Sun Country Airlines just finished a successful initial public offering (IPO) in March. One month since then, the airline is flying high and targeting expansion. In an exclusive interview with Simple Flying, Sun Country’s CEO, Jude Bricker, talked about its fleet and expansion moves. One big takeaway is that the ultra-low-cost carrier (ULCC) is interested in the 737 MAX and could even take the Airbus A320neo, but the economics do not make either acquisition feasible just yet.
Sun Country is interested in the 737 MAX
Mr. Bricker confirmed the airline’s interest in the MAX, stating the following:
“The 737 Max is an airplane that we’re interested in, and we remain engaged with Boeing and CFM – the engine manufacturer – on that type.”
The Boeing 737 MAX would be a natural extension of Sun Country’s fleet. The airline currently flies a fleet of Boeing 737 Next Generation aircraft. These are mid-life jets that serve the airline well and it has built up its reputation as an all-Boeing 737 carrier. The airline also operates a diversified business, including charter operations and flying cargo for Amazon.
What is holding the airline back?
Sun Country has not placed an order for the Boeing 737 MAX. On why the airline has not done so yet, Mr. Bricker stated the following:
“If we can get the economics where we need them to be, we’ll be in that airplane. I’m a believer in the airplane; it’s a good machine. But right now, the 737NG, it is the type we operate, is just more available and cheaper.
“It doesn’t have to be the same price, obviously, but that price differential between a MAX 8 – same size interior – and an -800 isn’t sufficient enough for us to get into the new MAX aircraft. But, Boeing can control the price, and if they make it worth our while, we’ll be in it.”
As an ultra-low-cost carrier, keeping costs down is very important for the airline. Taking on a new Boeing 737 MAX would cost the airline more than a mid-life, used Boeing 737-800. While that would be partially offset by lower fuel and maintenance costs for the MAX compared to the 737-800, the price of a new aircraft is a little too high for the airline right now.
All-Boeing is not a foregone conclusion
The impetus to move toward a new fleet is all about economics. For Sun Country, as long as the airplane can help keep its costs low on the airline’s model, it will fly the jet. This also leaves the Airbus A320neo family as an option:
“I don’t think it’s going to be age or reliability that pushes us into changing out the fleet. It’s going to be the economics of the MAX, or the Neo, we could go Airbus too, but it’s going to be the economics of the aircraft that push us into that type.”
Sun Country taking on a new fleet type is a focus around the airline’s expansion plans and less so about an urgent need to change out its fleet of Boeing 737-800s. While it is difficult to imagine a mixed fleet of both Boeing 737-800s and Airbus A320neos, a transition toward the A320neos would need to be a low-cost option that will benefit the airline.
The Airbus A320neos could easily beat out the mid-life 737-800s on maintenance expenditures. The 737-800s the carrier currently flies are getting closer to needing maintenance overhauls than a brand new Airbus A320neo. Also, the A320neo beats out the 737-800 on fuel efficiency.
The issue with taking on a new A320neo, which is true across most mixed fleets, would be that Sun Country’s pilots would have to undergo training to fly the A320neo. That training can be expensive.
In addition, Sun Country would not be able to completely end its Boeing 737 flying. The agreement with Amazon sees the airline fly Boeing 737 freighters, and it does not appear that either party would want to take on the costs of flying a new type of aircraft such as an Airbus A321 converted freighter.
Operating a mixed fleet means Sun Country cannot double-dip easily on pilots. Currently, the airline can use its pilots in the off-seasons to fly the cargo 737s it needs to fly and bring those pilots back to the mainline passenger operation in the busy season. With a mixed fleet, Sun Country cannot do that.
That lack of flexibility would increase the carrier’s costs since it needs pilots to support the airline during the busy season, but in the off-season, aside from leasing out its jets and pilots to another airline, it would be an excess cost of payroll.
There is no shortage of 737-800s right now
Used, mid-life 737-800s are available at a steal. Few carriers are looking at expanding their fleet with secondhand aircraft, but Sun Country has made those jets work in the past, and that model should still be successful in the future.
Owning an aircraft is key for the airline. When Sun Country does not need to fly a jet, it can easily park it at the cost of whatever it takes to store the aircraft safely. However, on a new jet that would likely be financed or leased, the payments on that plane still need to continue even when the jet is parked. This puts financial strain on the airline during its low periods, such as between Labor Day and the winter holiday period.
Given that the carrier has many opportunities to take on used mid-life 737-800s, there is no pressing need to take a new aircraft type, whether it be a Boeing 737 MAX or an Airbus A320neo. From a cost perspective, the mid-life 737-800s on the market can come to the airline without adding massive debt or expensive lease agreements to the balance sheet.
Do you think Sun Country Airlines should order the Boeing 737 MAX? What about the Airbus A320neo? Let us know in the comments!