NASDAQ:SNCY Sun Country Airlines Q4 2024 Earnings Report $9.43 +0.73 (+8.39%) As of 04:00 PM Eastern Earnings HistoryForecast Sun Country Airlines EPS ResultsActual EPS$0.27Consensus EPS $0.21Beat/MissBeat by +$0.06One Year Ago EPS$0.12Sun Country Airlines Revenue ResultsActual Revenue$260.40 millionExpected Revenue$258.04 millionBeat/MissBeat by +$2.36 millionYoY Revenue Growth+6.10%Sun Country Airlines Announcement DetailsQuarterQ4 2024Date2/4/2025TimeAfter Market ClosesConference Call DateTuesday, February 4, 2025Conference 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)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Sun Country Airlines Q4 2024 Earnings Call TranscriptProvided by QuartrFebruary 4, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Sun Country Airlines 4th Quarter and Full Year 2024 Earnings Call. My name is Michelle, and I will be 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 session. Operator00:00:36Please be advised that today's conference is being recorded. I will now turn the call over to Chris Allen, Director of Investor Relations. Mr. Allen, you may begin. Chris AllenDirector, IR at Sun Country Airlines00:00:48Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer Dave Davis, President and Chief Financial Officer and a group of others to help answer questions. 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 are based upon management's current beliefs, expectations and assumptions and are Chris AllenDirector, IR at Sun Country Airlines00:01:07subject to risks and uncertainties. Actual results may differ materially. We encourage you to review the risk factors and Chris AllenDirector, IR at Sun Country Airlines00:01:12cautionary statements outlined in our earnings release and our most recent SEC filings. We assume no obligation to update any forward looking statements. You can find our Q4 and full year 2024 earnings press release Chris AllenDirector, IR at Sun Country Airlines00:01:23on the Investor Relations portion of our website at ir. Suncountry.com. With that Chris AllenDirector, IR at Sun Country Airlines00:01:28said, I'd like to turn the Chris AllenDirector, IR at Sun Country Airlines00:01:28call over to Jukin. Jude BrickerCEO at Sun Country Airlines00:01:30Thanks, Chris. Good morning, everyone. Before we get into our financial results, I want to take a moment to address the tragic accident last week in Washington, D. C. Our thoughts are with the families and loved ones affected by this event. Jude BrickerCEO at Sun Country Airlines00:01:41Our industry is highly competitive, but we've always worked together with other airlines, the OEMs and regulators to make sure we deliver the safest possible operations. Once all the facts are gathered, there will surely be lessons that will be applied across the industry. We will continue to maintain the highest safety standards across our operations to earn and keep the trust of our passengers and the public. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo business, we are able to deliver the most flexible scheduled service capacity in the industry. Jude BrickerCEO at Sun Country Airlines00:02:15The combination of our schedule flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe due to our structural advantages, we will be able to reliably deliver industry leading profitability throughout all cycles. I want to first highlight a few developments. First, last month, we reached agreements in principle with the unions of both our flight attendants and our dispatchers. We expect these agreements to go to vote among the respective work groups in the next month or so. Jude BrickerCEO at Sun Country Airlines00:02:51I'm excited to be able to deliver improved rates and work rules to all these team members. Also, we took delivery of our first cargo aircraft from our latest agreement with Amazon. This aircraft is yet to enter service, but by summer, we will have all 8 aircraft growing the cargo fleet to 20. I expect cargo revenue will roughly double by this time next year. We also executed redelivery off lease of our first 730seven-nine 100. Jude BrickerCEO at Sun Country Airlines00:03:20This aircraft will also go into service this summer. We still have 6 aircraft that we own that are out on lease, redelivering through the end of 2026. These aircraft will provide the growth in our passenger fleet in the coming years. Including the freighters, we'll be able to grow block hours by about 30 percent through 2027 without a change in utilization or additional aircraft acquisitions. In scheduled service and similar to the rest of the industry, we are seeing capacity rationalization starting to inflect unit revenues to the positive. Jude BrickerCEO at Sun Country Airlines00:03:53Our TRASM was flat year on year for the Q4. However, in December, we saw scheduled service TRASM increase almost 5%, which is where January is. Capacity trends remain positive through the selling schedule. As underlying demand remains strong, I expect unit revenues continue to perform well. Our staff continues to deliver for our customers. Jude BrickerCEO at Sun Country Airlines00:04:15Of note, our completion factor and mishandled bag rate operational metrics that are particularly important to our low frequency model are near the best in the industry. After a strong 2024, you should expect more of the same from us in 2025, margins at or near the top of the industry, high levels of free cash production, healthy growth at about 10% block hour increase, operational excellence and continued balance sheet strengthening. And with that, I'll turn it over Jude BrickerCEO at Sun Country Airlines00:04:43to Dave. Dave DavisPresident & CFO at Sun Country Airlines00:04:44Thanks, Jude. We're pleased to report that Q4 was our 10th consecutive quarter of profitability. Both total revenue of $260,400,000 and adjusted operating margin of 10.6 were the highest on record for Sun Country. With the exception of the Q2 of 2022, on an adjusted net income basis, we've been profitable in every quarter since our IPO in March of 2021. Dave DavisPresident & CFO at Sun Country Airlines00:05:10Additionally, 2024 was our 4th consecutive full year of profitability. Total revenue of $1,080,000,000 was our highest full year on record, driven by strong revenues in the charter line of business and the cargo segment. Operating margin for the year was 9.9% and adjusted operating margin was 10.4%. Adjusted diluted EPS for the year was $1.05 These results speak directly to the resilience of the uniquely diversified Sun Country model. Industry overcapacity prevailed through much of 2024, but the capacity picture changed quickly in Q4 and we were very active in adjusting scheduled service capacity to match demand. Dave DavisPresident & CFO at Sun Country Airlines00:05:55While scheduled service ASMs in the first half of the year grew 17%, we trimmed growth in the second half of the year to less than 5%. Despite the significant removal in scheduled service flying, we're still able to hold growth in adjusted CASM to only 1.3% for the year. Unit revenues rebounded in the second half of the year as Q4 scheduled service TRASM was down only 1% on 3.5% growth in scheduled service ASMs. As industry capacity continues to rationalize, we are seeing a stronger pricing environment into Q1 of 'twenty five. I'll now turn to the specifics of the Q4. Dave DavisPresident & CFO at Sun Country Airlines00:06:33First to revenue and capacity. 4th quarter total revenue of $260,400,000 was 6.1% higher than last year. Revenue for our passenger segment, which includes our scheduled service and charter businesses grew 2.2% year over year. Average scheduled service fare also grew 2.2% year over year to $159.88 Scheduled service TRASM steadily improved during the quarter with December up 5.8% year over year. As we turn our focus to Q1 'twenty five, we're expecting scheduled service unit revenues to be roughly flat with Q1 of 'twenty four and 7% growth in Sched Service ASMs. Dave DavisPresident & CFO at Sun Country Airlines00:07:15Charter revenue in the 4th quarter grew 2.3% to $48,000,000 on 5% growth in charter block hours. As a reminder, a portion of charter revenue is a reconciliation of fuel expense caused by the variance of fuel prices to the amount specified in our longer term charter contracts. As Q4 fuel prices were down 20%, we received less revenue tied to fuel reconciliation. Excluding this fuel reconciliation, Q4 charter revenue grew approximately 10% over last year. Ad hoc charter revenue growth was also significant as we saw it increase by 27% in the quarter versus last year. Dave DavisPresident & CFO at Sun Country Airlines00:07:55Excluding the fuel reconciliation, Q4 charter revenue per block hour was up 4.6% versus Q4 of 2023 24, I should say. For our cargo segment, revenue grew by 13.1% in Q4 to $28,600,000 which was an all time quarterly high. This growth came despite a 2.5% decrease in cargo block hours. Q4 cargo revenue per block hour was up 16%, driven by the impact of a portion of the rate changes implicit in our extended Amazon agreement as well as annual rate adjustments. We continue to expect cargo flying to reflect sharply upward in 2025 as we take on an anticipated 8 additional freighter aircraft throughout the year. Dave DavisPresident & CFO at Sun Country Airlines00:08:401 of the freighters has already been delivered and we expect it to enter service in late Q1. The revised Amazon contract rates will continue to escalate as we receive additional aircraft and will not be in full effect until the second half of twenty twenty five. Turning now to costs. Q4 total operating expense grew 2.6% on 2.7% growth in total block hours. We continue to remain well disciplined as demonstrated by full year 2024 adjusted CASM only increasing by 1.3% versus 2023. Dave DavisPresident & CFO at Sun Country Airlines00:09:12For full year 2025, we expect our ex fuel operating expenses to grow in line with our total block hours, which are expected to increase between 9% 10% versus full year of 2024. As a reminder, our 8 additional Amazon aircraft will drive most of the growth in 2025 and we expect full year scheduled service ASMs to decline between 3% 5% with the reductions occurring in Q2 through Q4. The lower ASM productions put pressure on adjusted CASM, which we currently anticipate to increase mid to high single digits in 2025. This decline will happen from Q2 through the rest of 2025 as we are anticipating scheduled service revenue growth in Q1. Regarding our balance sheet, our total liquidity at the end of the year was $205,600,000 As of February 3rd, total liquidity stood at $226,700,000 Full year 2024 CapEx was $88,000,000 which includes the acquisition of 3 aircraft previously on finance leases. Dave DavisPresident & CFO at Sun Country Airlines00:10:17At this point, we do not need to purchase any incremental aircraft until we begin looking for 2027 or 2028 capacity. We expect 2025 CapEx to be between $70,000,000 $80,000,000 with much of this spent on spare engines. During the quarter, we appended a new C tranche to our existing 2019 AETC raising $60,000,000 This was used to pay down a significant portion of the term loan financing our 5730seven-nine 100 ER aircraft. This is expected to drive savings of approximately $800,000 in 2025 interest expense. Our leverage continues to improve and we finished 2024 with a net debt to adjusted EBITDA ratio of 2 times. Dave DavisPresident & CFO at Sun Country Airlines00:11:04Additionally, we have extended the lease return dates on 3 of the 4730seven-nine hundred ERs currently on lease to another carrier. The 4 aircraft are now expected to return to us in May, September November of 2025 and in