SNCY - Earnings call transcript Q2 2022 | Sun Country Airlines Holdings, Inc.

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Operator

Welcome to the Sun Country Airlines Second Quarter 2022 Earnings Call. My name is Kathy Darnell, and I'll be operator for today's call. At this time, all participants are in a listen-only mode. [Operator instructions] Please be advised that today's conference is being recorded. I'll now turn the call over to Chris Allen, Director of Investor Relations. Mr. begin. may you Allen,

Chris Allen

joined Davis, Jude Officer; President others questions. group I'm Executive and our Officer; of answer help Dave and to today you. Bricker, by Chief a Thank Chief Financial

would we company the certain like Before make I to everyone this may forward-looking that constitute that remind statements call, during statements. begin,

materially. expectations, to uncertainties. may are any subject and SEC forward-looking the statement. include today are obligation Actual remarks no and outlined assumptions, may statements, which cautionary to you most We based filings. in release risk and and We upon risk factors Our our update assume forward-looking recent management's review and results different current encourage beliefs, statements to our earnings

portion like website said, of With that You turn Jude. to ir.suncountry.com. the release can find our relations quarter at I'd second call press over the the investor on the

Jude Bricker

Demand morning, strong segments Thanks, as everyone. ever our as been. it's Chris. for business remains all Good of

in Our revenue block grew versus at over hour XX% in same XQ XXXX growth on XX%. quarter the

During through rapid all year growth customers as model deliver in main We date, record-high that of industry quickly profitable can utilization we we over quarters, that believe back environment. excellence airline the XXXX team and testament pandemic, get this a and I'm and several now business each fuel. challenging of our profits that the Sun fuel, on to members Country next our operational and out now, through that challenges our factor our us. record the growth, built deliver That built hard the service day. through Country all We led to customers in during war, our talents to the launched in tight were any this at to environment. staff to the and also Sun a completion pressures. a we're Like as to fleet, with possible. such proud our especially performance airlines, levels is is for maintaining deliver market, want our has while work and the pandemic, XX.X% We operational passenger expect of levels focus cargo and inflationary labor facing

able combined committed having long-term returns. and By response facing. pass-through schedule on flexible a large ability of our we're acceptable our the is percentage challenges we're off-peak when Our periods give be flying high of achieve us of with successful to our cut to the to network, to fuel flying contracts, to what design, concentrate regardless calendar

aggressively fuel revenue and rose growth fuel TRASM rapidly These mid-week, cut through for As with initiatives, to along and service May, over us into allowed all XX% like our May cuts, schedule deliver intensive. are XXXX routes XQ. long-haul that more February we September capacity versus weaker and periods

As we've selling time of to lead continue TRASM the approach quarter, our currently XX% April going across our had service to and next third see more strength into scheduled through we year. improvement, posted we schedule expect

were want I be capacity margins. we've only time to to changes implemented first the for give color why, third not quarters, to the profitable in XX but environments, in isn't deliver to also and expect all We The case. cuts. that some second the industry-leading as quarters in all

constraints. agreement hiring. retention pilot any add during to fleet or periods. crew peak Since However, flying our ratifying at this the the of end with year, we justifies more due our weren't issues fare environment flying and significantly haven't to We last size had able

status. were were of we the June, volume of in fleet a XX% service, the a in contract of best the train about markets. scheduled under-allocated domestic opportunities in However, to we're for attempting margin utilization about fleet large the to training versus This June, of versus XXXX. XX% third our end pre-COVID crews amount levels. the a of month, With Xx resulted committed At FOs reduction passenger quarter, flying, peak during to namely a

As our constraints all Again, Country proud at temporary. our be to every and expect it issue, members beyond I'll And Sun team with crew retention to be day. going so I'm we an to continues hiring here turn of not above that, Dave. for over

Dave Davis

Jude. Thanks

QX whose during QX. adjusted our $X.XX operating I Sun results, a get profit Adjusted margin This Country QX. Country of X.X%. for posted for than per share. loss $X is quarter adjusted EPS into was a competitors and seasonally an Before unlike negative discussion of is the Sun business of strengthens recall quarter weaker many an of million that our operating

results by fuel in in prices, driven staffing and one I'll historically unit my combination of were items high unprecedented delve by driven growth into revenue, a these under-capacity each Our issues. of remarks.

