NASDAQ:SNCY Sun Country Airlines Q2 2023 Earnings Report $9.31 -0.11 (-1.17%) Closing price 04/28/2025 04:00 PM EasternExtended Trading$9.30 -0.02 (-0.16%) As of 04:00 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Sun Country Airlines EPS ResultsActual EPS$0.40Consensus EPS $0.41Beat/MissMissed by -$0.01One Year Ago EPS-$0.03Sun Country Airlines Revenue ResultsActual Revenue$261.10 millionExpected Revenue$258.81 millionBeat/MissBeat by +$2.29 millionYoY Revenue Growth+19.20%Sun Country Airlines Announcement DetailsQuarterQ2 2023Date8/4/2023TimeBefore Market OpensConference Call DateFriday, August 4, 2023Conference Call Time8:30AM ETUpcoming EarningsSun Country Airlines' Q1 2025 earnings is scheduled for Friday, May 2, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Sun Country Airlines Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 4, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Welcome to the Sun Country Airlines Second Quarter 2023 Earnings Call. My name is Josh, and I will your operator for today's call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer please be advised that today's conference is being recorded. I would now like to turn the call over to Chris Allen, Director of Investor Relations. Operator00:00:33Mr. Allen, you may begin. Begin. Speaker 100:00:36Thank you. I'm joined today by Jude Brecher, our Chief Executive Officer Dave Davis, President and Chief Financial Officer and a group of others to help answer questions. Before Before we begin, I would like to remind everyone that during this call, the company may make certain statements that constitute forward looking statements. Our remarks today may include forward looking statements, which Speaker 200:00:51are based upon management's conducting a few questions. Speaker 300:00:53I will now turn the call over Speaker 100:00:54to Mr. President of the Company. Please go ahead. Thank you, sir. Our first question comes from the line Speaker 200:00:57of Mr. President of the Company. Please go ahead. Speaker 100:00:57Thank you, sir. Speaker 200:01:00Our conducting a review of our Speaker 100:01:02SEC filings. We assume no obligation to update any forward looking statement. You can find our Q2 earnings press release on Speaker 300:01:07the Investor Relations portion of Speaker 100:01:08the website at ir.suncountry at dotcom. With that said, I'd like to turn the call over to Juk. Speaker 200:01:14Thank you, Chris. Good morning, everyone. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we are able to deliver the most flexible scheduled service in the industry. The combination of our schedule flexibility and low fixed cost model allow us to respond to both predictable leisure demand fluctuations an exogenous industry shocks. Speaker 200:01:38We believe due to our structural advantages, we will be able to reliably deliver the industry leading profitability throughout all cycles. We crossed a few milestones since our last call that I wanted to highlight. Participating in the first Sun Country surpassed $1,000,000,000 in revenue for the 12 months ending in June, a first for our 40 year old company. Be sharing with you today. In 2Q, we carried over 1,000,000 scheduled service passengers for the first time in any quarter. Speaker 200:02:06We regained our position as the top margin a carrier among the 11 carriers for the 12 months ending in Q2. Recall that we were the 1st into this pilot contract cycle. Be In July, we executed a record number of flights in a day. Being able to deliver quality operations during peak days the employees that deliver for our customers every day. Consistent with the theme of the last several calls, we remain in an environment where demand across all our be sharing some color sharing on the revenue environment for our scheduled business. Speaker 200:02:55Our 2nd quarter scheduled service TRASM was up 10% year on year on ASM growth of 6%, certainly very positive results. We expect to be able to accelerate scheduled service ASM growth into the 3rd quarter to mid teens be pleased to report that we will be in the range of 20 2019 was up in 1Q and 2Q by 34% and 43%, respectively. We expect 3Q to fall between those bounds. Speaker 400:03:33Be Speaker 200:03:42be participating in the call. Minneapolis, by far our largest market, has been particularly robust through the COVID recovery. This summer, we launched 15 new markets, all are performing well. Speaker 400:03:52Be joining the call today. Speaker 200:03:53Since I've been at Sun Country, we haven't had any MSP markets that didn't have a positive contribution. That's pretty amazing. Be One thing I'd like to call out is future cash flow. This year we'll produce about 50% more flights than were performed in 2019. Be participating in the Q1 of 2019. Speaker 200:04:12In 2 years, I expect departures to grow versus this year by over 30%. We can produce those growth figures with the addition of only 3 net aircraft to the fleet at about $60,000,000 cost, along with the redelivery of our 900s currently leased out. All three of the expected deliveries already have committed financing. So this free cash flow gives us the confidence in executing on the share buyback recently approved by our Board. And with that, I'll Speaker 300:04:41turn it over to Dave. Thanks, Jude. Q2 was a historically strong quarter for Sun Country, despite it being among the seasonally weaker quarters for our business. Total revenue increased 19.2 percent year over year to $261,100,000 while earnings before taxes were 26 $800,000 versus a loss of $4,800,000 in Q2 of 2022. Adjusted op margin was 15.3% for the quarter. Speaker 300:05:10Revenue, earnings and margin results were historically record highs for the Q2. Revenue from our passenger business continued to stay strong in Q2, be increasing 16.6 percent year over year to $227,900,000 Scheduled service plus ancillary sales generated $178,200,000 in revenue, which was 16.8% higher than last year. Be This easily exceeded a 5.6% growth in scheduled service ASMs, was driven by a 2.7% growth in total fare to $177 at a 2 point increase in load factor to 85.8%. Scheduled service TRASM grew 10.3% versus Q2 of last year. Since the Q2 of last year, we've seen a significant sustained increase in our scheduled service TRASM versus pre COVID levels. Speaker 300:06:03Be believe this is driven by the continued optimization of our network and changes in the public's demand for leisure travel. As Jude mentioned, During Q2, our scheduled service TRASM was up 43% versus 2019. And in Q3 of this year, we expect scheduled service TRASM to be up at least at 35% versus Q3 of 2019. We don't see any sign of scheduled service TRASM numbers returning to pre COVID levels, be rather they appear to be stabilizing at the higher levels we're now experiencing. Charter revenue in the 2nd quarter grew by 15.1 percent to $49,600,000 on block hour growth of 23.9%. Speaker 300:06:43A portion of our charter revenue consists of reimbursement from customers for changes in fuel prices as we do not take fuel risk on our charter flying. Q2 fuel prices dropped by over 38% versus last year. If you exclude the fuel reimbursement revenue from both Q2 of 2023 in Q2 of 2022, charter revenue grew 33.6% over the period and charter revenue per block hour grew by 8%. Be Program charter flying was 87% of total charter block hours versus 92% in Q2 of last year. Will continue to pursue more ad hoc business as our available capacity increases. Speaker 300:07:252nd quarter cargo revenue grew 18.1 percent to 20 in the range of $5,000,000 on a 10.4% increase in block hours. Last year, we had lower levels of flying due to scheduled maintenance events be participating