Sun Country Airlines Reports Second Quarter 2022 Results

Aug 08, 2022

Q2 2022 GAAP diluted EPS of $(0.07) and operating income of $3 million

Q2 2022 Adjusted diluted EPS of $(0.03)⁽¹⁾and adjusted operating income of $4 million⁽¹⁾

MINNEAPOLIS, Aug. 08, 2022 (GLOBE NEWSWIRE) -- Sun Country Airlines Holdings, Inc. (“Sun Country Airlines”, “Sun Country”, the “Company”) (NASDAQ: SNCY) today reported financial results for its second quarter ended June 30, 2022.

“Despite the second quarter being a historically seasonally weaker quarter, scheduled service TRASM in the quarter was up 29% versus the second quarter 2019 and 13% sequentially versus first quarter 2022. We generated a positive operating profit of $3.4 million and an adjusted operating profit of $4 million despite fuel prices averaging $4.39 per gallon during the quarter,” said Jude Bricker, Chief Executive Officer of Sun Country. "During the month of June, scheduled service TRASM was 44% higher than in 2019 and we generated a GAAP operating margin of almost 8%, all while we were paying $4.47 per gallon for jet fuel. We continued to see strong leisure demand in July and expect it to stay elevated through the summer travel period. We are facing the same training challenges that have impacted the rest of the industry, resulting in less scheduled service flying than we would like to have flown and negatively impacting results We are making progress on resolving these training challenges and fundamentally view them to be temporary in nature; I am as bullish as ever on all of the critical factors that will determine Sun Country’s long-term success.”

Overview of Second Quarter	Three Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2022		2021⁽⁷⁾		% Change
Total Operating Revenue	$	219.1		$	149.2	46.8
Operating Income		3.4			49.8	(93.2	)
Income (Loss) Before Income Tax		(4.8	)		61.8	(107.8	)
Net Income (Loss)		(3.9	)		52.2	(107.5	)
Diluted earnings (Loss) per share	$	(0.07	)	$	0.84	(108.3	)

	Three Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2022		2021⁽⁷⁾		% Change
Adjusted Operating Income ⁽¹⁾	$	3.9		$	10.8	(63.4	)
Adjusted Income (Loss) Before Income Tax ⁽¹⁾		(2.6	)		4.7	NM
Adjusted Net Income (Loss) ⁽¹⁾		(1.8	)		3.9	NM
Adjusted diluted earnings (Loss) per share ⁽¹⁾	$	(0.03	)	$	0.06	NM

	Six Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2022		2021⁽⁷⁾		% Change
Total Operating Revenue	$	445.6		$	276.8	61.0
Operating Income		25.2			80.4	(68.7	)
Income Before Income Tax		1.6			85.3	(98.2	)
Net Income (Loss)		(0.3	)		69.0	(100.4	)
Diluted earnings (Loss) per share	$	0.00		$	1.20	(100.0	)

	Six Months Ended June 30,
(unaudited) (in millions, except per share amounts)		2022	2021⁽⁷⁾			% Change
Adjusted Operating Income ⁽¹⁾	$	26.7	$	12.0		123.2
Adjusted Income Before Income Tax ⁽¹⁾		13.0		0.0		NM
Adjusted Net Income (Loss) ⁽¹⁾		10.5		(1.0	)	NM
Adjusted diluted earnings (Loss) per share ⁽¹⁾	$	0.18	$	(0.02	)	NM

“NM” stands for not meaningful

For the quarter ended June 30, 2022, Sun Country reported a net loss of $4 million and a loss before income tax of $5 million, on $219 million of revenue. Adjusted loss before income tax for the quarter was $3 million⁽¹⁾. GAAP operating income during the quarter was $3 million, producing an operating margin of 1.5%, while adjusted operating income was $4 million⁽¹⁾, resulting in an adjusted operating income margin of 1.8%⁽¹⁾.

“Demand continues to be at some of the strongest levels that we have seen,” said Dave Davis, President and Chief Financial Officer. "Unfortunately, despite growing second quarter block hours by 23% versus 2019, we were undersized in the quarter due to training challenges limiting our scheduled service and ad hoc charter growth. Since signing our new pilot agreement in December of last year, we have been able to attract all of the new hire pilots we need, and attrition has been greatly reduced. We are making strong progress in expanding our training pipeline to accommodate our growth and we anticipate seeing the benefits later this year. Capacity constraints have pressured our unit costs by limiting aircraft utilization. As we hire and train new staff at a record pace for Sun Country, new flying will come at high marginal profitability as the needed assets already exist.”

