reported as a component of Accumulated Other Comprehensive Income, net of income tax effects, within Stockholders' Equity on the Condensed Consolidated Balance Sheets until realized. Realized gains and losses are recorded using the specific identification method and reflected in Other, net within Non-operating Income (Expense) on the Company's Condensed Consolidated Statement of Operations. Premiums and discounts recorded on Available-for-Sale debt securities are accounted for in Interest Income within Non-operating Income (Expense) on the Company's Condensed Consolidated Statement of Operations.

At each reporting period, the Company assesses its Available-for-Sale investments in an unrealized loss position to determine whether an impairment exists. The Company will record an impairment if management intends to sell an impaired security, will likely be required to sell a security before recovery of the entire amortized cost, or the same level of collectible cash flows from the security is no longer expected. The

~~-13-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~entire impairment will be included in Other, net within Non-operating Income (Expense) on the Company's Condensed Consolidated Statement of Operations.~~

~~Recently Adopted Accounting Standards~~

~~In May 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("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 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.~~

~~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 decrease in demand related to the COVID-19 pandemic, which caused a material decline in 2021 revenues as compared to pre-pandemic levels, and negatively impacted the Company’s financial condition and operating results.

During the third quarter of 2022, Sun Country continued to see recovery in demand from 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 nine months ended September 30, 2021, the Company received and recognized as income within Special Items, net $71,587 from the U.S. Treasury under the Payroll Support Program Extension (“PSP2”) and the American Rescue Plan Act of 2021 ("PSP3"). The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit against certain employment taxes. During the nine months ended September 30, 2021, the Company recorded $848 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 U.S. 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.~~

~~-14-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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 Program 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 through 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 through September 30, 2022; and restrictions on the payment of certain executive compensation ~~through April 1,~~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, 2023. ~~As of September 30, 2022,~~To the ~~Company was~~extent we are deemed to have failed to remain in full compliance with ~~these provisions.~~the CARES Act and the applicable rules and regulations thereunder, we may become subject to fines or other enforcement actions.

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: baggage fees, seat selection fees, passenger interface ~~fee~~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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Scheduled Service	Scheduled Service	$	102,200	$	80,212	$	334,679	$	201,905	Scheduled Service	$	152,657	$	124,068
Charter Service	Charter Service	42,899		33,809		118,526		88,511		Charter Service	46,187		32,879
Ancillary	Ancillary	50,261		33,697		139,548		86,626		Ancillary	68,425		45,086
Passenger	Passenger	195,360		147,718		592,753		377,042		Passenger	267,269		202,033
Cargo	Cargo	23,687		24,400		65,930		68,084		Cargo	23,361		21,053
Other	Other	2,653		1,545		8,607		5,338		Other	3,485		3,439
Total Operating Revenue		$	221,700	$	173,663	$	667,290	$	450,464
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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Domestic $ 214,904 $ 167,660 $ 634,963 $ 429,508
Latin America 6,756 5,447 32,182 19,870
Other 40 556 145 1,086
Total Operating Revenue $ 221,700 $ 173,663 $ 667,290 $ 450,464

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~


	Three Months Ended March 31,
	2023		2022
Domestic	$	273,423	$	208,591
Latin America	20,255		17,869
Other	437		65
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 Maintenance Expense on a pro-rata basis over the initial six years of the ATSA.~~The amount expensed during the three and nine months ended September 30, 2022 was $151 and $469, respectively. The expense for both the three and nine months ended September 30, 2021 was $208 and $515, respectively.

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

~~As part~~

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Table of ~~the ATSA executed~~Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars 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 Amazonthousands, except per share 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 and nine months ended September 30, 2022, $225 and $699 was amortized into Cargo revenue, respectively. For the three and nine months ended September 30, 2021, $310 and $779 was amortized into Cargo revenue, respectively.share amounts)

(Unaudited)

Contract Assets and Liabilities are as follows:


		September 30, 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	$	2,350	$	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	132,830		118,562		Air Traffic Liabilities	$	141,613	$	157,995
Loyalty Program Liabilities	Loyalty Program Liabilities	16,317		19,718		Loyalty Program Liabilities	13,799		15,437
Amazon Deferred Up-front Payment	Amazon Deferred Up-front Payment	3,501		4,200		Amazon Deferred Up-front Payment	3,019		3,271
Total Contract Liabilities	Total Contract Liabilities	$	152,648	$	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 ~~nine~~three months ended ~~September 30, 2022, $109,852~~March 31, 2023, $123,574 of revenue was recognized in Passenger revenue that was included in the Air Traffic Liabilities as of December 31, ~~2021.~~2022.

Loyalty Program

~~-16-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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.

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	5,125		3,058		Loyalty Points Earned	2,294		1,819
Loyalty Points Redeemed (1)	Loyalty Points Redeemed (1)	(8,526)		(4,816)		Loyalty Points Redeemed (1)	(3,932)		(4,163)
Balance – September 30		$	16,317	$	20,311
Balance – March 31						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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Numerator:
  Net Income $ 10,677 $ 13,379 $ 10,392 $ 82,334
Denominator:
  Weighted Average Common Shares Outstanding - Basic 58,146,606 57,355,104 58,039,201 54,368,231
  Dilutive effect of Stock Options, RSUs and Warrants (1)
2,646,910 4,357,274 3,333,534 4,331,760
  Weighted Average Common Shares Outstanding - Diluted 60,793,516 61,712,378 61,372,735 58,699,991
Basic earnings per share $ 0.18 $ 0.23 $ 0.18 $ 1.51
Diluted earnings per share $ 0.18 $ 0.22 $ 0.17 $ 1.40

~~______________________~~


~~(1)~~			There were 3,221,617 and 3,626,851 performance-based stock options outstanding at September 30, 2022 and 2021, respectively. As of September 30, 2022 and 2021, the Company expected approximately 63% and 75% of these options to vest, respectively. As of September 30, 2022, 32.5% of the eligible outstanding performance-based stock options vested and were considered exercisable. These amounts are included in the measure above to the extent they are dilutive.

~~The Company's anti-dilutive shares for the periods presented were immaterial to the Condensed Consolidated Financial Statements.~~

Warrants held by Amazon are included in the calculation of 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 has not been satisfied.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

~~6. AIRCRAFT~~

~~As of September 30, 2022, Sun Country operated a fleet of 54 Boeing 737-NG aircraft, consisting of 53 Boeing 737-800s and one Boeing 737-700.~~4. EARNINGS PER SHARE

The following ~~tables summarize~~table shows the ~~Company’s aircraft fleet activity for the nine months ended September 30, 2022~~computation of basic and ~~2021, respectively:~~diluted earnings per share:

December 31, 2021 Additions Reclassifications Removals September 30, 2022
Passenger:
Owned 21 5 4 (1)

29
Finance leases (1)
9 2 — — 11
Operating leases 6 — (4) — 2
Sun Country Airlines’ Fleet 36 7 — (1) 42
Cargo:
Aircraft Operated for Amazon 12 — — — 12
Total Aircraft Operated 48 7 — (1) 54
December 31, 2020 Additions Reclassifications Removals September 30, 2021
Passenger:
Owned 14 1 6 — 21
Finance leases 5 3 — — 8
Operating leases 12 — (6) — 6
Sun Country Airlines’ Fleet 31 4 — — 35
Cargo:
Aircraft Operated for Amazon 12 — — — 12
Total Aircraft Operated 43 4 — — 47


	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)			~~Two aircraft operating leases~~There were ~~reclassified into finance lease~~3,117,544 and ~~two separate aircraft finance lease purchase~~3,550,810 performance-based stock options ~~were exercised, resulting~~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 ~~a net change of zero finance lease reclassifications.~~the measure above to the extent they are dilutive.

During the nine months ended September 30, 2022, the Company acquired seven incremental aircraft, five of which were financed using proceeds from the issuance of Class A and Class B pass-through trust certificates (the "2022-1 EETC"), and two through finance lease arrangements. As of September 30, 2022, 26 of the owned aircraft were financed and three aircraft were unencumbered. For more information on the Company's financing arrangements, see ~~Note 7~~ ~~of these Condensed Consolidated Financial Statements.~~

During the nine months ended September 30, 2022, the Company completed transactions that adjusted the composition of its fleet. The Company executed lease amendments to purchase two aircraft at the end of the lease term, which modified the classification from operating leases to finance leases with expiration dates in fiscal year 2026. The Company purchased two aircraft previously classified as finance leases, using proceeds from the 2022-1 EETC. Additionally, the Company purchased two aircraft previously classified as operating leases, both of which are now unencumbered.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

5. AIRCRAFT

As of March 31, 2023, Sun Country's fleet consisted of 57 Boeing 737-NG aircraft, comprised of 53 Boeing 737-800s, three Boeing 737-900ERs and one Boeing 737-700.

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


	December 31, 2022	Additions	Reclassifications	Removals	March 31, 2023
Passenger:
Owned	29	—	—	—	29
Finance leases	11	—	—	—	11
Operating leases	2	—	—	—	2
Sun Country Airlines’ Fleet	42	—	—	—	42
Cargo:
Aircraft Operated for Amazon	12	—	—	—	12
Other owned:
Aircraft Held for Operating Lease	—	3	—	—	3
Total Aircraft	54	3	—	—	57

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

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company entered into an ~~owned aircraft~~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 ~~retired due to~~completed resulting in the ~~aircraft sustaining damage beyond economic repair.~~acquisition of the two remaining Aircraft Held for Operating Lease. The ~~retirement had no impact on the Company's Condensed Consolidated Results of Operations.~~five Aircraft Held for Operating Lease were financed through a term loan arrangement. See Note 136 of these Condensed Consolidated Financial Statements for more ~~information.~~

~~Six~~information on this transaction. As of March 31, 2023, 29 of the owned aircraft ~~purchased during~~and Aircraft Held for Operating Lease were financed and three aircraft were unencumbered.

During the ~~nine~~three months ended ~~September 30, 2021 were financed through~~March 31, 2022, the ~~Delayed Draw Term Loan Facility. See~~ Company executed lease amendments to purchase two aircraft at the end of the lease term, which modified the lease classification from operating leases to

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~~Note 7~~Table of Contents ~~for additional information. All six aircraft were previously accounted for as operating leases.~~

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 ~~four~~two incremental 737-800 aircraft, one of which was ~~purchased,~~financed using proceeds from the issuance of Class A and ~~three~~Class B pass-through trust certificates (the "2022-1 EETC") and another through a finance lease ~~arrangements.~~arrangement that is set to expire in fiscal year 2030.

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


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
Aircraft Status	Aircraft Status	Expense Type	2022		2021		2022		2021		Aircraft Status	Expense Type	2023		2022
Owned	Owned	Depreciation	$	10,179	$	9,284	$	29,027	$	26,514	Owned	Depreciation	$	11,872	$	8,673
Finance Leased	Finance Leased	Amortization	4,419		2,977		12,533		7,846		Finance Leased	Amortization	4,683		4,069
Operating Leased	Operating Leased	Aircraft Rent (1)	1,949		3,925		7,347		13,339		Operating Leased	Aircraft Rent (1)	1,480		3,186
			$	16,547	$	16,186	$	48,907	$	47,699			$	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~~

6. ASSET ACQUISITIONS

During the ~~Condensed Consolidated Statements of Operations.~~

three months ended March 31, 2023, the Company entered into an agreement to acquire five Aircraft ~~Maintenance Deposits Contra-Assets~~

AsHeld for Operating Lease for approximately $158,000. On March 29, 2023, the Company acquired three of the ~~Acquisition Date,~~Aircraft Held for Operating Lease. The table below reflects 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 deposits remitted by the previous ownerscumulative balances recognized upon acquisition of the ~~Company~~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 ~~lessor for maintenance events. The contra-assets represent the Company’s obligation to perform planned maintenance events on leased aircraft held~~assets based upon their relative fair values as of the ~~Acquisition~~acquisition date. ~~As reimbursable maintenance events are performed and Maintenance Expense is incurred, a portion~~The Company estimated the fair value of the ~~contra-asset is recognized~~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 ~~reduction to Maintenance Expense on~~discounted cash flow model that involves the ~~Condensed Consolidated Statements~~comparison of ~~Operations due~~contractual lease cash flows to the ~~fact that~~estimated at-market lease payments for an aircraft of the ~~previously acquired maintenance deposit is partially funding~~same type and age.

On April 4, 2023, the ~~maintenance event. As~~Company completed the transaction resulting in the acquisition of ~~September 30, 2022 and December 31, 2021,~~the two additional Aircraft Held for Operating Lease for the remaining ~~balance~~consideration of approximately $63,000. The acquisition cost of the ~~contra-asset was $13,211 and $22,348, respectively. Of the $9,137 reduction in the contra-asset during the nine months ended September 30, 2022, $8,362 is related to the purchase of two~~ aircraft ~~previously under operating leases. The contra-assets reduced the acquisition costs incurred to purchase the aircraft off the operating lease.~~

~~Over-market Liabilities~~

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 September 30, 2022 and December 31, 2021 was $132 and $10,363, respectively and is recorded withinwill be allocated between Aircraft Held for Operating Lease, ~~Right-of-Use Assets. During the first quarter of 2022, the Company executed lease amendments which modified two aircraft from operating leases to finance leases. As~~Maintenance Rights, and Over-Market Assets on a result of the modifications, the Company reclassified $9,687 of the over-market lease liability from Operating Lease Right-of-Use Assets to Finance Lease Assets. The resulting reclassification reduced the go-forward Depreciation and Amortization for the related Finance Lease Assets. Additionally, $173 of therelative fair value basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

~~reduction is~~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, ~~previously under operating leases~~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 ~~September 30, 2022. The contra-assets reduced~~March 31, 2023.