in the Q3 and the annual increases in our Amazon contract occurred in December of 2022. We expect year over year aggregate growth at peak in Q3 and moderate thereafter. We're expecting full year 2023 block hour growth to be in the high single digit range. As always, our unique model allows us to move capacity between lines of business as conditions warrant. Speaker 300:08:01Now, let me turn now to costs. Total operating expenses increased 4.5% on an 11.3% increase in total block hours for the 2nd quarter. Adjusted CASM was up 10.4% versus Q2 of 2022. This compares to a 14% increase in the year over year comparison for Q1. Be happy to take your questions. Speaker 300:08:22We expect year over year CASM growth to continue to moderate in the quarters ahead. Daily aircraft utilization was still 9.5 in the range of $1,000,000,000 to $1,000,000,000 lower year over year, which continues to put pressure on unit costs. Total non fuel operating costs increased by approximately 25% versus in Q2 of last year. Significant drivers of this increase include the aircraft ownership costs for the 5730seven-900s we currently leased to Oman Air, be participating in the call as well as non repeating costs for the vesting of management stock options and a payment to one of our labor groups to settle past grievances. Excluding these expenses, non fuel operating costs would have increased by 19.8% year over year. Speaker 300:09:03Fuel expense decreased 32% versus last here. Regarding our balance sheet, our total liquidity at the end of Q2 was $263,000,000 which was slightly higher than the amount at the end of in the Q1. Year to date through July, we spent $210,000,000 on CapEx, which has funded a majority of our planned aircraft growth into 2025. Be able to achieve our growth objectives over the next 2 years with higher aircraft utilization and the addition of only 3 net aircraft. Be participating in the Q2. Speaker 200:09:37As a result, we're Speaker 300:09:37expecting CapEx to decline considerably in 2024 and 2025. Our net debt to adjusted EBITDA ratio at the end of Q2 was at 2.3. Since we do not have a significant debt burden, we have flexibility in how we deploy our cash. Since Q4 of last year, we've spent $47,300,000 on share repurchases. Our boards authorized another 30,000,000 repurchase authority, which brings our current available share repurchase authority to $32,800,000 be Turning now to guidance. Speaker 300:10:11We're anticipating Q3 total revenue to be between $240,000,000 $250,000,000 be taking an increase of 8% to 13% versus Q2 of 2022 on a block hour increase of 13% to 16%. Be forecasting a $2.90 per gallon fuel price in the quarter. Operating margin for the quarter is forecasted to be between 6% 11%. The The fundamentals of our unique diversified business remain strong and our model is highly resilient to changes in macroeconomic conditions. Operator00:10:59Be one moment for questions. Our first question comes from Duane Pfennigwerth with at Evercore ISI. You may proceed. Speaker 500:11:12Hey, good morning. Just on be Charter, can you talk a little bit and just remind us how fuel change year over year impacts revenue trends in Charter be And also margins in Charter. Speaker 200:11:30So I think it's important to break out what be there's several track programs. We have a fleet of 60 aircraft, 5 of them are dedicated to be using the track programs plus the VIP. So it's basically 6 aircraft and those have absolute pass through in fuel. We have a significant amount of ad hoc business that is predominantly sports programs. Again, that's 100% pass through. Speaker 200:12:04Sometimes, however, we need to position aircraft at our costs. Be So there's a little bit of flying that we do in support of those that has be Fuel at risk. And then there's the military business, which is 100% pass through. So it's effectively over 90% Perfect pass through. Speaker 300:12:26Yes, I mean think of it this way, Duane. So we negotiated a charter contract. In that charter contract is a reference price, Okay. If fuel is higher or lower than that reference price, we get reimbursed from the charter customer for either more or less be based on the fuel price. When fuel is really high, the reimbursement is higher, so the revenue looks higher. Speaker 300:12:50When fuel is really low, the reimbursement is less, so the revenue looks less. Speaker 500:12:56Got it. Be And then for some of the seasonal flying that you do, can you just remind us to what extent Mexico or Cancun be part of that seasonal set. Obviously, we heard some more cautious comments on Cancun, specifically from be speaking to Spirit yesterday, but could you just kind of comment on your trends to maybe Mexico and near Caribbean? Speaker 200:13:21Yes, I'll give you some backdrop. Our international network is focused from Minneapolis in the wintertime. And in the summertime, the predominance of our international network is focused on origination in southern large markets. The distinction there is that be sharing with you on the call. The Southern business is largely a scraping business where we don't support that flying with a lot of marketing. Speaker 200:13:46We're not focused on building a brand in some of these origination markets in contrast to what we do out of Minneapolis in the wintertime. And therefore, We're a little more subject in the summertime to the prevailing airfare in some of these international markets. And I would be be I agree with Ted's comments about some of the weakness, that we're seeing in Southern markets, but these are still highly profitable markets for us. Be And we have the ability to dial capacity to whatever optimal level is supported by the fare environment at that given time. Most of our International markets in the summertime are now winding down and we'll be out of by the end of August. Speaker 200:14:31And then we'll focus on building up our be largely Minneapolis, but also some Milwaukee and a few others where we fly winter markets as we approach into the Q4. Any color Grant? Speaker 600:14:46Yes. No, I'd just echo Jude's comments that there was a little pressure this year, but the results were on an on a diluted basis. We're still acceptable for us down from maybe what we've experienced, but we do some unique things down there. There's one market that speaking to the operator for the Q1 of 2019. It's been particularly strong for us, which is Harlingen, which did not have sort of the competitive impacts and that one performed very nicely. Speaker 600:15:09So to Jude's point, be our agility will make it work. We've been there for a while, and it's going to be something we continue to do in the summer. Speaker 200:15:17My diagnosis at Cancun was that it was a really strong summer in 2022 and a lot of carriers chase that demand into this summer. And if you look at capacity levels year on year, be It was Cancun was the beneficiary of a lot of capacity growth and that drove down fares. I think there's still strong structural demand and we can, as I've mentioned fly in any environment and be successful with that man. Speaker 500:15:39Okay, makes sense. I'm going to have to look up that originating market That you took it out. I have to go look at my map, but I appreciate the thoughts. Speaker 200:15:50Thanks, sir. Operator00:15:52Be thank you. One moment for questions. Our next question comes from Catherine O'Brien with Goldman Sachs. You may proceed. Speaker 700:16:03Hey, good morning everyone. Thanks so much for the time. Be Hey, another topic that's been popular this earnings season is domestic carriers having to rightsize day of week be just based on their current view on where corporate now sits, not that