Sun Country Airlines Holdings Inc.

05/01/2026 | Press release | Distributed by Public on 05/01/2026 10:09

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, the terms "Sun Country," "we," "us" and "our" refer to Sun Country Airlines Holdings, Inc., and its subsidiaries.
Forward-Looking Statements
The following discussion and analysis presents factors that had a material effect on our results of operations during the three months ended March 31, 2026 and 2025. Also discussed is our financial position as of March 31, 2026 and December 31, 2025. This section should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and related notes and discussion under the heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 10-K. This discussion contains forward-looking statements that involve risk, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions and forecasts. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this report titled, "Risk Factors" and elsewhere in this report. You should carefully read the "Risk Factors" included in our 2025 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Business Overview
Sun Country is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic passenger service (including Scheduled Service and Charter), and cargo service segments. By doing so, we generate high growth, high margins and strong cash flows with greater resilience than other passenger airlines. Based in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers, Charter customers and providing crew, maintenance and insurance ("CMI") service to Amazon, with flights throughout the U.S. and to destinations in Canada, Mexico, Central America and the Caribbean. We share resources, such as flight crews, across our Passenger and Cargo segments with the objective of generating higher returns and margins and mitigating the seasonality of our route network. We optimize capacity using an agile peak demand scheduling strategy which aims to shift flying to markets during periods of peak demand and away from markets during periods of low demand. This allows us to produce higher unit revenue with a competitive low-cost structure, in line with other ultra low-cost carriers ("ULCCs") resulting in relatively high unit profitability, while also providing greater resiliency to economic or industry downturns.
Merger Agreement with Allegiant Travel Company
On January 11, 2026, Sun Country, entered into the Merger Agreement with Allegiant Travel Company, a Nevada corporation ("Allegiant"), under which Allegiant will acquire Sun Country. Pursuant to the Merger Agreement, each existing share of Sun Country Common Stock will be converted into the right to receive (i) $4.10 in cash, without interest and (ii) 0.1557 shares of Allegiant Common Stock.
The Merger is expected to close as early as May 13, 2026, subject to shareholder approval (see Note 2 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report).
We have incurred material expenses related to the Merger which had an impact to earnings in the first quarter of 2026.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Operations in Review
We believe a key component of our success is establishing Sun Country as a high growth, low-cost carrier in the U.S. by attracting customers with low fares and garnering repeat business by delivering a high-quality passenger experience, complimentary streaming of in-flight entertainment to passenger devices, seat reclining and seat-back power in all our aircraft.
The demand for air travel services has historically been affected by U.S. and global economic conditions, or other geopolitical events. Our diversified business model, which includes a focus on leisure and VFR passengers, Charter and Cargo service, all primarily within the U.S., is unique in the airline sector and helps mitigate the impact of cyclical, economic, and industry downturns on our business when compared with other large U.S. passenger airlines. Our business model is flexible, which gives us the ability to adjust our services in response to market conditions and is intended to produce the highest possible returns for Sun Country.
Macroeconomic conditions continue to impact Sun Country, as well as the industry. Certain of our operating costs have been further impacted by inflationary pressures, geopolitical events, supply chain issues, and other macroeconomic conditions. To date, our strategy has allowed us to offset a majority of additional costs associated with the impact of macroeconomic conditions. Additionally, our Charter and Cargo businesses have the ability to pass on certain costs to customers.
Certain accounting estimates and assumptions used in the preparation of our Condensed Consolidated Financial Statements involve financial projections or depend on factors that are inherently uncertain and challenging to estimate during periods of economic uncertainty. Should the current economic uncertainty persist or worsen, the Company may need to reevaluate these estimates and assumptions, potentially resulting in a material impact on the Company's financial position, assets, or earnings.
In June 2024, we entered into the A&R ATSA with Amazon that increased the number of Boeing 737-800 cargo aircraft that we operate on behalf of Amazon from 12 to 20 in 2025. In early 2026, we agreed to operate two additional cargo aircraft on behalf of Amazon. This will increase the total aircraft that Sun Country operates on behalf of Amazon from 20 to 22. The two additional cargo aircraft were received as of March 31, 2026 and are expected to be in-service by the third quarter of 2026.