Maintenance Rights Asset

Upon purchase of the ~~acquisition costs incurred~~Aircraft Held for Operating Lease, the Company recognized a Maintenance Rights Asset which represents the Company’s contractual right to ~~purchase~~receive the aircraft ~~off~~in a specified maintenance condition at the ~~operating lease.~~

Asend of the ~~Acquisition Date, Sun Country’s existing~~lease. The acquired leases ~~included payments~~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 ~~reserves in addition~~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 ~~stated aircraft lease payments. For a substantial portion of these maintenance reserve payments,~~lessor (unfavorable to the ~~Company does not expect to be reimbursed by the lessor. Therefore, a liability was established representing over-market maintenance reserve lease terms~~lessee) as compared towith market terms of similar leases. The asset will be amortized over the remaining ~~balance of this liability at September 30, 2022 and December 31, 2021 was $2,958 and $14,737, respectively. Of~~lease terms for the ~~$11,779 reduction in~~respective aircrafts, which ranges from approximately 1.7-2.7 years. The amortization will be recognized as a contra-revenue, offsetting the ~~over-market maintenance reserve liabilities during the nine months ended September 30, 2022, $6,023 was incorporated into the Finance Lease Assets in accordance~~rental revenue associated with the terms of the executed lease amendments, as described above. Additionally, $3,303 of the reduction is related to the purchase of two aircraft previously under operating leases. The maintenance deposits were allocated to the acquisition costs incurred to purchase the aircraft off the operating lease.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 proceeds from the Revolving Credit Facility can be used for general corporate purposes, whereas the proceeds from the DDTL 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 ~~September 30, 2022.~~March 31, 2023.

During 2021, the Company drew $80,500 on the DDTL to purchase six aircraft, which were previously under operating leases. During ~~the first quarter of~~ 2022, the Company repaid the outstanding balance of the DDTL in full 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 ~~September 30, 2022.~~March 31, 2023. The Company recorded a $1,557 loss on extinguishment of debt ~~related to~~during the 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 ~~September 30, 2022,~~March 31, 2023, the Company had $24,650 of financing available through the Revolving Credit Facility, ~~remained undrawn and $24,650 was 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.

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 Loan-to-Value ("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 reduce the ratio to 75%. Amounts received under the end of lease maintenance compensation clause may be applied towards the LTV payment.

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 $2,526 in debt issuance costs associated with the 2022-1 EETC. Of the 13 aircraft financed by the 2022-1 EETC during the nine months ended September 30, 2022, five were existing owned aircraft previously financed by the DDTL, two of the aircraft were owned outright, four of the aircraft were acquired incrementally, and two aircraft were bought-out from an existing finance lease. The Company is required to make semi-annual principal and interest payments each March and September, the first payment occurred on September 15, 2022. The 2022-1 EETC is 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 aircraft and engines financed by the 2022-1 EETC was approximately $259,688 as of the original date of the agreement.

~~-20-~~-16-

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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)

~~During the nine months ended September 30, 2022, the Company capitalized $2,327 of Interest Expense related to aircraft financed with the proceeds of the 2022-1 EETC while undergoing induction.~~

Long-term Debt includes the following:

September 30, 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 4.73% as of September 30, 2022. $ 194,884 $ 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 September 30, 2022. 179,019 —
Delayed Draw Term Loan Facility — 77,481
Other Notes payable — 466
Total Debt 373,903 280,931
Less: Unamortized debt issuance costs (3,706) (3,505)
Less: Current Maturities of Long-term Debt (45,535) (29,412)
Total Long-term Debt $ 324,662 $ 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		$	18,187	$	(264)	$	17,923
2023		58,518		(962)		57,556
Remainder of 2023								Remainder of 2023	$	55,025	$	(982)	$	54,043
2024	2024	60,157		(777)		59,380		2024	69,623		(1,097)		68,526
2025	2025	65,241		(602)		64,639		2025	74,216		(872)		73,344
2026	2026	45,668		(415)		45,253		2026	55,142		(637)		54,505
2027								2027	58,280		(468)		57,812
Thereafter	Thereafter	126,132		(686)		125,446		Thereafter	104,588		(559)		104,029
Total as of September 30, 2022		$	373,903	$	(3,706)	$	370,197
Total as of March 31, 2023								Total as of March 31, 2023	$	416,874	$	(4,615)	$	412,259

The fair value of Debt was ~~$340,067~~$390,948 as of ~~September 30, 2022~~March 31, 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.

~~-21-~~-17-

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~(Unaudited)~~

~~8. FUEL DERIVATIVES AND RISK MANAGEMENT~~

The Company’s operations are inherently dependent upon the price of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into fuel option and swap contracts. The Company does not apply hedge accounting to its fuel derivative contracts, nor does it hold or issue them for trading purposes. As of September 30, 2022 and December 31, 2021, 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 and losses are classified in Aircraft Fuel on the Condensed Consolidated Statements of Operations.

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

Nine Months Ended September 30,
2022 2021
Balance - January 1 $ — $ (1,174)
Non-cash Gains — 3,527
Contract Settlements — (2,105)
Balance - September 30 $ — $ 248

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Total Fuel Derivative Gains (Losses) $ — $ (72) $ — $ 3,527

~~No cash premiums were paid in any of the periods presented above.~~

~~-22-~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

(Unaudited)

9.8. INVESTMENTS

A summary of debt securities by major security type:


		September 30, 2022 (1)									March 31, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-Sale Securities (2):
Available-for-Sale Securities: (1)										Available-for-Sale Securities: (1)
Municipal Debt Securities	Municipal Debt Securities	$	41,108	$	—	$	(331)	$	40,777	Municipal Debt Securities	$	27,601	$	5	$	(132)	$	27,474
Corporate Debt Securities	Corporate Debt Securities	83,547		—		(695)		82,852		Corporate Debt Securities	89,045		—		(386)		88,659
U.S. Government Agency Securities	U.S. Government Agency Securities	5,005		—		(65)		4,940		U.S. Government Agency Securities	49,174		69		(99)		49,144
Total	Total	$	129,660	$	—	$	(1,091)	$	128,569	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)			~~As the Company began purchasing these investment securities during the second quarter of 2022, there is no comparable prior period information.~~
~~(2)~~			The Company also holds Certificates of Deposit that are included in Investments on the Condensed Consolidated Balance Sheets totaling ~~$6,601~~$6,361 and ~~$6,283~~$6,301 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

As of ~~September 30, 2022,~~March 31, 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 were not the result of a deterioration in the credit quality of the securities. As of ~~September 30, 2022,~~March 31, 2023, the Company believes that any unrealized losses are recoverable prior to the investment's conversion to cash. Therefore, the Company believes these losses to be ~~temporary.~~temporary and no impairments have been recognized.

~~10.~~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.~~

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

~~Cash & Cash Equivalents~~ – The carrying value of cash and cash equivalents approximates fair value. Fair values of cash equivalent instruments that do not trade on a regular basis in active markets are classified as Level 2.

~~Available-for-Sale Securities~~ - Available-for-Sale investment securities include debt securities, such as municipal, corporate, and U.S. government agency notes. All of these investments are classified as Level 2 because they do not trade in active markets on a regular basis. The Company obtains its pricing per security from a third-party, which uses quoted market prices, when available, or other observable inputs for determination of fair value.

~~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.basis:


	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

~~-23-~~-18-

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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)

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

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

September 30, 2022
Level 1 Level 2 Level 3 Total
Cash & Cash Equivalents $ 70,925 $ 60,987 $ — $ 131,912
Available-for-Sale Securities:
Municipal Debt Securities — 40,777 — 40,777
Corporate Debt Securities — 82,852 — 82,852
U.S. Government Agency Securities — 4,940 — 4,940
Total Available-for-Sale Securities — 128,569 — 128,569
Total Assets Measured at Fair Value on a Recurring Basis $ 70,925 $ 189,556 $ — $ 260,481


		December 31, 2021									December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Cash & Cash Equivalents	Cash & Cash Equivalents	$	309,338	$	—	$	—	$	309,338	Cash & Cash Equivalents	$	73,727	$	18,359	$	—	$	92,086
Available-for-Sale Securities:										Available-for-Sale Securities:
Municipal Debt Securities										Municipal Debt Securities	—		47,655		—		47,655
Corporate Debt Securities										Corporate Debt Securities	—		92,778		—		92,778
U.S. Government Agency Securities										U.S. Government Agency Securities	—		32,202		—		32,202
Total Available-for-Sale Securities										Total Available-for-Sale Securities	—		172,635		—		172,635
Total Assets Measured at Fair Value on a Recurring Basis	Total Assets Measured at Fair Value on a Recurring Basis	$	309,338	$	—	$	—	$	309,338	Total Assets Measured at Fair Value on a Recurring Basis	$	73,727	$	190,994	$	—	$	264,721

~~11.~~10. INCOME TAXES

The Company's effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 was ~~17.4%~~22.9% and ~~28.4%, respectively. The effective tax rate for the three and nine months ended September 30, 2021 was 13.8% and 18.3%~~43.3%, 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 for~~20.4% decrease in the ~~three and nine months ended September 30, 2022~~ effective tax rate iswas primarily due to the ~~non-taxable~~$6,800 non-deductible adjustment to increase the tax receivable liability related to the Tax Receivable Agreement (the "Tax Receivable Agreement" or "TRA"), 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was ~~$103,800~~$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 ~~nine~~three months ended ~~September 30,~~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. During the three months ended March 31, 2023, the Company made a payment of $2,425 to the 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 Condensed Consolidated Statements of Cash Flows. Payments will be made in future periods as attributes that existed at the time of the 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 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 connection to this offering and did not receive any of the proceeds.

~~-24-~~-19-

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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)

~~liability of $5,000. Adjustments to the TRA are recorded in Other, net Non-Operating Income (Expense) on~~Common Stock Repurchases

On October 31, 2022, the Company’s ~~Condensed Consolidated Statements~~Board of ~~Operations.~~

~~For more information on~~Directors authorized a $50,000 stock repurchase program. During the ~~TRA, see~~ ~~Note 13~~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 ~~Notes~~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 repurchase additional shares of its Common Stock. The stock repurchase program has no expiration date and may be modified, suspended, or terminated at any time.

Amazon Agreement

On December 13, 2019, the ~~Consolidated Financial Statements~~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 ~~Part II, Item 8, “Financial Statements” in~~each respective period. As of March 31, 2023 and March 31, 2022, the ~~2021 10-K.~~cumulative vested warrants held by Amazon were 2,591,920 and 1,833,312, respectively. The exercise period of these warrants is through the eighth anniversary of the issue date.

12. ~~SPECIAL ITEMS, NET~~

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

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
CARES Act grant recognition (see Note 3)
$ — $ — $ — $ (71,587)
CARES Act employee retention credit (See Note 3)
— (68) — (848)
Other — 3 — 16
Total Special Items, net $ — $ (65) $ — $ (72,419)

~~13.~~ 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 1110), 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 asduring 2022. The contingency has been finalized and the impact of the second quarter and had no financial impact on the Company's Condensed Consolidated Statement of Operations. The estimate will be revised when additional information becomes available or when the contingency is finalized. The Company doesretirement was not ~~believe the finalization of the contingency will have a~~ material ~~effect on~~to the Company's Condensed Consolidated Results of Operations.

~~During the nine months ended September 30, 2022,~~As of March 31, 2023 the Company ~~executed an agreement~~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 $2,000 for six years.

As of March 31, 2023, the Company had a commitment to purchase ~~a flight simulator at a total purchase price of $9,745. To date, $8,781 has been remitted~~an incremental aircraft for approximately $24,500. The Company is expected to ~~the seller. The remaining purchase price will be remitted to the seller upon receipt and installation~~take delivery of the ~~simulator. Payments for~~aircraft in the ~~simulator are accounted for within Property & Equipment on the Condensed Consolidated Balance Sheets as~~second quarter of ~~September 30, 2022.~~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.

~~-25-~~-20-

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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)

~~14.~~13. OPERATING SEGMENTS

The following tables present financial information for the Company’s two 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 September 30, 2022 Three Months Ended September 30, 2021
Passenger Cargo Consolidated Passenger Cargo Consolidated
Operating Revenues $ 198,013 $ 23,687 $ 221,700 $ 149,263 $ 24,400 $ 173,663
Non-Fuel Operating Expenses 117,788 23,678 141,466 99,960 15,800 115,760
Aircraft Fuel 64,763 80 64,843 36,556 91 36,647
Special Items, net — — — (65) — (65)
Total Operating Expenses 182,551 23,758 206,309 136,451 15,891 152,342
Operating Income (Loss) $ 15,462 $ (71) 15,391 $ 12,812 $ 8,509 21,321
Interest Income 1,610 28
Interest Expense (7,493) (6,286)
Other, net 3,422 456
Income Before Income Tax $ 12,930 $ 15,519


		Nine Months Ended September 30, 2022						Nine Months Ended September 30, 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	$	601,360	$	65,930	$	667,290	$	382,380	$	68,084	$	450,464	Operating Revenues	$	270,754	$	23,361	$	294,115	$	205,472	$	21,053	$	226,525
Non-Fuel Operating Expenses	Non-Fuel Operating Expenses	355,894		64,470		420,364		280,272		50,272		330,544		Non-Fuel Operating Expenses	140,637		25,405		166,042		120,810		19,338		140,148
Aircraft Fuel	Aircraft Fuel	206,254		80		206,334		90,468		163		90,631		Aircraft Fuel	72,266		24		72,290		64,544		—		64,544
Special Items, net		—		—		—		(54,018)		(18,401)		(72,419)
Total Operating Expenses	Total Operating Expenses	562,148		64,550		626,698		316,722		32,034		348,756		Total Operating Expenses	212,903		25,429		238,332		185,354		19,338		204,692
Operating Income		$	39,212	$	1,380	40,592		$	65,658	$	36,050	101,708
Operating Income (Loss)														Operating Income (Loss)	$	57,851	$	(2,068)	55,783		$	20,118	$	1,715	21,833
Interest Income	Interest Income					2,166						52		Interest Income					2,741						24
Interest Expense	Interest Expense					(23,097)						(19,487)		Interest Expense					(8,630)						(8,562)
Other, net	Other, net					(5,156)						18,505		Other, net					(212)						(6,876)
Income Before Income Tax	Income Before Income Tax					$	14,505					$	100,778	Income Before Income Tax					$	49,682					$	6,419

~~15.~~14. SUBSEQUENT EVENTS

The Company evaluated subsequent events for the period from the Balance Sheet date through ~~November 2, 2022,~~April 28, 2023, the date that the Condensed Consolidated Financial Statements were available to be issued.

