Sun ntry Airlines (SNCY) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Earnings Release Sun Country Airlines reports its twelfth consecutive profitable quarter in Q2 2025, driven by strong cargo growth and healthy passenger demand despite reduced capacity Executive Summary Sun Country Airlines achieved its twelfth consecutive profitable quarter in Q2 2025, with GAAP diluted EPS of $0.12 and adjusted diluted EPS of $0.14, adapting to cargo growth by reducing passenger service capacity while maintaining strong passenger demand - Sun Country Airlines achieved its twelfth consecutive profitable quarter[2] - The company is steadily increasing its cargo fleet, expecting 20 cargo aircraft by the end of Q3, with 15 in service by the end of Q2[2] - Passenger service operations decreased to accommodate cargo growth, with scheduled service Available Seat Miles (ASMs) declining by 6.2%[2] - Scheduled service Total Revenue Per Available Seat Mile (TRASM) increased by 3.7% year-over-year, and total fares grew by 6.5%, indicating healthy passenger demand[2] Overview of Second Quarter Financial Results In Q2 2025, the company achieved record-high total operating revenue of $264 million, with GAAP net income of $6.6 million and adjusted net income of $7.8 million, reflecting significant growth in both GAAP and adjusted operating margins Key Financial Data for Q2 2025 (GAAP) | Metric | Three Months Ended June 30, 2025 (million USD) | Three Months Ended June 30, 2024 (million USD) | % Change | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | :------- | | Total Operating Revenue | 263.6 | 254.4 | 3.6 | | Operating Income | 16.3 | 12.4 | 31.5 | | Income Before Income Tax | 8.6 | 3.1 | 177.4 | | Net Income | 6.6 | 1.8 | 263.0 | | Diluted EPS | 0.12 | 0.03 | 300.0 | Key Financial Data for Q2 2025 (Adjusted) | Metric | Three Months Ended June 30, 2025 (million USD) | Three Months Ended June 30, 2024 (million USD) | % Change | | :--------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------- | | Adjusted Operating Income | 17.9 | 13.9 | 28.2 | | Adjusted Income Before Tax | 10.2 | 4.7 | 118.4 | | Adjusted Net Income | 7.8 | 3.0 | 158.7 | | Adjusted Diluted EPS | 0.14 | 0.06 | 133.3 | - GAAP operating margin was 6.2%, and adjusted operating margin was 6.8%[4] Notable Operational Highlights The company's operational strategy in Q2 2025 focused on reallocating capacity to cargo and charter services, resulting in decreased passenger ASMs but significant growth in cargo and charter flight hours Capacity In Q2 2025, total system flight hours decreased by 0.5% due to a 6.2% reduction in scheduled service ASMs, which supported a 9.5% increase in cargo flight hours and a 7.9% increase in charter flight hours, with further scheduled service ASM reductions anticipated for Q3 - Total system flight hours decreased by 0.5% year-over-year[7] - Scheduled service Available Seat Miles (ASMs) decreased by 6.2% to support cargo and charter business growth[7] - Cargo flight hours increased by 9.5%, and charter flight hours increased by 7.9%[7] - Scheduled service ASMs are projected to decrease by approximately 10% again in Q3 2025[7] Revenue Total revenue for Q2 2025 reached $264 million, a 3.6% increase, driven by a 36.8% surge in cargo revenue and a 6.4% rise in charter revenue, while strong scheduled service demand led to a 3.7% TRASM growth despite a slight load factor decline - Total revenue for Q2 2025 was $264 million, a 3.6% year-over-year increase[8] Q2 2025 Revenue by Business Segment | Revenue Source | Q2 2025 (million USD) | Q2 2024 (million USD) | % Change | | :------------- | :-------------------- | :-------------------- | :------- | | Cargo Revenue | 35 | 25.4 | 36.8 | | Charter Revenue | 54 | 51.0 | 6.4 | - The growth in cargo revenue was primarily due to an increase in cargo aircraft and new Amazon contract rates effective