Sun Country Airlines CEO Jude Bricker said Minneapolis (MSP) “is quickly becoming a two-airline market,” with Delta Air Lines targeting business passengers and operating mainline routes while Sun Country focuses on leisure passengers and winter sun routes.
Bricker pointed to the Seattle (SEA) market as “a good model for coexisting,” noting Alaska Airlines and Delta dominate SEA and are both able to operate successfully in the market. Sun Country is based at MSP and Alaska is based at SEA. Both airports are Delta hubs.
“Seattle is a bigger market than what we have here,” Bricker told analysts on a Feb. 8 conference call to discuss Sun Country’s $77.5 million 2021 net profit–bolstered by more than $72 million in assistance from the US government. “And the geography is a little bit different with the flow over the Pacific Ocean. But I think it's similar to what we're seeing [at MSP] with Delta.”
Sun Country is “more segmented in the way we think about [MSP versus how Alaska competes in SEA],” Bricker added. “Our focus is more directly on leisure, which I think means we will be less of a [direct competitor] than Alaska is in Seattle to Delta … I would put us right up there with Alaska as an example” of operating successfully as the second airline at a Delta hub.
Bricker also believes Sun Country’s business model (MSP-centered and focused on serving leisure routes during peak-demand periods) insulates it from being negatively affected by the proposed merger of US ULCCs Frontier Airlines and Spirit Airlines. When asked by an analyst if the merger will affect Sun Country, Bricker quickly responded: “Not at all.”
He added: “We don't have a lot of overlap with either of those carriers … [MSP] hasn't been very successful for them. And I don't think that changes with them as a single company. So, my view is we don't have a lot of overlap with them now and we won't have a lot of overlap with them in the future … There's no real positive, but it also isn't really a negative, and therefore it doesn't really change what we're doing.”
But Bricker said he generally views “consolidation in the industry as a good thing. So from a high level, I’m positively inclined toward it.”
He added that Sun Country has the ideal business model for operating to “really picky leisure markets that have predictable peaks … or primarily seasonal sensitivities. So, there's a set of 300, 400 O&Ds that have these really peak contributions from leisure demand.”
When sun route demand dries up at MSP during the summer, Sun Country moves capacity to airports such a Dallas/Fort Worth (DFW), from which it has flown, for example, to Montego Bay (MBJ), Jamaica.
Peak-demand oriented leisure markets are “not going to be effectively served with any other carrier than us,” Bricker said. “[Frontier and Spirit] just can't modulate their capacity to what's required to pick up that demand that exists on those peak periods. [If the merger goes through], I think our growth outside of Minneapolis is still going to be focused on these predictable peak-season leisure markets … I think [the merger] is positive for our ex-Minneapolis growth, and it's kind of neutral for Minneapolis and our plans here.”
Sun Country anticipates operating 5-10% more capacity in the current quarter compared to the 2019 first quarter (Q1). “This is the first quarter where we're bigger than 2019 on a pretty substantial basis on the schedule side of the house,” Chief Revenue Officer Grant Whitney said.
Executives conceded the airline does not have enough staff to fully match capacity to demand. “Really, the only limiter at this point is the staffing side–our ability to train pilots to get them through and fly the aircraft,” President and CFO Dave Davis said. “There's plenty of market opportunities for us, plenty of aircraft that are available.”
Bricker added: “We're currently selling a March schedule with a maximum volume limited by staff, indicating our confidence in a recovery.”
He said the US airline industry as a whole is contending with staffing shortages and the unpredictability of COVID-19, so Sun Country will not be alone in being unable to operate at maximum capacity. “It's just a weird environment right now and that's going to put kind of a governor on industry capacity,” Bricker noted.
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