November of 2026. We had 1 730seven-nine 100 ER returned to us in November 2024 and we expect this aircraft to enter revenue service in mid-twenty 25. These extensions provide continued lease revenues as we focus our 2025 growth on our cargo business. As the lease 730seven-nine 100 ERs return to us, they'll provide the passenger service growth we expect in 2026 and 2027. Dave DavisPresident & CFO at Sun Country Airlines00:11:47Let me turn now to guidance. We expect 1st quarter total revenue to be between $330,000,000 $340,000,000 on block hour growth of 7% to 9%. We're anticipating our fuel cost per gallon to be $2.76 and for us to achieve an operating margin between 17% 21%. Our business is built for resiliency and we'll continue to allocate capacity between segments to maximize profitability and minimize earnings volatility. With that, we'll open it up for questions. Operator00:12:19Thank Operator00:12:43And our first question will come from Ravi Shanker with Morgan Stanley. Your line is now open. Ravi ShankerManaging Director at Morgan Stanley00:12:50Great. Thank you. Good morning. A couple of here just to kick off. There's been some commentary on other airline calls about just strength in Europe in the Q1, kind of just unusual, probably driven by FX and such. Ravi ShankerManaging Director at Morgan Stanley00:13:05How does that kind of impact you guys? Does it kind of help with feeder? Does it potentially redirect some traffic away from domestic winter destinations to Europe? Just obviously given how important 1Q is for you guys? Jude BrickerCEO at Sun Country Airlines00:13:20Yes. To start with the obvious, Jude BrickerCEO at Sun Country Airlines00:13:22we don't fly there. So I think the secondary effect is that there's a reallocation of capacity into the transatlantic market that positively affects us. We're selling really well in the Mexican Caribbean destinations. It certainly doesn't appear that there's a shift in demand out of those markets into the transatlantic market. So I think on the whole, it's a positive. Jude BrickerCEO at Sun Country Airlines00:13:48I mean, we would like to see strength everywhere for U. S. Airlines. So there's no downside risk there. Ravi ShankerManaging Director at Morgan Stanley00:13:57Got it. That's really helpful. And yes, I was referring to the indirect impact. And maybe as a follow-up, kind of Dave, thanks for the specific guidance there. But can you just help us, given the moving parts here, frame the trajectory of margin and CASM evolution through the year please? Dave DavisPresident & CFO at Sun Country Airlines00:14:14Yes. I mean, I think you know the seasonal or the seasonal profile of the company. Q1, we expect to be really strong. We gave guidance. I think as sort of revenues come in, we're very confident in that guidance. Dave DavisPresident & CFO at Sun Country Airlines00:14:32I think we'll follow sort of a typical seasonal pattern. A lot of how the year plays out is going to be driven by the exact delivery dates of the Amazon cargo aircraft. We expect them to start service in March and then enter service throughout the year. They should all be in by late summer into Q4. But I don't see anything abnormal from a seasonal profitability perspective for the company. Jude BrickerCEO at Sun Country Airlines00:15:07One thing of note would be that the things that we were dealing with last year primarily were competitive encroachment into our network and that negatively affected the second and third quarter the most. As you can see in the Q4, we did quite well, the best we've ever done in the Q4. And that variance where capacity is now a tailwind as opposed to a headwind It's the strongest in the Q2 combined with the Easter shift into April. All else equal, we're not giving guidance into the Q2. The Q2 has the most upside relative to the prior year comps. Dave DavisPresident & CFO at Sun Country Airlines00:15:49And from a capacity perspective, Ravi, probably, you can anticipate Q3 being the biggest drawdown in scheduled service capacity for the year. Right now, it's looking to be around 10% reduction in Q3 and then starting to rebound in Q4. Ravi ShankerManaging Director at Morgan Stanley00:16:08Very helpful. Thank you. Jude BrickerCEO at Sun Country Airlines00:16:11Thanks, Ravi. Operator00:16:13And the next question will come from Duane Pfennigwerth with Evercore. Your line is open. Duane PfennigwerthSenior MD at Evercore00:16:21Hey guys, good morning. Maybe you could just speak to bookings patterns in the Q4. It looked like there was a nice build in your ATL. And is there something around maybe seasonal changes? Or is the booking curve extending? Duane PfennigwerthSenior MD at Evercore00:16:38Is it spring break? Any color you could provide on that would be great. Jude BrickerCEO at Sun Country Airlines00:16:44Well, so I just want to make sure when we look at ACLs that we should look on a year on year basis, not sequential because we have such strong seasonality. I'm assuming that you're doing that. Duane PfennigwerthSenior MD at Evercore00:16:56We are, sorry. We are, but I guess that sequential move is much stronger than it has been for the last few years, it looks like to us. Jude BrickerCEO at Sun Country Airlines00:17:06Yes. So a couple of things were bigger in the Q1 than we were in the prior year that affects ATLs. As we mentioned, we got some TRASM tailwind. One of the changes that we're inflicting ourselves on our own booking is just holding capacity further out. So we're seeing less variability in our pricing as the particular flight sells. Jude BrickerCEO at Sun Country Airlines00:17:32So we're building Mode Factor early on. And then as it moves close in, in the mid range, we get less bookings because we see such strong demand close in these days, particularly in our larger EDU markets. Anything else? Okay. Yes. Jude BrickerCEO at Sun Country Airlines00:17:51So like that's a complicated answer, but I'd say generally the output of that is higher fares, it's slightly lower load factors. Duane PfennigwerthSenior MD at Evercore00:18:00Got it. Thank you. And then just to the extent that you can on the cargo expansion, can you just remind us of, I guess, the cadence of the aircraft that you're taking on? How that may have changed? And relatedly, the cadence of maybe the rate improvement as that business rolls on? Duane PfennigwerthSenior MD at Evercore00:18:21Thank you for taking the questions. Dave DavisPresident & CFO at Sun Country Airlines00:18:24Yes. I think as we sit now, there's really no significant change from the guidance we've been giving for a while. The first aircraft now looks like it's probably going to be in service in late March. Jude BrickerCEO at Sun Country Airlines00:18:36Mid to late March. Dave DavisPresident & CFO at Sun Country Airlines00:18:37Mid to late March. And then they should all be in service by Q4. Jude BrickerCEO at Sun Country Airlines00:18:43By the Jude BrickerCEO at Sun Country Airlines00:18:43end of August. Dave DavisPresident & CFO at Sun Country Airlines00:18:44End of August, yes. So the rate of delivery is really fast and the rate of the escalations the 2 additional escalations in our rate is basically similar to what we've been talking about before. Duane PfennigwerthSenior MD at Evercore00:18:59Okay. Thank you. Operator00:19:03And the next question will come from Brandon Oglenski with Barclays. Your line is open. Brandon OglenskiDirector & Senior Equity Analyst at Barclays00:19:13Good morning and thanks for taking the question. Jude or Dave, do you guys mind talking about network priorities as you get into the summer months, especially as you flip some pilot capacity into the cargo business? And actually, should that help shape a better margin profile in those softer quarters for you guys? Jude BrickerCEO at Sun Country Airlines00:19:33Yes, I'll take that one. So it's pretty simple. I mean, the stuff that was on the margin last summer is going to be cut from the schedule. And that's going to be the cuts are going to be a combination of in particular last summer, we had a lot of markets that we put in to repel competitive incursion. Many of those will be suspended. Jude BrickerCEO at Sun Country Airlines00:19:55And then there's going to be some carving some capacity reductions in same store markets that had particularly low yields. So it's a pretty easy schedule to write from a capacity planning perspective. And yes, like we expect fares to be substantially higher based on those capacity moves and then a general reduction in OA capacity across our network and underlying strong demand. Yes, we're forecasting some pretty strong revenue productions. Brandon OglenskiDirector & Senior Equity Analyst at Barclays00:20:33Appreciate that, Jude. And then as you think about it going into 2026, I know it's far out there, but should we be thinking scheduled capacity remain down at the beginning of next year as well? Dave DavisPresident & CFO at Sun Country Airlines00:20:46I think probably by mid-twenty 26, we should be pretty close to back to where we were, let's say at the end of the Q1 of 2025. So in other words, shrink Q2, shrink Q3 and then start to rebound in Q4, grow into the Q1 of 2026. So sometime between there and the middle of 2026, we should be sort of back and then growing again. Brandon OglenskiDirector & Senior Equity Analyst at Barclays00:21:19Okay. Thank you, guys. Operator00:21:23And our next question will come from Catherine O'Brien with Goldman Sachs. Your line is open. Catherine O'BrienVice President at Goldman Sachs00:21:31Good morning, everyone. Just a one on the margin outlook here, I know you've already given some details, but your Q4 operating margin up just over 300 basis points year over year, midpoint of the Q1 guide implies 100 basis point decline. Obviously, the fuel tailwind is smaller year over year. But just sounded that the capacity environment continues to improve further upside on Amazon. On the 1Q year over year versus 4Q year over year margin comparison, is that just fuel or maybe the new flight attendant deals in there, perhaps some conservatism around industry uplift? Catherine O'BrienVice President at Goldman Sachs00:22:06Any color there would be really helpful. Thanks. Dave DavisPresident & CFO at Sun Country Airlines00:22:10Yes. So first of all, the new flight attendant deal is in there for part of the quarter. There is a little bit more significant increase in pilot pay in 2025. I would say just speaking generally probably the Q1 of 2025 we see at least as strong as the Q1 of 2024. We put a range around the guidance. Dave DavisPresident & CFO at Sun Country Airlines00:22:40Everything looks good at this point. Probably not going to say much more than that, but I think we're very confident in the number. Catherine O'BrienVice President at Goldman Sachs00:22:51Got it. Understood. And then just a strong secondary aircraft pricing, do you think you'll still be able to find growth aircraft for later this decade? Can you just help us frame maybe like rough numbers, how many aircraft you'd need past the ones you already have out on lease to get you through your growth plan to the rest of the decade? And do you feel confident being able to find opportunistic purchases for that volume of aircraft? Catherine O'BrienVice President at Goldman Sachs00:23:13Thanks. Dave DavisPresident & CFO at Sun Country Airlines00:23:16The answer is yes. There's 2 pieces that are out there to provide growth in the 2026, 2027 and 2028. And those two pieces are the redelivery of the aircraft that are on lease with Oman, the 730seven-900s, those 5 aircraft and then a couple other ones that we have on lease 730seven-800s. So those come back into the