June 2024[8] Key Scheduled Service Metrics for Q2 2025 | Metric | Q2 2025 | Q2 2024 | % Change | | :----------------------------- | :------- | :-------- | :------- | | Scheduled Service TRASM (cents) | 10.40 | 10.03 | 3.7 | | Total Fare Per Scheduled Passenger | $151 | $141.71 | 6.5 | | Load Factor | 81.8% | 83.1% | (1.3)pp | Cost In Q2 2025, Cost Per Available Seat Mile (CASM) increased by 6.3% and adjusted CASM by 11.3%, primarily due to reduced scheduled service capacity supporting cargo growth, with overall costs expected to remain elevated until scheduled service business recovers in late 2026 Q2 2025 Cost Metrics | Metric | Q2 2025 (cents) | Q2 2024 (cents) | % Change | | :------------- | :-------------- | :-------------- | :------- | | CASM | 12.79 | 12.03 | 6.3 | | Adjusted CASM | 8.34 | 7.49 | 11.3 | - Total GAAP operating expenses increased by 2.2% year-over-year, while total flight hours decreased by 0.5%[9] - Costs are expected to remain high for the rest of the year, mainly due to reduced scheduled service flights to increase cargo flights, until scheduled service business resumes growth in late 2026[9][10] - Landing fees and airport rent increased by 9.1%, and other operating expenses grew by 14.0%[10] Fleet By the end of Q2 2025, the company had received all eight cargo aircraft under new agreements, with five in service and the remaining three expected by Q3 end, bringing the total cargo fleet to 20, while also managing passenger aircraft leases and retirements - All eight cargo aircraft under the new agreement have been received, with five in service and the remaining three expected by the end of Q3[9] - By the end of Q3, the company will operate 20 cargo aircraft[9] - Lease agreements for two passenger aircraft leased to other operators were extended[9] - One 737-800 aircraft was retired in Q2, with the company expecting to have 45 passenger aircraft and 20 cargo aircraft by the end of 2025[9] Fleet Composition at End of Q2 2025 | Fleet Type | Number | | :--------------------- | :----- | | Passenger Service Fleet | 45 | | Cargo Fleet | 19 | | Leased to Other Airlines | 5 | Financial Position and Liquidity The company's financial position at the end of Q2 2025 shows a decrease in total assets and liabilities, an increase in total shareholder equity, and stable total liquidity with a slight reduction in net debt Balance Sheet As of June 30, 2025, total assets were $1,552.1 million, a 4.8% decrease from December 31, 2024, with total liabilities at $939.1 million (down 11.4%) and total shareholder equity at $613.0 million (up 7.5%) Balance Sheet Summary | Metric | June 30, 2025 (million USD) | December 31, 2024 (million USD) | % Change | | :----------------------- | :---------------------------- | :------------------------------ | :------- | | Cash and Cash Equivalents | 37.0 | 83.2 | (55.5) | | Total Assets | 1,552.1 | 1,630.2 | (4.8) | | Total Liabilities | 939.1 | 1,059.8 | (11.4) | | Total Shareholder Equity | 613.0 | 570.4 | 7.5 | | Air Passenger Liabilities | 106.6 | 160.7 | (33.7) | Liquidity As of June 30, 2025, total liquidity was $207 million, largely consistent with $205.6 million at year-end 2024, while net debt slightly decreased to $431 million from $438.2 million Liquidity and Net Debt | Metric | June 30, 2025 (million USD) | December 31, 2024 (million USD) | | :--------------------------- | :---------------------------- | :------------------------------ | | Cash and Cash Equivalents | 37.0 | 83.2 | | Available-for-Sale Securities | 94.6 | 97.6 | | Revolving Credit Facility Availability | 75.0 | 24.7 | | Total Liquidity | 206.6 | 205.6 | | Net Debt | 430.8 | 438.2 | Third Quarter 2025 Guidance The company provides Q3 2025 guidance, projecting total revenue between $250 million and $260 million, with an operating margin of 3% to 6%, and an increase in total system flight hours Q3 