Sun Country Airlines Holdings, Inc.

Sun Country Airlines Holdings, Inc. - 2025 Annual Report Summary (Verified)

Dive into Sun Country Airlines' 2025 performance. This summary highlights key financial results, strategic developments, and the competitive landscape for investors, following a robust year of growth and significant corporate news.

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1. Business Overview

Sun Country Airlines operates a unique hybrid business model, combining scheduled passenger service, on-demand charter flights, and a dedicated cargo operation.

• Passenger Service: The company primarily serves leisure travelers, offering scheduled flights to popular sunny destinations across the U.S., Latin America, and the Caribbean. It also provides on-demand charter services for sports teams, government, and other groups. As of December 31, 2025, its passenger fleet consisted of 45 Boeing 737-800 aircraft (20 owned, 25 leased).
• Cargo Service: Sun Country operates a dedicated fleet of 12 Boeing 737-800 cargo aircraft exclusively for Amazon. This segment delivers a stable, contracted revenue stream, and the fleet size will remain at 12 aircraft through 2026.

2. Financial Performance

Building on its distinct model, Sun Country delivered strong financial results in 2025. The company reported total revenue of $1.35 billion, a 12% increase from $1.20 billion in 2024. This growth stemmed primarily from robust leisure travel demand and consistent Amazon cargo operations.

Revenue breakdown for 2025:

• Scheduled Passenger Flights: $980 million (72.6%)
• Cargo Service: $300 million (22.2%)
• Ancillary Services (e.g., baggage fees, seat selection): $70 million (5.2%)
• Other Revenue (including rental income): $10 million (0.7%)

Geographically, the U.S. is its largest market, with significant contributions also coming from Latin America and other international destinations.

Sun Country demonstrated solid financial performance in 2025:

• Total Revenue: $1.35 billion, up 12% year-over-year.
• Operating Income: $150 million, with an 11.1% operating margin.
• Net Income: $105 million, for a 7.8% net profit margin. Diluted earnings per share (EPS) reached $1.85.
• Adjusted EBITDA: $280 million, reflecting strong cash generation from operations.

3. Risk Factors

While 2025 brought strong performance, investors should be aware of the inherent risks in the airline industry and specific to Sun Country's operations:

• Customer Concentration: The company significantly relies on Amazon for cargo revenue (22.2% of total revenue in 2025). Adverse changes to this contract or Amazon's operational needs could significantly impact financial results.
• Supplier Concentration: The company depends on a limited number of key suppliers (e.g., Boeing for aircraft, major fuel providers) for a substantial portion of its operating costs. Disruptions or significant price increases from these suppliers could affect profitability.
• Unionized Workforce and Labor Relations: A substantial portion of its workforce is unionized, with collective bargaining agreements for pilots and flight attendants set to expire in 2025. Unsuccessful negotiations could result in labor disruptions, increased operating costs, or negative public perception.
• Fuel Price Volatility: Jet fuel price fluctuations significantly affect airlines, as fuel is a significant operating expense. Although the company employs hedging strategies, these may not fully mitigate the risk.
• Economic Downturn and Demand Fluctuations: As a leisure-focused airline, Sun Country's performance is sensitive to economic conditions, consumer discretionary spending, and travel demand.
• Intense Competition: The company operates in a highly competitive airline industry and faces pressure from other low-cost carriers, legacy airlines, and charter operators.
• Regulatory and Environmental Changes: The company is subject to extensive government regulation, including air safety, environmental standards, and consumer protection. Changes in these regulations may increase compliance costs or restrict operations.
• Integration Risk (Post-Merger): If the Allegiant merger proceeds, significant risks exist in integrating two distinct corporate cultures, operational systems, and fleets, potentially leading to disruptions, cost overruns, or failure to realize anticipated synergies.

4. Management Discussion and Analysis Highlights

Management discusses the key factors influencing the company's financial condition and results of operations for 2025. The 12% increase in total revenue stemmed primarily from robust leisure travel demand and consistent Amazon cargo operations. Operating income and net income improvements reflect effective cost management and operational efficiencies, including the benefits of a modernized, fuel-efficient fleet.

A proposed all-stock merger with Allegiant Travel Company, announced after the fiscal year ended, significantly impacts the company's strategic direction. This potential transaction, if completed, could create a formidable ultra-low-cost carrier focused on leisure travel, and would significantly alter Sun Country's competitive landscape and operational scale. Management sees this as a synergy opportunity through an expanded network and cost efficiencies, while acknowledging potential integration challenges.

