Earnings call transcript Q2 2023

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Operator

Welcome to the Sun Country Airlines Second Quarter 2023 Earnings Call. My name is Josh, and I will be your operator for today's call. At this time all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that Today's conference is being recorded.

to Investor call Relations. like Allen, to now of Director would turn over the Chris I Mr. Allen, may you begin.

Chris Allen

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

company statements. Before the like this I'd statements certain began. remind everyone make we during and that to call, may constitute forward-looking

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

second press Investor find earnings ir.suncountry.com. at can on portion release You Relations our the quarter

turn said, Jude. that like With I'd call over to the to

Jude Bricker

everyone. Good Thank morning, you, Chris.

is Our flexible shocks. and industry. the charter of flexibility of low our to fluctuations, diversified respond the to our us to model demand The business fixed industry the to due businesses, and able model predictable airline in both allow industry, schedule, the predictability service are capacity leisure deliver cargo exogenous unique and combination in cost we schedule most

we We all industry to leading due cycles. will profitability our believe structural reliably to advantages throughout able be deliver the

highlight. crossed We that call a few milestones last wanted to since I our

XX billion carriers million our cycle. time this surpassed ending revenue the XX the ending position as scheduled that for first $X contract first the for into any margin Country in we in quarter. In carried passengers the company. among Recall in months XX-year-old top for our the We First XQ over June, service the were carrier Sun for first XX months we in pilot second quarter. regained a

variable is and our This of us a our number customers every performance record we as testament to a during capacity days execute peak frontline model. able growth employees quality day, executed being day. in for flights key we deliver July, priority all our a to deliver a operations In for is that

of remained with our we've calls, theme segments an the where Consistent across the environment several all is strong. demand last in

a been give topic revenue industry, our the color for environment to I some business. on wanted scheduled it's As the common around

up quarter scheduled of year results. year service on second Our TRASM X% was ASM XX% very growth on positive certainly

We expect on to into year the accelerate mid-teens. growth to service we TRASM be to expect able to third ASM quarter And be down scheduled slightly year.

However, up XX% scheduled out and XXXX to I by for TRASM XX% respectively. that service point want and XQ was XQ

fall between those bounds. We to expect XQ

substantially into we're revenue seeing pre-COVID selling at persistent unit based be This stabilized seems our on a So levels. through out sales April XXXX. currently higher reset schedule level verse to

our we amazing. new far haven't MSP had COVID all positive Since a performing by XX didn't pretty largest been well. I've have particularly through are market launched This any robust markets the contribution. has Minneapolis summer, Sun recovery. been That's in markets Country, we that

years redelivery those committed to about cost the aircraft financing. XXXs net This leased at of a over year I thing expected All to out XX% growth the can versus cash of fleet of with $XX about only One two XXXX. like deliveries than produce year XX%. three with more figures were flow. will the along in have expect future addition this to I'd is call flights million We currently by In the performed produce departures three out. our grow already

buyback by share cash gives recently the executing So us the board. in this on our approved free flow confidence

with turn And to Dave. over I'll it that,

Dave Davis

QX a among revenue the loss were before for while seasonally million, in year-over-year Jude. despite $XX.X earnings our of for Thanks, taxes was Country, quarter Total quarters business. million, million to QX XXXX. a Sun historically XX.X% versus being increased strong $XXX.X of weaker $X.X it

op quarter. was XX.X% the the record second quarter. margin historically results highs for earnings Adjusted margin and Revenue were for

easily QX, in to strong our XX.X% stay continued which increasing XX.X% to higher ASMs X.X% which service a This factor generated year-over-year $XXX.X million revenue, exceeded and by total growth Revenue $XXX.X business X.X% in plus to was million. X-point passenger in year. increase than growth from and ancillary a last XX.X%. scheduled a to in Scheduled fare sales service load $XXX driven