2025 Guidance The company forecasts Q3 2025 total revenue between $250 million and $260 million, representing 0% to 4% year-over-year growth, with economic fuel cost at $2.61 per gallon and an operating margin between 3% and 6%, alongside a 5% to 8% increase in total system flight hours Q3 2025 Performance Guidance | Metric | Q3 2025 | Year-over-Year Change | | :----------------------------- | :---------- | :-------------------- | | Total Revenue (million USD) | $250-$260 | 0-4% | | Economic Fuel Cost (per gallon) | $2.61 | (3)% | | Operating Margin | 3%-6% | (2.6)pp-0.4pp | | Effective Tax Rate | 23% | | | Total System Flight Hours (thousand hours) | 38-39 | 5%-8% | Company Information This section provides an overview of Sun Country Airlines' business model and details for its Q2 2025 earnings conference call About Sun Country Airlines Sun Country Airlines operates as a hybrid low-cost carrier, offering scheduled and charter passenger services, alongside cargo services for Amazon, connecting travelers across the US, Mexico, Central America, Canada, and the Caribbean from its Minnesota headquarters - Sun Country Airlines is a hybrid low-cost airline operating through passenger and cargo services[15] - Headquartered in Minnesota, the company primarily serves leisure travelers, those visiting friends and relatives, and charter clients, also providing cargo services for Amazon[15] - Routes cover the United States, Mexico, Central America, Canada, and the Caribbean[15] Conference Call & Webcast Details Sun Country Airlines will host a conference call on August 1, 2025, at 10:00 AM ET to discuss its Q2 2025 results, with live and archived webcasts available on the company's investor relations website - The conference call will be held on August 1, 2025, at 10:00 AM ET[14] - Live and archived webcasts are available on the company's investor relations website at **https://ir.suncountry.com/news-events/events-and-presentations**[14](index=14&type=chunk) Legal and Non-GAAP Disclosures This section provides essential legal disclaimers, including endnotes defining key terms and non-GAAP metrics, forward-looking statements, and an introduction to the use and limitations of non-GAAP financial measures End Notes Endnotes provide definitions and explanations for specific data and terminology within the report, including details on non-GAAP financial measures, TRASM composition, adjusted CASM calculation, and definitions of liquidity and net debt - Endnotes provide detailed information on non-GAAP financial measures and their reconciliation to the most comparable GAAP metrics[17] - The composition of scheduled service TRASM is explained, including scheduled service revenue, ancillary revenue, and ASM-generating revenue[17] - The calculation method for adjusted CASM is defined, excluding fuel costs, non-cash management equity compensation expenses, cargo business costs, depreciation and amortization of leased revenue-generating assets, among others[17] - Formulas for total liquidity and net debt are clearly specified[17] Forward Looking Statements This press release contains forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, based on views and assumptions as of the release date, with no obligation for the company to update or revise them - This press release contains forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from expectations[18][19] - Forward-looking statements are based on views and assumptions as of the release date, and the company undertakes no obligation to update or revise them[20] - Investors should read the entire press release and understand that actual future results may differ materially from expectations[20] Non-GAAP Financial Measures Introduction The company uses non-GAAP financial measures as supplemental disclosures to provide more meaningful comparisons with industry peers and its own past