Minneapolis-based Sun Country Airlines has reported a net loss of almost US$4 million and a loss before income tax of nearly $5 million on approximately $220 million of revenue for the second quarter of 2022. Despite strong demand, labor shortages and training challenges held the US airline back. But Sun Country has recently been on a hiring spree and hopes to see those labor shortages ease by the year's end.

Training challenges limit Sun Country's passenger and charter operations

In an SEC filing on Monday, Sun Country Airlines reported a net loss of $3.9 million for the quarter on total operating revenues of $219.1 million. The loss contrasts with a net profit of $52.2 million in the same quarter in 2021 on then total operating revenues of $149.2 million.

"Demand continues to be at some of the strongest levels that we have seen," said Dave Davis, President and Chief Financial Officer. "Unfortunately, despite growing second quarter block hours by 23% versus 2019, we were undersized in the quarter due to training challenges limiting our scheduled service and ad hoc charter growth."

Sun Country Airlines Boeing 737-700 at Denver Airport
Photo: Denver International Airport

Sun Country counts on a hiring spree to ease operational constraints

With its 41 Boeing 737 NG passenger planes and 12 dedicated Boeing 737-800 freighters, Sun Country Airlines operates a mix of scheduled passenger, charter, and cargo operations. The airline flies to 77 destinations in 13 countries, with its passenger flights targeting the leisure and visiting friends and relatives (VFR) markets. Apollo Global Management - the same investment management business that last week purchased Atlas Air, owns Sun Country Airlines.

"Since signing our new pilot agreement in December of last year, we have been able to attract all of the new hire pilots we need, and attrition has been greatly reduced," says Mr Davis. "We are making strong progress in expanding our training pipeline to accommodate our growth, and we anticipate seeing the benefits later this year. Capacity constraints have pressured our unit costs by limiting aircraft utilization. As we hire and train new staff at a record pace for Sun Country, new flying will come at high marginal profitability as the needed assets already exist."

Sun Country Boeing 737-800 at Denver Airport
Sun Country Airlines operates an all Boeing 737 fleet of passenger and freighter aircraft. Photo: Denver International Airport

Sun Country CEO bullish on the future

Sun Country's filing says although it had 6% less available seat miles (ASMs) in Q2 2022 compared to Q2 2019, the average total fare revenue in Q2 2022 was $173, up 23% compared to the 2019 quarter. Around $50 (or 28%) of that average fare revenue came from ancillary revenue. Income from scheduled passenger operations in Q2 2022 was nearly $152 million.

Revenue for charter operations in the same quarter was $43 million. Sun Country Airlines does brisk business operating charter flights for various customers, including collegiate and professional sports teams, the US Department of Defense, and casinos. Revenue from cargo operations comes primarily from a contract with Amazon. Sun Country Airlines earned $21 million from its cargo operations in the second quarter of 2022.

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Meanwhile, the airline is generally upbeat about its Q3 2022 forecast and expects to generate between $215 - $220 million across the three months.

"We continue to see strong leisure demand in July and expect it to stay elevated through the summer travel period," says Sun Country Chief Executive Officer Jude Bricker. "We are facing the same training challenges that have impacted the rest of the industry. We are making progress on resolving these training challenges and fundamentally view them to be temporary in nature. I am as bullish as ever on all of the critical factors that will determine Sun Country's long-term success."