fleet and then we still think there's room on the utilization front. We're in the 7 hours range ish. Dave DavisPresident & CFO at Sun Country Airlines00:23:46We think there's upside to that as well. So there's probably 30% to 40% growth just on the metal that we have right now and that gets us into 28% most likely. Used aircraft are expensive right now. We continue to be in the market and we'll buy opportunistically. But with very little activity in the market, we think there's significant growth left in the airline, enough to get us through the end of the decade. Jude BrickerCEO at Sun Country Airlines00:24:14Just a couple more comments. It's good not to be dependent on Airbus, Boeing, CFM or Pratt and Whitney the way they're executing right now. So I'd rather have our fleet win than sort of anybody else's. And then also we have very reliable aircraft. So like we're not having to deal with any of the out of service issues that other airlines are dealing with associated with the new technology equipment. Jude BrickerCEO at Sun Country Airlines00:24:43So I mean, we already own these aircraft that Dave mentioned that are going to provide growth. I just feel really good about where we are on the fleet Jude BrickerCEO at Sun Country Airlines00:24:53side. Catherine O'BrienVice President at Goldman Sachs00:24:53Yes, definitely a great spot to be in. Thanks for all that color. Jude BrickerCEO at Sun Country Airlines00:24:57Yes. Operator00:24:59And the next question will come from Michael Linenberg with Deutsche Bank. Your line is open. Michael LinenbergManaging Director at Deutsche Bank00:25:08Hey, good morning guys. I guess a couple here. Jude, you talked about encroachment capacity and I do see that as you guys scale back pretty meaningfully in call it, spring, early summer, we are seeing some additional capacity come into your markets by some of those who are probably just there skimming. And so I guess the question is, as you scale back, does it open up opportunities for others and maybe to establish share sort of thoughts on that? Jude BrickerCEO at Sun Country Airlines00:25:40Hey, Mike, let me take this opportunity to talk a little bit better about how we think about capacity. So I think the innovation that Sun Country brings to the market is that we basically say at any moment in time, what's the best thing a plane can do right now. And then we fill out the schedule till we either run out of things to do, and in which case we park airplanes or we run out of planes. And every other airline generally would build an optimized day and repeat it many, many times and then kind of tweak that day based on certain inputs. It's just fundamentally different way to think about it. Jude BrickerCEO at Sun Country Airlines00:26:15And what we want to get to, which probably isn't possible, is where we don't have to fly, where our fixed obligations are so low and can be serviced by our cargo and track flying that's contractual that we can be entirely independent when we make capacity decisions. So when we look at summer markets, for example, that we're going to be pulling out, those markets work for us, but don't work for anybody else even if we're not in them. We're talking about like Cleveland, Minneapolis that can be supported by a carrier, a leisure carrier like ours because there's leisure demand between Memorial Day and Labor Day sufficient to support a twice weekly service pattern. But if you're going to fly it daily with the 321, at the back of the clock, it's going to be empty at 0 fares. And so I'm just not at all I don't lose any sleep about some of the backfill opportunities that might happen for other airlines. Jude BrickerCEO at Sun Country Airlines00:27:15We are keeping our footprint down in these really what I would consider strategically important markets that call out like JetBlue leaving Minneapolis, Boston. If you go way back in time to 2017, we used to serve that market up to 3 daily in the summertime. We're going to keep a healthy level of capacity in that market. So I think markets that can sustain any significant capacity level will continue to get service from us. And then markets that really only work for us are going to be the kind of markets that we're going to be pulling back on for the summer next year. Michael LinenbergManaging Director at Deutsche Bank00:27:51Great. Very great. Very helpful. And then just thanks for that. My second, just with all the headlines around tariffs and you're going all in on cargo and I realize there's it's more about knock on effects, secondary or second order effects from tariff and the impact to overall cargo and commerce and freight. Michael LinenbergManaging Director at Deutsche Bank00:28:15With your Amazon contract, do you have minimums whether it's block hours or revenues and so the plane flies and if whether the plane is 90% full or 60% full, you're going to get compensated. Can you just talk about maybe downside risk protection? Thanks. Dave DavisPresident & CFO at Sun Country Airlines00:28:32Yes. So the way the contract maybe before speaking broadly about tariffs, which are difficult to sort of assess, especially given that we have one customer. There's no set minimums, but there's the way this contract is constructed is there is a fixed rate per aircraft and then a block hour rate on top of that. So it operates as sort of a de facto minimum, because we get paid for each aircraft. Jude BrickerCEO at Sun Country Airlines00:29:01Generally speaking, the lower the utilization of the cargo fleet, the better the margins are for us because we can redeploy that pilot capacity most of the calendar into more high margin flying. And then you mentioned the load on the airplane, I want to call out, we can fly empty or full, it doesn't matter that the rates are the same. Hence, pass through economics on fuel and stuff. So any other secondary effects of a full airplane that doesn't impact profitability of the cargo market Jude BrickerCEO at Sun Country Airlines00:29:33for us. Michael LinenbergManaging Director at Deutsche Bank00:29:33Perfect. That's what I wanted to hear. Thanks. Michael LinenbergManaging Director at Deutsche Bank00:29:36Nice quarter. Dave DavisPresident & CFO at Sun Country Airlines00:29:37Thanks. Operator00:29:40And our next question will come from Scott Group with Wolfe Research. Your line is open. Scott GroupMD & Senior Analyst at Wolfe Research00:29:47Hey, thanks. Good morning. I just I'm not sure if I heard this right, but I think at one point you said January unit revenue was tracking up 5%, but you're assuming for the quarter scheduled service unit revenue flat. Did I hear that right? Is that I just want to understand that. Jude BrickerCEO at Sun Country Airlines00:30:06Yes. January is doing about what December did. We haven't closed January yet, but it looks like along the lines, February is going to be a softer month this year. So kind of the wash is and March is about in line. So that's kind of where we're at. Jude BrickerCEO at Sun Country Airlines00:30:25On a quarterly basis, roughly flat. Scott GroupMD & Senior Analyst at Wolfe Research00:30:28What's driving the weaker February and flattish March relative to a strong January? Jude BrickerCEO at Sun Country Airlines00:30:38So March has there's the Easter shift. We should talk about a flat March with 5% unit revenue with 5% or 6% ASM growth, I think is a pretty good result. And February, the weakness? Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:30:54I think it's some of it moving into sort of that April timeframe. Last year was so concentrated with the early holidays. And we have some strategic capacity growth out of Milwaukee into the Caribbean, which we feel really good about meeting expectations, but there's just some year over year comp on that as well. Jude BrickerCEO at Sun Country Airlines00:31:14I'd say, yes, just more color would be the Caribbean is a little bit softer than previous year, but our core markets are really strong. So those are the markets that you would see, call it, trunk wrap for us. So Phoenix, Vegas, Fort Myers, Orlando, Cancun are all really good. And those become a more heavily weighted portion of the network in March, where kind of early February is these once or twice a week markets into deep Caribbean and those are a little off. Scott GroupMD & Senior Analyst at Wolfe Research00:31:50Okay. With last week, UPS announced a 50% cut in their volume with Amazon. So Amazon maybe has got to look somewhere else. Is this an opportunity for you? Or is this what you're doing for Amazon is pretty different than what the UPS is involved with? Scott GroupMD & Senior Analyst at Wolfe Research00:32:08So I don't know. Is this an opportunity, a risk? Dave DavisPresident & CFO at Sun Country Airlines00:32:13Yes. I think I don't see it as a risk in any way. Here's sort of the issue. The Amazon operates 20 narrow bodies and we're going to have them. So unless we sort of go to a different fleet type where they grow that narrow body fleet, there's probably not a short term opportunity to take advantage of what's going on at UPS. Dave DavisPresident & CFO at Sun Country Airlines00:32:37And as you pointed out, it doesn't matter if the aircraft are more full, we get paid a per block hour basis. Now over the long term, Dave DavisPresident & CFO at Sun Country Airlines00:32:45we love the Amazon business. Dave DavisPresident & CFO at Sun Country Airlines00:32:47The margins are great. So we think there's probably more growth ahead, but I don't think the near term UPS stuff is near term potential for us. Jude BrickerCEO at Sun Country Airlines00:32:59The Amazon growth is coming faster than we can grow the operation and also keep the kind of performance that we expect. So we want to be able to absorb this growth, allocate more growth into our scheduled service and then before we talk about cargo growth, if we could have it our way, that's how we do it. We pause on cargo growth after this 20 airplane expansion and then for a couple of years at least. Scott GroupMD & Senior Analyst at Wolfe Research00:33:27And then just lastly if I can, I think you said $70,000,000 to $80,000,000 of CapEx this year? Any other what are the other puts and takes for free cash flow and how are you Scott GroupMD & Senior Analyst at Wolfe Research00:33:35thinking about the buyback right now? Dave DavisPresident & CFO at Sun Country Airlines00:33:40Yes. So, yes, your CapEx number is right. We'll be paying back a fair amount of debt in 2025. And a buyback is always on the table that we are and we are looking at it and as we see sort of how the numbers come in, cash flow looks strong now, we'll kind of make decisions. Dave DavisPresident & CFO at Sun Country Airlines00:34:01But we're not announcing a buyback right now, but we'll continue to be sort of assessing it. Scott GroupMD & Senior Analyst at Wolfe Research00:34:10Thank you, guys. Jude BrickerCEO at Sun Country Airlines00:34:12Thanks, guys. Operator00:34:14And the next question comes from Tom Fitzgerald with TD Cohen. Your line is open. Thomas FitzgeraldSenior Hotels And Online Travel Analyst at TD Cowen00:34:21Hi, everyone. Thanks so much for the time. Did I hear that right that you said 30% block hour growth through 2027? And would you mind just breaking that up between scheduled charter and cargo? Jude BrickerCEO at Sun Country Airlines00:34:33Well, that's just simple arithmetic of saying 2024 utilization applied to the in service fleet that we will have after all the committed fleet is redelivered into the operation. Yes. Dave DavisPresident & CFO at Sun Country Airlines00:34:45So that by definition is passenger growth. Yes. Yes. So the 30% is basically as you just said, the