~~-26-~~

~~Table~~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 ~~Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~On October 31, 2022,~~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 ~~Board~~restricted cash that was previously deposited.

For more information on the subsequent events, see Note 5, No te 6, and Note 7 of ~~Directors authorized a stock repurchase program pursuant~~the Notes to ~~which~~ the Company may purchase up to $50,000 of its Common Stock, $0.01 par value per share (“Common Stock”). The Company may purchase shares of its Common Stock on a discretionary basis from time-to-time through open market repurchases, privately negotiated transactions, accelerated share repurchase, or other means, including through Rule 10b5-1 trading plans. Whether any repurchases are made, and the timing and actual number of any shares repurchased, will be determined by management depending on a variety of factors, including stock price, trading volume, market conditions and other general business considerations. The stock repurchase program has no expiration date and may be modified, suspended, or terminated at any time. Any repurchases made underCondensed Consolidated Financial Statements included elsewhere in this ~~program will be funded from the Company’s existing cash flows, or future cash flows.~~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 significant accounting policies are described in~~ ~~Note 2~~ of the Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2021 10-K. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments, or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria:

i.~~the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and~~

~~ii.~~different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition, or results of operations.

~~We have identified the following critical accounting policies:~~

–~~Revenue Recognition~~

–~~Loyalty Program Accounting~~

–~~Asset Impairment Analysis~~

–~~Valuation of the TRA Liability~~

~~Revenue Recognition~~

Scheduled passenger service, charter service, and most ancillary revenues are recognized when the passenger flight occurs. Revenues exclude amounts collected on behalf of other parties, including transportation taxes.

The Company initially defers ticket sales as an air traffic liability and recognizes revenue when the passenger flight occurs. Unused non-refundable tickets expire at the date of scheduled travel and are recorded as revenue unless the customer notifies the Company in advance of such date that the customer will not travel. If notification is made, a travel credit is created for the face value, including ancillary fees, less applicable change fees. Revenue for change fees is deferred and recognized when the passenger travel is provided.

Travel credits may generally be redeemed toward future travel for up to 12 months after the date of the original booking. As of September 30, 2022, the Company’s air traffic liability included $8,378 related to travel credits for future travel. The Company records an estimate for travel credits that will expire unused, otherwise known as breakage, in Passenger Revenue upon issuance of the travel credit. During the nine months ended September 30, 2022 and 2021, the Company recorded $7,837 and $9,008 of estimated travel credit breakage, respectively. A portion of travel credits will expire unused, at which time any remaining revenue is recognized.

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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 estimated breakage rate is primarily based on historical experience of travel credit activity and other factors that may not be indicative of future trends, such as the COVID-19 pandemic, program changes or modifications that could affect the ultimate usage patterns of tickets and travel credits. The Company continuously monitors its breakage rate assumptions and may adjust its estimated breakage rate in the future. Changes in the Company’s estimated breakage rate impact revenue recognition prospectively.

~~For the nine months ended September 30, 2022, a 10% change in the Company’s estimated travel credit breakage rate would have resulted in a change to Passenger Revenue of approximately $626.~~

~~There are no critical accounting estimates associated with Charter or Cargo revenue recognition that would materially impact the amount of revenue recognized in any specific period.~~

~~Loyalty Program Accounting~~

The Sun Country Rewards program provides loyalty awards to program members based on accumulated loyalty points. 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 by passengers on purchases of the Company’s services is established by deferring revenue based on the redemption value, net of 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 Company’s Sun Country Rewards program allows for the redemption of points to include payment towards air travel, land travel, taxes, and other ancillary purchases. 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). The Company records an estimate for loyalty points breakage in Passenger Revenue upon issuance of the loyalty points. Loyalty points held by co-branded credit card members do not expire. All other loyalty points expire if unused after three years.

~~Points Earned Through Travel Purchases~~. Passenger sales that earn Sun Country Rewards provide customers with travel services and loyalty points, which are each considered distinct performance obligations. The Company values each performance obligation on a standalone basis. The Company determines the standalone selling price of loyalty points issued using a redemption value approach, which considers the value a passenger will receive upon redemption of the loyalty points. Consideration allocated to loyalty points is deferred, net of estimated breakage, and recognized as Passenger Revenue when both the loyalty points have been redeemed and the passenger travel occurs.

~~Points Earned through the Co-Branded Credit Card Program~~. Under the Company's co-branded credit card program, funds received for the marketing of a co-branded credit card and delivery of loyalty points are accounted for as a multiple-deliverable arrangement. The Company determined that the arrangement has two distinct performance obligations: (1) loyalty points to be awarded; and, (2) use of our brand and access to our customer lists, and certain other advertising and marketing elements (collectively, the marketing performance obligation). Funds received from the co-branded credit card program are allocated to the two performance obligations based on relative standalone selling price. The assumptions used to allocate the funds received are not considered critical to the application of the accounting model for the Company’s loyalty program. Consideration allocated to loyalty points is deferred and recognized as Passenger Revenue when both the loyalty points have been redeemed and the passenger travel occurs. Consideration allocated to the marketing performance obligation is recognized as revenue as the spend occurs and is recorded in Other Revenue.

The Company estimates breakage for loyalty points that are not likely to be redeemed. Loyalty points are combined in one homogenous pool, that includes both air and non-air travel awards, and are not separately identifiable. The estimated breakage rate is primarily based on historical experience of loyalty point redemption

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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)~~

activity and other factors that may not be indicative of future trends, such as the COVID-19 pandemic, program changes or modifications that could affect the ultimate usage pattern of loyalty points. The Company continuously monitors its breakage rate assumptions and may adjust its estimated breakage rate for loyalty points in the future. Changes in the Company’s estimated breakage rate assumptions impact revenue recognition prospectively.

During the nine months ended September 30, 2022, the Company recognized $1,134 of loyalty points breakage within Passenger Revenue. A 10% change in the Company’s loyalty point estimated breakage rate would have resulted in a change to Passenger Revenue of approximately $141.

~~Asset Impairment Analysis~~

The Company’s long-lived assets, such as Property & Equipment and finite-lived Intangible Assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company’s assets include aircraft and associated engines, operating and finance lease assets, the Company’s customer relationship finite-lived intangible assets, and other long-lived assets. The Company reviews the current economic and operating environment to determine whether events or circumstances indicate that these assets may be impaired. Such indicators include, but are not limited to: (1) significant, permanent decrease in the market price of the Company’s long-lived assets, (2) significant decrease in the projected cash flows generated from the use of its long-lived assets, (3) changes in the estimated useful life or productive capacity of the asset, (4) changes in the regulatory environment in which the Company operates, and (5) a decision to permanently remove flight equipment or other long-lived assets from operations. If such factors are identified and the Company determines that the carrying amount of the long-lived asset (or asset group) is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the asset (or asset group’s) carrying amount exceeds its fair value. Fair value is determined using various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

When the Company assesses its long-lived assets for impairment, it utilizes certain assumptions, including, but not limited to: (1) estimated fair value of the assets and (2) estimated future undiscounted cash flows expected to be generated by those assets. Cash flow estimates are determined based on additional assumptions, including asset utilization, average fares, projected fuel costs and other operating costs, along with the estimated service life of the asset. Certain of these assumptions are highly volatile and could change significantly from period to period due to various macroeconomic and industry-specific events.

To determine whether impairment exists, the Company groups its assets based on the lowest level of identifiable cash flows, which is its operating segments. This is due to the Company operating a Passenger Service fleet comprised exclusively of one type of aircraft, the Boeing 737-NG. None of the Company’s long-lived assets are owned by, or associated with, the Cargo operating segment.

The Company has not recorded an impairment on its long-lived assets for any of the periods presented in these Condensed Consolidated Financial Statements, nor did it identify any triggering events during the nine months ended September 30, 2022 and for the year ended December 31, 2021.

~~Valuation of the TRA Liability~~

In connection with its IPO, the Company entered into a TRA with 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”). Amounts payable under the TRA are contingent upon, among other things, (i) generation of future

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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)~~

taxable income over the term of the TRA, (ii) the Company’s participation in future government programs, (iii) stock option activity during periods prior to the commencement of payments under the TRA and (iv) future changes in tax laws. These factors could result in an increase or decrease in the related liability, which would be recognized in the Company’s earnings in the period of such change.

If the Company does not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax benefits, then it would not be required to make the related TRA payments. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, the Company considers its historical results and incorporates certain assumptions, including revenue growth, operating margin, stock option exercises and tax depreciation expense. The TRA liability estimates related to the generation of future taxable income and stock option activity during the periods prior to the commencement of payments only applies through fiscal year 2022, due to the expiration of the CARES Act dividend and capital distribution restrictions in 2022.

A $10,000 change in forecasted taxable income would have resulted in a change to the TRA Liability of approximately $1,200. Stock option exercises during the nine months ended September 30, 2022 did not significantly impact the TRA liability. Adjustments to the TRA are recorded in the current period in Other, net within Non-operating Income (Expense) on the Company’s Condensed Consolidated Statements of Operations.

~~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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Also discussed is our financial position as of ~~September 30, 2022~~March 31, 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.

The COVID-19 pandemic resulted in a dramatic decline in passenger demand across the U.S. airline industry. We experienced a significant decrease in demand related to the COVID-19 pandemic, which caused a material decline in our 2021 results as compared to pre-pandemic levels, and negatively impacted our financial condition and operating results.

During the third quarter of 2022, we have continued to see recovery in demand from the COVID-19 pandemic relative to demand in 2021, which may impact the comparability of results presented. However, the ongoing impact of the COVID-19 pandemic on overall demand for air travel remains uncertain and cannot be predicted

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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)~~

~~at this time. In addition, the impact of COVID-19 vaccine mandates, uncertainties in pilot staffing, higher aircraft~~Pilot training throughput issues, fuel ~~prices~~price increases due to ~~global~~ geopolitical events, and the impact of macroeconomic conditions including inflationary pressures ~~could~~continue to impact our business and results of operations in the near term. While the COVID-19 pandemic-induced industry downturn 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.

~~Operational challenges, driven by training throughput issues, fuel price increases and other inflationary pressures have impacted~~ the Company, as well as the industry. ~~In the near term, current airline~~Airline travel demand ~~will partially~~has remained strong which has offset the additional costs associated with ~~operational challenges,~~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 Company experienced challenging winter weather at our main hub, the Minneapolis – St. Paul International Airport ("MSP") during the first quarter of 2023. A substantial portion of our business is focused on serving markets originating or ending in MSP during this seasonal peak period. Minneapolis-St. Paul had one of the top snowfalls on record this year, which drove a number of operational challenges and resulted in additional costs for the Company. Two major storms shut down MSP airport during the first quarter of 2023, which is rare. The resulting cancellations from these closures negatively impacted results in the 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.

~~Prior Periods' Financial Statement Revisions~~

~~As described in~~ ~~Note 2~~ to the Condensed Consolidated Financial Statements, we have revised previously issued financial statements to correct an immaterial misstatement. Accordingly, all prior period numbers included in this Management's Discussion and Analysis of Financial Condition reflect the effect of the revisions.

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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 September 30, 2022 (1)								Three Months Ended September 30, 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)	5,611			2,359		3,043	11,072		5,533			1,798		2,912	10,299		Departures (2)	6,177			2,369		3,027	11,672		6,227			1,620		2,574	10,487
Block hours (2)	Block hours (2)	16,947			4,623		8,739	30,492		17,313			3,835		8,533	29,842		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)	6,777,764			1,629,061		3,399,149	11,864,450		7,046,575			1,423,300		3,376,084	11,897,035		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)	1,256,755			286,189			1,553,483		1,296,555			244,393			1,549,432		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)	12.34			14.99			12.75		8.90			13.83			9.63		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)							36.8								32.9		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)							42								35		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)							6.4								7.0		Average daily aircraft utilization (hours) (3)							7.3								8.6
Average stage length (miles)	Average stage length (miles)							1,055								1,155		Average stage length (miles)							1,225								1,336
Revenue passengers carried (4)	Revenue passengers carried (4)	908,967								785,348								Revenue passengers carried (4)	998,238								922,652
Revenue passenger miles (RPMs) (thousands) (4)	Revenue passenger miles (RPMs) (thousands) (4)	1,101,011								1,011,936								Revenue passenger miles (RPMs) (thousands) (4)	1,432,131								1,338,459
Load factor (4)	Load factor (4)	87.6		%						78.0		%						Load factor (4)	88.1		%						79.5		%
Average base fare per passenger (4)	Average base fare per passenger (4)	$	112.44							$	102.14							Average base fare per passenger (4)	$	152.93							$	134.47
Ancillary revenue per passenger (4)	Ancillary revenue per passenger (4)	$	55.29							$	42.91							Ancillary revenue per passenger (4)	$	68.55							$	48.87
Charter revenue per block hour (4)	Charter revenue per block hour (4)				$	9,280							$	8,816				Charter revenue per block hour (4)				$	9,139							$	8,643
Fuel gallons consumed (thousands) (2)	Fuel gallons consumed (thousands) (2)	13,352			3,056			16,509		13,475			2,760			16,321		Fuel gallons consumed (thousands) (2)	17,383			3,526			21,073		17,401			2,758			20,245
Fuel cost per gallon, excluding derivatives and other items								$	3.93							$	2.24
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							2,354								2,014		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)							13.28								9.83		Cost per available seat mile (CASM) (cents) (5)							12.25								10.62
Adjusted CASM (cents) (6)	Adjusted CASM (cents) (6)							7.55								6.39		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 and Charter service utilize the same fleet of aircraft. Aircraft counts and utilization metrics are shown on a system basis only.

