Sun Country Airlines Holdings, Inc. · NASDAQ:SNCY
Sun Country Airlines — Investor Presentation (March 2022)
36 slides from Sun Country Airlines's investor presentation, March 2022
Slide 1: Sun Country Airlines
Sun Country Airlines March 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: Unique, Diversified Business Model
Unique, Diversified Business Model Sun Country’s symbiotic business lines share assets to maximize operating leverage Sun Country Business Line Synergies 2 1 Passenger Leisure Charter (~64% of Revenue(1)) (~20% of Revenue(1)) • Unique low cost airline with focus on leisure travel • A leader in U.S.
Slide 5: Sun Country Route Network
Sun Country Route Network Broad and Growing Network – No Long-Haul International Exposure ~97% of our markets are seasonal which reflects demand trends of our customer 5
Slide 6: Agile Passenger Capacity Built to Capture Peak Demand
Agile Passenger Capacity Built to Capture Peak Demand Unlike other passenger airlines, we quickly shift our capacity to focus flying when and where demand is high, resulting in higher yields Seasonal Demand Dictates Monthly Schedule Day-of-Week Capacity Determined by Demand Patterns(2) (% of Peak Da
Slide 7: We Offer A Higher Quality Product
We Offer A Higher Quality Product Weighted Average Seat In-Flight In-Seat Free Seat Pitch Recline Entertainment Power Beverage 31” 32” 30” 30” 28” 7
Slide 8: Ancillary Revenue Growth Potential
Ancillary Revenue Growth Potential Ancillary revenue per passenger is expected to continue to grow, driven by better merchandising, new products and pricing initiatives Ancillary Revenue per Passenger Growth Range(1) Initiative Areas • Enhanced Merchandising – improved offer and product presentation
Slide 9: Differentiated, Leading Charter Business…
Differentiated, Leading Charter Business… NCAA and professional sports, casino/VIP, US military, among other customers Overview Charter Revenue per Block Hour • High growth and high margin market leader in COVID recovery $8,767 $8,793 underway narrow-body charter market $8,508 $8,101 • Only U.S. sch
Slide 10: …Coupled With Unique, Stable Cargo Business…
…Coupled With Unique, Stable Cargo Business… Only partnership between Amazon and a scheduled passenger service carrier with stable, high margin revenue and cash flow Overview Annual Cargo Revenue ($mm) Fully ramped to • 12 Boeing 737-800 freighter aircraft operated 12 aircraft $91.4 on behalf of Ama
Slide 11: …Allows Us to Smooth Schedule Volatility
…Allows Us to Smooth Schedule Volatility Peak demand scheduling strategy maximizes unit revenue, while cargo and charter smooth overall schedule volatility. Result is resilient TRASM-maximizing business resistant to competition Daily Block Hour Variance by Business Relative standard deviation (std d
Slide 12: Model Generates High TRASM, Competitive CASM
Model Generates High TRASM, Competitive CASM Spread between passenger unit revenue and unit cost among the best in the industry. Results exclude cargo flying which further improves earnings Full year 2021 – numbers in cents TRASM Adj CASM TRASM – Adj CASM Stage Length Adjusted(1) Stage Length Adjust
Slide 13: Continued Reduction in CASM as Sun Country Grows
Continued Reduction in CASM as Sun Country Grows Adjusted CASM vs Historical Utilization Utilization in 2022 and 9.8 9.7 9.6 beyond continues improvement from pandemic-era lows During • Capex-free growth COVID • High margin flying 7.80 7.57 7.05 6.8 Expect to be lower than Expect to be 6.31 6.44 201
Slide 14: Ratified Pilot Contract Unlocks Growth
Ratified Pilot Contract Unlocks Growth Higher pilot cost starting in 2022 mitigated by solid cost control in other parts of the business Pilot cost per Strong cost control Total Adj op cost block hour2 elsewhere offsets per block hour1,2 2021 to 2022 34% increase 2021 to 2022 2% Key Provisions Key B
Slide 15: Decline in Key Cost Categories Over Time
Decline in Key Cost Categories Over Time Strong focus on overall cost reduction throughout the business Declining Aircraft Costs Distribution Costs per Passenger(2) USD in 000s Total expense per AC(1) per month $266 $9.78 $246 $246 $8.68 $8.01 $7.69 $194 2018 2019 2020 2021 2018 2019 2020 2021 Mix D
Slide 16: Positioned for Growth
Positioned for Growth
Slide 17: Scheduled Service Growth Builds On Capabilities
Scheduled Service Growth Builds On Capabilities Sun Country expects to continue to grow at reasonable rates based on “playbook” that has demonstrated successes Sun Country's Scheduled Service Growth Plan1 Average Daily Roundtrips (MSP and non-MSP) Non-MSP • Super-scraper: high seasonal peaks in larg