Notable Highlights

Adding a third aircraft to its charter service for Caesars Entertainment in October 2022
Selected by the U.S. Department of Transportation to provide Essential Air Service (EAS) for Chippewa Valley Regional Airport (EAU) in Eau Claire, WI, beginning in December 2022
Announced new service to Grand Cayman beginning in December 2022
Airline Business awarded Sun Country with the Airline Strategy Award 2022 for Sector Leadership

Capacity

System block hours flown during the second quarter of 2022 grew by 10% year over year and by 23% versus the same period in 2019, driven by the growth in our cargo business. Staffing challenges impacted passenger service capacity with scheduled service block hours and charter block hours lower by 9% and 5% when compared to the second quarter of 2019.

Charter block hours under long term contracts remain the bulk of the charter flying performed in the second quarter. This composed 92% of total charter flying versus 51% in the second quarter of 2019. As the Company begins to normalize its aircraft utilization, it will be able to pursue more ad-hoc charter flying.

Revenue

For the second quarter of 2022, the Company reported total revenue of $219 million, which was 29% more than the second quarter of 2019. Excluding the $21 million in cargo revenue that did not exist in 2019, revenue still exceeded second quarter 2019 by $28.5 million. The Company’s scheduled service TRASM ⁽³⁾ of 11.6 cents in the second quarter of 2022 increased 29% from the second quarter of 2019 while scheduled service ASMs decreased 6%. The second quarter 2022 total fare of $173 exceeded second quarter 2019 by 23%, and included strong ancillary revenue per passenger of $50.

Charter service revenue is primarily generated through service provided to collegiate and professional sports teams, the U.S. Department of Defense, casinos, and other customers. In the second quarter of 2022, the Company’s charter service revenue was $43 million, an increase of 3% versus second quarter 2019. On a rate basis, second quarter 2022 charter revenue per block hour was 8% higher than the rate in the second quarter of 2019.

Cargo revenue consists of revenue earned from flying cargo aircraft under the Air Transportation Services Agreement (“ATSA”) with Amazon. In the second quarter of 2022, cargo revenue was $21 million, a 4% decrease versus the second quarter of 2021 due to the timing of planned heavy maintenance events.

Cost

For the second quarter of 2022, total GAAP operating expenses increased 35% versus the second quarter of 2019, primarily due to a 77% increase in aircraft fuel expense in the quarter. Adjusted CASM in the second quarter increased 15% in the second quarter 2022 versus the second quarter 2019 while total ASMs decreased 6% for the same period. Second quarter 2022 was also impacted by the new pilot agreement that was signed at the end of 2021.

Balance Sheet and Liquidity

The Company’s net debt⁽⁵⁾ on June 30, 2022 was $362 million, while total liquidity⁽⁶⁾ was $308 million.

(unaudited) (in millions)	June 30, 2022		December 31, 2021
Cash and Cash Equivalents	$	212.9	$	309.3
Available-for-Sale Securities		70.1		—
Amount Available Under Revolving Credit Facility		25.0		25.0
Total Liquidity	$	308.0	$	334.3

	June 30, 2022		December 31, 2021
Long-term Debt	$	363.5	$	277.4
Finance Lease Obligations		249.6		192.2
Operating Lease Obligations		31.6		76.0
Total Debt and Lease Obligations		644.7		545.6
Cash and Cash Equivalents		212.9		309.3
Available-for-Sale Securities		70.1		—
Net Debt	$	361.7	$	236.3

Fleet

As of June 30, 2022, the Company had 41 aircraft in its passenger service fleet, and operated twelve freighter aircraft in its cargo operation.

Guidance for Third Quarter 2022

	Q3 2022	H/(L) vs Q3 2019
Total revenue - millions	$215 to $220	25% to 28%
Economic fuel cost per gallon	$3.84
Operating income margin - percentage	3% - 5%
Effective tax rate	23%
Total system block hours - thousands	31 to 32	17% to 21%

Conference Call & Webcast Details
Sun Country Airlines will host a conference call to discuss its second quarter 2022 results at 10:00 a.m. Eastern Time on Tuesday, August 9, 2022. A live broadcast of the conference call will be available via the investor relations section of Sun Country Airlines’ website at https://ir.suncountry.com/news-events/events-and-presentations. The online replay will be available on the same website approximately one hour after the call. The conference call can also be listened to live by accessing https://register.vevent.com/register/BI2e6b0275b8fe4c78aceab592f270965f .

