Sun Country is betting its unusual model will help it endure the crisis better than other airlines. But it's no sure thing. The airline faces many of the same problems as other carriers.
As a hedge to its passenger business, Minneapolis-based Sun Country Airlines announced an agreement in December to fly 10 dedicated cargo aircraft for Amazon.
With cargo demand soaring, that’s looking like an auspicious decision. Sun Country, an ultra-low-cost-carrier, expects to fly its first airplane for Amazon Thursday, with nine more coming by mid-summer, the airline’s CEO, Jude Bricker, said in an interview.
Operating freighters is a serious undertaking. Unlike larger U.S. airlines, some of which now fly freight in passenger airplanes by putting cargo in the belly, on seats and in overhead bins, Sun Country is operating dedicated cargo jets. These were converted in China at considerable expense, and look more like a Fedex airplane than a typical passenger jet.
“It is a substantial undertaking to get DOT approval to fly main deck cargo,” Bricker said. “It is a good thing to have a segment of our business doing well financially these days.”
The work was delayed slightly, as Chinese authorities dealt with Covid-19, but the program is back on track, Bricker said. Sun Country expects to have all 10 delivered by July, and that should balance some passenger demand weakness.
“Relative to the rest of the industry we are in a good spot,” Bricker said. “But it is still not sustainable.”
Sun County has studied carrying cargo in passenger jets, but concluded the economics don’t work If it flew passengers planes, Sun Country would have to sell the space itself, and Bricker said the airline lacks that infrastructure. Plus, he said, much of the new demand is for international cargo, and his airline flies only Boeing 737s.
Passenger Demand Rebound?
Sun Country still makes the bulk of its revenue from passenger operations. It has 31 airplanes, or enough to fly 800 flights per week, Bricker said.
For now, though. Sun Country is flying only about 80 flights per week. Load factors last month were a little less than 30 percent, Bricker said.
Still, in the past week, Bricker said he’s seen business pick up, but only because it was nearly non-existent at the end of March and early April. “The bottom was about two weeks ago,” he said.
In late April, Bricker said the airline had a three flights, from Minneapolis to Phoenix, Los Angeles and Fort Myers, Florida, with more than 100 passengers. And judging by the number of golf bags loaded on the Phoenix flight, Bricker said he suspects some non-essential flyers are returning to the skies.
People are also buying more tickets, Bricker noted, though the booking curve is different than unusual. Some customers book flights a day or two in advance, while others buy for July and August travel. Few people are buying for June.
Even with the slight uptick, Sun Country expects low demand for the foreseeable future.
“Our passenger operation is certainly smaller than it should be,” Bricker. “We are flying 85 percent less than we thought we would.”
Because of its unusual structure and business model, privately held Sun Country may be holding up better than some larger competitors.
Sun Country is receiving about $60 million in federal grants to help it cover payroll costs through September. In return for funding, the government expects carriers to serve all airports they flew to before the Covid-19 pandemic.
But despite denying most airline requests for exemptions, the Department of Transportation is letting Sun Country temporarily drop 15 airports, allowing it to significantly reduce its schedule.
The government said those airports, many of them big hubs, including Chicago, Denver and Dallas/Fort Worth, had enough service from larger airlines. It said it did not need to impose “undue economic and operational burden” on Sun Country.
“It helps being small and insignificant, quite frankly,” Bricker said. “They don’t have to worry about setting any precedents with us, a little carrier in the Midwest.”
The relief allows Sun Country to focus on routes that make financial sense. Many remaining routes are cash-flow positive, Bricker said, though that’s more of a function of government grants and low fuel prices than an indication of demand.
“The hurdle of making a flight cash positive in this environment is pretty low,” he said.
For safety, Bricker said Sun Country is mimicking larger competitors by cleaning airplanes more thoroughly, giving employees masks and gloves, and increasing onboard spacing by leaving middle seats open.
Not selling center seats does not promote real distancing — passengers remain closer than six feet apart — and Bricker admitted it is not a perfect solution. But it may promote consumer confidence, he said.
“This is for peace of mind,” he said.
Still, like many airline executives, Bricker said he’s not sure blocking middle seats is sustainable, longer term. He said he doubts customers will want to pay 30 percent more for air travel.
“Right now, it is not an issue,” he said. “There is plenty of room on the airplane.”
Ideally, he said, the Department of Transportation would create safety guidelines for all airlines to follow.
“If we were all beholden to the same operational constraints, I think it would be good,” Bricker said. “It is is about making people feel comfortable on the airplane.”
Photo credit: A Sun Country jet in Las Vegas. Tomas Del Coro / Flickr