that's a market you chase, but be I know your network has less overlap with some of these carriers, but have you started to see any pickup in competitive capacity into the fall or early winter be As these changes are to take place in other airline schedules? Speaker 200:16:40Generally, the capacity environment be It's constructive, meaning not a lot of growth. We are seeing some build backs into Minneapolis based on 2019 levels, discussing stuff that was cut that's coming back from non Delta carriers. And so, but that's Perfectly fine. On the day a week stuff, I mean, this is sort of what we do. And I don't think it should be a surprise to anybody that Vegas is a little weaker on Tuesdays than it is on weekend demand patterns. Speaker 200:17:12So we built the business around that. It's not a substantial change. Here's a point that I can bring up, which is perhaps out of consensus. July doesn't have a lot of day week sensitivity. There's a tremendous amount of demand, but it's elastic as compared to March, which has these fantastic days. Speaker 200:17:33Be So there's really deep demand that's inelastic on a few given days, particularly around spring break travel patterns. Be so July, we need to be a lot bigger than we were. And that means adding into off peak periods. So we have a capacity constraint that's a block hour constraint based on pilot availability. And so we choose to put be taking a closer look at our full year 2019 outlook. Speaker 200:18:00However, if we had more flying, we would expand and flatten the schedule With a relatively moderate or de minimis even reduction in unit revenues because be. In contrast, September is completely different and as it always has There's just not a lot of mid week opportunities in September. And I agree with the overall sentiment that there is be taking a focus a renewed focus perhaps from the big three on to leisure demand, which is crowding out somewhat be using leisure carriers when there is limited demand. But we've already focused be on flying around those limited demand periods. And so for us, it's really about adding into be taking a look at the results of the year. Speaker 200:18:53So it's a more nuanced and complicated matter, I think, than the market is making be Our opportunity is to grow into these 40% variable contribution scheduled service be sharing with you on the next call. Networks that we have during peak months and that's what gets our Q3 margins up into the mid teens from where they are today at this fuel Speaker 700:19:21be. Got it. That's really helpful. Thanks for the perspective, Jude. Maybe just Two quick ones on costs for Dave. Speaker 700:19:31So you're be just coming back to the CASM commentary through year end that that eases. Can you just give us some more color on if that's ratable, like step down in each quarter or anything you should be aware of on 4Q capacity growth. And then just on the share based comp, In the press release, you noted there was like a one off vesting in stock comp, but 1Q wasn't too far below this quarter. Be both were a little bit elevated last year. Can you just give us some color on how we should expect that to trend? Speaker 700:20:04Just something outside of your commentary on CASMEX. Thanks so Speaker 300:20:08much. Yes, sure. So, essentially, I think be this is consistent with Jude's commentary is we're a little bit oversized. We mentioned on the aircraft So we're a little oversized and as we continue and that's negatively impacting CASM. Be As we sort of roll forward into the quarters ahead and you see some of this growth, particularly like some of the 3rd quarter growth and then some growth we're going to have in the 4th quarter as well, be. Speaker 300:20:49Those year over year numbers will begin to will continue to, I should say, moderate. So we should be single digit kind of in the Q3 and Q4. I'm not giving guidance on yet, but we should just see continually improving year over year trends here on the CASM front. Be Regarding the management options, Speaker 200:21:13there was there were a Speaker 300:21:15number of be joining the call to questions. Speaker 200:21:16Thanks, Josh. Thanks, Josh. Thanks, Josh. Speaker 300:21:17Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Speaker 300:21:19Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Speaker 300:21:21Thanks, Josh. Thanks, Josh. Thanks, Josh. Be Apollo's ownership, which I think is an important point for investors, has continued to drop and is now sub-thirty percent at the company. Be in the quarter. Speaker 300:21:43So when we fell below that number, a significant number of management options vested. Be So those original options are now fully vested. So vesting costs will not continue to recur in the quarters ahead at least for those options, so that number will moderate. Speaker 700:22:04Okay, great. Thanks so much, Steve. Operator00:22:08Be Thank you. One moment for questions. Our next question comes from Helane Becker with TD Cowen. You may proceed. Speaker 300:22:18Hi, thanks very much. This is Tom Fitzgerald on for Helane. My question is just on what you're seeing in terms of pilot attrition and How you're feeling about getting 1st officers to upgrade into the captain's seat? Appreciate any color you could have. Thanks very much. Speaker 200:22:33Be I'll make some very general comments and then Greg, if you want to jump in. Well, we don't have any problem hiring pilots and our attrition is consistently below where we had expected it would be at this time. The issue boils down really to getting pilots to be So we're constrained in the left seat and we continue to make strides in improving that figure and as We will grow as we upgrade Captains. Speaker 300:23:01Yes. I mean, to Jude's point, we don't have a problem hiring pilots right now. We've got really robust applications. We've got a great recruiting team. On the attrition front, we watch that daily. Speaker 300:23:14That staying within our expectations. We see these other deals that are going on out there now that might affect that attrition, but we believe we can moderate that with additional class sizes So as you said, it really does come down to our ability to grow is at the rate of our cap and upgrades. Speaker 200:23:30And this is an industry wide issue as these be in the case of the big three, they did a bunch of early retirements. So everybody is trying to get pilots through their training pipeline and right sized their pilot groups. It's taking a little time. Speaker 300:23:46Yes, I think one of the points is, we've talked about this point for now a number of quarters. This continues to be a challenge for us, but I think you can look at Speaker 200:23:55the growth that we're looking at here in Speaker 300:23:57the Q3 as a testament to the fact that we are making progress, be Operator00:24:19One moment for questions. Our next question comes from Mike Linenberg with Deutsche Bank. You may proceed. Speaker 800:24:28Hey, good morning everyone. I did get on a few minutes late and I apologize if you may have addressed this, but just going from a 15% operating margin, you're guiding 6 to 11, we're coming off of what was seasonally one of your weaker quarters. What are sort of the primary drivers there? Is it things like fuel? I know September is a tough month for you guys. Speaker 800:24:53Can you just run through some of the puts and takes, Your thinking behind that decel and profitability? Thanks. Speaker 200:25:02I mean the main thing is be segmented capacity allocation. So we have very consistent profitability from our track and cargo programs, track charter and cargo programs. Be And it's a good thing that they in many ways, it's a good