public's our versus the XX.X% and year, is driven scheduled levels. travel. grew last of We significant pre-COVID leisure continued of we've for quarter our believe in increase the last versus service network TRASM second QX by of changes service sustained seen the TRASM year. demand a Since this Scheduled in optimization

scheduled during levels TRASM to As service versus we now to XX% XX% QX we're rather be experiencing. to higher pre-COVID our 'XX. We see least at be don't of of stabilizing returning appear of numbers in at and XXXX, Jude QX versus year, sign scheduled mentioned, expect up any levels, scheduled a QX service service was TRASM the TRASM they this

for by fuel quarter the million, in our charter flying. our dropped on we growth our risks Charter portion by take as XX.X%. versus of consists fewer revenue grew from not to second XX% prices reimbursement prices XX.X% in customers changes of revenue $XX.X of A unblock over last QX charter year. fuel do

and block from revenue Charter grew reimbursement period the per 'XX 'XX. fuel grew the hour QX exclude over X%. of by revenue you revenue QX both XX.X% charter and If of

pursue XX% of total businesses was increases. as QX charter capacity year. to flying continue available last charter block hours versus Program more in We'll ad-hoc of XX%

maintenance the due occurred $XX XX.X% our December Amazon block Second XXXX. of in events, million contract to lower to Last had increases quarter hours. in revenue in grew increase of year we annual cargo on XX.X% and scheduled a levels flying

and We block We're growth hour high-single moderate year thereafter. to in full expect range. XXXX to the expecting in aggregate year-over-year peak QX growth be digit

cast As conditions, model capacity always, us move between of our lines to unique allows businesses

up This year-over-year a comparison Adjusted increase QX. versus turn on total an to second expenses was XX.X% in block X.X% of increase the me cost. the CASM XX.X% 'XX. to for Total let Now for XX% operating now increased in QX hours quarter. compares

year-over-year We ahead. in continue quarters expect growth CASM to to the moderate

costs. Daily QX costs as aircraft continues as by five drivers utilization currently hundreds XXX-X non-fuel was on year. Air, past management non-repeating for aircraft the for and the well of costs include year-over-year, to this vesting last of pressure versus ownership our costs Total groups unit operating put of lower the settle Oman to one payment XX% increased still to of we Significant leased grievances. options, X.X% which a approximately increase stock to labor

have Fuel expense expenses year-over-year. Excluding costs operating year. these by non-fuel increased would last XX% versus XX.X% decreased

aircraft the slightly into at CapEx, July was QX. QX of sheet, at balance funded liquidity end $XXX higher of end of growth through amount spent the $XXX is which total than the million our Regarding our we Year-to-date, our majority XXXX. which million, was a planned on

We able objectives addition net of only growth to the be three next achieve expect the two years, over and to utilization with aircraft. aircraft our higher

to we're result, considerably and a 'XX. CapEx expecting As decline 'XX in

debt debt at we how we last Our deploy repurchases. Since adjusted million $XX.X Since a burden, the share of have on do QX was have spent flexibility cash. ratio net to year, QX and significant EBITDA not end we of X.X. we our

$XX.X XX our million. current million Our brings in to share which authority, authority repurchase available boards repurchase authorized another

on million, fuel to $XXX Turning million XX%. $XXX XX% quarter in now between gallon a total margin our anticipating We're to and per Operating between to forecasting X% to guidance. to quarter. We're in XX% is increase block be of an $X.XX of a for and QX versus forecasted increase revenue the X% price 'XX QX be the XX%.

to highly unique remains and resilient our changes in is our model strong of fundamentals conditions. business diversified macro economic The

Our focus profitable growth. remains on

up And with that, we questions. open will for it

Operator

first Our with comes Instructions] [Operator question Duane Pfennigwerth Evercore ISI. you. Thank from

may You proceed.