The increase in aircraft that we operate on behalf of Amazon will result in more resources being allocated to the Cargo segment. This aligns with our strategy of long-term flexibility and supports our ability to mitigate the impact of cyclical, economic, and industry downturns on our business.
For more information on our business and strategic advantages, see the "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections within Part I, Item 1 and Part II, Item 7, respectively, in our 2025 10-K.
Components of Operations
For a more detailed discussion on the nature of transactions included in the separate line items of our Condensed Consolidated Statement of Operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 in our 2025 10-K.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Operating Statistics
Three Months Ended March 31, 2026 (1)
Three Months Ended March 31, 2025 (1)
Scheduled
Service 		Charter Cargo Total Scheduled
Service 		Charter Cargo Total
Departures (2)
6,442 2,394 4,818 13,794 7,466 2,468 2,926 12,964
Block hours (2)
23,712 5,373 12,321 41,973 27,242 5,424 7,605 40,681
Aircraft miles (2)
9,428,273 1,874,377 4,611,164 16,057,284 10,863,145 1,886,746 2,868,687 15,719,114
Available seat miles (ASMs) (thousands) (2)
1,755,808 330,804 2,112,944 2,020,545 331,510 2,370,755
Total revenue per ASM (TRASM) (cents) (3)
13.19 17.35 13.67 11.63 16.55 12.23
Average passenger aircraft during the period (4)
46.1 44.0
Passenger aircraft at end of period (4)
47 45
Cargo aircraft at end of period 22 15
Leased Aircraft (5)
3 6
Average daily aircraft utilization (hours) (4)
7.2 8.4
Average stage length (miles) 1,279 1,283
Revenue passengers carried (6)
1,027,745 1,165,073
Revenue passenger miles (RPMs) (thousands) (6)
1,501,173 1,686,484
Load factor (6) (7)
85.5 % 83.5 %
Average base fare per passenger (6)
$ 142.59 $ 123.19
Ancillary revenue per passenger (6)
$ 79.26 $ 75.25
Total fare per passenger (6)
$ 221.85 $ 198.44
Charter revenue per block hour (6)
$ 10,653 $ 10,083
Fuel gallons consumed (thousands) (2)
18,628 3,756 22,636 21,289 3,699 25,171
Fuel cost per gallon, excluding indirect fuel credits $ 3.24 $ 2.66
Employees at end of period 3,276 3,124
Cost per available seat mile (CASM) (cents) (8)
14.27 11.41
Adjusted CASM (cents) (9)
7.96 7.34
______________________
(1)Certain operating statistics and metrics are not presented as they are not calculable or are not utilized by management.
(2)Total System operating statistics for Departures, Block hours, Aircraft miles, ASMs and Fuel gallons consumed include amounts related to flights operated for maintenance; therefore, the Total System amounts are higher than the sum of Scheduled Service, Charter and Cargo amounts.
(3)Scheduled Service TRASM includes Scheduled Service revenue, Ancillary revenue, and ASM generating revenue classified within Other revenue on the Condensed Consolidated Statements of Operations.
(4)Scheduled Service and Charter utilize the same fleet of aircraft. Aircraft counts and utilization metrics are shown on a system basis only.
(5)Includes both our Owned Aircraft Held for Operating Lease as well as subleased aircraft. These aircraft are leased to unaffiliated third parties.
(6)Passenger-related statistics and metrics are shown only for Scheduled Service. Charter revenue is driven by flight statistics.
(7)Load factor is a measure of utilized available seating capacity calculated by dividing Scheduled Service RPMs by Scheduled Service ASMs for a reporting period.
(8)CASM is a key airline cost metric. CASM is defined as operating expenses divided by total available seat miles.