About Sun Country Airlines

Sun Country Airlines is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter and cargo businesses. Based in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers and charter customers and providing cargo CMI services, with flights throughout the United States and to destinations in Mexico, Central America, Canada, and the Caribbean.

End Notes

1 -	See additional details in the tables below in the section titled “Non-GAAP financial measures”
2 -	Total system TRASM = total revenue – cargo revenue / system ASMs
3 -	Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs
4 -	Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, Special Items, non-cash management stock compensation expense, costs arising from its cargo operations (began in 2020 when the Company launched cargo operations), certain commissions, and other costs of selling its vacations product from this measure. See table titled “Reconciliation of Adjusted CASM to CASM”
5 -	Net debt = current portion of long-term debt + long-term debt + finance lease obligations + operating lease obligations – cash and cash equivalents - Available-for-Sale Securities
6 -	Total liquidity = cash and cash equivalents + available-for-sale securities + amount of undrawn revolver
7 -	Certain prior period amounts have been revised to correct an immaterial change related to the application of the Company’s accounting for its aircraft transactions, as reflected this in our in our Quarterly Report on Form 10-Q.

Forward Looking Statements

This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. The forward-looking statements are relating to:

• our strategy, outlook and growth prospects;

• our operational and financial targets and dividend policy;

• general economic trends and trends in the industry and markets; and

• the competitive environment in which we operate.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

These forward-looking statements reflect our views with respect to future events as of the date of this press release and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. We anticipate that subsequent events and developments will cause our views to change. You should read this press release completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements. Additional information concerning certain factors is contained in the Company’s Securities and Exchange Commission filings, including but not limited to the Company’s Annual Reports on Form 10-K, Quarterly Report on Form 10-Q, and Current Reports on Form 8-K.

Non-GAAP Financial Measures

We sometimes use information that is derived from the condensed consolidated financial statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this document to the most directly comparable GAAP financial measures.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months Ended June 30,
		2022		2021⁽⁷⁾			% Change
Operating Revenues:
Scheduled Service	$	108,412		$	67,073		61.6
Charter Service		42,749			28,898		47.9
Ancillary		44,201			29,159		51.6
Passenger		195,362			125,130		56.1
Cargo		21,190			22,098		(4.1	)
Other		2,515			1,961		28.3
Total Operating Revenue		219,067			149,189		46.8

Operating Expenses:
Aircraft Fuel		76,947			29,709		159.0
Salaries, Wages, and Benefits		60,298			42,316		42.5
Aircraft Rent		2,211			3,815		(42.0	)
Maintenance		12,782			11,300		13.1
Sales and Marketing		7,881			5,822		35.4
Depreciation and Amortization		16,854			14,208		18.6
Ground Handling		8,212			6,551		25.4
Landing Fees and Airport Rent		9,496			8,752		8.5
Special Items, net		—			(39,819	)	(100.0	)
Other Operating, net		21,017			16,746		25.5
Total Operating Expenses		215,698			99,400		117.0
Operating Income		3,369			49,789		(93.2	)

Non-operating Income (Expense):
Interest Income		532			9		NM
Interest Expense		(7,042	)		(6,080	)	15.8
Other, net		(1,702	)		18,054		NM
Total Non-operating Income (Expense), net		(8,212	)		11,983		(168.5	)

Income (Loss) before Income Tax		(4,843	)		61,772		(107.8	)
Income (Benefit) Tax Expense		(921	)		9,595		(109.6	)
Net Income (Loss)	$	(3,922	)	$	52,177		(107.5	)

Net Income (Loss) per share to common stockholders:
Basic	$	(0.07	)	$	0.91		(107.7	)
Diluted	$	(0.07	)	$	0.84		(108.3	)
Shares used for computation:
Basic		58,060,716			57,156,159		1.6
Diluted		58,060,716			61,982,441		(6.3	)

