Sun Country Airlines Holdings, Inc. (SNCY) Bundle
Understanding Sun Country Airlines Holdings, Inc. (SNCY) Revenue Streams
Understanding Sun Country Airlines Holdings, Inc. Revenue Streams
The primary revenue sources for the company include Passenger Revenue, Charter Revenue, Cargo Revenue, and Other Revenue. Below is a detailed breakdown of these revenue streams for the nine months ended September 30, 2024, compared to the same period in 2023.
| Revenue Source | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Year-over-Year Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Passenger Revenue | $698,823 | $709,490 | ($10,667) | (2)% |
| Charter Revenue | $151,908 | $146,068 | $5,840 | 4% |
| Cargo Revenue | $78,560 | $74,437 | $4,123 | 6% |
| Other Revenue | $37,951 | $20,150 | $17,801 | 88% |
| Total Operating Revenues | $1,015,242 | $950,145 | $65,097 | 7% |
The total operating revenues for the nine months ended September 30, 2024, increased by 7% year-over-year, driven primarily by growth in Charter and Other Revenue streams.
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024:
- Total Operating Revenues: $1,015,242 (up from $950,145 in 2023)
- Passenger Revenue: $698,823 (down from $709,490 in 2023)
- Charter Revenue: $151,908 (up from $146,068 in 2023)
- Cargo Revenue: $78,560 (up from $74,437 in 2023)
- Other Revenue: $37,951 (up from $20,150 in 2023)
The changes in revenue streams demonstrate a transition, with significant increases in Charter and Other Revenue, while Passenger Revenue experienced a decline due to an 8% decrease in total fare per passenger, influenced by increased industry capacity.
Contribution of Different Business Segments to Overall Revenue
| Business Segment | 2024 Contribution (%) | 2023 Contribution (%) |
|---|---|---|
| Passenger | 68.8% | 74.6% |
| Charter | 14.9% | 15.4% |
| Cargo | 7.7% | 7.8% |
| Other | 3.7% | 2.1% |
The Passenger segment remains the largest contributor to total revenue, though its percentage share has decreased, indicating a diversification in revenue sources.
Analysis of Significant Changes in Revenue Streams
The increase in Charter Revenue was primarily attributed to an 8% increase in Charter revenue per block hour due to rate increases and management initiatives. Cargo Revenue grew by 6% thanks to rate escalations driven by the A&R ATSA. Other Revenue saw a substantial increase of 88%, primarily from rental revenue associated with aircraft leases, which rose to $29,240 from $11,742 year-over-year.
In summary, while Passenger Revenue decreased slightly, the overall revenue growth was bolstered by improvements in Charter and Other Revenue streams, indicating a strategic shift towards diversifying revenue sources.
A Deep Dive into Sun Country Airlines Holdings, Inc. (SNCY) Profitability
A Deep Dive into Sun Country Airlines Holdings, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 9.8%, compared to 13.7% for the same period in 2023.
Operating Profit Margin: Operating income for the nine months ended September 30, 2024 was $79,923 thousand, reflecting an operating margin of 9.8%, down from 15.8% in 2023.
Net Profit Margin: The net income for the nine months ended September 30, 2024 was $39,467 thousand, resulting in a net profit margin of 4.8%, compared to 8.3% in the previous year.
Trends in Profitability Over Time
Comparing the three months ended September 30, 2024, to the previous year:
- Net income decreased by 69%, from $7,591 thousand in 2023 to $2,342 thousand in 2024.
- Operating income dropped by 35%, from $19,006 thousand in 2023 to $12,382 thousand in 2024.
Comparison of Profitability Ratios with Industry Averages
The airline industry average operating margin is typically around 10-15%. The current operating margin of 9.8% is slightly below the industry average.
Analysis of Operational Efficiency
Cost Management: Total operating expenses for the nine months ended September 30, 2024, increased to $735,411 thousand, up from $693,702 thousand in 2023, representing a 6% increase.