redelivery of the leased aircraft and then improved utilization. Thomas FitzgeraldSenior Hotels And Online Travel Analyst at TD Cowen00:34:56Okay, thanks. That's really helpful. And then, just like longer term, how are you thinking about I know in August you talked about with some of the volatility that other airlines are facing, wanted to keep your powder dry to invest opportunistically. How are you thinking longer term about adding other focus cities or adding like another and something else in addition to Minneapolis? Thanks again for the time. Jude BrickerCEO at Sun Country Airlines00:35:21Well, we want to do it. I'd say we're putting in we're making the investments into markets that we think can support over time a Sun Country type operation. So we have we've expanded into the upper Midwest with origination service out of Milwaukee. We continue to support our summer Mexican Caribbean service out of Dallas and Central Texas. So I think those are the kind of markets that we're going to be able to expand into at the end of the decade. Jude BrickerCEO at Sun Country Airlines00:35:56But quite frankly, the next 2 years, it's going to kind of be getting the network back to what it was in 2024. Dave DavisPresident & CFO at Sun Country Airlines00:36:04Yes. So I mean, I think if you just look a little bit sort of longer term, 25 is all cargo, right? And then 26 cargo basically the full year effect of these new aircraft will be hitting the growth of the airline as well. And then 26, probably 27 are refilling in Minneapolis and then some of these other focus cities. As we move to later in the decade, we think we can take this model to a lot of different cities. Dave DavisPresident & CFO at Sun Country Airlines00:36:32Grant mentioned one, where we're doing some strategic growth now. But that's definitely on the table, but we got our hands full with all of our sort of program bid growth here over the next couple of years. Jude BrickerCEO at Sun Country Airlines00:36:44I think also the point would be it's difficult to predict where those opportunities are going to be because of the pull down from Spirit and kind of how all that shakes out where they end up in their restructuring. So and then Southwest is doing some pretty dramatic changes to their network and adjusting down their growth. So I think Jude BrickerCEO at Sun Country Airlines00:37:10what we see as an opportunity a few years from Jude BrickerCEO at Sun Country Airlines00:37:10now may not be what we see is an opportunity a few years from now may not be what we see today. And so I think the main point is our capacity is going to be our growth capacity outside of Minneapolis isn't going to be available about 2 years. And when that happens, it's going to be probably a different network. Operator00:37:38And our next question comes from James Kirby with JPMorgan. James KirbyVice President at JP Morgan00:37:46Hey, good morning guys. Most of my questions have been asked. Maybe just on the ad hoc charter segment, I think you mentioned in the prepared remarks that has been growth in the Q4. I guess what drove that? Was that just kind of better efficiency or demand? James KirbyVice President at JP Morgan00:38:03And I guess going forward, should we expect the charter segment to kind of be proportionally down with scheduled service for the cadence of the year? Dave DavisPresident & CFO at Sun Country Airlines00:38:13Yes. So the growth on a percentage basis in ad hoc charter in the Q4 was significant. Now remember, most of our flying 80% plus is on the program side, so that percentage growth is up a relatively low base. But we did have Dave DavisPresident & CFO at Sun Country Airlines00:38:29a lot of football flying in Dave DavisPresident & CFO at Sun Country Airlines00:38:32the 4th quarter that really drove that growth. And we sort of see that ad hoc growth continuing into the year, into 2025. The cargo that charter business story is not going to be down on the order of the scheduled service business, maybe flat to up low single digits kind of a number. James KirbyVice President at JP Morgan00:38:56Got it. That's helpful. And there's a significant contract roll offs in the next 2 years, I believe, right? I think, MLS was 2027 or is that incorrect? Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:39:08Yes. We did work with them this year. So we feel really good about that contract into the future. And then I would just say for the Q4, I would just add to what Dave said. I think it's just a very good illustration of the power of our model that when we are looking for that. Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:39:34We communicate really well with them and when we have availability, we win business. So, I would just say that, but yes, we feel very good about our partnerships in the short term, the medium term. We're doing a really good job of delivering for our customers. James KirbyVice President at JP Morgan00:39:53Okay, got it. Thanks for the questions. Operator00:40:03And our next question will come from Christopher Staphoulopoulos with Susquehanna. Your line is now open. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:40:12Thank you, operator. Good morning, everyone. I want to go back to the Amazon. Good morning. Amazon business. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:40:18So the date, March and then mid to late August, full you'll have the full fleet in place. So I want to go back to the economics here. So there's a fixed rate per aircraft, which I'm guessing covers all insurance and things like that and block hour, commit rate on top of that, which is utilization agnostic. And then how much visibility do you have into the block hours? So is it sort of as your schedule is given a week, a month in advance? Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:40:53And then is the flying going to be concentrated out of CVG or more ad hoc point to point? Just want to understand the more nuances here between the fixed block hour rate piece and then the commitments and how that kind of network looks and will ultimately shape over time? Thanks. Jude BrickerCEO at Sun Country Airlines00:41:16Scheduled development is a 2 month schedule that gets approved roughly 6 times a year. They come in and we try to work together to optimize the schedule for utilization inputs, but ultimately it's their network and they fly where they want. I can't really comment on where we expect the planes to go because I don't really know. And that's the value Sun Country brings is that we can do sort of anything with the airplane based on our charter DNA really. So, but your comments about the rate structure are accurate and that there's a fixed component that includes margin and sort of everything else. Jude BrickerCEO at Sun Country Airlines00:42:01And then the variable costs associated with the operation are passed through in a fee basis. So from our perspective, it doesn't matter so much what the network looks like. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:42:16Okay. So I heard Chris, if Jude BrickerCEO at Sun Country Airlines00:42:18I get to your crux of your prop, go ahead. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:42:21Yes. So 2 month approval prop, so you have visibility into what March and through spring flying might look like at this point? Jude BrickerCEO at Sun Country Airlines00:42:34That's right. Yes. Now this is going to be a messy period just because the dates that we get the airplane on the certificate. So we take a delivery, then we'll do some work to the airplane, get it on the certificate and then schedule it. And so there's going to be a little bit of noise about the fleet count and the utilization and the schedule as we integrate these aircraft. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:43:00Okay. And my second question, so you spoke to the favorable supply demand balance here in the U. S. We've heard that from the peers. But as we look at a map of your network, are there areas or regions that are perhaps doing better or worse versus what kind of sort of looks like a low single digit domestic seat growth or at least the first half and a point or 2 of demand on top of that. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:43:28Just want to understand if there are pockets that are doing better or worse than as we think about domestic system as a whole? Thanks. Jude BrickerCEO at Sun Country Airlines00:43:36On the scheduled side, we're seeing, as I mentioned earlier, really strong demand into our really leisure trunk routes. I'd say the things that were uncertain going into this period are West Florida, they've had a lot of impact from storms down there and we've got a ton of seats. We have 5 markets on the West Coast and they're doing really well. I'd say Southern California is off a little bit. And then Caribbean as I mentioned earlier, but the Mexican markets are doing really, really well. Jude BrickerCEO at Sun Country Airlines00:44:11That was a point of uncertainty just with all the geopolitical stuff going on. I don't know, is it sort of Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:44:22I think you nailed it. The traditional spring break routes look really good year over year, just the capacity rationalization. And as we've mentioned, the Caribbean, there's pressure in the Caribbean, but it's because it's a strategic growth opportunity for us. We've done exceptionally well there. So we've added some these were single weekly markets. Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:44:43We've added some to twice a week. That's a significant capacity adjustment. These are really strong markets. So there was always going to be some impact to that and some competitors have seen that too. But we will be continue to be in these markets for the long run and the customers are responding to what we've added. Jude BrickerCEO at Sun Country Airlines00:45:02Yes. It's a good point, Grant. I should clarify. It's in the schedule because it's going to achieve some really high level of profitability. When I say weak, it's a year over year, yes, transit decline, but it's from such a high level in the prior year. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:45:19Okay. Thank you. Operator00:45:23I show no further questions in the queue at this time. I would now like to turn the call back over to Jude Bricker for closing remarks. Jude BrickerCEO at Sun Country Airlines00:45:33Thanks for calling in everybody. We really appreciate it. I think we have a great story and we're excited to share it with you guys. Have a great day everybody. Operator00:45:42This concludes today's conference call. Thank you for participating. You may now disconnect.Read moreParticipantsExecutivesChris AllenDirector, IRJude BrickerCEODave DavisPresident & CFOGrant WhitneyChief Revenue Officer & EVPAnalystsRavi ShankerManaging Director at Morgan StanleyDuane PfennigwerthSenior MD at EvercoreBrandon OglenskiDirector & Senior Equity Analyst at BarclaysCatherine O'BrienVice President at Goldman SachsMichael LinenbergManaging Director at Deutsche BankScott GroupMD & Senior Analyst at Wolfe ResearchThomas FitzgeraldSenior Hotels And Online Travel Analyst at TD CowenJames KirbyVice President at JP MorganChristopher StathoulopoulosSenior Equity Research Analyst at SusquehannaPowered by Conference Call Audio Live Call not available Earnings Conference CallSun Country Airlines Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress Release(8-K)Annual report(10-K) Sun Country Airlines Earnings HeadlinesSun Country Airlines Will Hold Its First Quarter 2025 Earnings Conference Call May 2April 23 at 11:02 AM | globenewswire.comShort Interest in Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) Declines By 14.6%April 22 at 4:09 AM | americanbankingnews.comWho’s really running AmericaMost Americans have never heard his name… He was instrumental in Trump’s victory. He turned J.D. Vance from a Trump-hater into his vice president. He’s one of the driving forces behind the rise of cryptocurrencies, digital commerce, social media, Big Data, cloud computing, and artificial intelligence... In other words, he’s America’s puppet master. April 24, 2025 | Porter & Company (Ad)Is Sun Country Airlines Holdings Inc (SNCY) The Top Falling Stock with Unusual Volume?April 22 at 3:05 AM | msn.comSpirit Airlines names new CEO after emerging from bankruptcyApril 17, 2025 | msn.comSun Country CFO Departing for Top Role at Spirit AirlinesApril 17, 2025 | marketwatch.comSee More Sun Country Airlines Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Sun Country Airlines? 