Sun Country Airlines is not planning to add a large number of aircraft to its fleet in 2023 as the bulk of its growth will be driven by increasing aircraft utilization.
The Minneapolis-based ULCC added roughly eight Boeing 737NGs to its fleet in 2022. During a Feb. 3 earnings discussion the company’s CFO David Davis explained Sun Country is inducting two aircraft into service during the 2023 first quarter (Q1) that it purchased in 2022. The company will likely add one or two more aircraft to its fleet in 2023, he said.
“I expect most of our 2023 growth to come through utilization increases, which remain well below 2019 levels,” Sun Country CEO Jude Bricker said. In 2022, the airline’s daily aircraft utilization was 7.2 hours, a roughly 6% increase year-on-year.
Sun Country is already lining up aircraft deliveries for 2024 and 2025, and the airline plans to add 7-9 aircraft to its fleet in each of those years, Davis said.
Given the fairly strong values for 737-800s, “I’m pretty comfortable not being a buyer at the moment,” Bricker said. The strong market for those aircraft is being driven by airlines extending leases to accommodate delays in delivery streams of 737 MAX narrowbodies, he said.
“We’re still seeing some spot bankruptcies,” said Bricker, referencing the recent bankruptcy filing of Norwegian LCC Flyr. At the time it ceased operations, the airline had a fleet of six 737-8s and six 737-800s.
Bricker noted the aircraft affected by carrier bankruptcies “get absorbed really quickly, so we’re not going to get, in my view, a lot of price relief,” he said. However, he is confident Sun Country “will get the planes we need.”
Currently, 20 of the 55 aircraft Sun Country has in service operate under cargo or charter operations, Bricker said. He said the company would be “optimized at around a quarter of our block hours allocated to fixed-fee contracts.”
The airline has adopted a unique business model in its pursuit of opportunities outside scheduled service flying. Its charter revenue in 2022 increased 27% year-on-year to $162 million, and Davis said Sun Country believes there is more room for growth in that business segment.
Sun Country’s cargo revenue, which is driven by the operation of 12 aircraft for Amazon, fell 1% year-on-year in 2022 on a 4% drop in block hours. David explained during the first half of last year Sun Country had numerous aircraft it operated for Amazon in heavy maintenance, which drove the decrease in block hours.
“Our cargo business will improve this year due to contracted escalation,” Bricker said. “We expect volumes to be consistent year-over-year as we focus on building our scheduled [service] and charter businesses.”
Sun Country’s scheduled service revenue increased 57% year-on-year in 2022 to $438 million. The airline’s total operating revenue grew 44% to $894 million.
Davis said the company continues to see strong demand, with 80% of its planned revenue for Q1 2023 already booked, “and we expect this strength to continue throughout the quarter.”
The airline’s net profits for 2022 fell 79% to $18 million as expenses jumped 64% to $839 million. For the fourth quarter (Q4), Sun Country’s operating revenue of $227 million was a 32% increase compared with the same time period in 2021. The airline’s operating expenses grew 31% to $212 million. The airline posted a Q4 net profit of $7.2 million compared with its Q4 2021 $1 million net loss.