(9)Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, and certain other costs that are unrelated to our airline operations.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Results of Operations
For the Three Months Ended March 31, 2026 and 2025
Three Months Ended March 31, %
Change
2026 2025
Operating Revenues:
Scheduled Service $ 146,551 $ 143,522 2 %
Charter 57,245 54,692 5 %
Ancillary 81,463 87,674 (7) %
Passenger 285,259 285,888 - %
Cargo 46,089 28,157 64 %
Other 7,018 12,604 (44) %
Total Operating Revenues 338,366 326,649 4 %
Operating Expenses:
Aircraft Fuel 72,901 64,619 13 %
Salaries, Wages, and Benefits 104,191 92,845 12 %
Maintenance 20,423 18,862 8 %
Sales and Marketing 10,092 10,395 (3) %
Depreciation and Amortization 25,157 24,804 1 %
Ground Handling 10,461 11,407 (8) %
Landing Fees and Airport Rent 17,722 16,833 5 %
Special Items
9,799 1,799 NM
Other Operating, net 30,743 28,839 7 %
Total Operating Expenses 301,489 270,403 11 %
Operating Income 36,877 56,246 (34) %
Non-operating Income (Expense):
Interest Income 2,235 1,995 12 %
Interest Expense (8,851) (9,625) (8) %
Other, net 2 (478) NM
Total Non-operating Expense, net (6,614) (8,108) (18) %
Income Before Income Tax 30,263 48,138 (37) %
Income Tax Expense 6,157 11,603 (47) %
Net Income $ 24,106 $ 36,535 (34) %
"NM" stands for not meaningful
Total Operating Revenues increased $11,717, or 4%, to $338,366 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily the result of growth in
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Cargo revenue due to additional aircraft received and operated, as well as contractual rate increases under the A&R ATSA. These items are discussed in further detail below.
Passenger. Passenger revenue decreased $629 to $285,259 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The table below presents select operating data for lines of revenue within Passenger, expressed as year-over-year changes:
Three Months Ended March 31, %
Change
2026 2025
Scheduled Service and Ancillary Statistics:
Departures 6,442 7,466 (14) %
Block Hours 23,712 27,242 (13) %
Passengers 1,027,745 1,165,073 (12) %
Average base fare per passenger $ 142.59 $ 123.19 16 %
Ancillary revenue per passenger $ 79.26 $ 75.25 5 %
Total fare per passenger $ 221.85 $ 198.44 12 %
RPMs (thousands) 1,501,173 1,686,484 (11) %
ASMs (thousands) 1,755,808 2,020,545 (13) %
TRASM (cents) 13.19 11.63 13 %
Passenger load factor 85.5 % 83.5 % 2.0 (1)
Charter Statistics:
Departures 2,394 2,468 (3) %
Block hours 5,373 5,424 (1) %
Charter revenue per block hour $ 10,653 $ 10,083 6 %
(1) Percentage point difference
Our year-over-year results were impacted by reduced capacity in the Passenger segment as we focused our operations on growth in the Cargo segment. This reduced capacity led to a 12% decrease in passengers, offset by a 12% increase in total fare per passenger. The decrease in passengers also impacted Ancillary revenue, which declined 7% year-over-year.
Passenger revenue benefited from the $2,553, or 5%, increase in Charter revenue during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This increase was the result of a 6% increase in Charter revenue per block hour. The increase in Charter revenue per block hour was primarily driven by rate increases and higher fuel recovery revenue due to a 22% increase in the average fuel cost per gallon.
Cargo. Revenue from cargo services increased $17,932, or 64%, to $46,089 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily due to additional aircraft and contractual rate increases. During the three months ended March 31, 2026, we agreed to operate two additional cargo aircraft on behalf of Amazon. This will increase the total aircraft that Sun Country operates on behalf of Amazon from 20 to 22. The two additional cargo aircraft were received as of March 31, 2026 and are expected to be in-service by the third quarter of 2026.
Other. Other revenue decreased $5,586, or 44%, to $7,018 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was largely driven by lower aircraft lease
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
revenue. For the three months ended March 31, 2026 and 2025, there were an average of 3 and 6 aircraft on lease to unaffiliated airlines, respectively. For more information, see Note 5 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Operating Expenses
Aircraft Fuel. We believe Aircraft Fuel expense, excluding indirect fuel credits, is the best measure of the effect of fuel prices on our business as it consists solely of direct fuel expenses that are related to our operations and is consistent with how management analyzes our operating performance. This measure is defined as GAAP Aircraft Fuel expense, excluding indirect fuel expenses and credits that are recognized within Aircraft Fuel expense, but are not directly related to our Fuel Cost per Gallon.