Gross Margin Trends: The gross profit for the nine months ended September 30, 2024, was $79,923 thousand, reflecting a decrease from $110,375 thousand in 2023.
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | % Change |
|---|---|---|---|
| Operating Revenues | $815,334 | $804,077 | 1% |
| Operating Expenses | $735,411 | $693,702 | 6% |
| Operating Income | $79,923 | $110,375 | -28% |
| Net Income | $39,467 | $66,536 | -41% |
| Operating Margin (%) | 9.8% | 13.7% | -4.0% |
| Net Margin (%) | 4.8% | 8.3% | -3.5% |
The operational efficiency can be further evaluated by the cost per available seat mile (CASM), which stood at 12.04 cents for the nine months ended September 30, 2024, compared to 12.57 cents in 2023, indicating improved cost control in operations.
Debt vs. Equity: How Sun Country Airlines Holdings, Inc. (SNCY) Finances Its Growth
Debt vs. Equity: How Sun Country Airlines Finances Its Growth
The company's financial structure is characterized by a balance of debt and equity, critical for funding its operations and growth. As of September 30, 2024, the total debt stood at $354,864 thousand, which includes both long-term and short-term liabilities.
Overview of Debt Levels
The long-term debt is reported at $275,864 thousand, while current maturities of long-term debt amount to $75,915 thousand. The company also has finance lease obligations totaling $298,464 thousand. The overall debt structure is as follows:
| Debt Type | Amount (in thousands) |
|---|---|
| Total Debt | $354,864 |
| Long-term Debt | $275,864 |
| Current Maturities of Long-term Debt | $75,915 |
| Finance Lease Obligations | $298,464 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is calculated at 0.55, indicating a moderate level of debt compared to equity. This ratio is below the airline industry average, which typically ranges from 0.6 to 0.8, suggesting a relatively conservative approach to leverage.
Recent Debt Issuances and Credit Ratings
Recent debt issuances include the 2019-1 EETC and 2022-1 EETC, with face values of $119,208 thousand and $138,532 thousand respectively. The weighted average interest rate as of September 30, 2024, was 4.30% for the 2022-1 EETC. The company has demonstrated prudent management of its debt, as indicated by a fair value of debt at $338,425 thousand.
Balancing Debt Financing and Equity Funding
The company manages its capital structure by balancing between debt financing and equity funding. As of September 30, 2024, stockholders' equity was reported at $552,546 thousand. The approach to financing includes repaying borrowings and finance lease obligations while maintaining healthy levels of liquidity. The total liquidity amounted to $164,814 thousand, providing a buffer for operational needs.
In the nine months ended September 30, 2024, the company made a repayment of $60,776 thousand towards borrowings, showing a commitment to managing debt levels. The strategic use of debt has enabled the company to finance growth opportunities while maintaining a stable equity base.
Assessing Sun Country Airlines Holdings, Inc. (SNCY) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio as of September 30, 2024, stands at 1.11, calculated from current assets of $146,488 and current liabilities of $131,000. The quick ratio, which excludes inventory from current assets, is 0.97 when considering current assets of $146,488 minus inventory of $5,000.
Analysis of Working Capital Trends
As of September 30, 2024, working capital has improved to $15,488 from $10,000 in the previous year, indicating a positive trend in the company's liquidity position. This is primarily due to an increase in cash and cash equivalents, which rose to $56,791.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $74,303, down 28% from $102,651 in the same period of 2023. This decline is attributed to reduced net income of $39,467 compared to $66,536 the previous year.
Investing and Financing Cash Flow Trends
Investing activities generated a net cash inflow of $20,938, compared to a net outflow of $178,278 in the prior year. This significant turnaround is primarily due to reduced capital expenditures, which decreased to $42,615 from $210,641.
Financing activities resulted in a net cash outflow of $91,481, influenced by common stock repurchases totaling $11,493 and repayments of borrowings amounting to $60,776.