revenue capacity. First, and

XX.X% totaled a Demand $XXX.X Second service TRASM increase scheduled service XXXX, XXXX. QX of be QX versus continues Scheduled quarter XXXX. increase versus grew revenue a revenue was $XXX.X million, over XX% XX% robust. and million, to

the July higher than For over of service TRASM than XXXX. July XX% June, was month higher finished and XX% scheduled XXXX

trends continuing bookings. evident positive revenue are recent and are So, forward in our

X%, driven was $X of plus Our higher our which System cargo we of QX by System than than the block smaller average ASMs was QX been, considerably would've XXXX. was to the higher XXXX, QX for hour XX% compared even declined than fare of optimally segment. growth fuel prices. XX% quarter by growth $XXX XXXX, of at

finalizing all year, our attract As we’ve requirements. December able we in meet been agreement since need of to pilot staffing the last pilots to our of mentioned, Jude

QX In of year. addition, attrition to has continued since moderate last

charter output This is the increase training increasing the underway accommodate flying year. of and during and the million, and was agreement, to for new XXXX. our hiring earlier revenue XX% Pilot plans. did of quarter the Over over was long-term the we than work over under larger June continue size $XX.X new-hire double output a implement we our good contracts. in class XX% make the we than progress. September growth to in is Charter pipeline of our quarter April been more in XX% we've QX was As the

trend, a remains that represents gap to profitable flying do. our business favorable today's to of the charter This the potential contract number as for charter was increasing we flying opportunity under XX% of there While hoc hoc. ad In amount was number by continues in XXXX, ad growth XXXX, segment main cargo proportion for The year. $XX.X by is increase. of last ample to of deck QX XXXX. our flat with available XXXX. X% the aircraft of pilots quarter QX check and Cargo the million not heavy decrease revenue more fly down aircraft was driven versus did We increase versus

to now costs. Turning

our per versus versus X.X% new XXXX, total same of in implementation in and available our costs undersized $X.XX gave X.X% of non-fuel decrease XXXX. was $X.XX quarter block that non-fuel the the gallon, profitable the hour quarter to quarter both relative paid were price fuel op we to Relative the increase in of experienced expense quarter the reduction to CASM far gallon is CASM increased QX we XX% per pilot significantly largely to average per as mentioned, the was price plans despite gallon, Adjusted QX X%. adjusted fact we driven that increased only the ASMs. in the and I added gallon $X.XX This that, guidance a second margin we an than in higher the us. period the we XXXX, last for for Our The as million initial agreement. for fuel by QX in over were led QX our per opportunities of paid would've $XX.X drove guided higher second expense. of the fuel $X.XX for per We flying

the would've So, discussed. challenges been capacity I've despite

Let me talk guidance. about now briefly

TRASM in of scheduled of higher excess through move we demand be than XXXX. we strong QX, and to remains As very QX environment XX% expect service

X% operating third to versus be be quarter and expect to total We up to revenue X%. and XX% margin XXXX between XX%

conditions. $X.XX per our expect our Our projected fuel fly plan macroeconomic in XX,XXX to strong billion business resilient remain to to highly X.X and XX,XXX fundamentals ASMs. or the believe price QX changes of model block we hours, We approximately and gallon, is is

The that relative pre-COVID remains we grown in profitable anticipated aircraft focus growth. to has than on Our utilization have resulted fact a in decline less periods.

output improve, costs are growth being higher pilot as at continues incurred. we fixed anticipate already to aircraft our margin come will As

high me and $XX cash sheet with flow year. where positive fuel quarter strongly the balance million second prices, to we during closed million extremely cash our revolver. of excluding $XXX on $XXX let generated we over the be cash undrawn in expect continue we of $XX million Despite million the focus and flow of of Finally, free liquidity, free for CapEx, consisting aircraft to quarter,

questions. balance sheet open quarters the deployment it capital strong continues in to ahead. I'll that, With for provide flexibility up Our