The primary components of Aircraft Fuel expense are shown in the following table:
Three Months Ended March 31, %
Change
2026 2025
Total Aircraft Fuel Expense $ 72,901 $ 64,619 13 %
Indirect Fuel (Expenses) Credits 411 2,251 (82) %
Aircraft Fuel Expense, Excluding Indirect Fuel (Expenses) Credits $ 73,312 $ 66,870 10 %
Fuel Gallons Consumed (thousands) 22,636 25,171 (10) %
Fuel Cost per Gallon, Excluding Indirect Fuel (Expenses) Credits $ 3.24 $ 2.66 22 %
Aircraft Fuel expense increased 13% year-over-year due to a 22% increase in the average fuel cost per gallon, partially offset by a 10% decrease in fuel consumption due to reduced passenger capacity as we focused our operations on growth in the Cargo segment, which benefits from pass-through fuel economics. The increase in the average fuel cost per gallon was driven by the impact of geopolitical events. We expect fuel costs to remain elevated until supply disruptions are resolved.
Salaries, Wages, and Benefits. Salaries, Wages, and Benefits expense increased $11,346, or 12%, to $104,191 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year increase in Salaries, Wages, and Benefits was impacted by higher crew pay due to increased operational activity and contractual pay increases as a result of new collective bargaining agreements.
Maintenance. Maintenance expense increased $1,561, or 8%, to $20,423 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year increase in Maintenance expense was primarily driven by an increased volume of line maintenance due to operational growth, as well as an overall increase in cost per maintenance event.
Sales and Marketing. Sales and Marketing expense decreased $303, or 3%, to $10,092 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year decrease was primarily driven by lower booking and credit card transaction fees due to the decrease in passengers. This was partially offset by increased advertising activity.
Depreciation and Amortization. Depreciation and Amortization expense increased $353, or 1%, to $25,157 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily driven by depreciation on newly capitalized projects.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Ground Handling. Ground Handling expense decreased $946, or 8% for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily driven by the 11% decrease in Passenger segment departures as we focused our operations on the growth in the Cargo segment.
Landing Fees and Airport Rent. Landing Fees and Airport Rent increased $889, or 5%, to $17,722 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This year-over-year increase was driven by rate increases at airports due to market pressures, primarily at MSP, partially offset by an 11% decrease in Passenger segment departures.
Special Items. Special Items totaled $9,799 for the three months ended March 31, 2026, as compared to $1,799 for the three months ended March 31, 2025. Special Items for the three months ended March 31, 2026 consisted of professional services and other costs related to the proposed Merger with Allegiant. Special Items for the three months ended March 31, 2025 consisted of ratification bonuses for a new five-year collective bargaining agreement paid to eligible flight attendants, as well as the related payroll tax expense. For more information, see Note 10 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Other Operating, net. Other Operating, net increased $1,904, or 7%, to $30,743 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily the result of an increase in operations due to growth in the Cargo segment, partially offset by activity from our engine parts sales programs.
Non-operating Income (Expense)
Interest Income. Interest income increased $240, or 12%, to $2,235 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily due to more funds being allocated to interest-generating accounts.
Interest Expense. Interest expense decreased $774, or 8%, to $8,851 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was due to year-over-year decreases in debt balances, as well as a lower interest rate achieved through the 2025 Term Loan Facility, which refinanced higher interest rate debt. For more information on our Debt, see Note 6 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Other, net. Other, net did not have a material impact to either period presented.