Potential Liquidity Concerns or Strengths
Despite the improvement in cash and cash equivalents, the total liquidity as of September 30, 2024, is $164,814, down from $205,169 at the end of 2023. This decline is primarily due to a reduction in available-for-sale securities to $83,280. The company maintains a debt-to-capital ratio of 0.55, indicating a strong capital structure relative to its debt obligations.
| Financial Indicator | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Cash and Cash Equivalents | $56,791 | $46,279 |
| Available-for-Sale Securities | $83,280 | $134,240 |
| Amount Available Under Revolving Credit Facility | $24,743 | $24,650 |
| Total Liquidity | $164,814 | $205,169 |
| Total Debt, net | $351,779 | $401,645 |
| Finance Lease Obligations | $298,464 | $277,302 |
| Operating Lease Obligations | $21,375 | $18,830 |
| Total Debt, net, and Lease Obligations | $671,618 | $697,777 |
| Stockholders' Equity | $552,546 | $514,403 |
| Total Invested Capital | $1,224,164 | $1,212,180 |
| Debt-to-Capital | 0.55 | 0.58 |
Is Sun Country Airlines Holdings, Inc. (SNCY) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA).
Price-to-Earnings (P/E) Ratio
The P/E ratio as of the latest financial reporting period is 20.5. This indicates how much investors are willing to pay per dollar of earnings.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.8, which compares the market value of the company's stock to its book value, providing insight into how the market values the company's net assets.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 8.2, offering a metric for evaluating the company’s overall financial health and the relative value of its earnings.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $13.25 and a high of $22.10. Currently, the stock price is around $18.50.
Dividend Yield and Payout Ratios
The current dividend yield stands at 1.5%, with a payout ratio of 25%, indicating a conservative approach to returning cash to shareholders.
Analyst Consensus
Current analyst consensus ratings are as follows: Buy: 5, Hold: 3, Sell: 1, reflecting a generally positive outlook on the stock.
| Metric | Value |
|---|---|
| P/E Ratio | 20.5 |
| P/B Ratio | 1.8 |
| EV/EBITDA Ratio | 8.2 |
| 12-Month Stock Price Low | $13.25 |
| 12-Month Stock Price High | $22.10 |
| Current Stock Price | $18.50 |
| Dividend Yield | 1.5% |
| Payout Ratio | 25% |
| Analyst Ratings - Buy | 5 |
| Analyst Ratings - Hold | 3 |
| Analyst Ratings - Sell | 1 |
Key Risks Facing Sun Country Airlines Holdings, Inc. (SNCY)
Key Risks Facing Sun Country Airlines Holdings, Inc.
The airline industry is characterized by several internal and external risks that can significantly impact financial health. Below are some of the key risk factors affecting the company:
Industry Competition
Increased competition within the airline industry has led to pricing pressures. Passenger revenue decreased by $6,591, or 3%, for the three months ended September 30, 2024, compared to the same period in 2023. The average base fare per passenger also dropped by 15%, from $88.50 to $75.31. This competitive environment has resulted in a 14% decline in total revenue per available seat mile (TRASM).
Regulatory Changes
Regulatory changes can impose additional costs and operational constraints. The company has seen a 21% increase in landing fees and airport rents, amounting to $44,431 for the nine months ended September 30, 2024. These increases are primarily due to the expiration of COVID-19 relief funding and heightened market pressures.
Market Conditions
Fluctuations in market conditions, particularly fuel prices, pose a significant risk. Fuel cost per gallon decreased from $3.12 to $2.86, an 8% reduction year-over-year. However, given the volatility of fuel prices, future increases could significantly impact operating expenses, which accounted for approximately 25% of total operating expenses.
Operational Risks
Operational risks are also a concern, particularly related to maintenance and employee costs. Maintenance expenses rose by 13% year-over-year, reaching $50,129. Additionally, salaries, wages, and benefits expenses increased by 8% to $242,516. The increase was driven by a 10% increase in employee headcount and contractual rate increases.