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 Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? 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PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Sun Country Airlines 4th Quarter and Full Year 2024 Earnings Call. My name is Michelle, and I will be 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 session. Operator00:00:36Please be advised that today's conference is being recorded. I will now turn the call over to Chris Allen, Director of Investor Relations. Mr. Allen, you may begin. Chris AllenDirector, IR at Sun Country Airlines00:00:48Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer Dave Davis, President and Chief Financial Officer and a group of others to help answer questions. 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 are based upon management's current beliefs, expectations and assumptions and are Chris AllenDirector, IR at Sun Country Airlines00:01:07subject to risks and uncertainties. Actual results may differ materially. We encourage you to review the risk factors and Chris AllenDirector, IR at Sun Country Airlines00:01:12cautionary statements outlined in our earnings release and our most recent SEC filings. We assume no obligation to update any forward looking statements. You can find our Q4 and full year 2024 earnings press release Chris AllenDirector, IR at Sun Country Airlines00:01:23on the Investor Relations portion of our website at ir. Suncountry.com. With that Chris AllenDirector, IR at Sun Country Airlines00:01:28said, I'd like to turn the Chris AllenDirector, IR at Sun Country Airlines00:01:28call over to Jukin. Jude BrickerCEO at Sun Country Airlines00:01:30Thanks, Chris. Good morning, everyone. Before we get into our financial results, I want to take a moment to address the tragic accident last week in Washington, D. C. Our thoughts are with the families and loved ones affected by this event. Jude BrickerCEO at Sun Country Airlines00:01:41Our industry is highly competitive, but we've always worked together with other airlines, the OEMs and regulators to make sure we deliver the safest possible operations. Once all the facts are gathered, there will surely be lessons that will be applied across the industry. We will continue to maintain the highest safety standards across our operations to earn and keep the trust of our passengers and the public. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo business, we are able to deliver the most flexible scheduled service capacity in the industry. Jude BrickerCEO at Sun Country Airlines00:02:15The combination of our schedule flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe due to our structural advantages, we will be able to reliably deliver industry leading profitability throughout all cycles. I want to first highlight a few developments. First, last month, we reached agreements in principle with the unions of both our flight attendants and our dispatchers. We expect these agreements to go to vote among the respective work groups in the next month or so. Jude BrickerCEO at Sun Country Airlines00:02:51I'm excited to be able to deliver improved rates and work rules to all these team members. Also, we took delivery of our first cargo aircraft from our latest agreement with Amazon. This aircraft is yet to enter service, but by summer, we will have all 8 aircraft growing the cargo fleet to 20. I expect cargo revenue will roughly double by this time next year. We also executed redelivery off lease of our first 730seven-nine 100. Jude BrickerCEO at Sun Country Airlines00:03:20This aircraft will also go into service this summer. We still have 6 aircraft that we own that are out on lease, redelivering through the end of 2026. These aircraft will provide the growth in our passenger fleet in the coming years. Including the freighters, we'll be able to grow block hours by about 30 percent through 2027 without a change in utilization or additional aircraft acquisitions. In scheduled service and similar to the rest of the industry, we are seeing capacity rationalization starting to inflect unit revenues to the positive. Jude BrickerCEO at Sun Country Airlines00:03:53Our TRASM was flat year on year for the Q4. However, in December, we saw scheduled service TRASM increase almost 5%, which is where January is. Capacity trends remain positive through the selling schedule. As underlying demand remains strong, I expect unit revenues continue to perform well. Our staff continues to deliver for our customers. Jude BrickerCEO at Sun Country Airlines00:04:15Of note, our completion factor and mishandled bag rate operational metrics that are particularly important to our low frequency model are near the best in the industry. After a strong 2024, you should expect more of the same from us in 2025, margins at or near the top of the industry, high levels of free cash production, healthy growth at about 10% block hour increase, operational excellence and continued balance sheet strengthening. And with that, I'll turn it over Jude BrickerCEO at Sun Country Airlines00:04:43to Dave. Dave DavisPresident & CFO at Sun Country Airlines00:04:44Thanks, Jude. We're pleased to report that Q4 was our 10th consecutive quarter of profitability. Both total revenue of $260,400,000 and adjusted operating margin of 10.6 were the highest on record for Sun Country. With the exception of the Q2 of 2022, on an adjusted net income basis, we've been profitable in every quarter since our IPO in March of 2021. Dave DavisPresident & CFO at Sun Country Airlines00:05:10Additionally, 2024 was our 4th consecutive full year of profitability. Total revenue of $1,080,000,000 was our highest full year on record, driven by strong revenues in the charter line of business and the cargo segment. Operating margin for the year was 9.9% and adjusted operating margin was 10.4%. Adjusted diluted EPS for the year was $1.05 These results speak directly to the resilience of the uniquely diversified Sun Country model. Industry overcapacity prevailed through much of 2024, but the capacity picture changed quickly in Q4 and we were very active in adjusting scheduled service capacity to match demand. Dave DavisPresident & CFO at Sun Country Airlines00:05:55While scheduled service ASMs in the first half of the year grew 17%, we trimmed growth in the second half of the year to less than 5%. Despite the significant removal in scheduled service flying, we're still able to hold growth in adjusted CASM to only 1.3% for the year. Unit revenues rebounded in the second half of the year as Q4 scheduled service TRASM was down only 1% on 3.5% growth in scheduled service ASMs. As industry capacity continues to rationalize, we are seeing a stronger pricing environment into Q1 of 'twenty five. I'll now turn to the specifics of the Q4. Dave DavisPresident & CFO at Sun Country Airlines00:06:33First to revenue and capacity. 4th quarter total revenue of $260,400,000 was 6.1% higher than last year. Revenue for our passenger segment, which includes our scheduled service and charter businesses grew 2.2% year over year. Average scheduled service fare also grew 2.2% year over year to $159.88 Scheduled service TRASM steadily improved during the quarter with December up 5.8% year over year. As we turn our focus to Q1 'twenty five, we're expecting scheduled service unit revenues to be roughly flat with Q1 of 'twenty four and 7% growth in Sched Service ASMs. Dave DavisPresident & CFO at Sun Country Airlines00:07:15Charter revenue in the 4th quarter grew 2.3% to $48,000,000 on 5% growth in charter block hours. As a reminder, a portion of charter revenue is a reconciliation of fuel expense caused by the variance of fuel prices to the amount specified in our longer term charter contracts. As Q4 fuel prices were down 20%, we received less revenue tied to fuel reconciliation. Excluding this fuel reconciliation, Q4 charter revenue grew approximately 10% over last year. Ad hoc charter revenue growth was also significant as we saw it increase by 27% in the quarter versus last year. Dave DavisPresident & CFO at Sun Country Airlines00:07:55Excluding the fuel reconciliation, Q4 charter revenue per block hour was up 4.6% versus Q4 of 2023 24, I should say. For our cargo segment, revenue grew by 13.1% in Q4 to $28,600,000 which was an all time quarterly high. This growth came despite a 2.5% decrease in cargo block hours. Q4 cargo revenue per block hour was up 16%, driven by the impact of a portion of the rate changes implicit in our extended Amazon agreement as well as annual rate adjustments. We continue to expect cargo flying to reflect sharply upward in 2025 as we take on an anticipated 8 additional freighter aircraft throughout the year. Dave DavisPresident & CFO at Sun Country Airlines00:08:401 of the freighters has already been delivered and we expect it to enter service in late Q1. The revised Amazon contract rates will continue to escalate as we receive additional aircraft and will not be in full effect until the second half of twenty twenty five. Turning now to costs. Q4 total operating expense grew 2.6% on 2.7% growth in total block hours. We continue to remain well disciplined as demonstrated by full year 2024 adjusted CASM only increasing by 1.3% versus 2023. Dave DavisPresident & CFO at Sun Country Airlines00:09:12For full year 2025, we expect our ex fuel operating expenses to grow in line with our total block hours, which are expected to increase between 9% 10% versus full year of 2024. As a reminder, our 8 additional Amazon aircraft will drive most of the growth in 2025 and we expect full year scheduled service ASMs to decline between 3% 5% with the reductions occurring in Q2 through Q4. The lower ASM productions put pressure on adjusted CASM, which we currently anticipate to increase mid to high single digits in 2025. This decline will happen from Q2 through the rest of 2025 as we are anticipating scheduled service revenue growth in Q1. Regarding our balance sheet, our total liquidity at the end of the year was $205,600,000 As of February 3rd, total liquidity stood at $226,700,000 Full year 2024 CapEx was $88,000,000 which includes the acquisition of 3 aircraft previously on finance leases. Dave DavisPresident & CFO at Sun Country Airlines00:10:17At this point, we do not need to purchase any incremental aircraft until we begin looking for 2027 or 2028 capacity. We expect 2025 CapEx to be between $70,000,000 $80,000,000 with much of this spent on spare engines. During the quarter, we appended a new C tranche to our existing 2019 AETC raising $60,000,000 This was used to pay down a significant portion of the term loan financing our 5730seven-nine 100 ER aircraft. This is expected to drive savings of approximately $800,000 in 2025 interest expense. Our leverage continues to improve and we