performance, emphasizing that these metrics are not substitutes for GAAP measures and have limitations - Non-GAAP metrics are used to provide more meaningful comparisons with industry peers and the company's own past performance[21] - Investors should consider non-GAAP metrics as supplemental, not as substitutes for GAAP financial measures[21] - Non-GAAP metrics have limitations, may differ from calculations by other companies, and should not be viewed in isolation or over-relied upon[21] Condensed Consolidated Financial Statements This section presents the condensed consolidated financial statements, including statements of operations, balance sheet, and cash flow, detailing the company's financial performance and position for Q2 and the first half of 2025 Condensed Consolidated Statements of Operations In Q2 2025, total operating revenue increased by 3.6% to $263.6 million, driven by a 36.8% rise in cargo revenue, while operating expenses grew by 2.2% despite an 18.7% decrease in aircraft fuel costs, leading to a 263.0% surge in net income to $6.6 million Q2 2025 Operating Revenue Breakdown | Operating Revenue Source | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | % Change | | :----------------------- | :--------------------- | :--------------------- | :------- | | Scheduled Service | 88,138 | 88,078 | 0.1 | | Charter | 54,271 | 51,009 | 6.4 | | Ancillary | 72,259 | 77,308 | (6.5) | | Passenger | 214,668 | 216,395 | (0.8) | | Cargo | 34,803 | 25,447 | 36.8 | | Other | 14,150 | 12,539 | 12.8 | | Total Operating Revenue | 263,621 | 254,381 | 3.6 | Q2 2025 Operating Expense Breakdown | Operating Expense Source | Q2 2025 (thousand USD) | Q2 2024 (thousand USD) | % Change | | :----------------------- | :--------------------- | :--------------------- | :------- | | Aircraft Fuel | 50,536 | 62,188 | (18.7) | | Salaries, Wages, and Benefits | 89,557 | 79,359 | 12.9 | | Maintenance | 18,250 | 17,339 | 5.3 | | Sales and Marketing | 8,001 | 8,392 | (4.7) | | Depreciation and Amortization | 24,972 | 23,631 | 5.7 | | Ground Handling | 11,353 | 11,368 | (0.1) | | Landing Fees and Airport Rent | 14,971 | 13,723 | 9.1 | | Special Items, Net | 49 | — | NM | | Other Operating, Net | 29,670 | 26,016 | 14.0 | | Total Operating Expenses | 247,359 | 242,016 | 2.2 | H1 2025 Operating Revenue Breakdown | Operating Revenue Source | H1 2025 (thousand USD) | H1 2024 (thousand USD) | % Change | | :----------------------- | :--------------------- | :--------------------- | :------- | | Total Operating Revenue | 590,270 | 565,864 | 4.3 | | Operating Income | 72,508 | 67,541 | 7.4 | | Net Income | 43,112 | 37,125 | 16.1 | Summary Balance Sheet As of June 30, 2025, cash and cash equivalents were $37.0 million, a 55.5% decrease from year-end 2024, with total assets at $1,552.1 million, total liabilities at $939.1 million, and total shareholder equity at $613.0 million Key Balance Sheet Data | Metric | June 30, 2025 (million USD) | December 31, 2024 (million USD) | % Change | | :----------------------- | :---------------------------- | :------------------------------ | :------- | | Cash and Cash Equivalents | 37.0 | 83.2 | (55.5) | | Total Assets | 1,552.1 | 1,630.2 | (4.8) | | Air Passenger Liabilities | 106.6 | 160.7 | (33.7) | | Total Liabilities | 939.1 | 1,059.8 | (11.4) | | Total Shareholder Equity | 613.0 | 570.4 | 7.5 | Summary Cash Flow In the first half of 2025, net cash from operating activities was $36.3 million (down 6.7%), net cash used in investing activities was $8.0 million, and net cash used in financing activities was $75.4 million, resulting in period-end cash, cash equivalents, and restricted cash of $53.3 million (up 56.8%) H1 2025 Key Cash Flow Data | Metric | H1 2025 (million USD) | H1 2024 (million USD) | % Change | | :----------------------------------- | :-------------------- | :-------------------- | :------- | | Net