Slide 18: Sun Country Has Been Growing its Share at MSP
Sun Country Has Been Growing its Share at MSP Second largest carrier at MSP with significant room to continue taking share from smaller players in the market Cumulative Change in MSP Passenger Share Since 2017(1) Current Share 9% 6% 6% 18% 4% 3% 2% 3% 3% 1% 58% 1% 0% 0% (3%) (2%) (6%) (4%) (5%) (9%)
Slide 19: Charter Flying Growth
Charter Flying Growth Charter flying under contract has grown by 150% since 2019. Return of ad hoc business will drive growth in 2022 and 2023 Charter Flying1 % of 2019 total block hours Return of ad hoc 2019 charter block flying to 2019 hours = 19,852 100% 78% levels + fleet growth Ad hoc charter f
Slide 20: Sustainable Charter Growth Over Time
Sustainable Charter Growth Over Time More than doubled share of charter market in recent years 2014 Domestic Narrowbody Charter Block Hours 2021 Domestic Narrowbody Charter Block Hours(1) Other(2) Other(2) 24% 29% 29% 29% 10% 23% 19% 23% 13% Source: Diio Mi, DOT T-100. 1 - Based on year-end October
Slide 21: Amazon Shipping Requirements to Continue to Grow
Amazon Shipping Requirements to Continue to Grow New pilot contract contains provisions which facilitate additional cargo growth for Sun Country U.S. Amazon E-Commerce Revenue(1) Historic Amazon Delivery Expenditures $bn $512 $77 $450 $392 $61 $341 $291 $38 $206 $174 $28 $150 $22 YoY Change 22% 16%
Slide 22: Responsible Fleet Growth
Responsible Fleet Growth With no aircraft order book and extensive experience purchasing mid-life aircraft, Sun Country can opportunistically acquire aircraft at best prices Aircraft in Service Strategy in Place to Support Fleet Growth (# of aircraft) 50 passenger aircraft target by YE 2023 • Restru
Slide 23: 737-800 an Outstanding Platform For Used Aircraft
737-800 an Outstanding Platform For Used Aircraft Significant supply of 737-800s means that aircraft acquisition is not a growth constraint Boeing 737-800 Production 500 450 1,693 aircraft 400 Sizeable market of 8-12-year-old aircraft 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2
Slide 24: Financials
Financials
Slide 25: Industry Leading Profitability During 2021 Recovery …
Industry Leading Profitability During 2021 Recovery … 2021 Adjusted EBITDAR Margin 19.8% 18.4% 7.6% 5.8% 3.4% 1.2% (0.4%) (4.5%) (6.3%) (6.9%) Multi-segment business strategy offsets some of leisure demand weakness Source: Company filings See appendix for Adjusted EBITDAR margin reconciliation 25
Slide 26: … And A Profitable Carrier During Depths of COVID
… And A Profitable Carrier During Depths of COVID Sun Country was the leading airline and one of only two profitable airlines in 2020; Amazon was not fully ramped up until Nov ‘20 2020 Adjusted EBITDAR Margin 9.7% 4.5% (5.6%) (18.6%) (27.8%) (34.3%) (39.4%) (40.6%) (44.3%) (46.6%) Source: Company fi
Slide 27: Balance Sheet Positions Sun Country for Growth
Balance Sheet Positions Sun Country for Growth • $334m of liquidity at year end 2021 provides ample capital to support growth • Manageable CAPEX requirements given mid-life passenger fleet; cargo segment asset-lite • Sole positive free cash flow U.S. airline in 2021 Liquidity(1) / TTM Revenue Free C
Slide 28: Low Debt Levels Provide Flexibility and Reduces Risk
Low Debt Levels Provide Flexibility and Reduces Risk • Net Debt to Adjusted EBITDAR among best in industry • No non-aircraft debt • Reduced debt levels during COVID 2021 Net Debt to Adjusted EBITDAR 33.1x 12.4x 1.9x 2.2x Source – public filings 28 1 – See appendix for Sun Country Adjusted EBITDAR re
Slide 29: Guidance
Guidance Guidance for First Quarter 2022 Q1 2022 H/(L) VS Q1 2019 Total revenue - millions $215 to $225 9% to 14% Economic fuel cost per gallon $2.79 24% Adjusted operating income margin 8% to 12% (15.5)pp to (11.5)pp Effective tax rate 23% Total system ASMs - millions 1,900 to 2,000 5% to 10% 29
Slide 30: Appendix
Appendix
Slide 31: 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 32: Non-GAAP Reconciliation – Adj EBITDAR
Non-GAAP Reconciliation – Adj EBITDAR Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization and Aircraft Rent (“EBITDAR”) is included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. Adjusted EBITDAR is a well recognized performan
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 Net Income
Non-GAAP Reconciliation – Adj Net Income Adjusted Net Income is included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. Adjusted Net Income is a well recognized performance measurement in the airline industry that is frequently used by our mana
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
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