Operator

Evercore. with call Thank comes you. line line the Go open. your of Pfennigwerth [Operator is Our from ahead, first Duane Instructions]

Duane Pfennigwerth

morning. Hey, thanks. Good

step-up be you back on re-summarize fourth do there where How for throughput Can toward can I when training, eye you be think to gave kind bottom is to just it, your of the in looking a of how of some or you're maybe month with number were to And maybe the line You want speak an think the just quarter? maybe did July. stats fully of change? flight the instructors that. going on you to you but changing? staffing, you

Dave Davis

of pilot a talked bottlenecks of in a the the been pretty Yeah, pipeline. about, output. dramatic I sort more our so just stats. couple increase training in couple There's

sort going to all couple bottleneck that of, the ones, go biggest airmen, a next quarters. now think of the to We number would to increased here we've our know in is they X, have next forward, but There's which that fly check online. the cleared. our so five lot when IOE IOE increase we through say, get more to of are is largely the overcome, things which in months, instructors we think kind several quarter before pilots working basically I who to we're in months One We’ll other largely we're pilots in only to of we solved, certify very favorable. July trends that can on XX. number months, as the a We'll I continue up leading had two ahead,

growth, you accelerating we'll into quarter. relative at again out fourth If year, look as our to be we look later the the

on, So, the sort them so going some a as want like solid of of The is, be. and the big new our have good we've we need handle just hires, attract uncontrollable the agreement. attrition pilots new are we to as and news classes all implementing we can been pilot we factors, through

Duane Pfennigwerth

network, then just on And markets in obviously, for you of the can types versus the color underperformed, give that great. you're outperformed the right benefit on follow-up Okay, maybe and that with now XQ here a markets hindsight? but some of constrained,

Jude Bricker

Duane. Sure,

more believe lot Indianapolis. markets improvements. capacity, York, showed under-capacity kind where Baltimore, of large an were to were that markets So, Seattle handle more wouldn't disappointing allocations the were in, that state of they Denver, environment the changed capacity And a Boston, revenue enough we significant much. most And to revenue large Portland, were and cities New Houston, have Minneapolis adding markets Dallas, most those like in-elastic

were kind we these into leisure lifted don't we saw were those of anything demand, as about, talked of in that we’re didn't we So, for I fares. by think opportunity the, that – lifted revenue add fee, see larger we but a also improvement add? a to allocated over Instead, know [year lot overall of And return markets that markets, three] lot think but capacity. there sure, [ph] we which Grant, to was significant a more business fixed markets. of

Grant Whitney

see – just, say over XX% just Minneapolis capacity we available. others, would but advantage remain I markets I expectations did some through Jude new as broadly, we opportunities market. Minneapolis the meet it growth than will destinations that better by did markets be we The non-stop would the of will It's of I'll mentioned, well. And And one a very, opportunistic, performed and grown as good very No, lot COVID. in well, take performed becomes add we've thing.

Duane Pfennigwerth

you. Okay, thank

Jude Bricker

Duane. Thanks,

Operator

you. Thank

Our next ahead. the comes of call from Go Linenberg Deutsche Bank. line Michael of

is open. Your line

Michael Linenberg

morning Hey, Great. good guys.

up following on... Just

Jude Bricker

Mike. Hey,

Michael Linenberg

guys. Hey,

but markets, where know you or haul on some I sound those or pricing just When did that they it Duane's volume worked – where higher all issue it also markets overall of have the combination are, the up that you mostly summer does fuel given it you following Was gallon, longer have a energy those have just say that of some that? would – didn't both was drove would of I worked, and down – assumed the prices was West like Just see $X above you Hawaii, fuel markets, Coast, staffing. were a high because staffing long, question. was that is fares pull a prices

Jude Bricker

like, we're schedule have and, in It started would you on keep about would've side. June worked, mean, Memorial about little service around market mind, a works talk that I everything bit I a Day, before, talking Hawaii, if mean, in absolutely. the

stuff in can get more environment, but would that calculus – So, trying best Hawaii be crew penalty, versus fuel intensity, we were goes on a constrained, combination in. we're about was the XX I a positioning flying to or or as way, in fly decisions, XX so network. it somebody efficiency so per if our also domestic passenger And we're have well. making back just then fine just done different then gallons done we of to expect this any into because Hawaii, it's the then we next summer, to there's crew put gallons to