“NM” stands for not meaningful

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	Six Months Ended June 30,
		2022		2021⁽⁷⁾			% Change
Operating Revenues:
Scheduled Service	$	232,479		$	121,693		91.0
Charter Service		75,628			54,703		38.3
Ancillary		89,287			52,929		68.7
Passenger		397,394			229,325		73.3
Cargo		42,243			43,684		(3.3	)
Other		5,954			3,793		57.0
Total Operating Revenue		445,591			276,802		61.0

Operating Expenses:
Aircraft Fuel		141,492			53,984		162.1
Salaries, Wages, and Benefits		119,915			86,392		38.8
Aircraft Rent		5,397			9,414		(42.7	)
Maintenance		24,777			20,510		20.8
Sales and Marketing		16,509			10,932		51.0
Depreciation and Amortization		32,182			26,823		20.0
Ground Handling		16,170			11,781		37.3
Landing Fees and Airport Rent		19,782			17,537		12.8
Special Items, net		—			(72,355	)	(100.0	)
Other Operating, net		44,166			31,397		40.7
Total Operating Expenses		420,390			196,415		114.0
Operating Income		25,201			80,387		(68.7	)

Non-operating Income (Expense):
Interest Income		556			24		NM
Interest Expense		(15,604	)		(13,201	)	18.2
Other, net		(8,577	)		18,049		NM
Total Non-operating Income (Expense), net		(23,625	)		4,872		NM

Income before Income Tax		1,576			85,259		(98.2	)
Income Tax Expense		1,861			16,304		(88.6	)
Net Income (Loss)	$	(285	)	$	68,955		(100.4	)

Net Income (Loss) per share to common stockholders:
Basic	$	0.00		$	1.30		(100.0	)
Diluted	$	0.00		$	1.20		(100.0	)
Shares used for computation:
Basic		57,984,608			52,850,041		9.7
Diluted		57,984,608			57,403,593		1.0

“NM” stands for not meaningful

KEY OPERATING STATISTICS

The following table presents key operating statistics and metrics for the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30,
		2022		2021⁽⁷⁾			% Change
Scheduled Service Statistics:
Revenue passenger miles (RPMs) – thousands		1,126,030			919,034		22.5
Available seat miles (ASMs) – thousands		1,343,116			1,198,768		12.0
Load factor		83.8	%		76.7	%	7.1
Revenue passengers carried		884,088			700,019		26.3
Departures		5,674			4,921		15.3
Block hours		18,205			15,900		14.5
Scheduled service TRASM⁽¹⁾ - cents		11.55			8.19		41.0
Average base fare per passenger	$	122.63		$	95.81		28.0
Ancillary revenue per passenger	$	50.00		$	41.66		20.0
Fuel gallons - thousands		14,187			12,267		15.7

Charter Statistics:
Departures		2,235			1,727		29.4
Block hours		4,573			3,656		25.1
Available seats miles (ASMs) - thousands		278,804			237,723		17.3
Fuel gallons - thousands		3,271			2,622		24.8

Cargo Statistics:
Departures		2,693			2,752		(2.1	)
Block hours		7,762			8,198		(5.3	)

Total System Statistics:
Average passenger aircraft		34.5			31.0		11.3
Passenger aircraft – end of period		41			33		24.2
Cargo aircraft – end of period		12			12		—
Available seat miles (ASMs) – thousands		1,632,501			1,442,744		13.2
Departures		10,687			9,445		13.1
Block hours		30,755			27,874		10.3
Daily utilization – hours		7.4			7.0		5.7
Average stage length – miles		1,120			1,179		(5.0	)
Total revenue per ASM (TRASM)⁽²⁾ - cents		12.12			8.81		37.6
Cost per ASM (CASM) - cents		13.21			6.89		91.7
Adjusted CASM - cents		7.14			6.40		11.6
Fuel gallons - thousands		17,568			14,955		17.5
Fuel cost per gallon, excluding derivatives	$	4.39		$	2.07		112.1
Employees at end of period		2,282			1,815		25.7

1 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs

2 – Total system TRASM = total revenue – cargo revenue / system ASMs

KEY OPERATING STATISTICS

	Six Months Ended June 30,
		2022		2021⁽⁷⁾			% Change
Scheduled Service Statistics:
Revenue passenger miles (RPMs) – thousands		2,464,490			1,694,033		45.5
Available seat miles (ASMs) – thousands		3,027,648			2,356,780		28.5
Load factor		81.4	%		71.9	%	9.5
Revenue passengers carried		1,806,740			1,253,051		44.2
Departures		11,901			9,244		28.7
Block hours		40,638			31,107		30.6
Scheduled service TRASM⁽¹⁾ - cents		10.82			7.57		42.9
Average base fare per passenger	$	128.67		$	97.12		32.5
Ancillary revenue per passenger	$	49.42		$	42.24		17.0
Fuel gallons - thousands		31,587			23,824		32.6

