Sun Country Airlines Holdings, Inc. Q4 FY2023 earnings call

• Diversified business model provides flexibility and low fixed costs, enabling response to demand fluctuations and industry shocks.
• 2023 ended with record full year revenue, passenger volume, and operating margin. Third quarter 2023 showed significant year-on-year improvement in operating metrics.
• 4Q 2023 CASMex declined for the first time since COVID, with improved staffing allowing more peak capacity in scheduled service and charter.
• Fleet has three aircraft in various stages of delivery, expected to have 63 airplanes by end of 2Q. Projects like rebidding credit card agreement, bag scanning technology rollout, crew rostering system transition, and crude training are paying off.

Scheduled service: Fourth quarter scheduled service plus ancillary revenue grew 4.6% to $163.8 million. Full year 2023 scheduled service plus ancillary revenue grew 15.7% to $730 million. Q1 2024 scheduled service ASMs expected to grow approximately 15% versus prior year. Charter: Fourth quarter charter revenue grew 8.8% to $46.9 million on 7.8% block hour growth. Full year 2023 charter revenue was $190.1 million, 17.6% higher than 2022. Cargo: Fourth quarter cargo revenue grew 3.6% to $25.3 million on 1.8% block hour growth. Full year 2023 cargo revenue grew 10.4% to $99.7 million on 5.8% block hour growth.

• Full quarter total revenue expected between $310 million to $320 million on block hour growth of 8% to 11%.
• Anticipate operating margin between 17% and 21%.
• Q1 2024 scheduled service ASMs expected to grow approximately 15% versus prior year.
• Full year 2024 CapEx expected to be approximately $100 million.

• Headwinds from heavy check cycle of fleet.
• Macroeconomic conditions could impact demand.
• Pilot availability and premium pay still factors, though staffing has improved.

Q: Unidentified Analyst on Duane Pfennigwerth's question about constrained segments and margin opportunity A: Jude Bricker talks about scheduled service being highest margin and affected by staffing, with more peak capture opportunity Q: Duane Pfennigwerth on utilization and premium pay A: Jude Bricker discusses staffing improvement and premium pay being at current levels Q: Catherine O'Brien on capacity growth, CASM, and domestic trends A: Dave Davis and Jude Bricker talk about mid-teen block hour growth, better cost trends vs industry, and positive domestic trends Q: Mike Linenberg on incremental opportunity and fleet A: Dave Davis and Jude Bricker discuss variable contribution margin and fleet market dynamics Q: Brandon Oglenski on first half profitability and cost control A: Jude Bricker and Dave Davis talk about Easter impact, scheduling philosophy, and cost control Q: Christopher Stathoulopoulos on charter contracts and cargo A: Jude Bricker and Dave Davis discuss charter contract percentage and cargo decline reasons Q: Catherine O'Brien on share repurchase A: Jude Bricker talks about free cash flow, capital allocation flexibility