Michael Linenberg

put got be helpful. was want if Then to an Anything just conversations Otherwise, may of that sure that that? think well. maybe it don't sort was what make I'm you're soon, do there'd interview when to can of it potentially kind and from maybe having like it I up it as Maybe doesn't about think was you right that you And [indiscernible]? – That's And picked with I wide-body, is. it rest. this would sense. off-the-cuff were to that add cargo seem dealing of maybe Amazon, sort I that know flying with complement be anytime now, and wide-body again, just off-the-cuff that's to that airplanes. that about in a Okay. it but I an conversation just you're

Jude Bricker

Sure. Yeah.

it we the And work? but rates have don't response noting it do do So, plans any question that are pilot reporter future. from near the yeah, would was, the it'll wide-body my to think agreement, in was, we our in work,

– than consider kind multiple narrow-bodies years spaces. out synergies the be, cargo would years complement So, that a of to more And so. we multi-segment need I our sentiment might get there three same into in with be of your from agree now, or business what well, wide-body as to the

focus Yeah. – out the So, and now that'll focus the be putting we're for right line quarters. onto next not is pilots the our two

Michael Linenberg

the that that help will does Okay, quick take you running some time? Is Because work contract. on bidding of great. various the one up When work system, preferential that also – and you're elements. of I contract? Obviously, pilot – do rolling squeezing part And just is think you help, out one the the now is or things through. there kind that – through that are yet on that does

Jude Bricker

Yeah.

a good Mike. that's The is question, no. answer So,

What in some don't don't have productivity that maybe place help We the that a we in is us. stuff help prep in doesn't of which have bid, So, perspective. we place place yet. from will have

and to help, So, be We've to through just very early that's no probably forth. implement next year, [ph] that's year. so in vendor chosen it and working but We doubt. productively. early got going right going it's now, We're got the with [Alpha] to our

Michael Linenberg

Thanks everyone. Great. great. the time, Okay, for

Operator

you, Thank Michael.

question next from line Barclays, the Oglenski. from Our Brandon comes of

Brandon Oglenski

the problems you here, having Thanks pre-pilot XXXX taking we does my right Jude or for where contract? this this, know questions. to or change does your relative capacity Dave, constriction training about were, longer-term the you're plans, now XXXX or think as maybe especially you

Jude Bricker

we're term, constrained certainly in near mean, I I think Yeah, the by pilots.

incremental fuel I our today's attainable. capacity, a growth flying we recession we going purposes. But incoming think over margin even sustained goal, proposition is I as move and I training that is of a in grow for able to to we period. or exists hour we're higher rate, plan, XXXX, and to change. achieve in XX% our but think opportunities high and would on block environment, into need flying, I which that that We're diversity growth XX% a to of price, rate growth be and with with fuel, we a expect, mean, to line We a contract more have rates growth have for have also a value pilots achievable not think out sight – which building

Dave Davis

Yeah.

me you Let is – just Brandon. a this couple hey, Dave, give

a Let though. give just other you couple numbers me

XX-passenger we'll to where So, expected we That's with be. end aircraft. originally the year

We have active coming in that'll fixed more to in. as later pretty three of times remaining on advanced about are we we The in now, aircraft the deliver in right plan, beauty XXXX, discussions, don't is us are fleet close and we talked market. before, orders the many

been just in and that, more. going we're looking We've still to up pivot, on, based of on a we're for opportunities what can sort And aircraft. continue are? beat three got can how market, we and we've like do go to So, doing. we're much down, the we the fly But strong

So, we're and moving forward sustained growth. for planning

Brandon Oglenski

achieve out where I the And in out? CASM you guess, if XXXX, you're would into that able see growth hours, Dave, look as XX% to block benefit come you