Duane Pfennigwerth

Hey, good morning.

can also impacts trends margins charter, talk fuel in you charter and little on remind bit how and charter. Just us by change in a year-over-year revenue just

Dave Davis

plus are out VIP. aircraft, So have dedicated fleet includes. break it's There's programs programs, several I what of track think important to five track XX to a of charter the we them

So six basically aircraft. those in fuel. have it's absolutely passed through And

a have programs. that business that's of hoc through. amount XXX% Again, pass We significant predominantly is ad sports

we position costs. aircraft our need Sometimes to however, at

there's and risk. bit military And then that pass fuel business, So there's do a that at little we which those XXX% of support through. flying is the has

So effectively through. XX% pass it's over perfect

Jude Bricker

it Duane. Yeah, this I think of mean, way,

contract So reference that a we charter negotiated charter contract is price. in

higher reference customer for get fuel more based from either or on charter less we fuel price, the Okay, the is reimbursed that if than lower price. or

fuel When When low, fuel so the looks is really reimbursement high, less, is revenue is the reimbursement higher. really is so higher, less. looks the the revenue

Duane Pfennigwerth

some Cancun is could cautious Got trends of just extent for comments seasonal part maybe of yesterday, it. can And heard Obviously, then Caribbean? from Spirit seasonal of to remind more your on or near we do, Mexico you you Mexico comment Cancun, set? to kind that that specifically but us, and just you some a on the what flying

Jude Bricker

backdrop. some you give I'll Yeah.

where in of markets is in our what in focused is focused network in business is is lot southern wintertime. contrast support predominance do on summertime, that the largely there network that to brand business international these Our distinction in We're origination from focused building flying don't Minneapolis wintertime. Minneapolis And large a scraping southern the not origination of on a marketing. some with and the we of we out of the markets. The a the international

a agree the still weakness markets, to we're about And some of markets. profitable highly at for in the southern more given with the capacity would I ability optimal airfare And is to comments little are these the be Dave's we're prevailing have dial that therefore, of level the in -- seeing supported in markets but whatever And subject international to we I some summertime time. these environment fair by us. that

are focus of Milwaukee few largely fourth and also winter we'll as international but down we markets building August. summertime Minneapolis approach where be the are up end into the of of quarter. markets the we'll then Most And now a out and others, our winding some in fly on we by

Any color, Grant?

Grant Whitney

pressure the were exceeded. Jude's strong basis. competitive Harlingen, acceptable But sort And, for has very which nicely. we've which do echoed for down performed down but things absolute for little what We're There's is maybe this was that impacts. a just that the an And year. have us on some particularly did still not comments market Yeah, one we one us, there. there that unique been of results

to while. do to be So agility something going make a And there Jude's We've will continue it it's point, summer. for been work. in the we our to

Jude Bricker

'XX. year of that it really And Cancun, year, of down was a is And carriers at was that capacity lot into the My was in summer capacity chase beneficiary in diagnosis fares. demand -- it a look lot drove if strong Cancun you this a of on summer. because levels, growth

structural fly strong in demand. still any And as we and environment be there's can, think successful. I I mentioned,

Duane Pfennigwerth

to at going to appreciate up But, I'm you about, I'm thoughts. look sense. look to Okay, that I makes go talked map. going have that market originating my the

Operator

you. Thank for moment One questions.

from O'Brien Sachs. Catherine from Goldman Our comes next question

proceed. may You

Catherine O'Brien

much been Hey. so Good popular another earnings just Hey, to based right season this day week, their now Not is, where morning, everyone. view topic Thanks having that's the for current on on, corporate a on size carriers time. a see any network sits? to your of that's place use has winter, But other have I early pickup fall and these into these with in carriers. case. airline the started changes schedules. or market some But, capacity as less take you know overlap domestic competitive

Jude Bricker

is lot meaning environment capacity growth. of our Generally, a that constructive,