Charter Statistics:
Departures		3,855			3,238		19.1
Block hours		8,377			6,987		19.9
Available seats miles (ASMs) - thousands		514,509			449,444		14.5
Fuel gallons - thousands		6,029			4,979		21.1

Cargo Statistics:
Departures		5,267			5,317		(0.9	)
Block hours		15,152			16,440		(7.8	)

Total System Statistics:
Average passenger aircraft		34.3			31.0		10.6
Passenger aircraft – end of period		41			33		24.2
Cargo aircraft – end of period		12			12		—
Available seat miles (ASMs) – thousands		3,560,651			2,819,540		26.3
Departures		21,174			17,897		18.3
Block hours		64,560			54,806		17.8
Daily utilization – hours		8.0			6.8		17.6
Average stage length – miles		1,227			1,225		0.2
Total revenue per ASM (TRASM)⁽²⁾ - cents		11.33			8.27		37.0
Cost per ASM (CASM) - cents		11.81			6.97		69.4
Adjusted CASM - cents		6.64			6.28		5.7
Fuel gallons - thousands		37,813			28,948		30.6
Fuel cost per gallon, excluding derivatives	$	3.76		$	1.99		88.9
Employees at end of period		2,282			1,815		25.7

1 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs

2 – Total system TRASM = total revenue – cargo revenue / system ASMs

SUMMARY BALANCE SHEET
(Dollars in millions)
(amounts may not recalculate due to rounding)

	June 30, 2022		December 31, 2021⁽⁷⁾		% Change
	(Unaudited)
Cash & Cash Equivalents	$	212.9	$	309.3	(31.2	)
Other Current Assets		150.5		66.1	127.6
Total Current Assets		363.3		375.4	(3.2	)
Total Property & Equipment, net		745.6		578.5	28.9
Other		397.8		426.5	(6.7	)
Total Assets		1,506.7		1,380.4	9.2

Air Traffic Liabilities		124.0		118.6	4.6
Current Finance Lease Obligations		29.4		11.7	151.3
Current Operating Lease Obligations		10.2		17.2	(40.7	)
Current Maturities of Long-Term Debt		43.8		29.4	49.0
Other Current Liabilities		124.0		104.7	18.4
Total Current Liabilities		331.4		281.7	17.6
Finance Lease Obligations		220.2		180.5	22.0
Operating Lease Obligations		21.4		58.8	(63.6	)
Long-Term Debt		319.7		248.0	28.9
Income Tax Receivable Agreement Liability		106.2		98.8	7.5
Other		11.9		22.1	(46.1	)
Total Liabilities		1,010.9		889.8	13.6

Total Stockholders Equity	$	495.9	$	490.6	1.1

SUMMARY CASH FLOW
(Dollars in millions)

(Unaudited - amounts may not recalculate due to rounding)

	Six Months Ended June 30,
		2022		2021⁽⁷⁾			% Change
Net cash provided by operating activities	$	37.1		$	96.8		(61.7	)

Purchases of property & equipment		(137.6	)		(73.7	)	86.8
Other		(61.3	)		(0.5	)	NM
Net cash used in investing activities		(199.0	)		(74.2	)	168.3

Cash received from stock offering		—			235.9		(100.0	)
Proceeds from borrowing		172.5			80.5		114.3
Repayment of finance lease obligations		(24.3	)		(7.9	)	208.9
Repayment of borrowings		(86.0	)		(74.7	)	15.2
Other		(1.0	)		(11.4	)	(90.9	)
Net cash provided by financing activities		61.1			222.5		(72.5	)

Net Increase (Decrease) in cash		(100.8	)		245.1		(141.1	)
Cash, Cash Equivalents and Restricted Cash – Beginning of the Period		317.8			70.4		351.6
Cash, Cash Equivalents and Restricted Cash – End of the Period	$	217.0		$	315.5		(31.2	)

“NM” stands for not meaningful

Calculation of Special Items

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following tables lists the items that are included as Special Items, net.