Income Tax. Our effective tax rate for the three months ended March 31, 2026 was 20.3% compared to 24.1% for the three months ended March 31, 2025. The effective tax rate in both periods was impacted by permanent stock compensation items. For more information on the effective tax rate, see Note 9 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Segments
For the Three Months Ended March 31, 2026 and 2025
Three Months Ended March 31, 2026 Three Months Ended March 31, 2025
Passenger Cargo Total Passenger Cargo Total
Operating Revenues $ 292,277 $ 46,089 $ 338,366 $ 298,492 $ 28,157 $ 326,649
Operating Expenses:
Aircraft Fuel 72,574 327 72,901 64,619 - 64,619
Salaries, Wages, and Benefits 73,169 31,022 104,191 75,183 17,662 92,845
Maintenance 13,803 6,620 20,423 15,343 3,519 18,862
Sales and Marketing 10,092 - 10,092 10,395 - 10,395
Depreciation and Amortization 25,145 12 25,157 24,799 5 24,804
Ground Handling 10,461 - 10,461 11,407 - 11,407
Landing Fees and Airport Rent 17,515 207 17,722 16,684 149 16,833
Special Items
6,853 2,946 9,799 1,799 - 1,799
Other Operating, net 20,446 10,297 30,743 23,543 5,296 28,839
Total Operating Expenses 250,058 51,431 301,489 243,772 26,631 270,403
Operating (Loss) Income
$ 42,219 $ (5,342) $ 36,877 $ 54,720 $ 1,526 $ 56,246
Operating Margin % 14.4 % (11.6) % 10.9 % 18.3 % 5.4 % 17.2 %
Passenger. Passenger Operating Income decreased $12,501 to $42,219 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The Operating Margin Percentage for the three months ended March 31, 2026 decreased by 3.9 percentage points, as compared to the three months ended March 31, 2025. Passenger revenue decreased year-over-year due to reduced capacity as we focused our operations on growth in the Cargo segment. Passenger total operating expenses increased year-over-year due to a 22% increase in the average fuel cost per gallon and special Merger-related charges allocated to the Passenger segment, partially offset by decreases in operation-driven expenses due to reduced capacity. The decrease in revenue and increase in expenses resulted in decreases in Passenger Operating Income and Operating Margin Percentage year-over-year. For more information on the changes in the components of Operating Income for the Passenger segment, refer to the Results of Operations discussion above.
Cargo. Cargo Operating (Loss) Income changed by $6,868, to an Operating Loss of $5,342, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Operating Margin Percentage for the three months ended March 31, 2026 decreased by 17.0 percentage points, as compared to the three months ended March 31, 2025. The changes in both Operating (Loss) Income and Operating Margin Percentage were primarily driven by operational challenges as a result of significant growth in the segment and weather related impacts, increased maintenance for Cargo aircraft, and special Merger-related charges allocated to the Cargo segment. These expense increases were partially offset by contractual rate increases. For more information on the components of Operating (Loss) Income for the Cargo segment, refer to the Results of Operations discussion above.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Non-GAAP Financial Measures
We sometimes use information that is derived from the Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this report to the most directly comparable GAAP financial measures.
Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Income and Adjusted EBITDA
Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Income, and Adjusted EBITDA are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of Operating Income and Net Income are well recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry.
The measures described above have limitations as analytical tools. Some of the limitations applicable to these measures include: they do not reflect the impact of certain cash and non-cash charges resulting from matters we consider not to be indicative of our ongoing operations; and other companies in our industry may calculate these non-GAAP measures differently than we do, limiting each measure's usefulness as a comparative measure. Because of these limitations, the following non-GAAP measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP and may not be the same as or comparable to similarly titled measures presented by other companies due to the possible differences in the method of calculation and in the items being adjusted.
For the foregoing reasons, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Income and Adjusted EBITDA have significant limitations which affect their use as indicators of our profitability. Accordingly, readers are cautioned not to place undue reliance on this information.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
The following table presents the reconciliation of Operating Income to Adjusted Operating Income, and Adjusted Operating Income Margin for the periods presented below.
Three Months Ended March 31,
2026 2025
Adjusted Operating Income Margin Reconciliation:
Operating Revenue $ 338,366 $ 326,649
Operating Income 36,877 56,246
Special Items (1)
9,799 1,799
Stock Compensation Expense 1,630 1,695
Adjusted Operating Income $ 48,306 $ 59,740
Operating Income Margin 10.9 % 17.2 %
Adjusted Operating Income Margin 14.3 % 18.3 %
_________________________
(1)
The adjustments include Special Items, as included in Note 10 of these Condensed Consolidated Financial Statements.
The following table presents the reconciliation of Net Income to Adjusted Net Income for the periods presented below.
Three Months Ended March 31,
2026 2025
Adjusted Net Income Reconciliation:
Net Income $ 24,106 $ 36,535
Special Items (1)
9,799 1,799
Stock Compensation Expense 1,630 1,695
Loss on Credit Facility - 186
Secondary Offering Costs - 481
Income Tax Effect of Adjusting Items, net (2)
(2,629) (957)
Adjusted Net Income $ 32,906 $ 39,739
_________________________
(1)
The adjustments include Special Items, as included in Note 10 of these Condensed Consolidated Financial Statements.