We back into on from Minneapolis, stuff coming are non-Delta build some seeing carriers. that levels, backs XXXX based was

fine. but so, And that's perfectly

Tuesdays on stuff, And anybody think on be we On what do. that should mean, I of Vegas the a to little is sort patterns. it week than day is demand surprise don't weaker weekend a a it I this

business So, the we change. it's not built that a substantial around

that bring can is up, of out perhaps consensus. I which a Here's point

a have doesn't elastic. lot but it's demand, July There's week amount tremendous sensitivity. a of day of

March, As has compared days. to these which fantastic

days, demand on given deep few patterns. inelastic travel that's So spring really particularly a break there's around

to means July, So bigger need And off-peak we were. be than periods. we adding into lot a that

on So that's pilot our capacity constraint, block we a based have constraint a availability.

to we of during the our month. best very put on that And flying choose so days

And would not off-peak lot unit if are However, has just contrast, the de days a different. September and it with more a we revenues of we September. completely In even midweek flatten schedule, had there's -- powerful. is relatively so in been and minimis as expand reduction flying, always because opportunities or the moderate

the limited agree And on is on leisure But that demand out carriers crowding the overall demand, leisure when focused a with flying there I from a sentiment limited there Three is perhaps, somewhat periods. which focus demand. we've those focus, to Big already around renewed is

periods peak really for so into months. it's And us, about off adding during peak

So I more and this it then a think nuanced point. is the market it's sense complicated at making matter, of

third peak have months networks where margins price. Our today quarter to grow gets mid-teens opportunity contribution from they these we this variable fuel and during what at is scheduled are our into that's the up XX% service that into

Catherine O'Brien

for thanks ones for That's on really Maybe quick just two it. cost the perspective. helpful Got Dave.

you just your capacity aware us some So quarter step what's give back like that's should each growth. on coming to that CASM and be a through commentary Can you're end color just eases. ratable or you of the if more an XQ anything down

And on notice this some XQ comp, a then that share comp, of should commentary press stock relevant base we wasn't just to too quarter, expect both the in just [ph].Thanks one-off the your far that's you give last much. and Can year. in but so on like just how was outside below try it release, elevate us you color CASM on been

Dave Davis

sure. Yeah,

enough more on We -- two we what have growth aircraft with is consistent is, this we add what, think mentioned a oversized. Jude's really to through commentary I reasonable aircraft, front, levels essentially, XXXX. sustain we're a bit little the So

little CASM. oversized, we -- continue impacting and negatively a and we're as that's So

we forward ahead. As sort into the roll quarters of

will And of to growth, the particularly say year-over-year quarter well. the you to, continue like fourth some see numbers will Those -- begin as this moderate. of third in growth, should I going then growth some some out and quarter

should fourth year-over-year should we on here be kind guidance digit single but think improving of trends in I'm the continually giving and the not quarter stuff we CASM So third on front. yet just quarter.

I the was company. of options is who Apollo's Regarding the -- a sub-XX%, an made. the has continued here management folks for original -- considerable now and Apollo, that ownership important investors acquisition which were there think point when options, we drop to is was there when from had number

for So options management XX% happened less. vesting trigger the overhang But was of and is getting quarter. of less that that the a a last sort

significant So of when management we that options number, fell vested. below number a

vested. options So those now fully are original

recur for the vesting So those quarters for continue to those least not costs in at will ahead, options.

moderate. will number that So

Catherine O'Brien

Okay, great. Thanks so Dave. much,

Operator

Thank you. moment One for questions.

