US carrier Sun Country Airlines has filed with the United States Securities and Exchange Commission (SEC) for a proposed initial public offering (IPO). The airline is hoping to raise $100 million from the offering, which could go far for the airline, as it plans a huge growth spurt.
Sun Country Airline’s IPO proposal
Sun Country Airlines has filed its IPO to trade under the symbol “SNCY” on the Nasdaq Global Select Market (Nasdaq). The airline is hoping to raise $100 million from the offering.
Currently, the carrier is held privately under Apollo Global Managment Inc. Following the offering, Apollo will continue to own a majority of voting power in the airline’s outstanding common stock, per the filing. This would make Sun Country a “controlled company.”
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About Sun Country Airlines
Sun Country is a very interesting carrier. The airline is a low-cost carrier that operates a relatively limited route network in the US. Its main base is Minneapolis/St. Paul International Airport (MSP), where the airline competes against Delta on leisure routes.
The airline brands itself as a “hybrid low-cost air carrier.” The reason is that, as the carrier does carry leisure travelers, it makes a lot of money and devotes plenty of resources to run a charter operation. Due to the charter operation, the carrier lands at up to a whopping 300+ airports a year. Sun Country also recently started flying cargo jets on behalf of Amazon.
The airline borrows a little bit from many airlines’ strategies. Like Allegiant, it prefers to take on mid-life aircraft, though Sun Country prefers the Boeing 737-800. This means the airline does not operate with robust order books and is not burdened by fixed capital expenditures. The airline also tends to schedule these aircraft to fly less per day than other airlines, another facet of Allegiant Air’s strategy.
However, unlike Allegiant, Sun Country has no problem flying from Minneapolis into some larger airports and markets. The airline believes there are plenty of growth opportunities out of Minneapolis once air demand returns.
Sun Country Airlines released some financial data that seems to indicate the airline came out profitable in most of 2020. For the nine months ended on September 30th, 2020, the airline recorded a net income of $4.1 million. The airline carried over 1.2 million passengers at a load factor of 66.5%.
The airline, per the prospectus, flies 43 aircraft, including 31 passenger Boeing 737s and 12 cargo jets. The carrier sees an opportunity to add three to five additional planes to its fleet in 2021.
The airline’s plan
Sun Country recently announced some new routes. However, it has some big plans for the future. By the end of 2023, the airline is expected to have approximately 50 aircraft. The Boeing 737-800 is the top contender for the type of aircraft the airline will take on. The current crisis, which has seen some carriers look to return leased aircraft or retire jets early, means there could be some great opportunities for Sun Country to take on more planes at a low cost.
Sun Country Airlines has identified over 250 new market opportunities that it could profitably serve. It definitely does not have the aircraft to serve all of them right now. Specifically, the airline added the following in its prospectus:
“Our future network plans include growing our network at our hub in Minneapolis to full potential, including adding frequencies on routes we already serve and adding new routes to leverage our large, loyal customer base in the area. Our long-term strategic plans have identified potential growth opportunities at MSP alone of 10 to 12 aircraft.”
Outside of MSP, the airline sees potential growth opportunities of five to eight aircraft, along with another three to four jets to supplement the airline’s charter operations.
In addition, the carrier flies 12 Boeing 737 cargo jets. However, it did signal it believes it has a shot to grow the cargo business over time. The carrier could end up flying not just for Amazon but perhaps other cargo carriers in the future, similar to Mesa’s deal with DHL.
What will an IPO do?
The IPO timing is not the most ideal, as the global downturn in aviation has not left investors very confident in airlines. But, Sun Country believes its financial results, which appear to have beat out nearly every other airline in the United States, could give investors the confidence they need to invest in the airline.
The IPO will raise plenty of cash for the airline. And, that cash could be used to pay down debt, fund additional expansion, or be used for other general corporate purposes.
Are you glad to see Sun Country propose to go public? Let us know in the comments!