The stable Amazon partnership remained a cornerstone of operations, providing a predictable revenue stream and contributing to overall profitability, as the dedicated fleet was fully utilized under a long-term contract. The company continued investing in fleet modernization, adding five new Boeing 737-800s to its passenger fleet in 2025. This enhanced operational efficiency and contributed to reduced fuel costs.

Sun Country's 2025 strategy focused on achieving profitable growth in leisure markets, optimizing its hybrid model, and maintaining strong cost controls. Capital allocation decisions included a Q1 2025 secondary public stock offering, which raised approximately $75 million in net proceeds to strengthen the balance sheet and fund growth. Additionally, an ongoing stock repurchase program, initiated in 2022, led the company to repurchase $50 million worth of common stock, aiming to enhance shareholder value. Management continues to monitor key market trends, including labor market dynamics, potential sustainable aviation fuel (SAF) mandates, and the ongoing recovery in air travel demand. These factors all influence operational planning and financial performance.

5. Financial Health

Beyond operational performance, Sun Country maintained a solid financial position at year-end 2025:

• Cash and Cash Equivalents: $310 million, reflecting a strong liquidity position.
• Total Debt: $1.2 billion, primarily consisting of:
  • Revolving Credit Facility: $50 million drawn from a $100 million facility, offering flexible short-term borrowing capacity.
  • Term Loans: $700 million, which it used for general corporate purposes and fleet expansion.
  • EETC (Enhanced Equipment Trust Certificate) Notes Payable: $450 million, a common aircraft financing structure that offers attractive rates by collateralizing specific aircraft.
• Debt-to-Equity Ratio: Approximately 2.5x, reflecting typical airline industry leverage.
• Capital Actions:
  • In Q1 2025, the company completed a secondary public stock offering, raising approximately $75 million in net proceeds to strengthen its balance sheet and fund growth initiatives.
  • The ongoing stock repurchase program, initiated in 2022, led the company to repurchase $50 million worth of its common stock in 2025, reducing outstanding shares and enhancing shareholder value.
• Key Liabilities: Beyond traditional debt, the company manages significant liabilities, including air traffic liabilities ($180 million), which is cash received for future flights not yet flown, and loyalty program liabilities ($45 million), which reflects the value of unredeemed loyalty points customers have earned.

6. Future Outlook

Looking ahead, Sun Country's trajectory largely depends on the proposed merger with Allegiant. If successful, the combined entity could achieve significant growth and market expansion by leveraging complementary networks and operational strengths. The Amazon cargo contract's continued stability and growth potential also provide a resilient base. However, the integration process, regulatory hurdles, and broader economic conditions will critically influence near-to-medium-term performance. The company plans to continue focusing on cost efficiency, customer experience, and disciplined capacity growth.

Beyond the potential merger, key trends and regulatory considerations also influence the outlook, including:

• Labor Market Dynamics: The expiring union agreements in 2025 underscore the ongoing importance of labor relations and potential wage pressures within the airline industry.
• Sustainable Aviation Fuel (SAF) Mandates: Increasing pressure and potential regulatory mandates for the use of SAF may impact operating costs and require significant long-term investment.
• Air Travel Demand: Continued recovery and growth in leisure travel demand, particularly to sun-belt destinations, remains a positive trend.
• Technological Advancements: The company's ongoing investment in digital platforms and operational technology aims to enhance customer experience and operational efficiency.

7. Competitive Position

Sun Country holds a strong niche as a low-cost, leisure-focused carrier. Its hybrid model, integrating scheduled passenger service with a robust cargo operation, sets it apart from pure passenger airlines. The potential merger with Allegiant would significantly enhance its competitive standing by creating a larger, more diversified ultra-low-cost carrier (ULCC) with increased market share, route network, and purchasing power, particularly in the leisure travel segment. This positions the combined entity as a major player in the North American leisure air travel market, potentially challenging larger legacy carriers on specific routes.

To sum it up, Sun Country's 2025 performance shows a strong, unique airline with a solid financial footing and a clear strategy for growth, especially with the potential Allegiant merger. For investors, the opportunity lies in its hybrid model and market expansion, but it's crucial to consider the risks, particularly around merger integration and industry-specific challenges like fuel costs and labor relations. Your decision will hinge on how you weigh these growth prospects against the inherent uncertainties.