(2)
The tax effect of adjusting items, net is calculated at our statutory rate for the applicable period.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
The following table presents the reconciliation of Net Income to Adjusted EBITDA for the periods presented below.
Three Months Ended March 31,
2026 2025
Adjusted EBITDA Reconciliation:
Net Income $ 24,106 $ 36,535
Special Items (1)
9,799 1,799
Stock Compensation Expense 1,630 1,695
Secondary Offering Costs - 481
Interest Income (2,235) (1,995)
Interest Expense 8,851 9,625
Provision for Income Taxes 6,157 11,603
Depreciation and Amortization
25,157 24,804
Adjusted EBITDA $ 73,465 $ 84,547
_________________________
(1)
The adjustments include Special Items, as included in Note 10 of these Condensed Consolidated Financial Statements.
CASM and Adjusted CASM
CASM is a key airline cost metric defined as operating expenses divided by total available seat miles. Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our Cargo operations, depreciation and amortization recognized on certain assets that generate lease income, stock-based compensation, certain commissions and other costs of selling our vacation products from this measure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is an important measure used by management and our Board of Directors in assessing quarterly and annual cost performance. Adjusted CASM is commonly used by industry analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain other costs in their calculation of Adjusted CASM. The measure is also the subject of frequent questions from investors.
Adjusted CASM excludes fuel costs. By excluding volatile fuel expenses that are outside of our control from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact and trends in company-specific cost drivers, such as labor rates, aircraft costs and maintenance costs, and productivity, which are more controllable by management.
We have excluded costs related to the Cargo operations, as well as depreciation and amortization recognized on certain assets that generate lease income as these operations do not create ASMs. The Cargo expenses in the reconciliation below are different from the total operating expenses for our Cargo segment in the "Segment Information" table presented above, due to several items that are included in the Cargo segment, but have been captured in other line items used in the Adjusted CASM calculation. We have entered into certain transactions where it serves as a lessor. As of March 31, 2026, three of our aircraft were leased or subleased. Adjusted CASM further excludes special items and other adjustments, as defined in the relevant reporting period, that are not representative of the ongoing costs necessary to our airline operations and may improve comparability between periods. We also exclude stock compensation expense when computing Adjusted CASM. Our
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
compensation strategy includes the use of stock-based compensation to attract and retain employees and executives and is principally aimed at aligning their interests with those of our stockholders and long-term employee retention, rather than to motivate or reward operational performance for any period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any period.
As derivations of Adjusted CASM are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of Adjusted CASM as presented may not be directly comparable to similarly titled measures presented by other companies. Adjusted CASM should not be considered in isolation or as a replacement for CASM. For the aforementioned reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Accordingly, readers are cautioned not to place undue reliance on this information.
The following tables present the reconciliation of CASM to Adjusted CASM:
Three Months Ended March 31,
2026 2025
Operating
Expenses 		Per ASM
(in cents) 		Operating
Expenses 		Per ASM
(in cents)
CASM $ 301,489 14.27 $ 270,403 11.41
Less:
Special Items (1)
9,799 0.46 1,799 0.08
Aircraft Fuel 72,901 3.45 64,619 2.73
Stock Compensation Expense 1,630 0.08 1,695 0.07
Cargo Expenses, Not Already Adjusted Above 47,664 2.26 26,264 1.11
Sun Country Vacations 388 0.02 497 0.02
Leased Aircraft, Depreciation and Amortization Expense (2)
825 0.04 1,612 0.06
Adjusted CASM $ 168,282 7.96 $ 173,917 7.34
ASM (thousands) 2,112,944 2,370,755
________________________
(1)
The adjustments include Special Items, as included in Note 10 of these Condensed Consolidated Financial Statements.
(2)
Includes both our Owned Aircraft Held for Operating Lease as well as subleased aircraft. These aircraft are leased to unaffiliated third parties.
Liquidity and Capital Resources
Our primary sources of liquidity as of March 31, 2026 included our existing cash and cash equivalents of $153,729 and short-term investments of $66,029, our expected cash generated from operations, and the $75,000 of available funds under the Revolving Credit Facility. We invest cash and cash equivalents in highly liquid securities with strong credit ratings. We classify our investments as current assets because of their highly liquid nature and availability to be converted into cash to fund current operations. Given the significant portion of our portfolio held in cash and cash equivalents and the high credit quality of our debt security investments, we do not anticipate fluctuations in the aggregate fair value of our investments to have a material impact on our liquidity or capital position.
