Sun Country Airlines reported net income of $7.59 million on revenue of $248.9 million, up 12.6%, for its third quarter ended September 30, 2023.
“Sun Country’s diversified business model continued to deliver strong results in the third quarter, as evidenced by our strong GAAP operating results and our third consecutive quarter of year over year improvement in adjusted operating margin, adjusted pre-tax margin and adjusted earnings per share,” said Jude Bricker, Chief Executive Officer of Sun Country. “Total revenue was up by 12.3% versus the third quarter 2022 and we produced GAAP operating income of $19 million, operating margin of 7.6%, and adjusted operating margin of 8.1% for the quarter. The revenue environment continues to stay healthy as demonstrated by scheduled service TRASM declining only 5.0%, while scheduled service ASMs grew 15.1%. This helped to drive GAAP diluted EPS of $0.13 and Adjusted diluted EPS of $0.14 in the third quarter. In addition to our excellent performance, our board of directors has authorized an additional $25 million for repurchases of Sun Country shares.”
“For the fourth consecutive quarter, we have seen year-over-year revenue growth across our scheduled service, charter and cargo businesses,” said Dave Davis, President and Chief Financial Officer. “Year-to-date, we have continued to see unit revenue strength with scheduled service TRASM up 13.6% versus the same time period last year, and we do not see demand abating through the rest of 2023. Sun Country continues to generate strong margins and our outlook for 2024 capital expenditures falls sharply from 2023 levels driving an expected, significant increase in free cash flow next year.”
Sun Country repurchased 2.1 million shares at an average price of $15.30 during the third quarter, and the board of directors has approved an additional $25 million of buyback authority which brings the current repurchase authorization to $25 million.
System block hours flown during the third quarter of 2023 grew by 14.4% year-over-year. Cargo block hours grew in the third quarter by 6.3% year-over-year as Amazon flying was constrained last year due to scheduled maintenance events. Scheduled service block hours and charter block hours increased by 17.6% and 14.1%, respectively year-over-year on a 14.1% increase in average passenger aircraft.
Charter block hours under long-term contracts comprised 82.2% of the total charter flying performed in the third quarter of 2023. As the Company continues to normalize its aircraft utilization, it intends to pursue more ad-hoc charter flying.
For the third quarter of 2023, total GAAP operating expenses increased 11.4% year-over-year, primarily due to a 23.7% increase in salaries, wages, and benefits and a 39.1% increase in maintenance expense. Fuel expense decreased by 5.7% compared to third quarter 2022. This combination drove adjusted CASM(5) in the third quarter to increase 2.6% versus the third quarter 2022.
Total liquidity was $198 million on September 30, 2023, while the Company’s net debt was $544 million.
As of September 30, 2023, Sun Country had 42 aircraft in its passenger service fleet, operated 12 freighter aircraft in its cargo operation, and had five aircraft held for operating lease.