[ Top Story ]October 16, 2020 6:37 pm ET
By John McDermott
Sun Country Expands Fleet During Pandemic, Prepares Push for IPO
Sun Country Airlines, an airline specializing in ultra-low-cost and charter operations in the United States, has restarted plans for an Initial Public Offering (IPO) as soon as 2021 if demand appropriately picks up, Crain’s reports.
Sun Country had hoped to push an IPO in April 2020, but the operational complexity and the gravity of losses brought about by the coronavirus pandemic dashed those plans.
The airline has faced increased competition in recent months as most major U.S. airlines have expanded their route networks to include more leisure destinations amid the coronavirus pandemic, cutting into Sun Country’s operations, which focuses on taking travelers from chillier Midwest cities to warmer destinations in Florida and the Pacific coast.
Sun Country estimates that its summer 2021 business will be 20% smaller than the same period in 2019, though it hopes to be back to its pre-pandemic size by the end of 2021.
Still, the carrier has seen substantial recoveries far ahead of what other major carriers have seen in the U.S. Its charter and freight operations have seen a comeback driven by a rebound in sports charters and a new contract with delivery giant Amazon in the spring.
“We’re going to fly as many flights in October as we flew in February,” said Sun Country CEO Jude Bricker earlier this week. “We’re in the sweet spot of everything that could be good about owning an airline right now but we need to see a recovery of airline traffic.”
“Explaining an outperformance in passenger strength in the market could be difficult [without a sustained traffic rebound across the industry],” Bricker added, alluding to the uncertainty of whether the airline can go ahead with an IPO on its current information alone.
Sun Country’s relative success has been highlighted by the fact that it has been the only major airline in the U.S. to take expand its fleet since the pandemic started. The airline has taken 10 new Boeing 737-800F aircraft to support its partnership with Amazon. Meanwhile, carriers across the country have grounded hundreds of aircraft, some now for six months or more, in response to dwindling demand. In March, the airline operated 30 aircraft and this number has grown to 38 as of early October.
Sun Country’s relative success speaks volumes to the importance of diversifying operations. The airline has been able to see a quicker rebound because it can fall back on multiple different business plans, like reallocating crews for rebounding charter or cargo operations rather than having one single overstaffed passenger division. While big airlines certainly operate their own sports charters, Sun Country’s uniform fleet makes it easier for them to use more crews on its flights since it can pull from its entire pool of workers instead of needing to focus only on crews trained for specific aircraft types.
The airline’s uniform fleet also improves flexibility since it’s easier to swap aircraft or utilize more planes on an albeit reduced per-aircraft schedule.
Sun Country’s predictions for its return to full-capacity is notably faster than predictions for bigger airlines. While many expect the airline industry to take three to four years to recover – which means most may not see 2019 numbers until the end of 2024 or beyond – Sun Country is hoping to return to its 2019 size by the end of 2021, roughly eighteen months after the pandemic rocked the U.S. travel market in March 2020.
A part of this is the airline’s smaller size, which means it doesn’t have as much to recover as huge carriers like American Airlines, but can also be connected back to charter and cargo operations. As demand for cargo stays strong since people are shopping online at stores like Amazon more than in-person right now and sports leagues begin restarting operations, Sun Country has recovered a good majority of two essential parts of its business. Now, as it focuses on attracting paying passengers once again, it may have more resources to restart certain routes sooner even if money is lost on select routes.
If Sun Country can recover by the end of next year, there will also be the question of whether it will be able to take a bigger market share than it currently has. If slots at airports are still as cheap as they are currently, Sun Country may be able to take advantage of bigger airlines’ slower responses to surges in demand and use already-operating aircraft and staff to open new routes instead of needing to wait to inspect parked aircraft and re-train crews for recency requirements.