Sun Country Airlines Holdings, Inc. · NASDAQ:SNCY
Sun Country Airlines — Investor Presentation (June 2022)
36 slides from Sun Country Airlines's investor presentation, June 2022
Slide 1: Sun Country Airlines
Sun Country Airlines June 2022
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by the Company for informational purposes only and not for any other purpose. Nothing contained in this presentation is, or should be construed as, a recommendation, promise or representation by the presenter or the Company or any director, employee, ag
Slide 3: Business Overview
Business Overview
Slide 4: Differentiated and Unique Aviation Company
Differentiated and Unique Aviation Company Differentiated Highly Balance Synergistic Sheet Businesses Resiliency Superior Unit Through Profitability the Cycle High Growth Contracted High Margin Recurring Strong Cash Flow Revenue Streams Sun Country was built to generate best in class performance in
Slide 5: Uniquely Resilient Business
Uniquely Resilient Business More Stable • Diversified across three lines of business with cross utilization of pilots and aircraft Earnings & • Approximately one-third of revenue comes from Cargo and Charter businesses, Cash Flow featuring long-term stable contracts Profitability Not • Flexible sche
Slide 6: Unique, Diversified Business Model
Unique, Diversified Business Model Sun Country Business Line Synergies 1 Passenger Leisure 2 Charter (~68% of Revenue(1)) (~19% of Revenue(1)) • Unique low cost airline with focus on leisure travel • A leader in U.S. narrowbody charter • Flexible capacity model focused on peak demand • Contracted re
Slide 7: Business Model Has Facilitated Rapid Growth…
Business Model Has Facilitated Rapid Growth… Significant Growth Since 2017… …Already Exceeding 2019 Levels (Revenue, $mm) (Revenue, $mm) $722 $722 $701 $559 2017 LTM Q1 22 2019 LTM Q1 22 Our financial performance has demonstrated growth and resilience inherent in our business model 7
Slide 8: …And Outperformance in COVID and Through the Recovery
…And Outperformance in COVID and Through the Recovery 2020 Adj. EBIT Margin 2021 Adj. EBIT Margin Q1 2022 Adj. EBIT Margin(1) 8% (12%) 10% (33%) (9%) (57%) (10%) (58%) (12%) (14%) (13%) (18%) SNCY ULCCs Big Four Mid Sized SNCY ULCCs Mid Sized Big Four SNCY Big Four ULCCs Mid Sized Carriers Carriers
Slide 9: Model Generates Highest Unit Profits
Model Generates Highest Unit Profits Q1 2022 TRASM – Adj CASM (Stage Length Adjusted(1)(2)) (¢) 4.5¢ 1.8¢ 1.8¢ 1.4¢ SNCY Big Four ULCCs Mid Sized Carriers SNCY ULCCs Mid Sized Carriers Big Four Spread between passenger unit revenue and unit cost is the best in the industry; results exclude cargo fly
Slide 10: Industry-Leading Free Cash Flow Yield
Industry-Leading Free Cash Flow Yield 2021 Free Cash Flow as a % of Revenue(1) 9.3% 1.2% 0.8% (7.4%) SNCY ULCCs Mid Sized Carriers Big Four SNCY ULCCs Mid Sized Carriers Big Four Our asset-light, high margin businesses generate meaningful free cash flow Source: Public filings. 1. Free cash flow defi
Slide 11: Flexible Scheduled Service Route Network
Flexible Scheduled Service Route Network ~97% of our markets are seasonal which reflects demand trends of our customer 11
Slide 12: Agile Passenger Capacity Built to Capture Highest Unit Revenues
Agile Passenger Capacity Built to Capture Highest Unit Revenues Seasonal Demand Dictates Day-of-Week Capacity Determined Results in Higher Unit Revenue Monthly Schedule by Demand Patterns(1) Versus High Utilization Peers (% of Peak Day ASMs) (TRASM) (¢) Monthly Seats as % of July 2021 2021 TRASM 120
Slide 13: Experts in Executing a Seasonal Network