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

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

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

Nine Months Ended September 30, 2022 (1)
Nine Months Ended September 30, 2021 (1)
Scheduled
Service Charter Cargo Total Scheduled
Service Charter Cargo Total
Departures (2)
17,512 6,214 8,310 32,246 14,777 5,036 8,229 28,196
Block hours (2)
57,585 13,000 23,891 95,052 48,420 10,822 24,973 84,648
Aircraft miles (2)
23,112,200 4,630,257 9,209,477 37,113,673 19,758,087 4,005,794 9,884,576 33,780,294
Available seat miles (ASMs) (thousands) (2)
4,284,403 800,698 5,114,134 3,653,335 693,837 4,368,972
Total revenue per ASM (TRASM) (cents) 11.27 14.80 11.76 8.04 12.76 8.75
Average passenger aircraft during the period (3)
35.2 31.7
Passenger aircraft at end of period (3)
42 35
Cargo aircraft at end of period 12 12
Average daily aircraft utilization (hours) (3)
7.4 6.9
Average stage length (miles) 1,169 1,199
Revenue passengers carried (4)
2,715,707 2,038,399
Revenue passenger miles (RPMs) (thousands) (4)
3,565,501 2,705,969
Load factor (4)
83.2 % 74.1 %
Average base fare per passenger (4)
$ 123.24 $ 99.05
Ancillary revenue per passenger (4)
$ 51.39 $ 42.50
Charter revenue per block hour (4)
$ 9,118 $ 8,179
Fuel gallons consumed (thousands) (2)
44,940 9,085 54,322 37,299 7,739 45,269
Fuel cost per gallon, excluding derivatives and other items $ 3.81 $ 2.08
Employees at end of period 2,354 2,014
Cost per available seat mile (CASM) (cents) (5)
12.25 7.98
Adjusted CASM (cents) (6)
6.91 6.32

~~____________________~~

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

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

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

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

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

~~(6)Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, special items,~~ and certain other costs 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 ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

Three Months Ended September 30, $
Change %
Change
2022 2021
Operating Revenues:
Scheduled Service $ 102,200 $ 80,212 $ 21,988 27 %
Charter Service 42,899 33,809 9,090 27 %
Ancillary 50,261 33,697 16,564 49 %
Passenger 195,360 147,718 47,642 32 %
Cargo 23,687 24,400 (713) (3) %
Other 2,653 1,545 1,108 72 %
Total Operating Revenues 221,700 173,663 48,037 28 %
Operating Expenses:
Aircraft Fuel 64,843 36,647 28,196 77 %
Salaries, Wages, and Benefits 58,661 43,424 15,237 35 %
Aircraft Rent 1,949 3,925 (1,976) (50) %
Maintenance 11,018 9,660 1,358 14 %
Sales and Marketing 6,827 5,470 1,357 25 %
Depreciation and Amortization 17,181 14,710 2,471 17 %
Ground Handling 8,669 7,873 796 10 %
Landing Fees and Airport Rent 12,926 12,069 857 7 %
Special Items, net — (65) 65 (100) %
Other Operating, net 24,235 18,629 5,606 30 %
Total Operating Expenses 206,309 152,342 53,967 35 %
Operating Income 15,391 21,321 (5,930) (28) %
Non-operating Income (Expense):
Interest Income 1,610 28 1,582 NM
Interest Expense (7,493) (6,286) (1,207) 19 %
Other, net 3,422 456 2,966 NM
Total Non-operating Expense, net (2,461) (5,802) 3,341 (58) %
Income Before Income Tax 12,930 15,519 (2,589) (17) %
Income Tax Expense 2,253 2,140 113 5 %
Net Income $ 10,677 $ 13,379 $ (2,702) (20) %


~~"NM" stands for not meaningful~~

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~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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

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

~~(Unaudited)~~

Total Operating Revenues increased $48,037, or 28%, to $221,700 for the three months ended September 30, 2022 from $173,663 for the three months ended September 30, 2021. The increase was largely driven by an increase in demand for passenger service during 2022 as compared to 2021, which was significantly impacted by a decrease in passenger demand due to the COVID-19 pandemic.

~~Scheduled Service~~. Scheduled service revenue increased by $21,988, or 27%, to $102,200 for the three months ended September 30, 2022 from $80,212 for the three months ended September 30, 2021. The table below presents select operating data for scheduled service, expressed as quarter-over-quarter changes:

Three Months Ended September 30, Change %
Change
2022 2021
Departures 5,611 5,533 78 1 %
Passengers 908,967 785,348 123,619 16 %
Average base fare per passenger $ 112.44 $ 102.14 $ 10.30 10 %
RPMs (thousands) 1,101,011 1,011,936 89,075 9 %
ASMs (thousands) 1,256,755 1,296,555 (39,800) (3) %
TRASM (cents) 12.34 8.90 3.44 39 %
Passenger load factor 87.6 % 78.0 % 9.6 pts N/A

The quarter-over-quarter increases in certain scheduled service operating data were primarily the result of the continued recovery in demand from the COVID-19 pandemic in the third quarter of 2022 relative to the same period in 2021. The quarter-over-quarter increase in demand is demonstrated by a 39% increase in TRASM, a 10% increase in the average base fare per passenger, and a 16% increase in passengers, even as quarter-over-quarter departures were materially consistent and ASMs decreased by 3%. The year-over-year revenue increase is slightly offset by the introduction of a new Ancillary product, which reclassified approximately $11,600 of revenue from Scheduled Service to Ancillary.

~~Charter Service.~~ Charter service revenue increased $9,090, or 27%, to $42,899 for the three months ended September 30, 2022, from $33,809 for the three months ended September 30, 2021. Charter revenue per block hour was $9,280 for the three months ended September 30, 2022, as compared to $8,816 for the three months ended September 30, 2021, for an increase of 5%. The increase in Charter service revenue was driven by the increase in rates and a 21% increase in Charter block hours due to the continued recovery from the COVID-19 pandemic and new charter agreements that began operations during 2022. Rates in 2021 suffered from significant competitive pressure because other carriers had excess aircraft, crew, and resources to operate charter capacity.

~~Ancillary~~. Ancillary revenue increased by $16,564, or 49%, to $50,261 for the three months ended September 30, 2022, from $33,697 for the three months ended September 30, 2021. The 16% increase in scheduled passengers during the period resulted in greater sales of air travel-related services, such as: baggage fees, seat selection and upgrade fees, and on-board sales. Ancillary revenue for the three months ended September 30, 2022 was further benefited by the introduction of a new a new ancillary product that began in the second quarter of 2022 and reclassified approximately $11,600 of revenue from Scheduled Service to Ancillary. Ancillary revenue was $55.29 per passenger in the three months ended September 30, 2022, up $12.38, or 29%, from the three months ended September 30, 2021. Revenue per passenger increased due to the inclusion of a new ancillary product that reclassified portions of revenue from Scheduled Service to Ancillary, the return of onboard food and beverage sales, and increased demand.

~~Cargo~~. ~~Revenue from cargo services decreased by $713, or 3%, to $23,687 for the three months ended September 30, 2022, from $24,400 for the three months ended September 30, 2021. The decrease was~~

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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)~~

~~primarily driven by an approximately $1,700 revenue benefit recognized in the prior year, slightly offset by a 2% and 4% increase in block hours and departures, respectively.~~

~~Other~~. Other revenue was $2,653 for the three months ended September 30, 2022, as compared to $1,545 for the three months ended September 30, 2021. The increase was primarily driven by increased revenue from Sun Country Vacations as a result of higher year-over-year bookings.

~~Operating Expenses~~

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

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

Three Months Ended September 30, Change %
Change
2022 2021
Total Aircraft Fuel Expense $ 64,843 $ 36,647 $ 28,196 77 %
Exclude: Fuel Derivative Losses — (72) 72 (100) %
Other Excluded Items 71 (5) 76 NM
Aircraft Fuel Expense, Excluding Derivatives and Other Items $ 64,914 $ 36,570 $ 28,344 78 %
Fuel Gallons Consumed (thousands) 16,509 16,321 188 1 %
Fuel Cost per Gallon, Excluding Derivatives and Other Items $ 3.93 $ 2.24 $ 1.69 75 %


~~"NM" stands for not meaningful~~

The increase in Aircraft Fuel expense was mainly driven by the 75% year-over-year increase in the average price per gallon of fuel due to current market conditions, further exacerbated by global geopolitical events.

~~Salaries~~, ~~Wages, and Benefits~~. Salaries, Wages, and Benefits expense increased $15,237, or 35%, to $58,661 for the three months ended September 30, 2022, as compared to $43,424 for the three months ended September 30, 2021. The increase was primarily driven by the new Collective Bargaining Agreement ("CBA") for our pilots, which went into effect in the first quarter of 2022, increased per unit costs, and an increase in Passenger Service block hours. The employee headcount as of September 30, 2022 was 2,354, as compared to 2,014 as of September 30, 2021, for an increase of 340, or 17%. The increase in employee headcount was driven by increased passenger demand as we continue our recovery from the impacts of the COVID-19 pandemic.

~~Aircraft Rent~~. Aircraft Rent expense decreased $1,976, or 50%, to $1,949 for the three months ended September 30, 2022, as compared to $3,925 for the three months ended September 30, 2021. Aircraft Rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (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 nine months ended September 30, 2022, we executed lease amendments which modified two aircraft from operating leases to finance leases

~~-38-~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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

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

~~(Unaudited)~~

~~and purchased two aircraft previously classified as operating leases. As of September 30, 2022 and 2021, there were two and six aircraft under operating leases, respectively~~.

~~Maintenance~~. Maintenance materials and repair expense increased $1,358, or 14%, to $11,018 for the three months ended September 30, 2022, as compared to $9,660 for the three months ended September 30, 2021. The increase in maintenance expense was primarily driven by increased line maintenance for the Cargo fleet, increased per unit costs due to incremental contract labor spend, and an increase in certain aircraft acquisition expenses that are not eligible for capitalization.

~~Sales and Marketing~~. Sales and Marketing expense increased $1,357, or 25%, to $6,827 for the three months ended September 30, 2022, as compared to $5,470 for the three months ended September 30, 2021. The quarter-over-quarter increase was driven by a $1,300 increase in credit card processing and global distribution system fees due to volume and rate increases.

~~Depreciation and Amortization~~. Depreciation and Amortization expense increased $2,471, or 17%, to $17,181 for the three months ended September 30, 2022, as compared to $14,710 for the three months ended September 30, 2021. The increase was primarily due to the impact of a change in the composition of our aircraft fleet that results in an increased number of owned aircraft and aircraft under finance leases (the expense is recorded as Depreciation and Amortization and Interest Expense). As of September 30, 2022 and 2021, there were 29 and 21 owned aircraft and 11 and eight finance leases, respectively.

~~Ground Handling~~. Ground Handling expense increased $796, or 10%, to $8,669 for the three months ended September 30, 2022, as compared to $7,873 for the three months ended September 30, 2021. The increase was primarily due to new charter agreements that began operations during 2022.

~~Landing Fees and Airport Rent~~. Landing Fees and Airport Rent increased $857, or 7%, to $12,926 for the three months ended September 30, 2022, as compared to $12,069 for the three months ended September 30, 2021. The increase was primarily due to new charter agreements that began operations during 2022 and an increase in rates.

~~Special Items, net~~. There were no Special Items recorded for the three months ended September 30, 2022, as compared to a net benefit of $65 for the three months ended September 30, 2021. For more information on Special Items, see ~~Note 12~~ ~~of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~

~~Other Operating, net~~. Other operating, net increased $5,606, or 30%, to $24,235 for the three months ended September 30, 2022, as compared to $18,629 for the three months ended September 30, 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, as well as an increase in rates associated with these expenditures.

~~Non-operating Income (Expense)~~

~~Interest Income~~. Interest income was $1,610 for the three months ended September 30, 2022 primarily due to the change in investment strategy which led to the purchase of debt securities during 2022. Interest income for the three months ended September 30, 2021 was nominal.

~~Interest Expense~~. Interest expense increased $1,207, or 19%, to $7,493 for the three months ended September 30, 2022, as compared to $6,286 for the three months ended September 30, 2021. The increase was primarily due to a larger mix of owned aircraft that were financed or refinanced with the proceeds from the 2022-1 EETC, as well as an increase in aircraft accounted for as finance leases during the three months ended

~~-39-~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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

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

~~(Unaudited)~~

~~September 30, 2022. These amounts were slightly offset by $1,049 of capitalized interest. For more information on the Company's Debt, see~~ ~~Note~~ 7 ~~of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~

~~Other, net~~. Other, net increased by $2,966 to a net benefit of $3,422 for the three months ended September 30, 2022, as compared to net benefit of $456 for the three months ended September 30, 2021. The increase was primarily due to the $3,500 adjustment to decrease the estimated TRA liability in the current quarter, as compared to the $1,100 adjustment to decrease the estimated TRA liability in the prior year. For more information on the TRA liability, see ~~Note 11~~ ~~of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~

~~Income Tax.~~ The Company's effective tax rate for the three months ended September 30, 2022 was 17.4% compared to 13.8% for the three months ended September 30, 2021. The increase in the effective tax rate was primarily due to the non-taxable adjustment of the TRA liability, partially offset by stock compensation benefits.