thing that they are flat in capacity. And then we have scheduled service, which is variable. And as I mentioned, and Dave alluded to, we're flying our airplanes in July, one of the showing strong demand months of the year at about 8 hours a day and that number should be 10, 11. Speaker 200:25:42Be And those are 40% incremental margin opportunities that we're cutting out because of Capacity constraints that don't have anything to do with opportunity or airplanes. It's really about staffing. So that's the biggest thing. In contrast, the 2nd quarter is a relatively flat demand period as compared to the Q3. So 3rd quarter The way the Q3 goes July, in contrast, the Q2 has a really good April, a really good June. Speaker 200:26:12May is not great, but it's not that bad. It's not as bad as September, so it's a lot more flat, and that's the difference in the 2 quarters. Speaker 800:26:21Makes sense. Jude, did you mention what your ASMs will be up scheduled ASMs in the September quarter? Speaker 200:26:31We didn't mention that. Speaker 300:26:34I don't think we have an issue sharing it. I just don't have it in front of me. Speaker 200:26:36We can get it to you. I got it at about mid teens. Speaker 800:26:41Okay. Mid teens. Okay. And then just my last question and this is more of a modeling question as we think about be The rental revenue, the $6,000,000 is that sort of the right quarterly run rate? And when does that start to fade out? Speaker 800:26:56What is it sometime late 2024, 2025? Thanks for taking my questions. Speaker 300:27:01Yes, that's right. The fade out will begin be And really in November 2024 and then continue through November 2025 as the 5 aircraft roll off and coming to us to operate. Speaker 800:27:18Okay. Thank you. Operator00:27:29Our next question comes from Christopher Sathalopoulos with Susquehanna Investment Group. You may proceed. Speaker 400:27:35Good morning, everyone. I want to get back to The comment you made on I believe you said that the stock comp should be moderating giving the changes in the vesting schedule. So Could you help frame the implied operating income for 3Q? How should we think about be stock comp there and believe this quarter was a little north of 15%. That's a significant step up from recent quarters. Speaker 400:28:03Be I just want to better understand how we should think about that underlying as we think about the second half of the year? Thank you. Speaker 100:28:13I don't have that precise number in Speaker 300:28:14front of me. It'll just be a significant step down. I mean in the second quarter, be There was a significant chunk of options that had not yet vested. They all vested in 1 quarter. So there will be a step down number. Speaker 300:28:28I just don't have that in front of me. Speaker 200:28:32As it pertains to the 2018 option grant be That was associated with the Apollo transaction. All those options are either vested or Speaker 300:28:45be done. So that goes to 0. Yes, exactly. So that number goes to 0. And as with any other company, we have an RSU program, which is ongoing. Speaker 300:28:54So there'll be Some stock comp expense that continues just at a significantly lower level. Speaker 400:29:02Okay. The second question, so I think you're backing out the D and A associated with these 5 dry leases from your CASM ex. Could you just walk us through the rationale why I'm guessing because they don't have associated ASMs and but you're including the revenue side of it. And then also as those come off, I think you said dry lease in 2025. If you could just kind of walk us be answering the question and answer session. Speaker 400:29:33How we should think about the unit cost impact or unit margin. I just want to kind of better understand this relationship here, is that sitting in revenue here, but it looks like it's coming out of your chasm. Thanks. Yes. Speaker 300:29:45I mean it's Yes. So I mean it's sitting in revenue and it's sitting in expense in our financials. But since as you pointed out, it doesn't generate any ASMs. We take it out of the CASM comp and it's out of the TRASM comp. So it's out of unit costs on the revenue side and on the cost side. Speaker 300:30:05In the same way that our cargo revenue wasn't in our cost per ASM or revenue per ASM number that generate ASMs. Speaker 200:30:15Be Strategically, I want to just reiterate from last quarter, we're not being a lessor. We're just acquiring airplanes be for future delivery. So when we report, we're doing our best to back out all those results so that you can kind of see the underlying success Speaker 300:30:33That's the business which what we care about. Speaker 400:30:36Okay. And if you could get in one more Yes. I'm sorry. Speaker 200:30:39Go ahead. Speaker 400:30:40No, I just wanted Speaker 300:30:40to follow-up quickly. I just pulled the numbers. So be Stock comp in the 2nd quarter, I think is around 4.5. That number will probably drop to $1,000,000 plus or minus. Speaker 400:30:52Be For 3Q or second half or? Speaker 300:30:57No, for 3Q. Speaker 400:30:59Be Okay, great. Thanks. And just if I could get in one more here. So we've heard from U. S. Speaker 400:31:05Peers talking about how the showing strong international travel is pulling from a pool of what would be domestic travelers. Are you seeing any of that? And if so, what are your thoughts on when that might be Speaker 200:31:21I mean, my view is that we observe be And so it's true that the Transatlantic be participating in the Q1 of 2019. I think it's a stretch to say that those folks that are flying transatlantic would have otherwise flown domestic. Be I think more confidently we can say summer of 2022 was an outlier in demand recovery with a lot of be recaptured from the previous years. Instead, we're going down to a fairly consistent year over 4 in a range of $1,000,000,000 in the quarter, and I will be in a Speaker 500:31:59range of $1,000,000,000 in Speaker 200:31:59the quarter, and I will be in a range of $1,000,000 in the quarter, and I will be in a range of $1,000,000 in the quarter. And that seems consistent going into all the bookings we're seeing through the spring of next year. So I think it's a little much to draw that conclusion, but I think what gets me excited is just it looks like Speaker 600:32:30be I would just add to that that those unit revenues versus 2019, I think we're at the high end of that. So that's specific to us and the testament to the good job this team has done. And I also think Jude's comments are spot on. If you look at our network, we grew, Jude mentioned 15 new markets this summer. They've all met expectations. Speaker 600:32:50Our load factors are up. So, we saw strong showing strong demand across our network and really happy with the results. Speaker 400:33:01Okay. Thank you. Be joining today's call. Operator00:33:05Thank you. I'd now like to turn the call back over to Jude Bricker for any closing remarks. Speaker 200:33:13Thanks for joining us. Thanks for your interest in Sun Country and we'll talk to you again at the end of the next quarter. Good morning everybody.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSun Country Airlines Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Sun Country Airlines Earnings HeadlinesSun Country Airlines Will Hold Its First Quarter 2025 Earnings Conference Call May 2April 23, 2025 | globenewswire.comShort Interest in Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) Declines By 14.6%April 22, 2025 | americanbankingnews.comTrump’s Secret WeaponHave you looked at the stock market recently? 