finished 2024 with a net debt to adjusted EBITDA ratio of 2 times. Dave DavisPresident & CFO at Sun Country Airlines00:11:04Additionally, we have extended the lease return dates on 3 of the 4730seven-nine hundred ERs currently on lease to another carrier. The 4 aircraft are now expected to return to us in May, September November of 2025 and in November of 2026. We had 1 730seven-nine 100 ER returned to us in November 2024 and we expect this aircraft to enter revenue service in mid-twenty 25. These extensions provide continued lease revenues as we focus our 2025 growth on our cargo business. As the lease 730seven-nine 100 ERs return to us, they'll provide the passenger service growth we expect in 2026 and 2027. Dave DavisPresident & CFO at Sun Country Airlines00:11:47Let me turn now to guidance. We expect 1st quarter total revenue to be between $330,000,000 $340,000,000 on block hour growth of 7% to 9%. We're anticipating our fuel cost per gallon to be $2.76 and for us to achieve an operating margin between 17% 21%. Our business is built for resiliency and we'll continue to allocate capacity between segments to maximize profitability and minimize earnings volatility. With that, we'll open it up for questions. Operator00:12:19Thank Operator00:12:43And our first question will come from Ravi Shanker with Morgan Stanley. Your line is now open. Ravi ShankerManaging Director at Morgan Stanley00:12:50Great. Thank you. Good morning. A couple of here just to kick off. There's been some commentary on other airline calls about just strength in Europe in the Q1, kind of just unusual, probably driven by FX and such. Ravi ShankerManaging Director at Morgan Stanley00:13:05How does that kind of impact you guys? Does it kind of help with feeder? Does it potentially redirect some traffic away from domestic winter destinations to Europe? Just obviously given how important 1Q is for you guys? Jude BrickerCEO at Sun Country Airlines00:13:20Yes. To start with the obvious, Jude BrickerCEO at Sun Country Airlines00:13:22we don't fly there. So I think the secondary effect is that there's a reallocation of capacity into the transatlantic market that positively affects us. We're selling really well in the Mexican Caribbean destinations. It certainly doesn't appear that there's a shift in demand out of those markets into the transatlantic market. So I think on the whole, it's a positive. Jude BrickerCEO at Sun Country Airlines00:13:48I mean, we would like to see strength everywhere for U. S. Airlines. So there's no downside risk there. Ravi ShankerManaging Director at Morgan Stanley00:13:57Got it. That's really helpful. And yes, I was referring to the indirect impact. And maybe as a follow-up, kind of Dave, thanks for the specific guidance there. But can you just help us, given the moving parts here, frame the trajectory of margin and CASM evolution through the year please? Dave DavisPresident & CFO at Sun Country Airlines00:14:14Yes. I mean, I think you know the seasonal or the seasonal profile of the company. Q1, we expect to be really strong. We gave guidance. I think as sort of revenues come in, we're very confident in that guidance. Dave DavisPresident & CFO at Sun Country Airlines00:14:32I think we'll follow sort of a typical seasonal pattern. A lot of how the year plays out is going to be driven by the exact delivery dates of the Amazon cargo aircraft. We expect them to start service in March and then enter service throughout the year. They should all be in by late summer into Q4. But I don't see anything abnormal from a seasonal profitability perspective for the company. Jude BrickerCEO at Sun Country Airlines00:15:07One thing of note would be that the things that we were dealing with last year primarily were competitive encroachment into our network and that negatively affected the second and third quarter the most. As you can see in the Q4, we did quite well, the best we've ever done in the Q4. And that variance where capacity is now a tailwind as opposed to a headwind It's the strongest in the Q2 combined with the Easter shift into April. All else equal, we're not giving guidance into the Q2. The Q2 has the most upside relative to the prior year comps. Dave DavisPresident & CFO at Sun Country Airlines00:15:49And from a capacity perspective, Ravi, probably, you can anticipate Q3 being the biggest drawdown in scheduled service capacity for the year. Right now, it's looking to be around 10% reduction in Q3 and then starting to rebound in Q4. Ravi ShankerManaging Director at Morgan Stanley00:16:08Very helpful. Thank you. Jude BrickerCEO at Sun Country Airlines00:16:11Thanks, Ravi. Operator00:16:13And the next question will come from Duane Pfennigwerth with Evercore. Your line is open. Duane PfennigwerthSenior MD at Evercore00:16:21Hey guys, good morning. Maybe you could just speak to bookings patterns in the Q4. It looked like there was a nice build in your ATL. And is there something around maybe seasonal changes? Or is the booking curve extending? Duane PfennigwerthSenior MD at Evercore00:16:38Is it spring break? Any color you could provide on that would be great. Jude BrickerCEO at Sun Country Airlines00:16:44Well, so I just want to make sure when we look at ACLs that we should look on a year on year basis, not sequential because we have such strong seasonality. I'm assuming that you're doing that. Duane PfennigwerthSenior MD at Evercore00:16:56We are, sorry. We are, but I guess that sequential move is much stronger than it has been for the last few years, it looks like to us. Jude BrickerCEO at Sun Country Airlines00:17:06Yes. So a couple of things were bigger in the Q1 than we were in the prior year that affects ATLs. As we mentioned, we got some TRASM tailwind. One of the changes that we're inflicting ourselves on our own booking is just holding capacity further out. So we're seeing less variability in our pricing as the particular flight sells. Jude BrickerCEO at Sun Country Airlines00:17:32So we're building Mode Factor early on. And then as it moves close in, in the mid range, we get less bookings because we see such strong demand close in these days, particularly in our larger EDU markets. Anything else? Okay. Yes. Jude BrickerCEO at Sun Country Airlines00:17:51So like that's a complicated answer, but I'd say generally the output of that is higher fares, it's slightly lower load factors. Duane PfennigwerthSenior MD at Evercore00:18:00Got it. Thank you. And then just to the extent that you can on the cargo expansion, can you just remind us of, I guess, the cadence of the aircraft that you're taking on? How that may have changed? And relatedly, the cadence of maybe the rate improvement as that business rolls on? Duane PfennigwerthSenior MD at Evercore00:18:21Thank you for taking the questions. Dave DavisPresident & CFO at Sun Country Airlines00:18:24Yes. I think as we sit now, there's really no significant change from the guidance we've been giving for a while. The first aircraft now looks like it's probably going to be in service in late March. Jude BrickerCEO at Sun Country Airlines00:18:36Mid to late March. Dave DavisPresident & CFO at Sun Country Airlines00:18:37Mid to late March. And then they should all be in service by Q4. Jude BrickerCEO at Sun Country Airlines00:18:43By the Jude BrickerCEO at Sun Country Airlines00:18:43end of August. Dave DavisPresident & CFO at Sun Country Airlines00:18:44End of August, yes. So the rate of delivery is really fast and the rate of the escalations the 2 additional escalations in our rate is basically similar to what we've been talking about before. Duane PfennigwerthSenior MD at Evercore00:18:59Okay. Thank you. Operator00:19:03And the next question will come from Brandon Oglenski with Barclays. Your line is open. Brandon OglenskiDirector & Senior Equity Analyst at Barclays00:19:13Good morning and thanks for taking the question. Jude or Dave, do you guys mind talking about network priorities as you get into the summer months, especially as you flip some pilot capacity into the cargo business? And actually, should that help shape a better margin profile in those softer quarters for you guys? Jude BrickerCEO at Sun Country Airlines00:19:33Yes, I'll take that one. So it's pretty simple. I mean, the stuff that was on the margin last summer is going to be cut from the schedule. And that's going to be the cuts are going to be a combination of in particular last summer, we had a lot of markets that we put in to repel competitive incursion. Many of those will be suspended. Jude BrickerCEO at Sun Country Airlines00:19:55And then there's going to be some carving some capacity reductions in same store markets that had particularly low yields. So it's a pretty easy schedule to write from a capacity planning perspective. And yes, like we expect fares to be substantially higher based on those capacity moves and then a general reduction in OA capacity across our network and underlying strong demand. Yes, we're forecasting some pretty strong revenue productions. Brandon OglenskiDirector & Senior Equity Analyst at Barclays00:20:33Appreciate that, Jude. And then as you think about it going into 2026, I know it's far out there, but should we be thinking scheduled capacity remain down at the beginning of next year as well? Dave DavisPresident & CFO at Sun Country Airlines00:20:46I think probably by mid-twenty 26, we should be pretty close to back to where we were, let's say at the end of the Q1 of 2025. So in other words, shrink Q2, shrink Q3 and then start to rebound in Q4, grow into the Q1 of 2026. So sometime between there and the middle of 2026, we should be sort of back and then growing again. Brandon OglenskiDirector & Senior Equity Analyst at Barclays00:21:19Okay. Thank you, guys. Operator00:21:23And our next question will come from Catherine O'Brien with Goldman Sachs. Your line is open. Catherine O'BrienVice President at Goldman Sachs00:21:31Good morning, everyone. Just a one on the margin outlook here, I know you've already given some details, but your Q4 operating margin up just over 300 basis points year over year, midpoint of the Q1 guide implies 100 basis point decline. Obviously, the fuel tailwind is smaller year over year. But just sounded that the capacity environment continues to improve further upside on Amazon. On the 1Q year over year versus 4Q year over year margin comparison, is that just fuel or maybe the new flight attendant deals in there, perhaps some conservatism around industry uplift? Catherine O'BrienVice President at Goldman Sachs00:22:06Any color there would be really helpful. Thanks. Dave DavisPresident & CFO at Sun Country Airlines00:22:10Yes. So first of all, the new flight attendant deal is in there for part of the quarter. There is a little bit more significant increase in pilot pay in 2025. I would say just speaking generally probably the Q1 of 2025 we see at least as strong as the Q1 of 2024. We put a range around the guidance. Dave DavisPresident & CFO at Sun Country Airlines00:22:40Everything looks good at this point. Probably not going to say much more than that, but I think we're very confident in the number. Catherine O'BrienVice President at Goldman Sachs00:22:51Got it. Understood. And then just a strong secondary aircraft pricing, do you think you'll still be able to find growth aircraft for later this decade? Can you just help us frame maybe like rough numbers, how many aircraft you'd need past the ones you already have out on lease to get you through your growth plan to the rest of the decade? And do you feel confident being able to find opportunistic purchases for that volume of aircraft? Catherine O'BrienVice President at Goldman Sachs00:23:13Thanks. Dave DavisPresident & CFO