The Strategy Behind Sun Country’s Success
Photo Credit:@AndrewWu
The aviation business is notorious for its thin margins. The average profit margin for an airline is 3-4%; for comparison, the restaurant business (also notably difficult) usually has margins double or triple that. Airlines require massive financial investments to operate. Planes are expensive, but then you’re paying for staff, training, maintenance, slots, fuel, and so much more. Any external pressure, like a pandemic or financial downturn can have major, potentially catastrophic, implications for airlines.
Sun Country Airlines is a financial anomaly. In 2023 and 2024, Sun Country had an operating margin of 13%, a full 2% higher than the next highest in the country, Delta. This year, they’ve so far been the most profitable low cost carrier in the United States, outpacing the likes of JetBlue, Southwest, Frontier, and Allegiant (on a per-share basis). I’m exploring why this is today.
Who is Sun Country?
First, some quick context. Sun Country is a Minneapolis-based ultra-low cost carrier, established in 1982. As the name suggests, they’re heavily leisure focused, a theme that’s been carried throughout their history. Despite their Minnesotan headquarters, their first flight was between Sioux Falls, South Dakota and Las Vegas using a leased 727 from Air Florida. They grew steadily throughout the ‘80s and ‘90s, but took a real financial hit after the 9/11 attacks and the subsequent drop in travel. They declared bankruptcy in late 2001, and entered a plan to emerge from it. Unfortunately, they went into bankruptcy a second time just seven years later after their owner, Tom Petters, was found to be involved in a massive Ponzi fraud scheme.
They were revitalized in 2010 and shifted to an ultra-low cost carrier model. Their acquisition in 2017 by asset management firm Apollo helped to fuel huge growth throughout the rest of the decade. They went public in 2021, and today offer a wide range of 100+ destinations across North America (mostly from Minneapolis), as well as a robust cargo and charter network which I’ll discuss more in depth later.
Scheduled Operations
The #1 factor in Sun Country’s financial success is adaptability. Demand is heavily seasonal from Minneapolis, and they’ve been able to very well capture that. In the Winter months, they have a substantial network of destinations for sun-seekers, while in the Summer they’re more likely to transport people a little closer to home. This isn’t a hard and fast rule - there’s a good number of cities that they serve year round (Boston, San Francisco, Cancun, and Phoenix, to name a few), but the majority of their flying is seasonal. For example, Kalispell, Syracuse, Providence, and Boise are summertime only destinations, while Sint Maarten, Belize City, Punta Cana, and Aruba are wintertime only.
Minnesota’s central location helps simplify scheduling as well. In the early morning, there’s a big bank of flights out to the East Coast and Florida. They’re back by late morning/early afternoon and are on their way to the West Coast and home late in the evening. There’s definitely exceptions, especially to cities they serve multiple times daily (like Seattle, Orlando, and Las Vegas), but that’s generally how it works. This has enabled them to capture some connecting traffic (though not nearly as much as Delta does from Minneapolis). If you want to get from Wilmington, North Carolina to Spokane, Washington, Sun Country is a relatively cheap and efficient way to do that.
All of this has enabled Sun Country to have the highest load factor in the industry. They’ve crafted their schedule in a way that maximizes seats filled.
Cargo & Charter Operations
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For Sun Country, scheduled service is only a part of the equation (albeit the largest). Sun Country maintains a robust contract of cargo flying for Amazon Prime Air, flying 20 737-800BCFs on behalf of Amazon. It’s a fantastic way for them to supplement their income when passenger loads are light - the boxes will always keep flowing. The cargo sector has been the biggest growth factor for Sun Country recently - their profits from that have increased 50% year over year.
The third major source of income for Sun Country is charter flying. They’re the official charter provider for Major League Soccer and the operator of choice for dozens of college sports teams. Beyond that, they have deals with a number of casinos. You’ll see at least a few Sun Country planes a day at Laughlin/Bullhead International Airport (which has no scheduled passenger service) operating on casino contracts for Caesars Entertainment and Don Laughlin’s Riverside Resort. There’s also the elusive VIP-configured 737-800 (N839SY) which operated high-value sports charters as well as a pretty regular mystery charter from Los Angeles to Kona.
Additionally, Sun Country is a major provider of flights for the United States military.
Where Does Sun Country Go Next?
In recent years, Sun Country has heavily focused on growing their cargo operations for Prime Air. According to President & CEO Jude I. Bricker, they plan to re-focus on growing the passenger side of the business starting in Q4 of 2025. Initially, they are going to bring back previously dropped destinations like Sacramento and Colorado Springs before taking on new services entirely. Where this is is a mystery - they have hinted at more Latin American growth in the past. At the Routes Americas 2024 conference in Bogota, Sun Country President Dave Davis said that they’d like to add another focus city in the near future. They’ve done some growth in a few other cities - Punta Cana and Montego Bay service from Milwaukee, Cancun from Harlingen, Cancun and Punta Cana from Dallas, and most recently, Tulsa to Cancun. None of these have been huge growths, and it seems more like one-offs to capture point-to-point demand.
If I were to guess, Detroit could be a viable option. It’s in the Midwest (not far from the home base), and there’s clearly a big ULCC demand because of the size of Spirit’s operation. If Spirit goes under, Sun Country could swoop in and pick some of that up. I feel like it’s unlikely they’d try to establish a hub in Florida, since it’s such a saturated market. This is a bit of a reach, but I could see them building up in Salt Lake City. They’re already good at sharing a market with Delta, and none of their fellow LCCs have a significant presence in Salt Lake (although Southwest is quickly growing there).
Whatever that future focus city may be, Minneapolis is still the focal point of the airline’s growth. They’ve recently accepted delivery of two of their five 737-900ERs, which will operate Sun Country’s highest demand routes from MSP (Orlando, Fort Myers, Phoenix, and Cancun, just to name a few).
All in all, Sun Country has carved out a niche for itself that’s working extraordinarily well. Their model isn’t as big and flashy as the Big 3 or some of their fellow low cost carriers, but it’s disciplined and opportunistic. They’re uniquely thriving while their peers like JetBlue and Spirit are facing deep financial challenges that may prove to be fatal.