In addition, we had restricted cash of $18,142 as of March 31, 2026, which generally consists of cash received as prepayment for chartered flights that is maintained in separate escrow accounts prior to the date of
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
transportation in accordance with DOT regulations. The restrictions are released once the charter transportation is provided.
We believe our unrestricted cash and cash equivalents, short-term investments, and availability under our Revolving Credit Facility, combined with expected future cash flows from operations, will be sufficient to fund our operations and meet our debt payment obligations for at least the next 12 months. However, we cannot predict what the effect on our business and financial position might be from a change in the competitive environment in which we operate or from events beyond our control, such as volatile fuel prices, economic conditions, pandemics, weather-related disruptions, the impact of airline bankruptcies, restructurings or consolidations, U.S. military actions, geopolitical factors, regulations, or acts of terrorism.
For a more detailed discussion on our Liquidity and Capital Resources, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 in our 2025 10-K.
Aircraft - We do not maintain an aircraft order book; instead, we enter into aircraft transactions on an opportunistic basis based on market conditions, our prevailing level of liquidity and capital market availability. As a result, we are not locked into large future capital expenditures. We have historically financed aircraft through debt and finance leases. As of March 31, 2026, our fleet consisted of 72 Boeing 737-NG aircraft. This includes 47 aircraft in the passenger fleet, 22 cargo aircraft operated pursuant to the A&R ATSA, and three aircraft currently on lease to unaffiliated airlines.
During the three months ended March 31, 2026, we agreed to operate two additional cargo aircraft on behalf of Amazon under the A&R ATSA. This will increase the total aircraft that Sun Country operates on behalf of Amazon from 20 to 22. The two additional cargo aircraft were received as of March 31, 2026 and are expected to be in-service by the third quarter of 2026. For more information on our fleet, see Note 5 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Maintenance Deposits - In addition to funding the acquisition of aircraft, we are required by certain of our aircraft lessors to fund cash reserves in advance for scheduled maintenance to act as collateral for the benefit of the lessors. Qualifying payments that are expected to be recovered from lessors are recorded as Lessor Maintenance Deposits on our Condensed Consolidated Balance Sheets. As of March 31, 2026, we had $71,969 of total Lessor Maintenance Deposits. All maintenance deposits as of March 31, 2026 are estimated to be recoverable either through reimbursable maintenance events or through application towards the purchase of the aircraft.
Credit Facilities and Debt - As of March 31, 2026, we had $75,000 of financing available through the Revolving Credit Facility. We were in compliance with all covenants as of March 31, 2026. For more information on our credit facilities or debt, see Note 6 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
TRA Liability - During the three months ended March 31, 2025, we made a payment of $10,525 to the TRA holders, which includes certain members of our management and certain members of our Board of Directors. The payment to the TRA holders during the three months ended March 31, 2026 was not significant. Payments will be made in future periods as Pre-IPO Tax Attributes are utilized. Upon completion of a merger that constitutes a change of control, such as the Merger Agreement with Allegiant, the TRA will terminate and be settled with the TRA holders. For more information on the TRA liability, see Note 9 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Liquidity and Financial Condition Indicators
The table below presents the major indicators of financial condition and liquidity:
March 31, 2026 December 31, 2025
Cash and Cash Equivalents $ 153,729 $ 144,684
Available-for-Sale Securities 59,531 83,131
Amount Available Under Revolving Credit Facility 75,000 75,000
Total Liquidity $ 288,260 $ 302,815
March 31, 2026 December 31, 2025
Total Debt, net $ 306,855 $ 323,346
Finance Lease Obligations 245,838 251,087
Operating Lease Obligations 16,563 17,393
Total Debt, net, and Lease Obligations 569,256 591,826
Stockholders' Equity 659,426 625,156
Total Invested Capital $ 1,228,682 $ 1,216,982
Debt-to-Capital 0.46 0.49
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Sources and Uses of Liquidity
Three Months Ended March 31, %
2026 2025 Change
Total Operating Activities $ 29,711 $ 16,431 81 %
Investing Activities:
Purchases of Property & Equipment (40,512) (15,409) 163 %
Proceeds from the Sale of Property & Equipment
9,618 6,004 60 %
Purchases of Investments - (19,092) (100) %
Proceeds from the Maturities of Investments 23,585 17,925 32 %
Total Investing Activities (7,309) (10,572) (31) %
Financing Activities:
Common Stock Repurchases - (10,000) (100) %
Repayment of Finance Lease Obligations (5,248) (4,923) 7 %
Repayment of Borrowings (16,776) (14,829) 13 %
Other, net 5,452 (9,450) (158) %
Total Financing Activities (16,572) (39,202) (58) %
Net Increase (Decrease) in Cash
$ 5,830 $ (33,343) (117) %
"Cash" consists of Cash, Cash Equivalents and Restricted Cash
Operating Cash Flow Activities
Operating activities in the three months ended March 31, 2026 provided $29,711, as compared to $16,431 during the three months ended March 31, 2025. During the three months ended March 31, 2026, Net Income was $24,106, as compared to $36,535 during the three months ended March 31, 2025.
