Sun Country Airlines is well-known now as a no-frills ultra-low-cost carrier (ULCC). However, the airline was not always known as ULCC. After being founded in the 1980s, the airline underwent a transition to a new model in the last few years. When current CEO Jude Bricker came to the airline in 2017, he instituted a transformation of the airline that turned the airline around and positioned it for a highly successful initial public offering (IPO) buoyed by a diversified business and a recovering market that will benefit the airline.
The lead-up to Sun Country’s transformation
In 2017, Sun Country Airlines was at a crossroads. The carrier was seeing lagging margins, growing competition, and a difficult pathway in a cutthroat industry. Current CEO Jude Bricker took the helm of the airline that year and helped drive the transition toward an ultra-low-cost carrier.
Mr. Bricker stated the following in an exclusive interview with Simple Flying on his push for a transition in 2017:
“I think it was acknowledging the reality of a situation that the airline was in, where they were delivering a product to customers who most valued the price of the fare, but they had a high cost structure – a higher cost structure than ultra- low-cost carriers that did the same, but at the same value proposition. We always felt like we could deliver a little bit better product, a little more reliable operations, [and] have a brand that was focused on the Minnesota originator. That would be really valuable, but core to the transition was to lower the cost structure. It was very important.”
ULCCs rely on maintaining a cost structure that is much lower than their full-service peers. For such carriers to survive, they need to ensure they can sell fares lower than the competition but still be able to turn a profit. While the fare itself does not necessarily pay all the bills for an airline, it sells ancillaries such as seat selection, bags, and food.
Not a traditional ULCC
In the US, when people conjure the image of a ULCC, the likes of Spirit or Frontier come to mind. These carriers feature slimline seats with tight pitch, though they offer some extra legroom seats and, in the case of Spirit, a hard product that mimics a traditional domestic first class experience.
These carriers are also traditionally known for minimizing accessory items passengers use onboard. This includes smaller tray tables, no power outlets, and certainly no onboard entertainment, though some carriers are working on offering WiFi onboard.
Sun Country has bucked that trend and chosen to offer passengers some more amenities. Some seats onboard aircraft are outfitted with power outlets, but most have access to just a USB port for charging, which is great for smaller devices like tablets or smartphones.
Also, passengers can access free entertainment. It comes streamed to your device and includes a library of movies, TV shows, music, and games.
In terms of onboard service, Sun Country even offers passengers complimentary non-alcoholic beverages. This includes coffee, tea, water, and soft drinks. There are snacks, snack boxes, and alcoholic beverages available for purchase onboard.
This was a deliberate choice, per CEO Jude Bricker:
“We try to take a pragmatic approach to investing in the product where we’re going to deliver to customersthings that they value. We have a little longer length of haul. Customers who get on our airplanes fly a little bit further, based on our geography, than they would on average, flying on Frontier or Spirit. A little more pitch – the distance between seats – a little more of an offering of onboard services, like free non alcoholic beverages, and free in flight entertainment, power to the seats, that doesn’t cost that much to deliver but it does cost. If you’re a purist on the ULCC model, you might reject those amenities, but we felt like, for our product, and for our brand, and for our customer, that they were a good investment.”
Focusing the airline on Minnesota
As part of the transition, Sun Country focused keenly on passengers originating in Minnesota and flying with the airline on vacation. Focused on the customer, the airline has to change its model a bit based on the season.
Sun Country Airlines is one of the few carriers in the world that actually has a winter peak. While most airlines wait for the summer to ramp up flying, in the past, the airline has actually needed to lease jets from other airlines to add flying during the cold winter months.
The winter peak is well-known in Minnesota. As the blizzards and storms batter the state, some customers eager to get away to a warm-weather destination can hop on Sun Country for a getaway to Los Cabos or Tampa, where the weather is much nicer.
A strong and stable balance sheet
One of Sun Country’s most important and most impressive accomplishments is getting to a strong balance sheet. As part of the transformation, Sun Country no longer needs to go out and find leases on new jets. It can instead focus on acquiring jets in its own right. That is the immediate focus of the airline:
“I think the best opportunity for us in the near- term is to service that pent up release of demand that’s going to be in leisure customers. So we’re out actively using our balance sheet to try to buy some passenger aircraft, and that’ll be our focus probably for the next two years. Because we picked up a lot of share, we came out of COVID, having made money through the crisis, which is unique in the US airline space, but one of the products of making money is that we didn’t have to take on all this debt to survive. We have a really strong balance sheet, and we intend to make the investments necessary to hold on to that share pickup that we experienced in the COVID crisis.”
Sun Country is seeing an outsized return of demand as leisure travelers show a willingness to get back onboard aircraft. As such, the airline is now focused on ensuring it can fly to all of the destinations it needs to and cater to as many Minnesotans as possible who want to fly somewhere for a leisure trip.
Mr. Bricker helped usher in a transition of the airline that saw it become a much more stable carrier to now go out and expand by acquiring its own aircraft. In addition, the pivot toward an LCC model has done well for Sun Country, and it has differentiated itself in the product market with a keen focus on its Minnesota originators. And, given the success of the IPO, the airline is certainly one investors are keen about.
This does not even include the cargo business, which has also helped stabilize Sun Country and set it up to profit in the future during non-peak times. As the airline expands its passenger operations and keeps flying for Amazon, that business will only further the airline’s margins. However, its low-cost passenger operations are still expected to make up the bulk of the airline’s operations.
Have you flown Sun Country Airlines? Are you impressed at the airline’s low-cost transformation? Let us know in the comments!
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