Experts in Executing a Seasonal Network Departures by Month at Three of Our Largest Cities MSP Departures DFW Departures (# of Departures) (# of Departures) Strong North / South demand in Winter, Strong summer demand 1,250 East / West in Summer 250 to Mexico / Caribbean 1,000 200 750 150 500 100 250
Slide 14: Unique Ability to Pass Through Fuel Costs
Unique Ability to Pass Through Fuel Costs Q1 2022 Fuel Expense as a % of Revenue Q1 2022 Effective Fuel Expense per Gallon Excludes Cargo, where Amazon pays for 100% of the fuel cost 38.1% $3.20 35.5% 32.8% 28.5% $2.81 ($0.39) Q1 2022 Reported Effect of Charter Q1 2022 Effective Fuel Price Reimburse
Slide 15: We Offer A High-Quality Product
We Offer A High-Quality Product Weighted Average Seat In-Flight In-Seat Free Seat Pitch Recline Entertainment Power Beverage 31” 32” 30” 30” 28” 15
Slide 16: Leader in Ancillary Revenue Generation
Leader in Ancillary Revenue Generation Ancillary Revenue per Passenger Growth Range(1) Benefits of Ancillary Revenue • Allows airline to lower base ticket fares which $42.89 stimulates passenger growth $40.53 $33.14 • Stickier than base ticket fares – ancillary revenue $21.70 does not traditionally
Slide 17: Differentiated, Leading Charter Business
Differentiated, Leading Charter Business NCAA and professional sports, casino/VIP, US military, among other customers Overview 2014 Domestic Narrowbody Charter Block Hours • High growth and high margin market leader in Other (2) 29% 29% narrow-body charter market • Only U.S. scheduled passenger airl
Slide 18: More Business Under Charter Contracts
More Business Under Charter Contracts Recent New Customers Details • 5 year agreement to provide charter service to all Major League Soccer teams - Agreement began at the beginning of 2022 • 5 year agreement to provide charter service for Caesars Entertainment guests - Agreement began in March 2022
Slide 19: Unique, Asset-Light Cargo Business
Unique, Asset-Light Cargo Business Overview Key Highlights • 12 Boeing 737-800 freighter aircraft operated on behalf of Third largest narrowbody cargo operator in the U.S(1) Amazon High margin and cash flow with stable revenue and pass- • Amazon supplies the aircraft, pays for many flight expens
Slide 20: Ratified Pilot Contract Unlocks Growth
Ratified Pilot Contract Unlocks Growth Key Benefits • Pay scales and benefits competitive with low-cost peers and on par with current legacy rates by 2025 • First airline to ratify new pilot contract post-COVID, providing predictable costs • Effect has been reduced attrition and increase in applican
Slide 21: Decline in Key Cost Categories Over Time
Decline in Key Cost Categories Over Time Total Expense Per AC(1) Per Month Distribution Costs per Passenger(2) ($000) $9.78 $266 $8.68 $246 $246 $8.01 $7.69 $194 2018 2019 2020 2021 2018 2019 2020 2021 Mix Direct 59% 52% 74% 74% Indirect 41% 48% 26% 26% Combined with high fuel pass through, lower ow
Slide 22: Positioned for Continued Growth
Positioned for Continued Growth
Slide 23: Unique Set of Vectors to Propel Growth
Unique Set of Vectors to Propel Growth Sun Country has multiples levers for growth… Scheduled Service Charter Cargo • Significant additional • Additional contracted • Amazon expected to MSP growth (same store business opportunities in continue strong growth & new markets) casinos and sports trends o
Slide 24: Scheduled Service Growth Builds On Capabilities
Scheduled Service Growth Builds On Capabilities Sun Country's Scheduled Service Growth Plan(1) Total ASMs in millions (MSP and non-MSP) Non-MSP • Super-scraper: high seasonal peaks in large markets (DFW-CUN) • Upper Midwest: brand extends well, 2,631 similar seasonalities to MSP • Strong profitabili
Slide 25: Sun Country Has Been Growing its Share at MSP