Our operating cash flow is primarily impacted by the following factors:
Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in Air Traffic Liabilities. Air Traffic Liabilities typically increase during the fall and early winter months as advanced ticket sales grow prior to the late winter and spring peak travel season and decrease during the summer months. Most tickets can be purchased no more than 12 months in advance, therefore any revenue associated with tickets sold for future travel will be recognized within that timeframe. For the three months ended March 31, 2026, $134,824 of revenue recognized in Passenger revenue was included in the $167,024 of Air Traffic Liabilities as of December 31, 2025 in our Condensed Consolidated Balance Sheets.
Aircraft Fuel. Aircraft Fuel expense represented approximately 24% of our total operating expense for the three months ended March 31, 2026 and 2025. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. Fuel cost per gallon increased by 22% year-over-year. Fuel consumption decreased by 10% during the three months ended March 31, 2026, compared to the prior year as a result of the operational shift in capacity from Scheduled Service to the Cargo segment. We expect volatility in Aircraft Fuel prices per gallon to continue for the foreseeable future due to the impact of market conditions and global geopolitical events.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Investing Cash Flow Activities
Capital Expenditures. Our capital expenditures were $40,512 and $15,409 for the three months ended March 31, 2026 and 2025, respectively. Our capital expenditures during the three months ended March 31, 2026 included the acquisition of three engines, and other items not individually material. Our capital expenditures during the three months ended March 31, 2025 included the acquisition of one engine and other items not individually material.
Investments. Our net investment activity resulted in cash inflows of $23,585 during the three months ended March 31, 2026, as compared to cash outflows of $1,167 during the three months ended March 31, 2025. The year-over-year change is a result of a reduction in our average investment balance in order to support general corporate purposes and debt repayments.
Financing Cash Flow Activities
Finance Leases. Our repayments of finance lease obligations were $5,248 and $4,923 for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026 and 2025, we had 13 aircraft finance leases.
Common Stock Repurchases. During the three months ended March 31, 2025, we repurchased 630,914 shares of our Common Stock at a weighted-average price of $15.85 per share. We did not repurchase any shares during the three months ended March 31, 2026. For more information on the stock repurchase program, see Note 11 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
TRA Payment. During the three months ended March 31, 2025, we made a payment of $10,525 to the TRA holders, which includes certain members of our management and certain members of our Board of Directors. The payment is included within Other, net in Financing Activities. The payment to the TRA holders during the three months ended March 31, 2026 was not significant. For more information on the payment of the TRA, see Note 9 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Off Balance Sheet Arrangements
For a detailed discussion on the nature of our Off Balance Sheet Arrangements, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 in our 2025 10-K. There have been no material changes to our Off Balance Sheet Arrangements as compared to the 2025 10-K.
Commitments and Contractual Obligations
See Note 12 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding commitments and contractual obligations.
Recently Adopted Accounting Pronouncements
During the three months ended March 31, 2026, there were no recently adopted accounting standards that had a material impact to us.
Critical Accounting Policies and Estimates
Our unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of the Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
reported amounts of assets, liabilities, revenue, expenses, and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. For more information on our critical accounting policies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections within Part II, Item 7 in our 2025 10-K.
There have been no material changes to our critical accounting policies and estimates as compared to the 2025 10-K.
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Sun Country Airlines Holdings Inc. published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 16:09 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]