Sun Country Airlines (SNCY) Barclays 42nd Annual Industrial Select Conference summary

Business model and operations

• Operates about 70 aircraft by mid-year, including 20 freighters, 45-46 scheduled service aircraft, and several leased to other carriers.

• Cargo operations for Amazon are under long-term contract, with compensation based on aircraft and block hours, not cargo volume.

• Amazon contract extended to at least 2030, with rate escalators and potential further extensions.

• Cargo and charter businesses provide steady, year-round revenue, offsetting the seasonality of scheduled passenger service.

• Fleet strategy focuses on mid-life 737 NGs, allowing cost-effective peak period flying.

Financial performance and outlook

• Amazon and passenger businesses are expected to contribute equally to margins by 2026.

• Margin profile is near industry-leading, with profitability leading among low-cost carriers since 2021.

• Capacity is being reduced in 2024 to support freighter growth, with scheduled service shrinking in Q2-Q4.

• Cost control remains strong, with adjusted CASM up 2.5%-3% in 2024 and expected mid- to high-single-digit growth in 2025.

• Maintenance CapEx projected at $90 million for the year, with no need for new aircraft purchases in the near term.

Market and competitive landscape

• Capacity discipline in the market, with ULCC capacity down 40%-50% in core markets, creating a favorable backdrop.

• Focused on leisure travel, especially peak periods, with minimal overlap with business-focused competitors.

• Charter market remains strong, with significant contracts and opportunities for further growth.

• About a third of capacity is hedged against fuel price movements through Amazon and fixed-price charter contracts.

• Growth opportunities remain in Minneapolis and Upper Midwest, with expansion into other regions like Dallas for seasonal demand.