	Three Months Ended June 30,
		2022	2021⁽⁷⁾
CARES Act employee grant recognition ⁽¹⁾	$	—	$	(39.4	)
CARES Act employee retention credit ⁽²⁾		—		(0.4	)
Total Special Items, net	$	—	$	(39.8	)

	Six Months Ended June 30,
		2022	2021⁽⁷⁾
CARES Act employee grant recognition ⁽³⁾	$	—	$	(71.6	)
CARES Act employee retention credit ⁽²⁾		—		(0.8	)
Total Special Items, net	$	—	$	(72.4	)

(1	)	In the quarter ended June 30, 2021, the United States Department of the Treasury awarded the Company a grant of $39.4 under the Payroll Support Program (“PSP2”) under the Consolidated Appropriations Act, 2021
(2	)	Relates to a credit recognized under the CARES Act Employee Retention credit which is a refundable tax credit against certain employee taxes
(3	)	In the first half of 2021, the United States Department of the Treasury awarded the Company a grant of $71.6 under the Payroll Support Program (“PSP2”) under the Consolidated Appropriations Act, 2021

NON-GAAP FINANCIAL MEASURES

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income (Loss) Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income (Loss) Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of operating income and net income are well recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry and facilitate comparisons among current, past and future periods. We believe that while items excluded from Adjusted EBITDA and Adjusted EBITDA Margin may be recurring in nature and should not be disregarded in evaluation of our earnings performance, Adjusted EBITDA and Adjusted EBITDA Margin is useful because its calculation isolates the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by finance lease or by operating lease, each of which is presented differently for accounting purposes), and income taxes, which may vary significantly between periods and for different companies for reasons unrelated to overall operating performance.

The presented non-GAAP measures have limitations as analytic tools, such as: these measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and other companies in our industry may calculate these measures differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, these non-GAAP measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Accordingly, you are cautioned not to place undue reliance on this information. We encourage investors to review our financial statements and other filings with the Securities and Exchange Commission in their entirety and not to rely on any single financial measure.

Reconciliation of GAAP Operating Income to Adjusted Operating Income

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP operating income to adjusted operating income.

	Three Months Ended June 30,
		2022		2021⁽⁷⁾
Operating Revenue	$	219.1		$	149.2
Operating Income		3.4			49.8
Special Items, net ⁽¹⁾		—			(39.8	)
Stock compensation expense		0.6			0.7
Tax Receivable Agreement expense ⁽²⁾		—			0.1
Adjusted Operating Income	$	3.9		$	10.8

Operating Income Margin		1.5	%		33.4	%
Adjusted Operating Income Margin		1.8	%		7.2	%

	Six Months Ended June 30,
		2022		2021⁽⁷⁾
Operating Revenue	$	445.6		$	276.8
Operating Income		25.2			80.4
Special Items, net ⁽¹⁾		—			(72.4	)
Stock compensation expense		1.5			3.6
Tax Receivable Agreement expense ⁽²⁾		—			0.3
Adjusted Operating Income	$	26.7		$	12.0

Operating Income Margin		5.7	%		29.0	%
Adjusted Operating Income Margin		6.0	%		4.3	%

(1	)	See special items table above for more details
(2	)	This represents the one-time costs to establish the Tax Receivable Agreement (“TRA”) liability with our pre-IPO stockholders

Reconciliation of GAAP Income (Loss) Before Income Tax to Adjusted Income (Loss) Before Income Tax

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP income (loss) before income tax to adjusted income (loss) before income tax.

	Three Months Ended June 30,
		2022		2021⁽⁷⁾
Net Income (Loss)	$	(3.9	)	$	52.2
Add: Provision for Income Tax Expense (Benefit)		(0.9	)		9.6
Income (Loss) Before Income Tax, as reported		(4.8	)		61.8
Pre-tax margin	(2.2)%				41.4	%

Special Items, net ⁽¹⁾		—			(39.8	)
Stock compensation expense		0.6			0.7
Secondary offering expense		—			0.6
Gain on asset transactions, net		(0.1	)		—
Tax Receivable Agreement expense ⁽²⁾		—			0.1
Tax Receivable Agreement adjustment ⁽³⁾		1.7			(18.7	)
Adjusted Income (Loss) Before Income Tax	$	(2.6	)	$	4.7