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Sign up for Earnings360's daily newsletter to receive timely earnings updates on Sun Country Airlines and other key companies, straight to your email. Email Address About Sun Country AirlinesSun Country Airlines (NASDAQ:SNCY), an air carrier company, operates scheduled passenger, air cargo, charter air transportation, and related services in the United States, Latin America, and internationally. It operates through two segments, Passenger and Cargo. The company also provides crew, maintenance, and insurance services through ad hoc, repeat, short-term, and long-term service contracts; and loyalty program rewards. As of December 31, 2023, its fleet consisted of 60 Boeing 737-NG aircraft, which includes 42 passenger fleet, 12 cargo, and 6 leased to unaffiliated airlines aircraft. The company serves leisure, and visiting friends and relatives passengers; charter and cargo customers; military branches; collegiate and professional sports teams; wholesale tour operators; schools; companies; and other individual entities through its website, call center, and travel agents. Sun Country Airlines Holdings, Inc. was founded in 1983 and is headquartered in Minneapolis, Minnesota.View Sun Country Airlines ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings QUALCOMM (4/30/2025)Automatic Data Processing (4/30/2025)Microsoft (4/30/2025)Meta Platforms (4/30/2025)KLA (4/30/2025)Equinix (4/30/2025)Lloyds Banking Group (4/30/2025)Itaú Unibanco (4/30/2025)Banco Santander (4/30/2025)Equinor ASA (4/30/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Welcome to the Sun Country Airlines Second Quarter 2023 Earnings Call. My name is Josh, and I will your operator for today's call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer please be advised that today's conference is being recorded. I would now like to turn the call over to Chris Allen, Director of Investor Relations. Operator00:00:33Mr. Allen, you may begin. Begin. Speaker 100:00:36Thank you. I'm joined today by Jude Brecher, our Chief Executive Officer Dave Davis, President and Chief Financial Officer and a group of others to help answer questions. Before Before we begin, I would like to remind everyone that during this call, the company may make certain statements that constitute forward looking statements. Our remarks today may include forward looking statements, which Speaker 200:00:51are based upon management's conducting a few questions. Speaker 300:00:53I will now turn the call over Speaker 100:00:54to Mr. President of the Company. Please go ahead. Thank you, sir. Our first question comes from the line Speaker 200:00:57of Mr. President of the Company. Please go ahead. Speaker 100:00:57Thank you, sir. Speaker 200:01:00Our conducting a review of our Speaker 100:01:02SEC filings. We assume no obligation to update any forward looking statement. You can find our Q2 earnings press release on Speaker 300:01:07the Investor Relations portion of Speaker 100:01:08the website at ir.suncountry at dotcom. With that said, I'd like to turn the call over to Juk. Speaker 200:01:14Thank you, Chris. Good morning, everyone. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we are able to deliver the most flexible scheduled service in the industry. The combination of our schedule flexibility and low fixed cost model allow us to respond to both predictable leisure demand fluctuations an exogenous industry shocks. Speaker 200:01:38We believe due to our structural advantages, we will be able to reliably deliver the industry leading profitability throughout all cycles. We crossed a few milestones since our last call that I wanted to highlight. Participating in the first Sun Country surpassed $1,000,000,000 in revenue for the 12 months ending in June, a first for our 40 year old company. Be sharing with you today. In 2Q, we carried over 1,000,000 scheduled service passengers for the first time in any quarter. Speaker 200:02:06We regained our position as the top margin a carrier among the 11 carriers for the 12 months ending in Q2. Recall that we were the 1st into this pilot contract cycle. Be In July, we executed a record number of flights in a day. Being able to deliver quality operations during peak days the employees that deliver for our customers every day. Consistent with the theme of the last several calls, we remain in an environment where demand across all our be sharing some color sharing on the revenue environment for our scheduled business. Speaker 200:02:55Our 2nd quarter scheduled service TRASM was up 10% year on year on ASM growth of 6%, certainly very positive results. We expect to be able to accelerate scheduled service ASM growth into the 3rd quarter to mid teens be pleased to report that we will be in the range of 20 2019 was up in 1Q and 2Q by 34% and 43%, respectively. We expect 3Q to fall between those bounds. Speaker 400:03:33Be Speaker 200:03:42be participating in the call. Minneapolis, by far our largest market, has been particularly robust through the COVID recovery. This summer, we launched 15 new markets, all are performing well. Speaker 400:03:52Be joining the call today. Speaker 200:03:53Since I've been at Sun Country, we haven't had any MSP markets that didn't have a positive contribution. That's pretty amazing. Be One thing I'd like to call out is future cash flow. This year we'll produce about 50% more flights than were performed in 2019. Be participating in the Q1 of 2019. Speaker 200:04:12In 2 years, I expect departures to grow versus this year by over 30%. We can produce those growth figures with the addition of only 3 net aircraft to the fleet at about $60,000,000 cost, along with the redelivery of our 900s currently leased out. All three of the expected deliveries already have committed financing. So this free cash flow gives us the confidence in executing on the share buyback recently approved by our Board. And with that, I'll Speaker 300:04:41turn it over to Dave. Thanks, Jude. Q2 was a historically strong quarter for Sun Country, despite it being among the seasonally weaker quarters for our business. Total revenue increased 19.2 percent year over year to $261,100,000 while earnings before taxes were 26 $800,000 versus a loss of $4,800,000 in Q2 of 2022. Adjusted op margin was 15.3% for the quarter. Speaker 300:05:10Revenue, earnings and margin results were historically record highs for the Q2. Revenue from our passenger business continued to stay strong in Q2, be increasing 16.6 percent year over year to $227,900,000 Scheduled service plus ancillary sales generated $178,200,000 in revenue, which was 16.8% higher than last year. Be This easily exceeded a 5.6% growth in scheduled service ASMs, was driven by a 2.7% growth in total fare to $177 at a 2 point increase in load factor to 85.8%. Scheduled service TRASM grew 10.3% versus Q2 of last year. Since the Q2 of last year, we've seen a significant sustained increase in our scheduled service TRASM versus pre COVID levels. Speaker 300:06:03Be believe this is driven by the continued optimization of our network and changes in the public's demand for leisure travel. As Jude mentioned, During Q2, our scheduled service TRASM was up 43% versus 2019. And in Q3 of this year, we expect scheduled service TRASM to be up at least at 35% versus Q3 of 2019. We don't see any sign of scheduled service TRASM numbers returning to pre COVID levels, be rather they appear to be stabilizing at the higher levels we're now experiencing. Charter revenue in the 2nd quarter grew by 15.1 percent to $49,600,000 on block hour growth of 23.9%. Speaker 300:06:43A portion of our charter revenue consists of reimbursement from customers for changes in fuel prices as we do not take fuel risk on our charter flying. Q2 fuel prices dropped by over 38% versus last