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~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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

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

~~(Unaudited)~~

~~Results of Operations~~

~~For the Nine Months Ended September 30, 2022 and 2021~~


		Nine Months Ended September 30,				$ Change			% Change			Three Months Ended March 31,					$ Change		% Change
		2022		2021				2023					2022
Operating Revenues:	Operating Revenues:													Operating Revenues:
Scheduled Service	Scheduled Service	$	334,679	$	201,905	$	132,774		66	%	Scheduled Service	$	152,657		$	124,068	$	28,589	23	%
Charter Service	Charter Service	118,526		88,511		30,015			34	%	Charter Service	46,187			32,879		13,308		40	%
Ancillary	Ancillary	139,548		86,626		52,922			61	%	Ancillary	68,425			45,086		23,339		52	%
Passenger	Passenger	592,753		377,042		215,711			57	%	Passenger	267,269			202,033		65,236		32	%
Cargo	Cargo	65,930		68,084		(2,154)			(3)	%	Cargo	23,361			21,053		2,308		11	%
Other	Other	8,607		5,338		3,269			61	%	Other	3,485			3,439		46		1	%
Total Operating Revenues	Total Operating Revenues	667,290		450,464		216,826			48	%	Total Operating Revenues	294,115			226,525		67,590		30	%

Operating Expenses:	Operating Expenses:										Operating Expenses:
Aircraft Fuel	Aircraft Fuel	206,334		90,631		115,703			128	%	Aircraft Fuel	72,290			64,544		7,746		12	%
Salaries, Wages, and Benefits	Salaries, Wages, and Benefits	178,576		129,815		48,761			38	%	Salaries, Wages, and Benefits	75,430			59,617		15,813		27	%
Aircraft Rent	Aircraft Rent	7,347		13,339		(5,992)			(45)	%	Aircraft Rent	1,480			3,186		(1,706)		(54)	%
Maintenance	Maintenance	35,794		30,170		5,624			19	%	Maintenance	13,039			11,995		1,044		9	%
Sales and Marketing	Sales and Marketing	23,336		16,402		6,934			42	%	Sales and Marketing	9,929			8,628		1,301		15	%
Depreciation and Amortization	Depreciation and Amortization	49,364		41,532		7,832			19	%	Depreciation and Amortization	19,460			15,328		4,132		27	%
Ground Handling	Ground Handling	24,838		19,654		5,184			26	%	Ground Handling	11,038			7,958		3,080		39	%
Landing Fees and Airport Rent	Landing Fees and Airport Rent	32,708		29,606		3,102			10	%	Landing Fees and Airport Rent	12,051			10,286		1,765		17	%
Special Items, net		—		(72,419)		72,419			(100)	%
Other Operating, net	Other Operating, net	68,401		50,026		18,375			37	%	Other Operating, net	23,615			23,150		465		2	%
Total Operating Expenses	Total Operating Expenses	626,698		348,756		277,942			80	%	Total Operating Expenses	238,332			204,692		33,640		16	%
Operating Income	Operating Income	40,592		101,708		(61,116)			(60)	%	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	2,166		52		2,114			NM		Interest Income	2,741			24		2,717		NM
Interest Expense	Interest Expense	(23,097)		(19,487)		(3,610)			19	%	Interest Expense	(8,630)			(8,562)		(68)		1	%
Other, net	Other, net	(5,156)		18,505		(23,661)			NM		Other, net	(212)			(6,876)		6,664		(97)	%
Total Non-operating Expense, net	Total Non-operating Expense, net	(26,087)		(930)		(25,157)			NM		Total Non-operating Expense, net	(6,101)			(15,414)		9,313		(60)	%

Income Before Income Tax	Income Before Income Tax	14,505		100,778		(86,273)			(86)	%	Income Before Income Tax	49,682			6,419		43,263		674	%
Income Tax Expense	Income Tax Expense	4,113		18,444		(14,331)			(78)	%	Income Tax Expense	11,354			2,782		8,572		308	%
Net Income	Net Income	$	10,392	$	82,334	$	(71,942)		(87)	%	Net Income	$	38,328		$	3,637	$	34,691	954	%


"NM" stands for not meaningful

Total Operating Revenues increased ~~by $216,826,~~$67,590, or ~~48%~~30%, to ~~$667,290~~$294,115 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 from ~~$450,464~~$226,525 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 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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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)

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~~ the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to ~~2021, which was significantly impacted by a decrease in passenger demand due to~~ the ~~COVID-19 pandemic.~~three months ended March 31, 2022.

Scheduled Service. Scheduled service revenue increased by ~~$132,774,~~$28,589, or ~~66%~~23%, to ~~$334,679~~$152,657 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 from ~~$201,905~~$124,068 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The table below presents select operating data for scheduled ~~service:~~service, expressed as year-over-year changes:


		Nine Months Ended September 30,						Change					% Change			Three Months Ended March 31,									Change				% Change
		2022			2021							2023					2022
Departures	Departures	17,512			14,777						2,735					19		%	Departures	6,177				6,227				(50)			(1)	%
Passengers	Passengers	2,715,707			2,038,399			677,308					33	%	Passengers	998,238					922,652				75,586				8	%
Average base fare per passenger	Average base fare per passenger	$	123.24		$	99.05		$	24.19				24	%	Average base fare per passenger	$	152.93				$	134.47			$	18.46			14	%
RPMs (thousands)	RPMs (thousands)	3,565,501			2,705,969			859,532					32	%	RPMs (thousands)	1,432,131					1,338,459				93,672				7	%
ASMs (thousands)	ASMs (thousands)	4,284,403			3,653,335			631,068					17	%	ASMs (thousands)	1,625,728					1,684,532				(58,804)				(3)	%
TRASM (cents)	TRASM (cents)	11.27			8.04			3.23					40	%	TRASM (cents)	13.81					10.25				3.56				35	%
Passenger load factor	Passenger load factor	83.2		%	74.1		%	9.1		pts			N/A		Passenger load factor	88.1		%			79.5		%		8.6		pts		N/A

The ~~significant~~ 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 ~~nine months ended September 30, 2022~~first quarter of 2023 relative to the same period in ~~2021.~~2022. The year-over-year increase in demand is demonstrated by a ~~40% increase in TRASM, 19% increase in departures, a 33% increase in passengers, and a 24%~~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 ~~a new~~an Ancillary product during the second quarter of 2022, which reclassified approximately ~~$17,200~~$17,224 of revenue from Scheduled Service to ~~Ancillary.~~Ancillary during the three months ended March 31, 2023.

Charter Service. Charter service revenue increased ~~$30,015,~~$13,308, or ~~34%~~40%, to ~~$118,526~~$46,187 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, from ~~$88,511~~$32,879 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Charter revenue per block hour was ~~$9,118~~$9,139 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$8,179~~$8,643 for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, for an increase of ~~11%~~6%. The increase in Charter service revenue was driven by ~~the increase in rates~~a 46% and ~~a 20%~~33% increase in Charter departures and block hours, respectively, primarily due to ~~the continued recovery from the COVID-19 pandemic and~~ new charter ~~agreements that began operations during 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 ~~$52,922,~~$23,339, or ~~61%~~52%, to ~~$139,548~~$68,425 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, from ~~$86,626~~$45,086 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Ancillary revenue was $68.55 per passenger in the three months ended March 31, 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 ~~33%~~ 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 for the nine months ended September 30, 2022 was further benefited by the introduction of a new a new ancillary product that began in the second quarter of 2022 and reclassified approximately $17,200 of revenue from Scheduled Service to Ancillary. Ancillary revenue was $51.39 per passenger in the nine months ended September 30, 2022, up $8.89, or 21%, from the nine months ended September 30, 2021. Revenue per passenger increased due to the inclusion of a new ancillary product that reclassified portions of revenue from Scheduled Service to Ancillary, the return of onboard food and beverage sales, and increased demand.

Cargo. Revenue from cargo services ~~decreased~~increased by ~~$2,154,~~$2,308, or 3%11%, to ~~$65,930~~$23,361 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, from ~~$68,084~~$21,053 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~number of departures was materially consistent year-over-year; however, block hours declined 4%. The year-over-year decrease in block hours~~increase was primarily driven by ~~heavy maintenance events. Operational factors~~a 18% and ~~an approximately $1,700 revenue benefit recognized~~5% increase in ~~2021~~departures and block hours, respectively. Revenue during the three months ended March 31, 2023 also ~~contributed to~~benefited from the ~~year-over-year revenue decrease.~~annual rate escalation included in the ATSA, which went into effect on December 13, 2022.

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SUN COUNTRY AIRLINES HOLDINGS, INC

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

(Dollars in thousands, except per share amounts)

(Unaudited)

Other. Other revenue was ~~$8,607~~$3,485 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$5,338~~$3,439 for the ~~nine~~three months ended ~~September 30, 2021. The increase was primarily driven by an increase~~March 31, 2022. Other revenue will benefit in future periods from the rental revenue ~~from Sun Country Vacations as a result~~associated with the five Aircraft Held for Operating Lease acquired in March and April of ~~higher year-over-year bookings.~~2023.

Operating Expenses

Aircraft Fuel. We believe Aircraft Fuel 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 related to~~indirect fuel ~~hedge derivative contracts and certain costs~~credits that are recognized within Aircraft Fuel expense, but are not directly related to our Fuel Cost per Gallon.

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

Nine Months Ended September 30, Change %
Change
2022 2021
Total Aircraft Fuel Expense $ 206,334 $ 90,631 $ 115,703 128 %
Exclude: Fuel Derivative Gains — 3,527 (3,527) (100) %
Other Excluded Items 598 64 534 NM
Aircraft Fuel Expense, Excluding Derivatives and Other Items $ 206,932 $ 94,222 $ 112,710 120 %
Fuel Gallons Consumed (thousands) 54,322 45,269 9,053 20 %
Fuel Cost per Gallon, Excluding Derivatives and Other Items $ 3.81 $ 2.08 $ 1.73 83 %

~~The increase in~~


	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	%

Aircraft Fuel expense ~~was mainly driven~~increased by ~~the 83%~~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 20% increase in fuel gallons consumed resulting from a recovery in demand as demonstrated~~continues to be impacted by ~~a 19% increase in passenger service block hours.~~global geopolitical events.

Salaries, Wages, and Benefits. Salaries, Wages, and Benefits expense increased ~~$48,761,~~$15,813, or ~~38%~~27%, to ~~$178,576~~$75,430 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$129,815~~$59,617 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase in Salaries, Wages, and Benefits was ~~driven by the new Collective Bargaining Agreement ("CBA") for our pilots, which went into effect~~primarily due to an increase in ~~the first quarter of 2022, increased~~headcount, as well as per unit costs ~~and an increase in Passenger Service block hours.~~for pilots to support the current flight schedule. The employee headcount as of ~~September 30, 2022~~March 31, 2023 was ~~2,354,~~2,634, as compared to ~~2,014~~2,316 as of ~~September 30, 2021,~~March 31, 2022, for an increase of ~~340,~~318, or ~~17%~~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 ~~$5,992,~~$1,706, or ~~45%~~54%, to ~~$7,347~~$1,480 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$13,339~~$3,186 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Aircraft Rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (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 nine months~~As of ~~2022, we executed lease amendments which modified two aircraft from operating leases to finance leases~~March 31, 2023 and ~~purchased two aircraft previously classified as operating leases. For the nine months ended September 30,~~ 2022, ~~and 2021,~~ there were ~~an average of~~two and four ~~and eight~~ aircraft under operating leases, respectively.

Maintenance. Maintenance ~~materials and repair~~ expense increased ~~$5,624,~~$1,044, or ~~19%~~9%, to ~~$35,794~~$13,039 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$30,170~~$11,995 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 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~~hours. These amounts were partially offset by fewer landing gear events and heavy maintenance checks.

Sales and Marketing. Sales and Marketing expense increased $1,301, or 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. The year-over-year

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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)

~~Passenger segment, an~~increase was driven by approximately $1,500 increase in ~~maintenance events for the Cargo fleet, and increased per unit costs due to incremental contract labor spend.~~

~~Sales and Marketing~~. Sales and Marketing expense increased $6,934, or 42%, to $23,336 for the nine months ended September 30, 2022, as compared to $16,402 for the nine months ended September 30, 2021. Passenger revenue increased 57% between these two periods leading to a nearly $6,500 in increased credit card processing, ~~and~~partially offset by a decrease in global distribution system ~~fees during this time period.~~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 ~~$7,832,~~$4,132, or ~~19%~~27%, to ~~$49,364~~$19,460 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$41,532~~$15,328 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 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 nine months ended September 30,~~As of March 31, 2023 and 2022, there were 43 and ~~2021, there was an average of 25 and 19~~34 aircraft that were owned ~~aircraft and 11 and six~~or under finance leases, respectively.

Ground Handling. Ground Handling expense increased ~~$5,184,~~$3,080, or ~~26%~~39%, to ~~$24,838~~$11,038 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$19,654~~$7,958 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily driven by the ~~20%~~46% increase in ~~Passenger segment~~Charter departures, as well as rate increases due to ~~the result of the continued recovery in demand from the COVID-19 pandemic~~inflationary and ~~new charter agreements that began operations during 2022.~~market pressures.