at Sun Country Airlines00:23:16The answer is yes. There's 2 pieces that are out there to provide growth in the 2026, 2027 and 2028. And those two pieces are the redelivery of the aircraft that are on lease with Oman, the 730seven-900s, those 5 aircraft and then a couple other ones that we have on lease 730seven-800s. So those come back into the fleet and then we still think there's room on the utilization front. We're in the 7 hours range ish. Dave DavisPresident & CFO at Sun Country Airlines00:23:46We think there's upside to that as well. So there's probably 30% to 40% growth just on the metal that we have right now and that gets us into 28% most likely. Used aircraft are expensive right now. We continue to be in the market and we'll buy opportunistically. But with very little activity in the market, we think there's significant growth left in the airline, enough to get us through the end of the decade. Jude BrickerCEO at Sun Country Airlines00:24:14Just a couple more comments. It's good not to be dependent on Airbus, Boeing, CFM or Pratt and Whitney the way they're executing right now. So I'd rather have our fleet win than sort of anybody else's. And then also we have very reliable aircraft. So like we're not having to deal with any of the out of service issues that other airlines are dealing with associated with the new technology equipment. Jude BrickerCEO at Sun Country Airlines00:24:43So I mean, we already own these aircraft that Dave mentioned that are going to provide growth. I just feel really good about where we are on the fleet Jude BrickerCEO at Sun Country Airlines00:24:53side. Catherine O'BrienVice President at Goldman Sachs00:24:53Yes, definitely a great spot to be in. Thanks for all that color. Jude BrickerCEO at Sun Country Airlines00:24:57Yes. Operator00:24:59And the next question will come from Michael Linenberg with Deutsche Bank. Your line is open. Michael LinenbergManaging Director at Deutsche Bank00:25:08Hey, good morning guys. I guess a couple here. Jude, you talked about encroachment capacity and I do see that as you guys scale back pretty meaningfully in call it, spring, early summer, we are seeing some additional capacity come into your markets by some of those who are probably just there skimming. And so I guess the question is, as you scale back, does it open up opportunities for others and maybe to establish share sort of thoughts on that? Jude BrickerCEO at Sun Country Airlines00:25:40Hey, Mike, let me take this opportunity to talk a little bit better about how we think about capacity. So I think the innovation that Sun Country brings to the market is that we basically say at any moment in time, what's the best thing a plane can do right now. And then we fill out the schedule till we either run out of things to do, and in which case we park airplanes or we run out of planes. And every other airline generally would build an optimized day and repeat it many, many times and then kind of tweak that day based on certain inputs. It's just fundamentally different way to think about it. Jude BrickerCEO at Sun Country Airlines00:26:15And what we want to get to, which probably isn't possible, is where we don't have to fly, where our fixed obligations are so low and can be serviced by our cargo and track flying that's contractual that we can be entirely independent when we make capacity decisions. So when we look at summer markets, for example, that we're going to be pulling out, those markets work for us, but don't work for anybody else even if we're not in them. We're talking about like Cleveland, Minneapolis that can be supported by a carrier, a leisure carrier like ours because there's leisure demand between Memorial Day and Labor Day sufficient to support a twice weekly service pattern. But if you're going to fly it daily with the 321, at the back of the clock, it's going to be empty at 0 fares. And so I'm just not at all I don't lose any sleep about some of the backfill opportunities that might happen for other airlines. Jude BrickerCEO at Sun Country Airlines00:27:15We are keeping our footprint down in these really what I would consider strategically important markets that call out like JetBlue leaving Minneapolis, Boston. If you go way back in time to 2017, we used to serve that market up to 3 daily in the summertime. We're going to keep a healthy level of capacity in that market. So I think markets that can sustain any significant capacity level will continue to get service from us. And then markets that really only work for us are going to be the kind of markets that we're going to be pulling back on for the summer next year. Michael LinenbergManaging Director at Deutsche Bank00:27:51Great. Very great. Very helpful. And then just thanks for that. My second, just with all the headlines around tariffs and you're going all in on cargo and I realize there's it's more about knock on effects, secondary or second order effects from tariff and the impact to overall cargo and commerce and freight. Michael LinenbergManaging Director at Deutsche Bank00:28:15With your Amazon contract, do you have minimums whether it's block hours or revenues and so the plane flies and if whether the plane is 90% full or 60% full, you're going to get compensated. Can you just talk about maybe downside risk protection? Thanks. Dave DavisPresident & CFO at Sun Country Airlines00:28:32Yes. So the way the contract maybe before speaking broadly about tariffs, which are difficult to sort of assess, especially given that we have one customer. There's no set minimums, but there's the way this contract is constructed is there is a fixed rate per aircraft and then a block hour rate on top of that. So it operates as sort of a de facto minimum, because we get paid for each aircraft. Jude BrickerCEO at Sun Country Airlines00:29:01Generally speaking, the lower the utilization of the cargo fleet, the better the margins are for us because we can redeploy that pilot capacity most of the calendar into more high margin flying. And then you mentioned the load on the airplane, I want to call out, we can fly empty or full, it doesn't matter that the rates are the same. Hence, pass through economics on fuel and stuff. So any other secondary effects of a full airplane that doesn't impact profitability of the cargo market Jude BrickerCEO at Sun Country Airlines00:29:33for us. Michael LinenbergManaging Director at Deutsche Bank00:29:33Perfect. That's what I wanted to hear. Thanks. Michael LinenbergManaging Director at Deutsche Bank00:29:36Nice quarter. Dave DavisPresident & CFO at Sun Country Airlines00:29:37Thanks. Operator00:29:40And our next question will come from Scott Group with Wolfe Research. Your line is open. Scott GroupMD & Senior Analyst at Wolfe Research00:29:47Hey, thanks. Good morning. I just I'm not sure if I heard this right, but I think at one point you said January unit revenue was tracking up 5%, but you're assuming for the quarter scheduled service unit revenue flat. Did I hear that right? Is that I just want to understand that. Jude BrickerCEO at Sun Country Airlines00:30:06Yes. January is doing about what December did. We haven't closed January yet, but it looks like along the lines, February is going to be a softer month this year. So kind of the wash is and March is about in line. So that's kind of where we're at. Jude BrickerCEO at Sun Country Airlines00:30:25On a quarterly basis, roughly flat. Scott GroupMD & Senior Analyst at Wolfe Research00:30:28What's driving the weaker February and flattish March relative to a strong January? Jude BrickerCEO at Sun Country Airlines00:30:38So March has there's the Easter shift. We should talk about a flat March with 5% unit revenue with 5% or 6% ASM growth, I think is a pretty good result. And February, the weakness? Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:30:54I think it's some of it moving into sort of that April timeframe. Last year was so concentrated with the early holidays. And we have some strategic capacity growth out of Milwaukee into the Caribbean, which we feel really good about meeting expectations, but there's just some year over year comp on that as well. Jude BrickerCEO at Sun Country Airlines00:31:14I'd say, yes, just more color would be the Caribbean is a little bit softer than previous year, but our core markets are really strong. So those are the markets that you would see, call it, trunk wrap for us. So Phoenix, Vegas, Fort Myers, Orlando, Cancun are all really good. And those become a more heavily weighted portion of the network in March, where kind of early February is these once or twice a week markets into deep Caribbean and those are a little off. Scott GroupMD & Senior Analyst at Wolfe Research00:31:50Okay. With last week, UPS announced a 50% cut in their volume with Amazon. So Amazon maybe has got to look somewhere else. Is this an opportunity for you? Or is this what you're doing for Amazon is pretty different than what the UPS is involved with? Scott GroupMD & Senior Analyst at Wolfe Research00:32:08So I don't know. Is this an opportunity, a risk? Dave DavisPresident & CFO at Sun Country Airlines00:32:13Yes. I think I don't see it as a risk in any way. Here's sort of the issue. The Amazon operates 20 narrow bodies and we're going to have them. So unless we sort of go to a different fleet type where they grow that narrow body fleet, there's probably not a short term opportunity to take advantage of what's going on at UPS. Dave DavisPresident & CFO at Sun Country Airlines00:32:37And as you pointed out, it doesn't matter if the aircraft are more full, we get paid a per block hour basis. Now over the long term, Dave DavisPresident & CFO at Sun Country Airlines00:32:45we love the Amazon business. Dave DavisPresident & CFO at Sun Country Airlines00:32:47The margins are great. So we think there's probably more growth ahead, but I don't think the near term UPS stuff is near term potential for us. Jude BrickerCEO at Sun Country Airlines00:32:59The Amazon growth is coming faster than we can grow the operation and also keep the kind of performance that we expect. So we want to be able to absorb this growth, allocate more growth into our scheduled service and then before we talk about cargo growth, if we could have it our way, that's how we do it. We pause on cargo growth after this 20 airplane expansion and then for a couple of years at least. Scott GroupMD & Senior Analyst at Wolfe Research00:33:27And then just lastly if I can, I think you said $70,000,000 to $80,000,000 of CapEx this year? Any other what are the other puts and takes for free cash flow and how are you Scott GroupMD & Senior Analyst at Wolfe Research00:33:35thinking about the buyback right now? Dave DavisPresident & CFO at Sun Country Airlines00:33:40Yes. So, yes, your CapEx number is right. We'll be paying back a fair amount of debt in 2025. And a buyback is always on the table that we are and we are looking at it and as we see sort of how the numbers come in, cash flow looks strong now, we'll kind of make decisions. Dave DavisPresident & CFO at Sun Country Airlines00:34:01But we're not announcing a buyback right now, but we'll continue to be sort of assessing it. Scott GroupMD & Senior Analyst at Wolfe Research00:34:10Thank you, guys. Jude BrickerCEO at Sun Country Airlines00:34:12Thanks, guys. Operator00:34:14And the next question comes from Tom Fitzgerald with TD Cohen. Your line is open. Thomas FitzgeraldSenior Hotels And Online Travel Analyst at TD Cowen00:34:21Hi, everyone. Thanks so much for the time. Did I hear that right that you said 30% block hour growth through 2027? And would you mind just breaking that up between scheduled charter and cargo? Jude BrickerCEO at Sun Country