year. If you exclude the fuel reimbursement revenue from both Q2 of 2023 in Q2 of 2022, charter revenue grew 33.6% over the period and charter revenue per block hour grew by 8%. Be Program charter flying was 87% of total charter block hours versus 92% in Q2 of last year. Will continue to pursue more ad hoc business as our available capacity increases. Speaker 300:07:252nd quarter cargo revenue grew 18.1 percent to 20 in the range of $5,000,000 on a 10.4% increase in block hours. Last year, we had lower levels of flying due to scheduled maintenance events be participating in the Q3 and the annual increases in our Amazon contract occurred in December of 2022. We expect year over year aggregate growth at peak in Q3 and moderate thereafter. We're expecting full year 2023 block hour growth to be in the high single digit range. As always, our unique model allows us to move capacity between lines of business as conditions warrant. Speaker 300:08:01Now, let me turn now to costs. Total operating expenses increased 4.5% on an 11.3% increase in total block hours for the 2nd quarter. Adjusted CASM was up 10.4% versus Q2 of 2022. This compares to a 14% increase in the year over year comparison for Q1. Be happy to take your questions. Speaker 300:08:22We expect year over year CASM growth to continue to moderate in the quarters ahead. Daily aircraft utilization was still 9.5 in the range of $1,000,000,000 to $1,000,000,000 lower year over year, which continues to put pressure on unit costs. Total non fuel operating costs increased by approximately 25% versus in Q2 of last year. Significant drivers of this increase include the aircraft ownership costs for the 5730seven-900s we currently leased to Oman Air, be participating in the call as well as non repeating costs for the vesting of management stock options and a payment to one of our labor groups to settle past grievances. Excluding these expenses, non fuel operating costs would have increased by 19.8% year over year. Speaker 300:09:03Fuel expense decreased 32% versus last here. Regarding our balance sheet, our total liquidity at the end of Q2 was $263,000,000 which was slightly higher than the amount at the end of in the Q1. Year to date through July, we spent $210,000,000 on CapEx, which has funded a majority of our planned aircraft growth into 2025. Be able to achieve our growth objectives over the next 2 years with higher aircraft utilization and the addition of only 3 net aircraft. Be participating in the Q2. Speaker 200:09:37As a result, we're Speaker 300:09:37expecting CapEx to decline considerably in 2024 and 2025. Our net debt to adjusted EBITDA ratio at the end of Q2 was at 2.3. Since we do not have a significant debt burden, we have flexibility in how we deploy our cash. Since Q4 of last year, we've spent $47,300,000 on share repurchases. Our boards authorized another 30,000,000 repurchase authority, which brings our current available share repurchase authority to $32,800,000 be Turning now to guidance. Speaker 300:10:11We're anticipating Q3 total revenue to be between $240,000,000 $250,000,000 be taking an increase of 8% to 13% versus Q2 of 2022 on a block hour increase of 13% to 16%. Be forecasting a $2.90 per gallon fuel price in the quarter. Operating margin for the quarter is forecasted to be between 6% 11%. The The fundamentals of our unique diversified business remain strong and our model is highly resilient to changes in macroeconomic conditions. Operator00:10:59Be one moment for questions. Our first question comes from Duane Pfennigwerth with at Evercore ISI. You may proceed. Speaker 500:11:12Hey, good morning. Just on be Charter, can you talk a little bit and just remind us how fuel change year over year impacts revenue trends in Charter be And also margins in Charter. Speaker 200:11:30So I think it's important to break out what be there's several track programs. We have a fleet of 60 aircraft, 5 of them are dedicated to be using the track programs plus the VIP. So it's basically 6 aircraft and those have absolute pass through in fuel. We have a significant amount of ad hoc business that is predominantly sports programs. Again, that's 100% pass through. Speaker 200:12:04Sometimes, however, we need to position aircraft at our costs. Be So there's a little bit of flying that we do in support of those that has be Fuel at risk. And then there's the military business, which is 100% pass through. So it's effectively over 90% Perfect pass through. Speaker 300:12:26Yes, I mean think of it this way, Duane. So we negotiated a charter contract. In that charter contract is a reference price, Okay. If fuel is higher or lower than that reference price, we get reimbursed from the charter customer for either more or less be based on the fuel price. When fuel is really high, the reimbursement is higher, so the revenue looks higher. Speaker 300:12:50When fuel is really low, the reimbursement is less, so the revenue looks less. Speaker 500:12:56Got it. Be And then for some of the seasonal flying that you do, can you just remind us to what extent Mexico or Cancun be part of that seasonal set. Obviously, we heard some more cautious comments on Cancun, specifically from be speaking to Spirit yesterday, but could you just kind of comment on your trends to maybe Mexico and near Caribbean? Speaker 200:13:21Yes, I'll give you some backdrop. Our international network is focused from Minneapolis in the wintertime. And in the summertime, the predominance of our international network is focused on origination in southern large markets. The distinction there is that be sharing with you on the call. The Southern business is largely a scraping business where we don't support that flying with a lot of marketing. Speaker 200:13:46We're not focused on building a brand in some of these origination markets in contrast to what we do out of Minneapolis in the wintertime. And therefore, We're a little more subject in the summertime to the prevailing airfare in some of these international markets. And I would be be I agree with Ted's comments about some of the weakness, that we're seeing in Southern markets, but these are still highly profitable markets for us. Be And we have the ability to dial capacity to whatever optimal level is supported by the fare environment at that given time. Most of our International markets in the summertime are now winding down and we'll be out of by the end of August. Speaker 200:14:31And then we'll focus on building up our be largely Minneapolis, but also some Milwaukee and a few others where we fly winter markets as we approach into the Q4. Any color Grant? Speaker 600:14:46Yes. No, I'd just echo Jude's comments that there was a little pressure this year, but the results were on an on a diluted basis. We're still acceptable for us down from maybe what we've experienced, but we do some unique things down there. There's one market that speaking to the operator for the Q1 of 2019. It's been particularly strong for us, which is Harlingen, which did not have sort of the competitive impacts and that one performed very nicely. Speaker 600:15:09So to Jude's point, be our agility will make it work. We've been there for a while, and it's going to be something we continue to do in the summer. Speaker 200:15:17My diagnosis at Cancun was that it was a really strong summer in 2022 and a lot of carriers chase that demand into this summer. And if you look at capacity levels year on year, be It was Cancun was the beneficiary of a lot of capacity growth and that drove down fares. I think there's still strong structural demand and we can, as I've mentioned fly in any environment and be successful with that man. Speaker 500:15:39Okay, makes