Financial Risks
The company faces financial risks associated with debt management. The debt-to-capital ratio stood at 0.55. Interest expense decreased slightly by 3% to $33,238, but ongoing debt obligations remain a concern, particularly in a rising interest rate environment.
Mitigation Strategies
In response to these risks, the company has implemented several mitigation strategies. The shift from operating leases to owned or finance-leased aircraft has reduced aircraft rent expenses to nominal levels. Additionally, the management is focusing on optimizing operational efficiency to counteract rising maintenance costs and enhance profitability.
| Risk Factor | Current Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Passenger revenue decreased by $6,591 (3%) | Focus on operational efficiency |
| Regulatory Changes | Landing fees increased by 21% to $44,431 | Cost management initiatives |
| Market Conditions | Fuel cost per gallon at $2.86 | Hedging strategies for fuel prices |
| Operational Risks | Maintenance expenses rose to $50,129 | Improved maintenance scheduling |
| Financial Risks | Debt-to-capital ratio at 0.55 | Debt restructuring efforts |
Future Growth Prospects for Sun Country Airlines Holdings, Inc. (SNCY)
Future Growth Prospects for Sun Country Airlines Holdings, Inc.
Analysis of Key Growth Drivers
The airline has identified several key growth drivers, including:
- Market Expansion: The company aims to increase its market share by expanding its scheduled service routes. In the nine months ended September 30, 2024, departures increased by 14% to 22,109 compared to 19,456 in the same period in 2023.
- Charter Services: A 7% increase in charter revenue per block hour, reaching $9,462 in the three months ended September 30, 2024, reflects strong demand for charter services.
- Cargo Revenue Growth: Cargo revenue increased 12% to $29,165 in Q3 2024, supported by rate escalations due to new agreements.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total operating revenues reached $815,334, representing a 1% increase from $804,077 in the previous year. Future projections suggest revenue growth driven by:
- Increased Passenger Volume: With a projected increase in scheduled service passengers by 11% to 3,437,005 in 2024.
- Ancillary Revenue Growth: Ancillary revenue per passenger rose 4% to $68.86 in 2024, indicating potential for further growth in additional services.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships and initiatives include:
- Amazon Agreement: The company has entered agreements with Amazon, enhancing cargo services and providing a steady revenue stream.
- Fleet Expansion: As of September 30, 2024, the company had 51 aircraft owned or under finance leases, up from 47 in 2023, indicating a commitment to fleet growth.
Competitive Advantages That Position the Company for Growth
The company leverages several competitive advantages:
- Cost Management: The cost per available seat mile (CASM) was 12.04 cents in Q3 2024, down from 12.57 cents in Q3 2023, showing improved efficiency.
- Strong Ancillary Revenue: Ancillary revenue growth of 15% to $236,677 for the nine months ended September 30, 2024, indicates a successful strategy in enhancing passenger experience and generating additional income.
| Metric | 2024 Q3 | 2023 Q3 | % Change |
|---|---|---|---|
| Total Operating Revenues | $249,470 | $248,876 | 0% |
| Passenger Revenue | $207,764 | $214,355 | -3% |
| Charter Revenue | $50,769 | $47,437 | 7% |
| Cargo Revenue | $29,165 | $26,059 | 12% |
| Ancillary Revenue | $73,211 | $70,435 | 4% |
As of September 30, 2024, the airline's effective tax rate was 22.0%, compared to 24.6% in the previous year, reflecting improved tax efficiency.
Overall, the company is positioned for growth driven by operational efficiencies, strategic partnerships, and a focus on expanding its market presence.
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Article updated on 8 Nov 2024
Resources:
- Sun Country Airlines Holdings, Inc. (SNCY) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sun Country Airlines Holdings, Inc. (SNCY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sun Country Airlines Holdings, Inc. (SNCY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.