Dave Davis

like on like P&L You or what line time period? what item mean,

Brandon Oglenski

little I below No. but more the X now CASM, be where to maybe longer-term think bit out, a X, see shaking target guess was I you specific? would CASM, around I mean,

Dave Davis

will be to down plan now you heading as we number. a revised CASM mean, don't right grow. Well, I have give a I

just number. are have you good costs plan in our a the done give don't yet think to XXXX hand. on XXXX enough I I well

us because The about, thing we've big cargo is tough this other think to got always with business. a

derive with we ASMs. unassociated So, have costs that

we lot now. precise don't right So, cost pretty I for hour which feel stuff a is you we block but really per in-hand, on a at look a have of well basis, forecast CASM

Brandon Oglenski

guys. it, you. Appreciate Thank Okay.

Jude Bricker

Brandon. Thanks,

Operator

Thank you.

from with Go line comes ahead. Scott Research. Wolfe call Group next our of So, the

Scott Group

morning thanks, good Hey, guys.

Jude Bricker

Hey, Scott.

Scott Group

June, in to are what we you're come fares XX% XX% So, go from where talked with July, unit thoughts fuel down? so seeing any I or starting and as on prices growth you in here revenue think about

Jude Bricker

a to just point, which of block is that's know, clarifying our don't our for hours, XX% of our make fixed hours, of block want that about, adjusts which And that. service slowly. the contracts, TRASM, scheduled long-term is XX% XX% which in is So, rest like Scott, I – something

I TRASM, yeah, entire long-term through for so, year sales trends. We've And April. improvements revenue in demand schedule about out selling really unit your is the question think seen three consistent over

see with were where July. in pullback – associated any don't demand we we So, from any on levels peak in slowdown

is get but fares travel change too influence We can of of portion capacity own our any to of [ph]. don't customers, Our large if able profile] our forward more. weakness we're in [demand any where summer for there's no indication add or to any high a that want bookings from this unattainable

Scott Group

so, in at drop And able that. least benefit of now sort feel for fuel like the to you be and keep the keep you'll of

Jude Bricker

Yes.

Scott Group

back you that of the Maybe then margins, about maybe the have – think what – to a double-digit beginning, that's, to And to when double-digit we realistically, talked want get you margin? just about, can goal in operating industry-leading margins. has happen

Jude Bricker

Yeah, back that pretty close the to probably in in quarter, put would've double-digits. $XX onto pre-tax opportunities fleet And your on basis, I crews look back put the it's worth XXXX. basis and get the which foregone the in how it's we operating around to flying, question mean, tune us the I had million, to passenger can have think if line so to tell, – utilization hard second so to the but levels quickly we the you answer of then becomes out

fares flying naturally is are utilization price the higher, high for higher. opportunities fuel of concentrated the Now, sort so when are,

this But months, to there wasn't charter margins good, that environment demand the significant lead we're opportunities that much opportunities. [ph]; that to delivering [opportunity lost] operating back opportunities add industry, down May, be key to September, that's ad utilization hoc And there so I where So than won't XX%. summer think. is forgoing for with other the many

Scott Group

goal to So, be for or back expectation would XXXX, the your industry? leading to that get

Jude Bricker

Yes.

Scott Group

Okay. All right. Thank you, guys.

Jude Bricker

from. There a color, the carriers is other business hedge in then from just Frontier Delta. those the portfolios, leaseback, [indiscernible] because in that. gain we're Alaska, couple there's that – a customer a not benefiting rebound myself. some three advantage industry they There's significant are so you of compare across taking significant basis, Southwest I mark-to-market with Just hedge with take And sale a portfolios as industry, and

a just and mind, So, good more that place. think in long-term, think we're keep I we really in when

Scott Group

guys. Makes you, sense. Thank

Jude Bricker

Thanks.

Operator

remarks. Thank like back you. turn I for it would Jude Bricker closing to now to

Jude Bricker

for day. in you everybody. thanks the to talk joining Well, three call, Have great We'll months. a

Operator

program for the conference. participation in you conclude you now may your today's does This disconnect. Thank and

Sun Country Airlines (SNCY) 13 Aug 222022 Q2 Earnings call transcript