Adjusted Pre-tax margin	(1.2)%				3.1	%

	Six Months Ended June 30,
		2022		2021⁽⁷⁾
Net Income (Loss)	$	(0.3	)	$	69.0
Add: Provision for income tax expense		1.9			16.3
Income Before Income Tax, as reported		1.6			85.3
Pre-tax margin		0.4	%		30.8	%

Special Items, net ⁽¹⁾		—			(72.4	)
Stock compensation expense		1.5			3.6
Secondary offering expense		—			0.6
Gain on asset transactions, net		(0.1	)		—
Early pay-off of US Treasury loan		—			0.8
Tax Receivable Agreement expense ⁽²⁾		—			0.3
Tax Receivable Agreement adjustment ⁽³⁾		8.5			(18.7	)
Loss on refinancing credit facility		1.6			0.4
Adjusted Income Before Income Tax	$	13.0		$	0.0

Adjusted Pre-tax margin		2.9	%		0.0	%

(1	)	See special items table above for more details
(2	)	This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders
(3	)	This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)

Reconciliation of GAAP Net Income (Loss) and Earnings per Share to Adjusted Net Income (Loss) and Adjusted Earnings per Share

Dollars and shares in millions, except for per share – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings per share.

	Three Months Ended June 30,
		2022					2021⁽⁷⁾
	Dollars			Per Share - diluted			Dollars			Per Share - diluted
Net Income (Loss)	$	(3.9	)	$	(0.07	)	$	52.2		$	0.84
Special Items, net ⁽¹⁾		—			—			(39.8	)		(0.64	)
Stock Compensation Expense		0.6			0.01			0.7			0.01
Secondary offering expense		—			—			0.6			0.01
Gain on asset transactions, net		(0.1	)		0.00			—			—
Tax Receivable Agreement expense ⁽²⁾		—			—			0.1			0.00
Tax Receivable Agreement adjustment ⁽³⁾		1.7			0.03			(18.7	)		(0.30	)
Income tax effect of adjusting items, net ⁽⁴⁾		(0.1	)		—			8.8			0.14
Adjusted Net Income (Loss)	$	(1.8	)	$	(0.03	)	$	3.9		$	0.06

Diluted share count		58.1						62.0

	Six Months Ended June 30,
		2022					2021⁽⁷⁾
	Dollars			Per Share - diluted			Dollars			Per Share - diluted
Net Income (Loss)	$	(0.3	)	$	0.00		$	69.0		$	1.20
Special Items, net ⁽¹⁾		—			—			(72.4	)		(1.26	)
Stock Compensation Expense		1.5			0.03			3.6			0.06
Secondary offering expense		—			—			0.6			0.01
Gain on asset transactions, net		(0.1	)		0.00			—			—
Early pay-off of US Treasury loan		—			—			0.8			0.01
Tax Receivable Agreement expense ⁽²⁾		—			—			0.3			0.01
Tax Receivable Agreement adjustment ⁽³⁾		8.5			0.15			(18.7	)		(0.33	)
Loss on refinancing credit facility		1.6			0.03			0.4			0.01
Income tax effect of adjusting items, net ⁽⁴⁾		(0.7	)		(0.01	)		15.3			0.27
Adjusted Net Income (Loss)	$	10.5		$	0.18		$	(1.0	)	$	(0.02	)

Diluted share count		58.0						57.4

(1	)	See special items table above for more details
(2	)	This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders
(3	)	This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)
(4	)	The tax effect of adjusting items, net is calculated at the Company’s statutory rate for the application period

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following tables present the reconciliation of net income (loss) to adjusted EBITDA for the periods presented below.

	Three Months Ended June 30,
		2022		2021⁽⁷⁾
Net Income (Loss)	$	(3.9	)	$	52.2
Special Items, net ⁽¹⁾		—			(39.8	)
Interest Income		(0.5	)		—
Interest Expense		7.0			6.1
Stock Compensation Expense		0.6			0.7
Gain on asset transactions, net		(0.1	)		—
Secondary offering expense		—			0.6
Tax Receivable Agreement expense ⁽²⁾		—			0.1
Tax Receivable Agreement adjustment ⁽³⁾		1.7			(18.7	)
Provision for Income Taxes		(0.9	)		9.6
Depreciation and Amortization		16.9			14.2
Adjusted EBITDA	$	20.7		$	25.0