Becker Our next Cowen. TD question with Helane comes from

may proceed. You

Tom Fitzgerald

This Helane. how of is you're and have. appreciate Hi, terms what thanks about is much. first could to question on on just very much. seat? captain officers any upgrade Thanks the My attrition I in color into for you Tom you're seeing very feeling Fitzgerald pilot getting

Jude Bricker

if it issue The I'll really where this to pilots you some jump problem make general comments pilots be very any our captains. consistently at Well, below Greg, getting we to and had upgrade hiring is want have don't and then to expected would we down in. to time. attrition boils

we're in left make So in we constrained will as and And captains. seat upgrade the we as to continue strides improving that we figure. grow

Greg Mays

I -- Jude's We've we really got robust applications. have Yeah, recruiting a pilots don't team. point, problem great a hiring We've now. got mean to right

affect there can these That sizes But see On might can the cost daily. additional watch going that within front, that fill. now other we stayed that deals that that attrition expectations. with We on out our we believe we that are we attrition. moderate

is our captain ability the come at said, does our rate So down upgrades. grow to as it to Jude really of

Jude Bricker

case a and and the is as they Big is an retirements, early everybody little pilots issue time. rightsize get groups bunch pipeline a of their is the to the industry-wide training Tree taking did trying in of this their and -- And to pilot so

Dave Davis

think you continues Yeah, quarter a is we for one growth the looking This can us, focus. that now the as the it's of and know making as we're in progress, but about quarters. I but challenge the the of at linear, fact bumpy not talked think in a here number third to for be points are I that it's at testament point this to this we've look you

Operator

Our comes Bank. Deutsche Mike Instructions] Thank with Linenberg next from you. [Operator question

may proceed. You

Mike Linenberg

is I a puts a of your profitability? just apologize addressed you weaker you did X% de-sell sort late, that guiding XX% one margin drivers of on know of if run and you get off going Thanks. primary few for quarters. have are of Can seasonally through September some was What But like Is I fuel? things may minutes and it thinking you're I one to We're the behind takes and XX%. of Hey, good tough guys. this. from morning, a just the everyone. operating what month there? -- you're coming

Jude Bricker

allocation. the I main capacity mean, thing is segmented

from So cargo a it's And it's good a track service programs. very capacity. ways, we our charter cargo many are then And that thing profitability programs, and have variable. consistent and in which we they they track, is thing scheduled that good in flat -- have

one that we're and alluded XX% about capacity in anything and months strongest mentioned XX of hours Dave airplanes as incremental demand July, that day, a have flying the staffing. do airplanes, our are of about or number And opportunities year don't out margin I to be we're XX, those with it's the at should and because of eight opportunity that cutting constraints to really to,

thing. that's So the biggest

contrast, flat quarter. compared second as relatively to is the In quarter demand period the third

the in really bad. quarter -- great, quarter as is that not goes third a a but good So May April, It's contrast, quarter it's second bad June. good the has really the way as July, third September. not not

a the flat, difference it's and two more the that's quarters. in lot So

Mike Linenberg

Makes in what did sense. September scheduled up quarter? ASMs Jude you will ASMs your be, the mention

Dave Davis

issue front We don't sharing of mention it can don't didn't to have get it that. in me. I it. I we We think have an just you.

Jude Bricker

it's it, about got mid-teens. I

Mike Linenberg

the Thanks question is does we revenue, think Okay. Mid-teens, fade my and question okay. that right that about questions. run-rate? to quarterly start when And last is modeling then late $X 'XX-'XX? million this of What taking of rental is it sometime the for a the And just my more as sort out?

Jude Bricker

off XXXX as November to The and that's come the continue in five begin will right. really fade-out XXXX us roll aircraft to through and then Yeah, operate. November

Mike Linenberg

Okay. Thank you.

Operator

questions. for moment One you. Thank

Christopher question Susquehanna Our Investment Group. from with comes Stathoulopoulos next

You may proceed.

