Core Insights - Sun Country Airlines reported record GAAP revenue of $263.6 million and adjusted earnings per share of $0.14 for Q2 2025, exceeding Wall Street expectations [1][5] - The airline's cargo operations saw significant growth, contributing to overall profitability despite rising costs in scheduled flights [1][6] Financial Performance - Non-GAAP EPS was $0.14, surpassing the estimate of $0.11 by 26.8%, while GAAP revenue exceeded estimates by 3.0% [1][2] - Year-over-year, adjusted EPS increased by 133.3%, and GAAP revenue rose by 3.6% compared to Q2 2024 [2] - Operating income reached $16.3 million, up 31.5% from the previous year, with an operating margin of 6.2% [2] Business Model and Strategy - Sun Country operates a hybrid business model that includes scheduled flights, charter services, and a growing cargo segment, primarily serving Amazon [3][4] - The focus on expanding cargo operations and optimizing fleet use is central to the company's strategy, allowing flexibility in resource allocation [4] Cargo Operations - Cargo revenue surged by 36.8%, with 15 cargo aircraft in service by the end of the quarter, expected to increase to 20 by Q3 2025 [6][12] - Cargo accounted for approximately 13.2% of total revenue, driven by new contract rates and increased flight hours [6] Scheduled Passenger Services - Scheduled passenger service revenue remained flat at $88.1 million, with a 6.2% reduction in available seat miles to prioritize cargo operations [8] - Despite a decline in scheduled passengers by 9%, total fare per passenger increased by 6.5% [8] Cost Management - Adjusted cost per available seat mile (CASM) rose by 11.3% due to higher fixed costs and increased labor and maintenance expenses [9] - Overall GAAP operating expenses increased by only 2.2%, indicating effective cost control measures [10] Future Outlook - For Q3 2025, the company expects GAAP revenue between $250 million and $260 million, with a system-wide block hours increase of 5% to 8% [12] - Scheduled passenger service capacity is projected to decline by about 10% as cargo growth peaks, with a return to growth in scheduled services anticipated in late 2026 [12]