Landing Fees and Airport Rent. Landing Fees and Airport Rent increased ~~$3,102,~~$1,765, or ~~10%~~17%, to ~~$32,708~~$12,051 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$29,606~~$10,286 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily driven by the ~~20%~~46% increase in ~~Passenger segment~~Charter departures, as well as rate increases due to ~~the result of the continued recovery in demand from the COVID-19 pandemic~~inflationary and ~~new charter agreements that began operations during 2022.~~

~~Special Items, net~~. There were no Special Items recorded during the nine months ended September 30, 2022. Special Items had a net benefit of $72,419 for the nine months ended September 30, 2021. The net benefit was primarily driven by the payroll support received under the CARES Act, of which the Cargo segment was allocated $18,401. These credits within the Cargo segment results were based on the respective segment salaries, wages, and benefits. For more information on Special Items, see ~~Note 12~~ ~~of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~market pressures.

Other Operating, net. Other operating, net increased ~~$18,375,~~$465, or ~~37%~~2%, to ~~$68,401~~$23,615 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$50,026~~$23,150 for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, mainly due to increased departures within ~~the Passenger segment,~~Charter, which resulted in higher crew ~~and other employee~~ travel costs and catering expenses, ~~and~~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 ~~$2,166~~$2,741 for the ~~nine~~three months ended ~~September 30, 2022~~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 ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was nominal.

Interest Expense. Interest expense increased ~~$3,610,~~$68, or ~~19%~~1%, to ~~$23,097~~$8,630 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$19,487~~$8,562 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily due to a larger mix of 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 ~~2022-1 EETC,~~three months ended March 31, 2022 related to the repayment of the DDTL. Interest expense will be impacted in future periods from the additional debt incurred to complete the acquisition of five Aircraft Held for Operating Lease in March and April of 2023. For more information on the Company's Debt, see Note 7 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Other, net. Other, net was a net expense of $212 for the three months ended March 31, 2023, as ~~well as an~~compared to a net expense of $6,876 for the three months ended March 31, 2022, a decrease of $6,664, or 97%. The decrease was primarily due to the $6,800 adjustment to increase the estimated TRA liability in ~~aircraft accounted for as finance leases~~the prior year, partially offset by offering expenses of $528 in connection to the Company's secondary offering during the ~~nine~~three months ended ~~September 30, 2022. These amounts were slightly offset by $2,327 of capitalized interest. For more information~~March 31, 2023.

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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)

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 ~~Company's Debt,~~TRA liability, see Note 710 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Segments

For the Three Months Ended March 31, 2023 and 2022


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

Operating Expenses:
Aircraft Fuel	72,266			24			72,290			64,544			—			64,544
Salaries, Wages, and Benefits	58,808			16,622			75,430			47,531			12,086			59,617
Aircraft Rent	1,480			—			1,480			3,186			—			3,186
Maintenance	9,482			3,557			13,039			9,103			2,892			11,995
Sales and Marketing	9,929			—			9,929			8,628			—			8,628
Depreciation and Amortization	19,430			30			19,460			15,302			26			15,328
Ground Handling	11,038			—			11,038			7,954			4			7,958
Landing Fees and Airport Rent	11,950			101			12,051			10,171			115			10,286
Other Operating, net	18,520			5,095			23,615			18,935			4,215			23,150
Total Operating Expenses	212,903			25,429			238,332			185,354			19,338			204,692
Operating Income (Loss)	$	57,851		$	(2,068)		$	55,783		$	20,118		$	1,715		$	21,833

Operating Margin %	21.4		%	(8.9)		%	19.0		%	9.8		%	8.1		%	9.6		%

~~Other, net~~Passenger.~~. Other, net decreased $23,661~~ Passenger Operating Income increased by $37,733 to ~~a net expense of $5,156~~$57,851 for the ~~nine~~three months ended ~~September 30, 2022, as compared to net benefit $18,505~~March 31, 2023 from $20,118 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~decrease was primarily due to~~Operating Margin Percentage for the ~~$5,000 adjustment to increase the estimated TRA liability as of September 30, 2022,~~three months ended March 31, 2023 increased by 11.6 percentage points, as compared to the ~~$19,800 adjustment~~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 ~~decrease~~ the ~~estimated TRA liability as~~first quarter of ~~September 30, 2021.~~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 ~~TRA liability, see~~ changes in the components of Operating Income for the Passenger segment, refer to the Results of Operations discussion above~~Note 11~~ ~~of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~.

~~Income Tax.~~Cargo. ~~The Company's effective tax rate~~Cargo had an Operating Loss of $2,068 for the ~~nine~~three months ended ~~September 30, 2021 was 28.4%~~March 31, 2023, as compared to ~~18.3%~~Operating Income of $1,715 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022, a decrease of $3,783. Operating Margin Percentage for the three months ended March 31, 2023 decreased by 17.0 percentage points, as compared to the three months ended March 31, 2022. The decrease was primarily driven by a year-over-year increase in ~~the effective tax rate was primarily~~Salaries, Wages, and Benefits due to ~~the non-taxable adjustment of the TRA liability, partially offset by stock compensation benefits.~~

an increase in head count, as well as per unit costs for pilots

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

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

(Dollars in thousands, except per share amounts)

(Unaudited)

~~Segments~~

~~For the Three Months Ended September 30, 2022 and 2021~~

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Passenger Cargo Total Passenger Cargo Total
Operating Revenues $ 198,013 $ 23,687 $ 221,700 $ 149,263 $ 24,400 $ 173,663
Operating Expenses:
Aircraft Fuel 64,763 80 64,843 36,556 91 36,647
Salaries, Wages, and Benefits 44,051 14,610 58,661 33,619 9,805 43,424
Aircraft Rent 1,949 — 1,949 3,925 — 3,925
Maintenance 7,290 3,728 11,018 7,175 2,485 9,660
Sales and Marketing 6,827 — 6,827 5,470 — 5,470
Depreciation and Amortization 17,152 29 17,181 14,684 26 14,710
Ground Handling 8,666 3 8,669 7,873 — 7,873
Landing Fees and Airport Rent 12,823 103 12,926 11,949 120 12,069
Special Items, net — — — (65) — (65)
Other Operating, net 19,030 5,205 24,235 15,265 3,364 18,629
Total Operating Expenses 182,551 23,758 206,309 136,451 15,891 152,342
Operating Income (Loss) $ 15,462 $ (71) $ 15,391 $ 12,812 $ 8,509 $ 21,321
Adjustment for Special Items, net — — — (65) — (65)
Operating Income (Loss), Excluding Special Items, net $ 15,462 $ (71) $ 15,391 $ 12,747 $ 8,509 $ 21,256
Operating Margin %, Excluding Special Items, net 8% —% 7% 9% 35% 12%

~~Passenger.~~ ~~Passenger Operating Income increased by $2,650~~ to $15,462 for the three months ended September 30, 2022 from $12,812 for the three months ended September 30, 2021. The increase in Passenger Operating Income was driven by an expansion in demand for passenger service during 2022 as compared to 2021, which was significantly impacted by the COVID-19 pandemic. Operating Margin Percentage for the three months ended September 30, 2022 decreased by 1%, as compared to the three months ended September 30, 2021. The Operating Margin Percentage decrease was primarily driven by the quarter-over-quarter increase in Aircraft Fuel Expense, slightly offset by increases in revenue across all Passenger segment business lines. For

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~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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

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

~~(Unaudited)~~

~~more information on the changes in the components of Operating Income for the Passenger segment, refer to the Results of Operations discussion above~~.

~~Cargo.~~ Cargo Operating Income decreased by $8,580, resulting in an Operating Loss of $71 for the three months ended September 30, 2022, as compared to Operating Income of $8,509 for the three months ended September 30, 2021. Operating Margin Percentage decreased by 35%, to break-even, over the same periods. The decrease was primarily driven by a quarter-over-quarter increase in Salaries, Wages, and Benefits driven by the new CBA for our pilots that went into effect in the beginning of 2022, a quarter-over-quarter increase in Maintenance Expense for the Cargo fleet due to an increase in maintenance events and per unit costs, and a revenue benefit recognized in the prior period.support operations. For more information on the components of Operating Income for the Cargo segment, refer to the Results of Operations discussion above, where we describe the cargo expenses embedded within each financial statement line item.

~~-47-~~

~~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)~~

~~Segments~~

~~For the Nine Months Ended September 30, 2022 and 2021~~

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
Passenger Cargo Total Passenger Cargo Total
Operating Revenues $ 601,360 $ 65,930 $ 667,290 $ 382,380 $ 68,084 $ 450,464
Operating Expenses:
Aircraft Fuel 206,254 80 206,334 90,468 163 90,631
Salaries, Wages, and Benefits 138,436 40,140 178,576 98,615 31,200 129,815
Aircraft Rent 7,347 — 7,347 13,339 — 13,339
Maintenance 25,665 10,129 35,794 22,417 7,753 30,170
Sales and Marketing 23,336 — 23,336 16,402 — 16,402
Depreciation and Amortization 49,282 82 49,364 41,453 79 41,532
Ground Handling 24,828 10 24,838 19,654 — 19,654
Landing Fees and Airport Rent 32,386 322 32,708 29,228 378 29,606
Special Items, net — — — (54,018) (18,401) (72,419)
Other Operating, net 54,614 13,787 68,401 39,164 10,862 50,026
Total Operating Expenses 562,148 64,550 626,698 316,722 32,034 348,756
Operating Income $ 39,212 $ 1,380 $ 40,592 $ 65,658 $ 36,050 $ 101,708
Adjustment for Special Items, net — — — (54,018) (18,401) (72,419)
Operating Income, Excluding Special Items, net $ 39,212 $ 1,380 $ 40,592 $ 11,640 $ 17,649 $ 29,289
Operating Margin %, Excluding Special Items, net 7% 2% 6% 3% 26% 7%

~~Passenger.~~ Passenger Operating Income decreased by $26,446 to $39,212 for the nine months ended September 30, 2022 from $65,658 for the nine months ended September 30, 2021. Operating Margin Percentage, Excluding Special Items, net increased by 4%, to 7%, from 3% over the same periods. The year-over-year decrease in Passenger Operating Income is primarily driven by the allocated payroll support received under the CARES Act during the first half of 2021, recognized within Special Items, net, as well as the increase in Aircraft Fuel Expense and Salaries, Wages, and Benefits. The increase in Operating Margin Percentage, Excluding Special Items, net was primarily driven by the year-over-year increases in revenue across all Passenger segment business lines, slightly offset by the increases in Aircraft Fuel Expense and Salaries,

~~-48-~~

~~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)~~

~~Wages, and Benefits. For more information on the changes in the components of Operating Income for the Passenger segment, refer to the Results of Operations discussion above~~.

~~Cargo.~~ Cargo Operating Income decreased by $34,670 to $1,380 for the nine months ended September 30, 2022, as compared to $36,050 for the nine months ended September 30, 2021. Operating Margin Percentage, Excluding Special Items, net decreased by 24%, to 2%, over the same periods. The decrease in Operating Income was primarily driven by the allocated payroll support received under the CARES Act during the first half of 2021, recognized within Special Items, net, a revenue benefit recognized in the prior period, a year-over-year increase in Salaries, Wages, and Benefits driven by the new CBA for our pilots that went into effect in the beginning of 2022, decreased block hours and departures driven by heavy maintenance events, and operational factors that reduced revenue. The year-over-year decrease in Operating Margin Percentage, Excluding Special Items, net is driven by the factors listed above, excluding the benefit recognized as a result of the allocated payroll support received under the CARES Act during the first half of 2021. For more information on the components of Operating Income for the Cargo segment, refer to the 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, Adjusted Net Income and Adjusted EBITDA

Adjusted Operating Income, Adjusted Operating Income Margin, 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 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, Adjusted Net Income, and Adjusted EBITDA~~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, Adjusted Net Income, and Adjusted EBITDA~~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, Adjusted Net Income, and Adjusted EBITDA~~these non-GAAP measures differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, 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.

~~-49-~~

~~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)~~

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

~~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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Adjusted Operating Income Margin Reconciliation:
Operating Revenue $ 221,700 $ 173,663 $ 667,290 $ 450,464
Operating Income 15,391 21,321 40,592 101,708
Special Items, net (a)
— (65) — (72,419)
Stock compensation expense 487 964 1,981 4,577
TRA expenses (b)
— 25 — 340
Adjusted Operating Income $ 15,878 $ 22,245 $ 42,573 $ 34,206
Operating Income Margin 6.9 % 12.3 % 6.1 % 22.6 %
Adjusted Operating Income Margin 7.2 % 12.8 % 6.4 % 7.6 %

~~_________________________~~


~~(a)~~			~~The adjustments include Special Items, net, as presented in~~ ~~Note 12~~ ~~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 11~~ ~~of the Company’s Condensed Consolidated Financial Statements.~~

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

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

(Dollars in thousands, except per share amounts)

(Unaudited)

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,
	2023			2022
Adjusted Operating Income Margin Reconciliation:
Operating Revenue	$	294,115		$	226,525
Operating Income	55,783			21,833

Stock Compensation Expense	2,678			920
Adjusted Operating Income	$	58,461		$	22,753

Operating Income Margin	19.0		%	9.6		%
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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Adjusted Net Income Reconciliation:
Net Income $ 10,677 $ 13,379 $ 10,392 $ 82,334
Special Items, net (a)
— (65) — (72,419)
Stock Compensation Expense 487 964 1,981 4,577
(Gain) Loss on Asset Transactions, net (239) 2 (318) 2
Early pay-off of US Treasury loan — — — 842
Loss on refinancing credit facility — — 1,557 382
Secondary Offering Costs — 641 — 1,281
TRA expenses (b)
— 25 — 340
TRA adjustment (c)
(3,500) (1,100) 5,000 (19,800)
Income tax effect of adjusting items, net (d)
(57) (360) (741) 14,949
Adjusted Net Income $ 7,368 $ 13,486 $ 17,871 $ 12,488


	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 12~~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 11~~ ~~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)~~(c)			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.