Christopher Stathoulopoulos

everyone. morning, Good

believe the be that to said vesting back on, made comp comment I to want the changes stock you get in the you moderating given Just the schedule. should

help implied stock I there? could north up of we income this you about recent quarters. the operating believe quarter should comp So, XX%, frame XQ? step a think significant a from little that's How for was

understand as the that underlying to we second just year? think how want I about we better of Thank about should think you. the half

Dave Davis

Yeah. there in will options all me, a the vested, that vested step precise just of yet quarter. chunk quarter I in in not mean have second significant be front had down. it number of was that one a I significant they don't

me. a be So front have just there'll of step number. in that down I don't

grant was options with vested all associated As either transaction, the it option XXXX done. that to Apollo or pertains those are

goes So that so, to zero. Yeah, exactly.

that to goes which level. as other at some company, is continues ongoing, stock zero So and any have with a be lower so number RSU an that there'll comp expense we program, significantly just

Christopher Stathoulopoulos

Okay.

second The question.

associated backing as think I from just dry out said don't because five guessing leases revenue have you're you're And you in CASMx. through your I'm you side it. of walk -- then lease they these associated dry those think us I rationale So ASMs. off, with XXXX. the come why, And the including but the Could DNA also

of coming just you impact CASM. here think want it sitting it's cost should the about here, of this kind relationship out better we that's of revenue how through your like or Could unit Thanks. walk understand in looks unit kind us but to margin? Just

Dave Davis

Yeah.

the and generate take the CASM TRASM sitting any mean doesn't you in out it out comp. it's comp sitting expense in out, it our financials. ASMs. But We in and pointed of since revenue it's of -- I So, as it's

revenue our ASM. of the ASM wasn't way cost the in out revenue side, or revenue costs on unit side on number our same cargo generate and per it's that So per ASM that cost in the

Jude Bricker

want from Just reiterate quarter. to strategically, I just last

a lessor. not being are We

We just for acquiring delivery. future airplanes are

all doing see that So kind we the our you so what about. when which underlying of we can business, are report, to out results is the of back best success care those we

Christopher Stathoulopoulos

-- Okay. more yeah, Go And then follow sorry. ahead. on one I'm

Dave Davis

No, pulled want I I just just to up follow numbers. quickly, the

$X number the will So X.X% plus is in I probably comp or think drop million quarter to stock around minus. that second

Christopher Stathoulopoulos

For XQ, or? or second half

Dave Davis

for No, XQ.

Christopher Stathoulopoulos

if could And I here. Okay. more Great, just then in get thanks. one

pulling travelers. any So what of on peers how Thank if a And strong slow? pool are international of from seeing would travel from what is U.S. be might you that? we've are you. so, domestic heard thoughts about the your talking when And that

Jude Bricker

we to and a that is something make view why my try observe reason exists. then mean, it I up

transatlantic so, are it's yields higher that had been. the And they much than true

that I that domestic. are think transatlantic otherwise flown stretch have it's a to would say flying folks those

confidently of we're fairly in more say outlier summer was unit of down think can 'XX the I a between of four Instead, improvements month-by-month XX%. seems a into to demand seeing lot an the going from over next that the through recovery bookings recapture years. spring we with previous are And we're environment consistent year XX% consistent revenue all where year. and going

to of But it gets fares I me anyway. looks draw it's environment post-COVID little think like is into else, much a think I our permanently So, for just, that have reset network Grant? conclusion. Anything excited what a sort

Grant Whitney

those to add at the just that. that, versus unit of would I we're end revenues high think that 'XX, I

to comments a for I So that's Jude's done. testament us and team has think on. the job spot specific also good are And this

If look we all XX this our Jude grew -- at markets new expectations. They've mentioned met network, summer. you

Our up. load factors are

we strong network demand really our happy So with and the saw results. across

Christopher Stathoulopoulos

Okay. you. Thank

Operator

like closing now over to Bricker I'd Jude for you. any remarks. the call to turn back Thank

Jude Bricker

and again morning, the us. at Thanks quarter. your Sun you in interest next we'll Country, Good end Thanks for to for everybody. talk joining the of

Operator

Thank today's Thank participating. you. This for call. conference concludes you

You disconnect. may now

Sun Country Airlines (SNCY) 4 Aug 232023 Q2 Earnings call transcript