Sun Country Has Been Growing its Share at MSP Cumulative Change in MSP Passenger Share Since 2017(1)(2) 9% Current Share 6% 6% 18% 4% 3% 3% 3% 2% 1% 58% 1% 0% 0% (3%) (2%) (4%) (6%) (5%) (9%) 23% (9%) (12%) 2017 2018 2019 2020 2021 SNCY DAL Others Second largest carrier at MSP with significant room
Slide 26: Ancillary Revenue Growth Potential
Ancillary Revenue Growth Potential Ancillary Revenue per Passenger Growth Range(1)(3) Initiative Areas Passenger Interface • Enhanced Merchandising – Fee of $16(2) improved offer and product presentation on suncountry.com, including bundled ancillary products $2 to $5 per Pax of Ancillary • New Prod
Slide 27: Charter Flying Growth
Charter Flying Growth Charter Flying(1) Represents $20 - $25mm of revenue upside % of 2019 total block hours 2019 charter block Return of ad hoc hours = 19,852 100% flying to 2019 78% levels + fleet growth Ad hoc charter flying 150% 150%+ Growth opportunities exist with current and Charter flying un
Slide 28: Amazon Shipping Requirements to Continue to Grow
Amazon Shipping Requirements to Continue to Grow U.S. Amazon E-Commerce Revenue(1) Historic Amazon Delivery Expenditures ($bn) ($bn) $512 $77 $450 $61 $392 $341 $291 $38 $206 $174 $28 $150 $22 YoY 22% 16% 18% 41% 17% 15% 15% 14% 34% 28% 37% 61% 26% Change 2017 2018 2019 2020 2021 2022 2023 2024 2017
Slide 29: Responsible Fleet Growth
Responsible Fleet Growth Total Aircraft in Service Strategy in Place to Support Fleet Growth (# of aircraft) • Restructured fleet with a focus on 70 - 75 ownership of Boeing 737-800s with low capital commitments 54 • The 737-800 is the LCC stalwart for 48 airlines such as Southwest and Ryanair 12 43
Slide 30: Balance Sheet Positions Sun Country for Growth
Balance Sheet Positions Sun Country for Growth • $297m of liquidity at first quarter 2022 provides ample capital to support growth • Manageable CAPEX requirements given mid-life passenger fleet; cargo segment asset-lite • No non-aircraft debt • Reduced debt levels during COVID Deleveraging Through t
Slide 31: Non-GAAP Reconciliations
Non-GAAP Reconciliations
Slide 32: Description of Special Items
Description of Special Items Special Items, Net – in millions USD FY 2018 FY 2019 FY 2020 FY 2021 CARES Act grant recognition $0.0 $0.0 ($62.3) ($71.6) CARES Act employee retention credit - - (2.3) (0.8) Contractual obligations for retired technology - 7.6 - - Sale of airport slot rights - (1.2) - -
Slide 33: Non-GAAP Reconciliation – Adj Operating Income
Non-GAAP Reconciliation – Adj Operating Income Adjusted Operating Income is included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. Adjusted Operating Income is a well recognized performance measurement in the airline industry that is frequentl
Slide 34: Non-GAAP Reconciliation – Adj EBITDA
Non-GAAP Reconciliation – Adj EBITDA Adjusted Earnings Before Interest, Taxes, and Depreciation & Amortization (“EBITDA”) is included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. Adjusted EBITDA is a well recognized performance measurement in
Slide 35: Non-GAAP Reconciliation – Adj CASM
Non-GAAP Reconciliation – Adj CASM Adjusted CASM, which is a non-GAAP financial measure, is also a key airline cost metric and excludes fuel costs, costs related to our freighter operations (starting in 2020 when we launched our freighter operation), certain commissions and other costs of selling ou
Slide 36: Non-GAAP Reconciliation – Free Cash Flow
Non-GAAP Reconciliation – Free Cash Flow Free Cash Flow is included as a supplemental disclosure because we believe it is a useful indicator of our financial performance. Free Cash Flow is a well recognized performance measurement in the airline industry that is frequently used by our management, as
Sun Country Airlines Holdings — Investor Presentation (June 2022) on 6ix