Adjusted EBITDA margin		9.5	%		16.7	%

	Six Months Ended June 30,
		2022		2021⁽⁷⁾
Net Income (Loss)	$	(0.3	)	$	69.0
Special Items, net ⁽¹⁾		—			(72.4	)
Interest Income		(0.6	)		—
Interest Expense		15.6			13.2
Stock Compensation Expense		1.5			3.6
Gain on asset transactions, net		(0.1	)		—
Secondary offering expense		—			0.6
Tax Receivable Agreement expense ⁽²⁾		—			0.3
Tax Receivable Agreement adjustment ⁽³⁾		8.5			(18.7	)
Provision for Income Taxes		1.9			16.3
Depreciation and Amortization		32.2			26.8
Adjusted EBITDA	$	58.7		$	38.8

Adjusted EBITDA margin		13.2	%		14.0	%

(1	)	See special items table above for more details
(2	)	This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders
(3	)	This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)

Adjusted CASM

Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations (began in 2020 when we launched our cargo operations), stock based compensation, certain commissions and other costs of selling our vacations product from this measure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is an important measure used by management and by our board of directors in assessing quarterly and annual cost performance. Adjusted CASM is also a measure commonly used by industry analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain other costs in their calculation of Adjusted CASM. The measure is also the subject of frequent questions from investors.

Adjusted CASM excludes fuel costs. By excluding volatile fuel expenses that are outside of our control from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact and trends in company-specific cost drivers, such as labor rates, aircraft costs and maintenance costs, and productivity, which are more controllable by management.

Adjusted CASM also excludes special items and other adjustments, as defined in the relevant reporting period, that are not representative of the ongoing costs necessary to our airline operations and may improve comparability between periods. We also exclude stock compensation expense when computing Adjusted CASM. The Company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives and is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

As derivations of CASM are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of CASM as presented may not be directly comparable to similarly titled measures presented by other companies. Adjusted CASM should not be considered in isolation or as a replacement for CASM. For the foregoing reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Total operating expense less fuel and special items per block hour is derived by excluding fuel expense and special items from total operating expense. By excluding volatile fuel expenses that are outside of our control from our unit metrics and certain special items that we consider to not be indicative of our ongoing operations, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Accordingly, you are cautioned not to place undue reliance on this information.

Reconciliation of CASM to Adjusted CASM

Amounts may not recalculate due to rounding, dollar amounts in millions

The following table presents the reconciliation of CASM to Adjusted CASM.

	Three Months Ended June 30,
		2022		2021⁽⁷⁾
	Operating Expenses - mm		Per ASM (cents)	Operating Expenses - mm			Per ASM (cents)
CASM	$	215.7	13.21	$	99.4		6.89
Less:
Aircraft Fuel		76.9	4.71		29.7		2.06
Stock Compensation Expense		0.6	0.04		0.7		0.05
Special Items, net ⁽¹⁾		—	—		(39.8	)	(2.76	)
Tax Receivable Agreement expense ⁽²⁾		—	—		0.1		—
Cargo expenses, not already adjusted above		21.3	1.31		16.2		1.13
Sun Country Vacations		0.2	0.01		0.2		0.01
Adjusted CASM	$	116.6	7.14	$	92.4		6.40

Available seat miles (ASMs) - mm		1,632.5			1,442.7

	Six Months Ended June 30,
		2022		2021⁽⁷⁾
	Operating Expenses - mm		Per ASM (cents)	Operating Expenses - mm			Per ASM (cents)
CASM	$	420.4	11.81	$	196.4		6.97
Less:
Aircraft Fuel		141.5	3.97		54.0		1.91
Stock Compensation Expense		1.5	0.04		3.6		0.13
Special Items, net ⁽¹⁾		—	—		(72.4	)	(2.56	)
Tax Receivable Agreement expense ⁽²⁾		—	—		0.3		0.01
Cargo expenses, not already adjusted above		40.4	1.14		33.4		1.19
Sun Country Vacations		0.6	0.02		0.4		0.01
Adjusted CASM	$	236.3	6.64	$	177.1		6.28

Available seat miles (ASMs) - mm		3,560.7			2,819.5

(1	)	See special items table above for more details
(2	)	This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders

Contacts Investor Relations Chris Allen 651-681-4810 IR@suncountry.com Media Wendy Burt 651-900-8400 mediarelations@suncountry.com