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

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

(Dollars in thousands, except per share amounts)

(Unaudited)

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Adjusted EBITDA Reconciliation:	Adjusted EBITDA Reconciliation:									Adjusted EBITDA Reconciliation:
Net Income	Net Income	$	10,677	$	13,379	$	10,392	$	82,334	Net Income	$	38,328	$	3,637
Special Items, net (a)		—		(65)		—		(72,419)
Stock Compensation Expense	Stock Compensation Expense	487		964		1,981		4,577		Stock Compensation Expense	2,678		920
(Gain) Loss on Asset Transactions, net		(239)		2		(318)		2
Secondary Offering Costs		—		641		—		1,281
TRA expenses (b)		—		25		—		340
TRA adjustment (c)		(3,500)		(1,100)		5,000		(19,800)
Gain on Asset Transactions, net (a)										Gain on Asset Transactions, net (a)	—		(2)
Secondary offering costs										Secondary offering costs	528		—
TRA adjustment (b)										TRA adjustment (b)	(357)		6,800
Interest Income	Interest Income	(1,610)		(28)		(2,166)		(52)		Interest Income	(2,741)		(24)
Interest Expense	Interest Expense	7,493		6,286		23,097		19,487		Interest Expense	8,630		8,562
Provision for Income Taxes	Provision for Income Taxes	2,253		2,140		4,113		18,444		Provision for Income Taxes	11,354		2,782
Depreciation and Amortization	Depreciation and Amortization	17,181		14,710		49,364		41,532		Depreciation and Amortization	19,460		15,328
Adjusted EBITDA	Adjusted EBITDA	$	32,742	$	36,954	$	91,463	$	75,726	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 12~~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 11~~ ~~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 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

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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 “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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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 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.

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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 tables present the reconciliation of CASM to Adjusted CASM.

Three Months Ended September 30,
2022 2021
Operating
Expenses Per ASM
(in cents) Operating
Expenses Per ASM
(in cents)
CASM $ 206,309 13.28 $ 152,342 9.83
Less:
Aircraft Fuel 64,843 4.17 36,647 2.37
Stock Compensation Expense 487 0.03 964 0.06
Special Items, net (a)
— — (65) —
TRA expense (b)
— — 25 —
Cargo expenses, not already adjusted above 23,569 1.52 15,544 1.00
Sun Country Vacations 193 0.01 176 0.01
Adjusted CASM $ 117,217 7.55 $ 99,051 6.39
ASM (thousands) 1,553,483 1,549,432

Nine Months Ended September 30,
2022 2021
Operating
Expenses Per ASM
(in cents) Operating
Expenses Per ASM
(in cents)
CASM $ 626,698 12.25 $ 348,756 7.98
Less:
Aircraft Fuel 206,334 4.03 90,631 2.07
Stock Compensation Expense 1,981 0.04 4,577 0.11
Special Items, net (a)
— — (72,419) (1.66)
TRA expense (b)
— — 340 0.01
Cargo expenses, not already adjusted above 64,007 1.25 48,923 1.12
Sun Country Vacations 810 0.02 563 0.01
Adjusted CASM $ 353,566 6.91 $ 276,141 6.32
ASM (thousands) 5,114,134 4,368,972

~~________________________~~


~~(a)~~			~~The adjustments include Special Items, net, as presented in~~ ~~Note 12~~ ~~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 11~~ ~~of the Company’s Condensed Consolidated Financial Statements.~~


	Three Months Ended March 31,
	2023			2022
	Operating Expenses		Per ASM (in cents)	Operating Expenses		Per ASM (in cents)
CASM	$	238,332	12.25	$	204,692	10.62
Less:
Aircraft Fuel	72,290		3.72	64,544		3.35
Stock Compensation Expense	2,678		0.13	920		0.05
Cargo expenses, not already adjusted above	24,812		1.28	19,112		0.99
Sun Country Vacations	436		0.02	402		0.02
Adjusted CASM	$	138,116	7.10	$	119,714	6.21

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

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 with attractive terms and 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.

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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 sources of liquidity as of ~~September 30, 2022~~March 31, 2023 included our existing cash and cash equivalents of ~~$131,912~~$71,587 and short-term investments of ~~$135,170,~~$171,638, our expected cash generated from operations, and the $24,650 of available funds from the Revolving Credit ~~Facility as of September 30, 2022.~~Facility. In addition, we had restricted cash of ~~$14,163~~$22,776 as of ~~September 30, 2022,~~March 31, 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, working capital 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 ~~September 30, 2022, we operated a~~March 31, 2023, our fleet consisted of 5457 Boeing 737-NG aircraft. This includes 42 aircraft in the passenger fleet, ~~and~~ 12 cargo operated aircraft through the ~~ATSA.~~ ATSA, and three Aircraft Held for Operating Lease.

During the three months ended March 31, 2023, the Company entered into an agreement to acquire five Aircraft Held for Operating Lease. On March 29, 2023, the 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 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.

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. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$30,925~~$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 ~~September 30, 2022,~~March 31, 2023, the Company held ~~$128,569~~$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 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 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 Condensed Consolidated Balance Sheets as of 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 of $45,000 in October 2020, which was repaid in full on March 24, 2021 using proceeds from~~twelve months ended June 30, 2022, the ~~IPO.~~

~~In accordance with~~compensation payable to an executive officer temporarily exceeded the $71,587 of grants received under the CARES Act, we are required to comply with the relevant provisions of the CARES Act and the related implementing agreements. The provisions related to the requirement that certain levels of commercial air service be maintained, if ordered by the DOT, and the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends, have lapsed as of the date of this filing. Restrictionsrestrictions on the payment of certain executive compensation under the 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

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(Dollars in thousands, except per share amounts)

(Unaudited)

compensation ~~continue through April 1,~~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, 2023. ~~We were~~To the extent we are deemed to have failed to remain in full compliance with the CARES Act ~~provisions as of September 30, 2022. For more information on~~and the ~~CARES Act provisions, see~~ ~~Note~~ 3 ~~of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~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 were 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 ~~September 30, 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 September 30, 2022. As of September 30, 2022, the Company had $24,650 of the $25,000 Revolving Credit Facility available and no balance drawn.31, 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.

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 ~~2022-1 EETC~~loan is ~~secured by a lien~~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 ~~financed or refinanced aircraft~~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.

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 ~~cross collateralized by~~subsequently reduced to 3.25% once the ~~other~~ aircraft ~~financed through~~have been redelivered to the ~~issuance. Total appraised value~~Company at the end of the ~~aircraft~~lease term and ~~engines financed by the 2022-1 EETC was approximately $259,688~~a LTV ratio calculation is completed. The interest rate in effect as of March 31, 2023 on the ~~original date~~term loan was 8.6%. To the extent that the LTV exceeds 75%, a principal prepayment will be required in order to reduce the ratio to 75%. Amounts received under the end of lease maintenance compensation clause may be applied towards 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:~~

September 30, 2022 December 31, 2021
Cash and Cash Equivalents $ 131,912 $ 309,338
Available-for-Sale Securities 128,569 —
Amount Available Under Revolving Credit Facility 24,650 25,000
Total Liquidity $ 285,131 $ 334,338
September 30, 2022 December 31, 2021
Total Debt $ 370,197 $ 277,426
Finance Lease Obligations 255,128 192,155
Operating Lease Obligations 27,789 76,041
Total Debt and Lease Obligations 653,114 545,622
Stockholders' Equity 508,005 490,589
Total Invested Capital $ 1,161,119 $ 1,036,211
Debt-to-Capital 0.56 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.

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

(Dollars in thousands, except per share amounts)

(Unaudited)

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


	March 31, 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

Nine Months Ended September 30,
2022 2021
Total Operating Activities $ 71,671 $ 116,358
Investing Activities:
Purchases of Property & Equipment (177,658) (118,016)
Proceeds from the Sale Property & Equipment 777 —
Proceeds from Insurance Settlements 8,865 —
Purchases of Investments (130,529) (1,436)
Proceeds from the Sale of Investments 935 1,062
Total Investing Activities (297,610) (118,390)
Financing Activities:
Cash Received from Stock Offering, net — 227,188
Proceeds from Stock Option and Warrant Exercises, net 1,625 2,407
Proceeds from Borrowings 188,277 80,500
Repayment of Finance Lease Obligations (37,842) (9,113)
Repayment of Borrowings (95,305) (75,728)
Debt Issuance Costs (2,526) (2,560)
Total Financing Activities 54,229 222,694
Net (Decrease) Increase in Cash $ (171,710) $ 220,662


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

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

Financing Activities:
Common Stock Repurchases	(14,812)		—		(14,812)		NM
Proceeds from Borrowings	71,280		77,986		(6,706)		(9)	%
Repayment of Finance Lease Obligations	(4,277)		(4,466)		189		(4)	%
Repayment of Borrowings	(10,122)		(77,947)		67,825		(87)	%
Other, net	(3,258)		(1,456)		(1,802)		124	%
Total Financing Activities	38,811		(5,883)		44,694		(760)	%

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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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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 provided ~~$71,671,~~$47,861, as compared to providing ~~$116,358~~$18,213 during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ our Net Income was ~~$10,392~~$38,328 and ~~$82,334,~~$3,637, respectively. ~~Net Income in 2021 benefited from $71,587 in grants received under the CARES Act.~~

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 ~~33%~~30% and ~~26%~~32% of our total operating expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 ~~20%~~4% during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to prior ~~year, consistent with increased passengers as the impact~~

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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)~~

~~of the pandemic subsides.~~year. Additionally, the cost per gallon increased by ~~83% year-over-year. We expect a trend of higher~~8% year-over-year ~~fuel costs per gallon to continue for the remainder of 2022~~ due to current market conditions, ~~further exacerbated~~which continue to be impacted by global geopolitical events.

~~CARESAct.~~ During the nine months ended September 30, 2022 we did not receive any funding from the CARES Act. During the nine months ended September 30, 2021, we received $71,587 in CARES Act grants and $848 in employee retention tax credits. We expect jet fuel prices to remain volatile throughout 2023.

Investing Cash Flow Activities

Capital Expenditures. Our capital expenditures were ~~$177,658~~$104,978 and ~~$118,016~~$49,683 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Our capital expenditures during the ~~nine~~three months ended ~~September 30,~~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 ~~five~~one incremental aircraft, ~~two aircraft off operating leases, five~~the purchase of three spare engines, ~~prepayment of $8,781 towards~~the first installment payment to purchase a flight simulator, and other miscellaneous projects. The final installment on the flight simulator will be remitted to the seller upon receipt and installation. The purchases of the aircraft previously under finance leases were recorded as a non-cash investing activities. Our capital expenditures during the nine months ended September 30, 2021 were primarily related to the purchases of seven aircraft, six of which were existing aircraft previously under operating leases.

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 ~~Company purchased $130,529~~purchase of ~~investments. Primarily all of these~~debt securities. Proceeds from maturing securities exceeded purchases ~~were debt securities, which are classified as Current Assets because of their highly liquid nature and availability to be converted into cash to fund current operations.~~during the three months ended March 31, 2023.

Financing Cash Flow Activities

~~IPO.~~Debt In. During the three months ended March ~~2021, we completed our IPO. In total, 10,454,545 shares were issued and the net proceeds to~~31, 2023, the Company ~~were $225,329 after deducting underwriting discounts and commissions, and other offering expenses.~~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 ~~from~~of $71,280 with respect to three of the ~~IPO were immediately used to repay our $45,000 loan with~~Aircraft Held for Operating Lease during the ~~U.S. Treasury, plus interest.~~

~~Debt~~.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.

~~For additional information regarding these financing arrangements, see~~ ~~Note 7~~ ~~of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this report.~~

~~Finance Leases~~. Our repayments of finance lease obligations were $37,842 and $9,113 for the nine months ended September 30, 2022 and 2021, respectively. During 2022, the Company exercised the purchase options on two finance leases using proceeds from the issuance of the 2022-1 EETC. The resulting cash outflows are recorded as payments for finance lease obligations. There were no similar transactions during the nine months ended September 30, 2021.

~~Off Balance Sheet Arrangements~~

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

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SUN COUNTRY AIRLINES HOLDINGS, INC

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

(Dollars in thousands, except per share amounts)

(Unaudited)

~~Pass-Through Trusts~~Finance Leases. ~~We have equipment notes outstanding issued~~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. During the ~~2019-1 EETC and 2022-1 EETC. Generally,~~three months ended March 31, 2023 the ~~structure~~Company repurchased 750,000 shares of its Common Stock at a total cost of $14,812, or $19.75 per share. The repurchase was part of a secondary public offering of the ~~EETC financings consists~~Company's shares by an affiliate of ~~pass-through trusts created~~certain investment funds managed by ~~us to issue pass-through certificates, which represent fractional undivided interests in~~affiliates of Apollo. For more information on the ~~respective pass-through trusts~~stock repurchase program and ~~are not obligations of Sun Country. The proceeds of the issuance of the pass-through certificates are used to~~this 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. The obligations are listed insee Note 711 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

~~Fuel Consortia~~Other.. 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, Southwest Florida International Airport and San Francisco 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 During 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, butthree months ended March 31, 2023, the Company ~~is not deemed~~made a payment of $2,425 to the ~~primary beneficiary. Therefore, these agreements are not reflected~~TRA holders.

Off Balance Sheet Arrangements

For a detailed discussion on the nature of the Company's Off Balance Sheet Arrangements, see “Management’s Discussion and Analysis of Operations” in Part II, Item 7 in our ~~Condensed Consolidated~~2022 10-K. There have been no material changes to the Company's Off Balance ~~Sheets. There are no assets or liabilities on our Balance Sheets related~~Sheet Arrangements as compared to ~~these VIEs, since our participation is limited to purchasing aircraft fuel.~~the 2022 10-K.