Cash from Operating Activities | 36.3 | 38.9 | (6.7) | | Net Cash (Used in)/Provided by Investing Activities | (8.0) | 3.5 | (327.5) | | Net Cash Used in Financing Activities | (75.4) | (72.0) | 4.7 | | Cash, Cash Equivalents, and Restricted Cash at Period End | 53.3 | 34.0 | 56.8 | Key Operating Statistics This section details key operational statistics for Q2 and the first half of 2025, highlighting changes in scheduled service ASMs, cargo flight hours, total system flight hours, and employee count Operating Statistics (Q2 & YTD) In Q2 2025, scheduled service ASMs decreased by 6.2% year-over-year while cargo flight hours increased by 9.5%, leading to a 0.5% decline in total system flight hours, whereas for the first half, scheduled service ASMs grew by 0.6% and total system flight hours by 2.7%, with a 7.0% increase in employee count Q2 2025 Key Operating Statistics | Metric | Q2 2025 | Q2 2024 | % Change | | :------------------------- | :-------- | :---------- | :------- | | Scheduled Service ASMs (thousand) | 1,571,210 | 1,675,927 | (6.2) | | Scheduled Service Load Factor | 81.8% | 83.1% | (1.3)pp | | Cargo Flight Hours | 9,157 | 8,363 | 9.5 | | Total System ASMs (thousand) | 1,933,871 | 2,011,921 | (3.9) | | Total System Flight Hours | 37,086 | 37,281 | (0.5) | | Number of Employees (period end) | 3,293 | 3,079 | 7.0 | H1 2025 Key Operating Statistics | Metric | H1 2025 | H1 2024 | % Change | | :------------------------- | :---------- | :---------- | :------- | | Scheduled Service ASMs (thousand) | 3,591,755 | 3,568,818 | 0.6 | | Scheduled Service Load Factor | 82.8% | 85.4% | (2.6)pp | | Cargo Flight Hours | 16,763 | 16,052 | 4.4 | | Total System ASMs (thousand) | 4,304,626 | 4,223,807 | 1.9 | | Total System Flight Hours | 77,767 | 75,717 | 2.7 | | Number of Employees (period end) | 3,293 | 3,079 | 7.0 | Non-GAAP Financial Measures Reconciliations This section provides detailed reconciliations of non-GAAP financial measures, including adjusted operating income, adjusted income before income tax, adjusted net income and EPS, adjusted EBITDA, and adjusted CASM, to their most comparable GAAP counterparts Adjusted Operating Income Adjusted operating income for Q2 2025 was $17.9 million, a 28.2% year-over-year increase, with an adjusted operating margin of 6.8%, while for the first half, it reached $77.6 million, growing by 9.9%, with an adjusted operating margin of 13.1% Adjusted Operating Income Reconciliation | Metric | Q2 2025 (million USD) | Q2 2024 (million USD) | H1 2025 (million USD) | H1 2024 (million USD) | | :--------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Operating Income | 16.3 | 12.4 | 72.5 | 67.5 | | Special Items, Net | — | — | 1.8 | — | | Equity Compensation Expense | 1.6 | 1.6 | 3.3 | 3.1 | | Adjusted Operating Income | 17.9 | 13.9 | 77.6 | 70.6 | | Operating Income Margin | 6.2% | 4.9% | 12.3% | 11.9% | | Adjusted Operating Income Margin | 6.8% | 5.5% | 13.1% | 12.5% | Adjusted Income Before Income Tax Adjusted income before income tax for Q2 2025 was $10.2 million, a 118.4% year-over-year increase, with an adjusted pre-tax margin of 3.9%, and for the first half, it was $62.5 million, growing by 18.5%, with an adjusted pre-tax margin of 10.6% Adjusted Income Before Income Tax Reconciliation | Metric | Q2 2025 (million USD) | Q2 2024 (million USD) | H1 2025 (million USD) | H1 2024 (million USD) | | :--------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Income Before Income Tax, Reported | 8.6 | 3.1 | 56.7 | 49.6 | | Special Items, Net | — | — | 1.8 | — | | Equity Compensation Expense | 1.6 | 1.6 | 3.3 | 3.1 | | Adjusted Income Before Income Tax | 10.2 | 4.7 | 62.5 | 52.7 | | Pre-Tax Margin | 3.2% | 1.2% | 9.6% | 8.8% | | Adjusted Pre-Tax Margin | 3.9% | 1.8% | 10.6% | 9.3% | Adjusted Net Income and Earnings per Share Adjusted net income for Q2 2025 was $7.8 