Ramstad: How Sun Country quietly became one of the most profitable airlines in the country

Minnesotans count on Sun Country Airlines to take them to warm places in the winter, cool ones in the summer and provide low-price competition year-round to Delta Air Lines’ dominance at Minneapolis-St. Paul International Airport.

So you may be surprised to hear that Sun Country has quietly become one of the nation’s most profitable airlines. By one key measure, it was the most profitable airline through the first three quarters of the year: operating margin. Delta was No. 2 in that metric.

With air travel a notoriously low-margin business, I wondered how an airline renowned for low fares had become a profit leader. There are several elements to the answer, but the main one is deceptively simple: Sun Country only flies routes where it can make money. In contrast to other airlines, it also only flies them when it can make money.

“The way we work here is, we keep adding capacity until the incremental flight can’t have a fare that is supported by our cost structure,” Jude Bricker, the company’s chief executive, said in an interview this month.

“So if the demand [for a route] is high, we fly a lot more and that brings down the airfares. If demand is low, we fly less and still airfares don’t fall below where it’s profitable for us,” Bricker added. “It works for the community. It works for us. And that’s the model.”

Today is one of the busiest days of the year for the nation’s airlines, and this week marks the start of the busiest time of the year for Sun Country.

The airline is also going through its annual change from summer routes to winter routes. Flights from MSP to cities like Albuquerque, Baltimore and Cleveland are ending and flights to Aruba, Belize City and Cozumel are starting up. The airline’s planes get packed during the holidays and again in February through April as winter-weary Minnesotans make getaways south.

The changeover period is always challenging. Because Sun Country doesn’t fly the same schedule every day, it risks stranding passengers in places when the seasonal service ends. A sudden weather event or problematic plane can produce an ill-timed flight cancellation — a lesson learned most painfully when it left passengers stranded in Mexico in spring 2018.

“We’re just trying to continue to do it better every year,” Bricker said.

In just a few weeks, two new gates will open up for Sun Country in Terminal 2 at MSP, boosting its total to 10.

“Two more gates means more flights first thing in the morning,” Bricker said. “That’s a real benefit to us. Fares look really good. We’re working hard to add the capacity and keep fares at affordable levels for the community.”

To make a non-repeating schedule work, all 51 of Sun Country’s passenger planes return to MSP each night. That gives Sun Country flexibility to go where demand is highest or, as happens on low-volume days in the middle of the week, to not fly at all.

Other low-fare carriers, by flying the same schedule every day, wind up with flights that are unprofitable on some days. And there’s been a shakeout this year. The nation’s three giant carriers, Delta, American and United, since the pandemic segmented their business by using low fares as a base to attract economically minded passengers that might have chosen a budget airline. They pull in additional revenue from people willing to pay more for space or better service.

This led the longtime standard-setter in low-fare, point-to-point flying, Southwest Airlines, to announce an end to its single class of seating and fares. Last week, low-fare carrier Spirit Airlines tumbled into bankruptcy with executives saying they would create “upscale bundles” in its financial restructuring.

When Bricker arrived at Sun Country seven years ago, one of the first things he did was remove the first-class section from its planes.

“It’s very difficult to compete with Delta in this market, particularly for premium service,” he said. “They’re good at what they do. They have corporate contracts in the community, which go a long way toward filling those premium seats and they have a really powerful loyalty program. We needed to differentiate ourselves from that and focus on leisure.”

Among the other changes, Sun Country started to own, rather than lease, its airplanes. It also overhauled its ticket sales to rely less on travel agencies and online platforms and more on direct sales from its website. And it expanded its charter and cargo services, helping to level out scheduling of pilots amid the ebbs and flows in passenger flights.

The airline is currently negotiating new contracts with four of its five unionized labor groups. It is in federal mediation on two of them, including its flight attendants. No doubt, Sun Country’s costs will rise as a result of the new contracts.

Bricker said he feels good about the negotiations. “The crews are fantastic and they continue to deliver great, great service to our customers. And they need a raise,” he said.

Finding mechanics and pilots remains a challenge, he said, but he called the overall staffing environment “healthy.”

“As an airline, you just can’t ask for anything better than the Twin Cities,” Bricker said. “The airport is such a great asset. It’s expensive to build airports. And they’re producing these incremental gates, I don’t want to say affordably, but they’re certainly efficient.”