~~We have no other off-balance sheet arrangements.~~

Commitments and Contractual Obligations

~~We have contractual obligations comprised of aircraft leases and supplemental maintenance reserves, payments of debt, interest, other lease arrangements, and the TRA.~~

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 as of the second quarter and had no financial impact on the Company's Condensed Consolidated Statement of Operations. The estimate will be revised when additional information becomes available or when the contingency is finalized. The Company does not believe the finalization of the contingency will have a material effect on the Company's Condensed Consolidated Results of Operations.

During the nine months ended September 30, 2022, the Company executed an agreement to purchase a flight simulator at a total purchase price of $9,745. To date, $8,781 has been remitted to the seller. The remaining purchase price will be remitted to the seller upon receipt and installation of the simulator. Payments for the simulator are accounted for within Property & Equipment on the Condensed Consolidated Balance Sheets as of September 30, 2022.

~~For additional information, refer to~~See Note 136 ~~Commitments~~ and ~~Contingencies~~Note 12 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 ~~September 30, 2022.~~March 31, 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 ~~fourth~~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 ~~$175~~$193 excluding reimbursed fuel from cargo ~~fuel.~~and 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 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 first 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 ~~$128,569~~$165,277 as of ~~September 30, 2022.~~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 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 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.

~~As required by Rules 13a-15 and 15d-15 under~~Our management, with the ~~Exchange Act,~~participation of our Chief Executive Officer and Chief Financial Officer, ~~carried out an evaluation of~~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) under the Exchange Act) as of ~~September 30, 2022.~~ March 31, 2023.

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Based ~~upon this~~on the evaluation of our disclosure controls and procedures as of March 31, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that ~~due to the existence of the material weakness in our internal control over financial reporting described below,~~ our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~15d-15(e) under the Exchange Act)~~ were not effective as of ~~September 30, 2022~~March 31, 2023, due to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Management as appropriate to allow timely decisions regarding required disclosure. In light of this fact, Management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weakness in our internal control over financial reporting, the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented, in conformity with U.S. GAAP.described below.

Material Weakness in Internal Control over Financial Reporting

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 Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We previously disclosed in our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K as of ~~June 30,~~December 31, 2022, that 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 ~~has begun supplementing~~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 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; however,~~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 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.

~~-61-~~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.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

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 ~~September 30, 2022~~March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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. 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 ~~2021~~2022 10-K and the risk ~~factor~~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 ~~Ownership of~~ Our ~~Common Stock~~Business

~~As previously disclosed, we have identified a material weakness in~~Major bank failure or sustained financial market illiquidity, or illiquidity at our ~~internal control over~~clearing, cash management and custodial financial ~~reporting and, if we are unable to remediate this material weakness, we may not be able to accurately or timely report~~institutions, could adversely affect our business, financial condition orand results of ~~operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.~~operations.

~~As disclosed~~Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or other companies in ~~Part I, Item 4, “Controls~~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 ~~Procedures,” we have previously disclosed~~may in the identification of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The control deficiency described below 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 as of June 30, 2022. 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.~~

~~Failure to have effective internal control over financial reporting and disclosure controls and procedures could impair our ability to produce accurate financial statements on a timely basis and could~~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 ~~restatement~~decline in the trading value of ~~our~~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 ~~statements. If, as a result~~institutions secured by such government securities held by financial institutions to mitigate the risk of potential losses on the ~~ineffectiveness~~sale of ~~our internal control over~~such instruments. However, widespread demands for customer withdrawals or other needs of financial ~~reporting and disclosure controls and procedures, we cannot provide reliable financial statements, our business decision processes~~institutions for immediate liquidity may ~~be adversely affected, our business and results~~exceed the capacity of ~~operations could be harmed, and investors could lose confidence in our reported financial information. In addition, in some circumstances, failure to~~such program. There is no guarantee that the U.S. Department

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~maintain effective internal control over~~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 ~~reporting could result~~institutions in ~~investigations~~a timely fashion or ~~sanctions by~~at all. The ultimate outcome of these events, and whether further regulatory ~~authorities.~~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 ~~described~~a result of their financial condition and lack of liquidity, lessees may be significantly in ~~Part 1, Item 4, Management began supplementing~~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 ~~system~~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 ~~internal control~~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 ~~reporting~~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 ~~address~~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 ~~weakness. Such remediation measures may require additional time and resources and there is no assurance that these initiatives will ultimately~~adverse effect on our business.

Although we have the ~~intended effects. As Management continues~~right to ~~evaluate~~repossess the aircraft and ~~work~~ to ~~improve~~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 ~~internal control over financial reporting, Management~~fleet, or place immediately with another lessee. We may ~~determine~~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 ~~measures to address control deficiencies or modifications~~limitations may apply. Certain jurisdictions give rights to the ~~remediation plan are necessary. Therefore, we cannot assure you when~~trustee in bankruptcy or a similar officer to assume or reject the ~~Company will remediate such weakness, nor can we be certain that additional actions will not be required and what costs~~lease or to assign it to a third party, or entitle the lessee or another third party to retain possession of ~~any such additional actions may be. In addition, there~~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 ~~remediation efforts~~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 ~~successful,~~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 ~~internal~~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, ~~over~~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 ~~reporting~~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 ~~be effective~~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 ~~these efforts nor~~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 ~~material weaknesses will not arise~~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 ~~that Management has identified all material weaknesses. If we identify any new material weaknesses~~“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 ~~future, any such newly identified material weakness could limit~~event our ~~ability~~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 ~~prevent~~achieve an acceptable ESG or ~~detect a misstatement of our accounts or disclosures that could~~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 ~~material misstatement~~broad range of ~~our annual~~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 ~~interim financial statements. Any such future deficiencies identified~~more restrictive foreign laws, rules and regulations, which may ~~not be material weaknesses~~also apply to us. Under these laws and regulations, the government may require export licenses, or impose restrictions that would ~~be required~~require modifications to ~~be reported~~business practices, including cessation of business activities in ~~future periods. In addition,~~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 ~~independent registered public accounting firm~~employees, consultants, sales agents, or associates will not engage in unlawful conduct for which we may be ~~able~~held responsible or that our business partners will not engage in conduct that could affect their ability to ~~attest that~~perform their contractual obligations and result in our being held liable for such ~~internal controls are effective when they are required to do so.~~conduct. Violation of laws or regulations may result in increased liabilities including penalties and fines as well as reputational harm.

~~If we fail to remediate~~The Company’s business has been, and in the ~~material weakness~~future may again be, materially and maintain effective internal control over financial reporting or disclosure controls and procedures, we may not be able to rely on the integrity of our financial results, which could result in inaccurate or late reporting of our financial results, as well as delays or theadversely impacted by extreme weather events. An inability to ~~meet our reporting obligations~~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 ~~comply with SEC rules~~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 ~~regulations. Any~~increase maintenance costs, cause delays and cancellations or other network disruptions, require implementation of ~~these could result~~weight limitations due to increased temperatures, increase turbulence-related injuries, cause increases in ~~delisting actions by~~fuel consumption to avoid such weather, disrupt the ~~Nasdaq Stock Market, investigation~~Company’s

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supply chains (including fuel, parts, and ~~sanctions by regulatory authorities, stockholder investigations~~service provider disruptions), and ~~lawsuits,~~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 ~~our business and~~demand for the ~~trading price of our common stock. The potential consequences of any material weakness could have a material~~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


10.1*			Employment Letter, dated as of July 5, 2022, by and between Sun Country, Inc. and Rose Neale

10.2*			Term Loan Facility Agreement, dated as of March 21, 2023, by and among Sun Country Airlines Holdings, Inc., Sun Country, Inc. (D/B/A Sun Country Airlines), the lenders party thereto and UMB Bank, National Association, as facility agent, security trustee and 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 ~~September~~ ~~30, 2022~~March 31, 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 ~~September~~ ~~30, 2022~~March 31, 2023

~~-63-~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~



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 ~~September~~ ~~30, 2022~~March 31, 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)

~~November 2, 2022~~April 28, 2023

~~-65-~~-50-


	Nine Months Ended September 30, 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	—	—		—		—		16,778		16,778
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	$	(60,098)	$	414,322
Initial Public Offering Expense Adjustment	—	—		—		349		—		349
Exercise of Stock Options	5,000	—		—		27		—		27
Net Income	—	—		—		—		52,177		52,177
Amazon Warrants	—	—		—		1,400		—		1,400
Stock-based Compensation	—	—		—		744		—		744
June 30, 2021	57,158,467	$	572	$	—	$	476,368	$	(7,921)	$	469,019
Exercise of Stock Options	393,274	4		—		2,376		—		2,380
Net Income	—	—		—		—		13,379		13,379
Amazon Warrants	—	—		—		1,400		—		1,400
Stock-based Compensation	—	—		—		964		—		964
September 30, 2021	57,551,741	$	576	$	—	$	481,108	$	5,458	$	487,142


	December 31, 2021
	As Previously Issued		Correction		As Revised
Assets
Aircraft and Flight Equipment	$	440,356	$	6,963	$	447,319
Total Property & Equipment	688,624		6,963		695,587
Accumulated Depreciation & Amortization	(115,013)		(2,056)		(117,069)
Total Property & Equipment, net	573,611		4,907		578,518
Deferred Tax Asset	18,737		(1,129)		17,608
Total Other Assets	427,590		(1,129)		426,461
Total Assets	1,376,644		3,778		1,380,422
Stockholder's Equity
Retained Earnings	594		3,778		4,372
Total Stockholders' Equity	486,811		3,778		490,589
Total Liabilities and Stockholders' Equity	1,376,644		3,778		1,380,422


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	As Previously Issued		Correction		As Revised		As Previously Issued		Correction		As Revised
Operating Expenses
Depreciation and Amortization	$	14,029	$	681	$	14,710	$	40,103	$	1,429	$	41,532
Special Items, net	(65)		—		(65)		(65,456)		(6,963)		(72,419)
Total Operating Expenses	151,661		681		152,342		354,290		(5,534)		348,756

Operating Income	22,002		(681)		21,321		96,174		5,534		101,708
Income Before Income Tax	16,200		(681)		15,519		95,244		5,534		100,778
Income Tax Expense	2,297		(157)		2,140		17,172		1,272		18,444
Net Income	13,903		(524)		13,379		78,072		4,262		82,334
Basic Income per share	$	0.24	$	(0.01)	$	0.23	$	1.44	$	0.07	$	1.51
Diluted Income per share	$	0.23	$	(0.01)	$	0.22	$	1.33	$	0.07	$	1.40


	As of March 31, 2022						As of September 30, 2021
	As Previously Issued		Correction		As Revised		As Previously Issued		Correction		As Revised
Retained Earnings	$	4,231	$	3,778	$	8,009	$	1,196	$	4,262	$	5,458
Total Stockholders' Equity	493,291		3,778		497,069		482,880		4,262		487,142
	As of June 30, 2021						As of March 31, 2021
	As Previously Issued		Correction		As Revised		As Previously Issued		Correction		As Revised
Retained Earnings (Deficit)	$	(12,707)	$	4,786	$	(7,921)	$	(64,460)	$	4,362	$	(60,098)
Total Stockholders' Equity	464,233		4,786		469,019		409,960		4,362		414,322


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	Passenger		Cargo		Consolidated		Passenger		Cargo		Consolidated
Operating Revenues	$	198,013	$	23,687	$	221,700	$	149,263	$	24,400	$	173,663
Non-Fuel Operating Expenses	117,788		23,678		141,466		99,960		15,800		115,760
Aircraft Fuel	64,763		80		64,843		36,556		91		36,647
Special Items, net	—		—		—		(65)		—		(65)
Total Operating Expenses	182,551		23,758		206,309		136,451		15,891		152,342
Operating Income (Loss)	$	15,462	$	(71)	15,391		$	12,812	$	8,509	21,321
Interest Income					1,610						28
Interest Expense					(7,493)						(6,286)
Other, net					3,422						456
Income Before Income Tax					$	12,930					$	15,519


	Nine Months Ended September 30, 2022 (1)								Nine Months Ended September 30, 2021 (1)
	Scheduled Service			Charter		Cargo	Total		Scheduled Service			Charter		Cargo	Total
Departures (2)	17,512			6,214		8,310	32,246		14,777			5,036		8,229	28,196
Block hours (2)	57,585			13,000		23,891	95,052		48,420			10,822		24,973	84,648
Aircraft miles (2)	23,112,200			4,630,257		9,209,477	37,113,673		19,758,087			4,005,794		9,884,576	33,780,294
Available seat miles (ASMs) (thousands) (2)	4,284,403			800,698			5,114,134		3,653,335			693,837			4,368,972
Total revenue per ASM (TRASM) (cents)	11.27			14.80			11.76		8.04			12.76			8.75
Average passenger aircraft during the period (3)							35.2								31.7
Passenger aircraft at end of period (3)							42								35
Cargo aircraft at end of period							12								12
Average daily aircraft utilization (hours) (3)							7.4								6.9
Average stage length (miles)							1,169								1,199
Revenue passengers carried (4)	2,715,707								2,038,399
Revenue passenger miles (RPMs) (thousands) (4)	3,565,501								2,705,969
Load factor (4)	83.2		%						74.1		%
Average base fare per passenger (4)	$	123.24							$	99.05
Ancillary revenue per passenger (4)	$	51.39							$	42.50
Charter revenue per block hour (4)				$	9,118							$	8,179
Fuel gallons consumed (thousands) (2)	44,940			9,085			54,322		37,299			7,739			45,269
Fuel cost per gallon, excluding derivatives and other items							$	3.81							$	2.08
Employees at end of period							2,354								2,014
Cost per available seat mile (CASM) (cents) (5)							12.25								7.98
Adjusted CASM (cents) (6)							6.91								6.32