sense. I'm going to have to look up that originating market That you took it out. I have to go look at my map, but I appreciate the thoughts. Speaker 200:15:50Thanks, sir. Operator00:15:52Be thank you. One moment for questions. Our next question comes from Catherine O'Brien with Goldman Sachs. You may proceed. Speaker 700:16:03Hey, good morning everyone. Thanks so much for the time. Be Hey, another topic that's been popular this earnings season is domestic carriers having to rightsize day of week be just based on their current view on where corporate now sits, not that that's a market you chase, but be I know your network has less overlap with some of these carriers, but have you started to see any pickup in competitive capacity into the fall or early winter be As these changes are to take place in other airline schedules? Speaker 200:16:40Generally, the capacity environment be It's constructive, meaning not a lot of growth. We are seeing some build backs into Minneapolis based on 2019 levels, discussing stuff that was cut that's coming back from non Delta carriers. And so, but that's Perfectly fine. On the day a week stuff, I mean, this is sort of what we do. And I don't think it should be a surprise to anybody that Vegas is a little weaker on Tuesdays than it is on weekend demand patterns. Speaker 200:17:12So we built the business around that. It's not a substantial change. Here's a point that I can bring up, which is perhaps out of consensus. July doesn't have a lot of day week sensitivity. There's a tremendous amount of demand, but it's elastic as compared to March, which has these fantastic days. Speaker 200:17:33Be So there's really deep demand that's inelastic on a few given days, particularly around spring break travel patterns. Be so July, we need to be a lot bigger than we were. And that means adding into off peak periods. So we have a capacity constraint that's a block hour constraint based on pilot availability. And so we choose to put be taking a closer look at our full year 2019 outlook. Speaker 200:18:00However, if we had more flying, we would expand and flatten the schedule With a relatively moderate or de minimis even reduction in unit revenues because be. In contrast, September is completely different and as it always has There's just not a lot of mid week opportunities in September. And I agree with the overall sentiment that there is be taking a focus a renewed focus perhaps from the big three on to leisure demand, which is crowding out somewhat be using leisure carriers when there is limited demand. But we've already focused be on flying around those limited demand periods. And so for us, it's really about adding into be taking a look at the results of the year. Speaker 200:18:53So it's a more nuanced and complicated matter, I think, than the market is making be Our opportunity is to grow into these 40% variable contribution scheduled service be sharing with you on the next call. Networks that we have during peak months and that's what gets our Q3 margins up into the mid teens from where they are today at this fuel Speaker 700:19:21be. Got it. That's really helpful. Thanks for the perspective, Jude. Maybe just Two quick ones on costs for Dave. Speaker 700:19:31So you're be just coming back to the CASM commentary through year end that that eases. Can you just give us some more color on if that's ratable, like step down in each quarter or anything you should be aware of on 4Q capacity growth. And then just on the share based comp, In the press release, you noted there was like a one off vesting in stock comp, but 1Q wasn't too far below this quarter. Be both were a little bit elevated last year. Can you just give us some color on how we should expect that to trend? Speaker 700:20:04Just something outside of your commentary on CASMEX. Thanks so Speaker 300:20:08much. Yes, sure. So, essentially, I think be this is consistent with Jude's commentary is we're a little bit oversized. We mentioned on the aircraft So we're a little oversized and as we continue and that's negatively impacting CASM. Be As we sort of roll forward into the quarters ahead and you see some of this growth, particularly like some of the 3rd quarter growth and then some growth we're going to have in the 4th quarter as well, be. Speaker 300:20:49Those year over year numbers will begin to will continue to, I should say, moderate. So we should be single digit kind of in the Q3 and Q4. I'm not giving guidance on yet, but we should just see continually improving year over year trends here on the CASM front. Be Regarding the management options, Speaker 200:21:13there was there were a Speaker 300:21:15number of be joining the call to questions. Speaker 200:21:16Thanks, Josh. Thanks, Josh. Thanks, Josh. Speaker 300:21:17Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Speaker 300:21:19Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Thanks, Josh. Speaker 300:21:21Thanks, Josh. Thanks, Josh. Thanks, Josh. Be Apollo's ownership, which I think is an important point for investors, has continued to drop and is now sub-thirty percent at the company. Be in the quarter. Speaker 300:21:43So when we fell below that number, a significant number of management options vested. Be So those original options are now fully vested. So vesting costs will not continue to recur in the quarters ahead at least for those options, so that number will moderate. Speaker 700:22:04Okay, great. Thanks so much, Steve. Operator00:22:08Be Thank you. One moment for questions. Our next question comes from Helane Becker with TD Cowen. You may proceed. Speaker 300:22:18Hi, thanks very much. This is Tom Fitzgerald on for Helane. My question is just on what you're seeing in terms of pilot attrition and How you're feeling about getting 1st officers to upgrade into the captain's seat? Appreciate any color you could have. Thanks very much. Speaker 200:22:33Be I'll make some very general comments and then Greg, if you want to jump in. Well, we don't have any problem hiring pilots and our attrition is consistently below where we had expected it would be at this time. The issue boils down really to getting pilots to be So we're constrained in the left seat and we continue to make strides in improving that figure and as We will grow as we upgrade Captains. Speaker 300:23:01Yes. I mean, to Jude's point, we don't have a problem hiring pilots right now. We've got really robust applications. We've got a great recruiting team. On the attrition front, we watch that daily. Speaker 300:23:14That staying within our expectations. We see these other deals that are going on out there now that might affect that attrition, but we believe we can moderate that with additional class sizes So as you said, it really does come down to our ability to grow is at the rate of our cap and upgrades. Speaker 200:23:30And this is an industry wide issue as these be in the case of the big three, they did a bunch of early retirements. So everybody is trying to get pilots through their training pipeline and right sized their pilot groups. It's taking a little time. Speaker 300:23:46Yes, I think one of the points is, we've talked about this point for now a number of quarters. This continues to be a challenge for us, but I think you can look at Speaker 200:23:55the growth that we're looking at here in Speaker 300:23:57the Q3 as a testament to the fact that we are making progress, be Operator00:24:19One moment for questions. Our next question comes from Mike Linenberg with Deutsche Bank. You may proceed. Speaker 800:24:28Hey, good morning everyone. I did get on a few minutes late and I apologize if you may have addressed this, but just going from a 15% operating