Airlines00:34:33Well, that's just simple arithmetic of saying 2024 utilization applied to the in service fleet that we will have after all the committed fleet is redelivered into the operation. Yes. Dave DavisPresident & CFO at Sun Country Airlines00:34:45So that by definition is passenger growth. Yes. Yes. So the 30% is basically as you just said, the redelivery of the leased aircraft and then improved utilization. Thomas FitzgeraldSenior Hotels And Online Travel Analyst at TD Cowen00:34:56Okay, thanks. That's really helpful. And then, just like longer term, how are you thinking about I know in August you talked about with some of the volatility that other airlines are facing, wanted to keep your powder dry to invest opportunistically. How are you thinking longer term about adding other focus cities or adding like another and something else in addition to Minneapolis? Thanks again for the time. Jude BrickerCEO at Sun Country Airlines00:35:21Well, we want to do it. I'd say we're putting in we're making the investments into markets that we think can support over time a Sun Country type operation. So we have we've expanded into the upper Midwest with origination service out of Milwaukee. We continue to support our summer Mexican Caribbean service out of Dallas and Central Texas. So I think those are the kind of markets that we're going to be able to expand into at the end of the decade. Jude BrickerCEO at Sun Country Airlines00:35:56But quite frankly, the next 2 years, it's going to kind of be getting the network back to what it was in 2024. Dave DavisPresident & CFO at Sun Country Airlines00:36:04Yes. So I mean, I think if you just look a little bit sort of longer term, 25 is all cargo, right? And then 26 cargo basically the full year effect of these new aircraft will be hitting the growth of the airline as well. And then 26, probably 27 are refilling in Minneapolis and then some of these other focus cities. As we move to later in the decade, we think we can take this model to a lot of different cities. Dave DavisPresident & CFO at Sun Country Airlines00:36:32Grant mentioned one, where we're doing some strategic growth now. But that's definitely on the table, but we got our hands full with all of our sort of program bid growth here over the next couple of years. Jude BrickerCEO at Sun Country Airlines00:36:44I think also the point would be it's difficult to predict where those opportunities are going to be because of the pull down from Spirit and kind of how all that shakes out where they end up in their restructuring. So and then Southwest is doing some pretty dramatic changes to their network and adjusting down their growth. So I think Jude BrickerCEO at Sun Country Airlines00:37:10what we see as an opportunity a few years from Jude BrickerCEO at Sun Country Airlines00:37:10now may not be what we see is an opportunity a few years from now may not be what we see today. And so I think the main point is our capacity is going to be our growth capacity outside of Minneapolis isn't going to be available about 2 years. And when that happens, it's going to be probably a different network. Operator00:37:38And our next question comes from James Kirby with JPMorgan. James KirbyVice President at JP Morgan00:37:46Hey, good morning guys. Most of my questions have been asked. Maybe just on the ad hoc charter segment, I think you mentioned in the prepared remarks that has been growth in the Q4. I guess what drove that? Was that just kind of better efficiency or demand? James KirbyVice President at JP Morgan00:38:03And I guess going forward, should we expect the charter segment to kind of be proportionally down with scheduled service for the cadence of the year? Dave DavisPresident & CFO at Sun Country Airlines00:38:13Yes. So the growth on a percentage basis in ad hoc charter in the Q4 was significant. Now remember, most of our flying 80% plus is on the program side, so that percentage growth is up a relatively low base. But we did have Dave DavisPresident & CFO at Sun Country Airlines00:38:29a lot of football flying in Dave DavisPresident & CFO at Sun Country Airlines00:38:32the 4th quarter that really drove that growth. And we sort of see that ad hoc growth continuing into the year, into 2025. The cargo that charter business story is not going to be down on the order of the scheduled service business, maybe flat to up low single digits kind of a number. James KirbyVice President at JP Morgan00:38:56Got it. That's helpful. And there's a significant contract roll offs in the next 2 years, I believe, right? I think, MLS was 2027 or is that incorrect? Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:39:08Yes. We did work with them this year. So we feel really good about that contract into the future. And then I would just say for the Q4, I would just add to what Dave said. I think it's just a very good illustration of the power of our model that when we are looking for that. Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:39:34We communicate really well with them and when we have availability, we win business. So, I would just say that, but yes, we feel very good about our partnerships in the short term, the medium term. We're doing a really good job of delivering for our customers. James KirbyVice President at JP Morgan00:39:53Okay, got it. Thanks for the questions. Operator00:40:03And our next question will come from Christopher Staphoulopoulos with Susquehanna. Your line is now open. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:40:12Thank you, operator. Good morning, everyone. I want to go back to the Amazon. Good morning. Amazon business. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:40:18So the date, March and then mid to late August, full you'll have the full fleet in place. So I want to go back to the economics here. So there's a fixed rate per aircraft, which I'm guessing covers all insurance and things like that and block hour, commit rate on top of that, which is utilization agnostic. And then how much visibility do you have into the block hours? So is it sort of as your schedule is given a week, a month in advance? Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:40:53And then is the flying going to be concentrated out of CVG or more ad hoc point to point? Just want to understand the more nuances here between the fixed block hour rate piece and then the commitments and how that kind of network looks and will ultimately shape over time? Thanks. Jude BrickerCEO at Sun Country Airlines00:41:16Scheduled development is a 2 month schedule that gets approved roughly 6 times a year. They come in and we try to work together to optimize the schedule for utilization inputs, but ultimately it's their network and they fly where they want. I can't really comment on where we expect the planes to go because I don't really know. And that's the value Sun Country brings is that we can do sort of anything with the airplane based on our charter DNA really. So, but your comments about the rate structure are accurate and that there's a fixed component that includes margin and sort of everything else. Jude BrickerCEO at Sun Country Airlines00:42:01And then the variable costs associated with the operation are passed through in a fee basis. So from our perspective, it doesn't matter so much what the network looks like. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:42:16Okay. So I heard Chris, if Jude BrickerCEO at Sun Country Airlines00:42:18I get to your crux of your prop, go ahead. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:42:21Yes. So 2 month approval prop, so you have visibility into what March and through spring flying might look like at this point? Jude BrickerCEO at Sun Country Airlines00:42:34That's right. Yes. Now this is going to be a messy period just because the dates that we get the airplane on the certificate. So we take a delivery, then we'll do some work to the airplane, get it on the certificate and then schedule it. And so there's going to be a little bit of noise about the fleet count and the utilization and the schedule as we integrate these aircraft. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:43:00Okay. And my second question, so you spoke to the favorable supply demand balance here in the U. S. We've heard that from the peers. But as we look at a map of your network, are there areas or regions that are perhaps doing better or worse versus what kind of sort of looks like a low single digit domestic seat growth or at least the first half and a point or 2 of demand on top of that. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:43:28Just want to understand if there are pockets that are doing better or worse than as we think about domestic system as a whole? Thanks. Jude BrickerCEO at Sun Country Airlines00:43:36On the scheduled side, we're seeing, as I mentioned earlier, really strong demand into our really leisure trunk routes. I'd say the things that were uncertain going into this period are West Florida, they've had a lot of impact from storms down there and we've got a ton of seats. We have 5 markets on the West Coast and they're doing really well. I'd say Southern California is off a little bit. And then Caribbean as I mentioned earlier, but the Mexican markets are doing really, really well. Jude BrickerCEO at Sun Country Airlines00:44:11That was a point of uncertainty just with all the geopolitical stuff going on. I don't know, is it sort of Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:44:22I think you nailed it. The traditional spring break routes look really good year over year, just the capacity rationalization. And as we've mentioned, the Caribbean, there's pressure in the Caribbean, but it's because it's a strategic growth opportunity for us. We've done exceptionally well there. So we've added some these were single weekly markets. Grant WhitneyChief Revenue Officer & EVP at Sun Country Airlines00:44:43We've added some to twice a week. That's a significant capacity adjustment. These are really strong markets. So there was always going to be some impact to that and some competitors have seen that too. But we will be continue to be in these markets for the long run and the customers are responding to what we've added. Jude BrickerCEO at Sun Country Airlines00:45:02Yes. It's a good point, Grant. I should clarify. It's in the schedule because it's going to achieve some really high level of profitability. When I say weak, it's a year over year, yes, transit decline, but it's from such a high level in the prior year. Christopher StathoulopoulosSenior Equity Research Analyst at Susquehanna00:45:19Okay. Thank you. Operator00:45:23I show no further questions in the queue at this time. I would now like to turn the call back over to Jude Bricker for closing remarks. Jude BrickerCEO at Sun Country Airlines00:45:33Thanks for calling in everybody. We really appreciate it. I think we have a great story and we're excited to share it with you guys. Have a great day everybody. Operator00:45:42This concludes today's conference call. Thank you for participating. You may now disconnect.Read moreParticipantsExecutivesChris AllenDirector, IRJude BrickerCEODave DavisPresident & CFOGrant WhitneyChief Revenue Officer & EVPAnalystsRavi ShankerManaging Director at Morgan StanleyDuane PfennigwerthSenior MD at EvercoreBrandon OglenskiDirector & Senior Equity Analyst at BarclaysCatherine O'BrienVice President at Goldman SachsMichael LinenbergManaging Director at Deutsche BankScott GroupMD & Senior Analyst at Wolfe ResearchThomas FitzgeraldSenior Hotels And Online Travel Analyst at TD CowenJames KirbyVice President at JP MorganChristopher StathoulopoulosSenior Equity Research Analyst at SusquehannaPowered by