million, with adjusted diluted EPS of $0.14, while for the first half, adjusted net income reached $47.6 million, with adjusted diluted EPS of $0.86 Adjusted Net Income and EPS Reconciliation (Q2) | Metric | Q2 2025 (million USD) | Q2 2025 (Diluted EPS) | Q2 2024 (million USD) | Q2 2024 (Diluted EPS) | | :--------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income | 6.6 | 0.12 | 1.8 | 0.03 | | Equity Compensation Expense | 1.6 | 0.03 | 1.6 | 0.03 | | Income Tax Impact of Adjustments, Net | (0.4) | (0.01) | (0.4) | (0.01) | | Adjusted Net Income | 7.8 | 0.14 | 3.0 | 0.06 | Adjusted Net Income and EPS Reconciliation (H1) | Metric | H1 2025 (million USD) | H1 2025 (Diluted EPS) | H1 2024 (million USD) | H1 2024 (Diluted EPS) | | :--------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income | 43.1 | 0.78 | 37.1 | 0.67 | | Special Items, Net | 1.8 | 0.03 | — | — | | Equity Compensation Expense | 3.3 | 0.06 | 3.1 | 0.06 | | Income Tax Impact of Adjustments, Net | (1.3) | (0.02) | (0.7) | (0.01) | | Adjusted Net Income | 47.6 | 0.86 | 39.5 | 0.72 | Adjusted EBITDA Adjusted EBITDA for Q2 2025 was $42.8 million, with an adjusted EBITDA margin of 16.2%, and for the first half, it reached $127.4 million, with an adjusted EBITDA margin of 21.6% Adjusted EBITDA Reconciliation | Metric | Q2 2025 (million USD) | Q2 2024 (million USD) | H1 2025 (million USD) | H1 2024 (million USD) | | :--------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income | 6.6 | 1.8 | 43.1 | 37.1 | | Interest Income | (1.5) | (1.8) | (3.5) | (4.2) | | Interest Expense | 9.2 | 11.1 | 18.8 | 22.2 | | Special Items, Net | — | — | 1.8 | — | | Equity Compensation Expense | 1.6 | 1.6 | 3.3 | 3.1 | | Income Tax Provision | 2.0 | 1.3 | 13.6 | 12.5 | | Depreciation and Amortization | 25.0 | 23.6 | 49.8 | 47.4 | | Adjusted EBITDA | 42.8 | 37.6 | 127.4 | 118.1 | | Adjusted EBITDA Margin | 16.2% | 14.8% | 21.6% | 20.9% | Adjusted CASM Adjusted CASM is a non-GAAP metric that excludes non-core operating costs like fuel, cargo business expenses, equity compensation, and depreciation of leased revenue assets, providing better operational cost visibility and comparability with peers, with Q2 2025 adjusted CASM at 8.34 cents and H1 at 7.79 cents - Adjusted CASM provides better operational cost visibility by excluding fuel costs, cargo business costs, equity compensation expenses, and depreciation and amortization of leased revenue-generating assets[42][45] - This metric is used to evaluate quarterly and annual cost performance and for comparison with other airlines in the industry[42] Adjusted CASM Reconciliation (Q2) | Metric | Q2 2025 Operating Expenses (million USD) | Q2 2025 Per ASM (cents) | Q2 2024 Operating Expenses (million USD) | Q2 2024 Per ASM (cents) | | :----------------------------------- | :--------------------------------------- | :---------------------- | :--------------------------------------- | :---------------------- | | CASM | 247.4 | 12.79 | 242.0 | 12.03 | | Less: Aircraft Fuel | 50.5 | 2.61 | 62.2 | 3.09 | | Less: Equity Compensation Expense | 1.6 | 0.08 | 1.6 | 0.08 | | Less: Cargo Expenses, Not Otherwise Adjusted | 32.1 | 1.66 | 25.3 | 1.26 | | Adjusted CASM | 161.4 | 8.34 | 150.7 | 7.49 | Adjusted CASM Reconciliation (H1) | Metric | H1 2025 Operating Expenses (million USD) | H1 2025 Per ASM (cents) | H1 2024 Operating Expenses (million USD) | H1 2024 Per ASM (cents) | | :----------------------------------- | :--------------------------------------- | :---------------------- | :--------------------------------------- | :---------------------- | | CASM | 517.8 | 12.03 | 498.3 | 11.80 | | Less: Aircraft Fuel | 115.2 | 2.68 | 132.5 | 3.14 | | Less: Equity Compensation Expense | 3.3 | 0.08 | 3.1 | 0.07 | | Less: Cargo Expenses, Not Otherwise Adjusted | 58.4 | 1.36 | 50.2 | 1.19 | | Adjusted CASM | 335.3 | 7.79 | 307.4 | 7.28 |