margin, you're guiding 6 to 11, we're coming off of what was seasonally one of your weaker quarters. What are sort of the primary drivers there? Is it things like fuel? I know September is a tough month for you guys. Speaker 800:24:53Can you just run through some of the puts and takes, Your thinking behind that decel and profitability? Thanks. Speaker 200:25:02I mean the main thing is be segmented capacity allocation. So we have very consistent profitability from our track and cargo programs, track charter and cargo programs. Be And it's a good thing that they in many ways, it's a good thing that they are flat in capacity. And then we have scheduled service, which is variable. And as I mentioned, and Dave alluded to, we're flying our airplanes in July, one of the showing strong demand months of the year at about 8 hours a day and that number should be 10, 11. Speaker 200:25:42Be And those are 40% incremental margin opportunities that we're cutting out because of Capacity constraints that don't have anything to do with opportunity or airplanes. It's really about staffing. So that's the biggest thing. In contrast, the 2nd quarter is a relatively flat demand period as compared to the Q3. So 3rd quarter The way the Q3 goes July, in contrast, the Q2 has a really good April, a really good June. Speaker 200:26:12May is not great, but it's not that bad. It's not as bad as September, so it's a lot more flat, and that's the difference in the 2 quarters. Speaker 800:26:21Makes sense. Jude, did you mention what your ASMs will be up scheduled ASMs in the September quarter? Speaker 200:26:31We didn't mention that. Speaker 300:26:34I don't think we have an issue sharing it. I just don't have it in front of me. Speaker 200:26:36We can get it to you. I got it at about mid teens. Speaker 800:26:41Okay. Mid teens. Okay. And then just my last question and this is more of a modeling question as we think about be The rental revenue, the $6,000,000 is that sort of the right quarterly run rate? And when does that start to fade out? Speaker 800:26:56What is it sometime late 2024, 2025? Thanks for taking my questions. Speaker 300:27:01Yes, that's right. The fade out will begin be And really in November 2024 and then continue through November 2025 as the 5 aircraft roll off and coming to us to operate. Speaker 800:27:18Okay. Thank you. Operator00:27:29Our next question comes from Christopher Sathalopoulos with Susquehanna Investment Group. You may proceed. Speaker 400:27:35Good morning, everyone. I want to get back to The comment you made on I believe you said that the stock comp should be moderating giving the changes in the vesting schedule. So Could you help frame the implied operating income for 3Q? How should we think about be stock comp there and believe this quarter was a little north of 15%. That's a significant step up from recent quarters. Speaker 400:28:03Be I just want to better understand how we should think about that underlying as we think about the second half of the year? Thank you. Speaker 100:28:13I don't have that precise number in Speaker 300:28:14front of me. It'll just be a significant step down. I mean in the second quarter, be There was a significant chunk of options that had not yet vested. They all vested in 1 quarter. So there will be a step down number. Speaker 300:28:28I just don't have that in front of me. Speaker 200:28:32As it pertains to the 2018 option grant be That was associated with the Apollo transaction. All those options are either vested or Speaker 300:28:45be done. So that goes to 0. Yes, exactly. So that number goes to 0. And as with any other company, we have an RSU program, which is ongoing. Speaker 300:28:54So there'll be Some stock comp expense that continues just at a significantly lower level. Speaker 400:29:02Okay. The second question, so I think you're backing out the D and A associated with these 5 dry leases from your CASM ex. Could you just walk us through the rationale why I'm guessing because they don't have associated ASMs and but you're including the revenue side of it. And then also as those come off, I think you said dry lease in 2025. If you could just kind of walk us be answering the question and answer session. Speaker 400:29:33How we should think about the unit cost impact or unit margin. I just want to kind of better understand this relationship here, is that sitting in revenue here, but it looks like it's coming out of your chasm. Thanks. Yes. Speaker 300:29:45I mean it's Yes. So I mean it's sitting in revenue and it's sitting in expense in our financials. But since as you pointed out, it doesn't generate any ASMs. We take it out of the CASM comp and it's out of the TRASM comp. So it's out of unit costs on the revenue side and on the cost side. Speaker 300:30:05In the same way that our cargo revenue wasn't in our cost per ASM or revenue per ASM number that generate ASMs. Speaker 200:30:15Be Strategically, I want to just reiterate from last quarter, we're not being a lessor. We're just acquiring airplanes be for future delivery. So when we report, we're doing our best to back out all those results so that you can kind of see the underlying success Speaker 300:30:33That's the business which what we care about. Speaker 400:30:36Okay. And if you could get in one more Yes. I'm sorry. Speaker 200:30:39Go ahead. Speaker 400:30:40No, I just wanted Speaker 300:30:40to follow-up quickly. I just pulled the numbers. So be Stock comp in the 2nd quarter, I think is around 4.5. That number will probably drop to $1,000,000 plus or minus. Speaker 400:30:52Be For 3Q or second half or? Speaker 300:30:57No, for 3Q. Speaker 400:30:59Be Okay, great. Thanks. And just if I could get in one more here. So we've heard from U. S. Speaker 400:31:05Peers talking about how the showing strong international travel is pulling from a pool of what would be domestic travelers. Are you seeing any of that? And if so, what are your thoughts on when that might be Speaker 200:31:21I mean, my view is that we observe be And so it's true that the Transatlantic be participating in the Q1 of 2019. I think it's a stretch to say that those folks that are flying transatlantic would have otherwise flown domestic. Be I think more confidently we can say summer of 2022 was an outlier in demand recovery with a lot of be recaptured from the previous years. Instead, we're going down to a fairly consistent year over 4 in a range of $1,000,000,000 in the quarter, and I will be in a Speaker 500:31:59range of $1,000,000,000 in Speaker 200:31:59the quarter, and I will be in a range of $1,000,000 in the quarter, and I will be in a range of $1,000,000 in the quarter. And that seems consistent going into all the bookings we're seeing through the spring of next year. So I think it's a little much to draw that conclusion, but I think what gets me excited is just it looks like Speaker 600:32:30be I would just add to that that those unit revenues versus 2019, I think we're at the high end of that. So that's specific to us and the testament to the good job this team has done. And I also think Jude's comments are spot on. If you look at our network, we grew, Jude mentioned 15 new markets this summer. They've all met expectations. Speaker 600:32:50Our load factors are up. So, we saw strong showing strong demand across our network and really happy with the results. Speaker 400:33:01Okay. Thank you. Be joining today's call. Operator00:33:05Thank you. I'd now like to turn the call back over to Jude Bricker for any closing remarks. Speaker 200:33:13Thanks for joining us. Thanks for your interest in Sun Country and we'll talk to you again at the end of the next quarter. Good morning everybody.Read morePowered by