Why Minnesota-based Sun Country is outperforming rest of airline industry

The crisis meetings at Sun Country Airlines started happening first thing every morning in mid-March, just as air travelers began canceling flight plans because of the coronavirus.

Dispatchers, operations executives and crew planners decided what flights to cut, looking at where planes and crews were and what airport contracts Sun Country needed to uphold. Chief Executive Jude Bricker calls those days "dramatically terrible."

That's when a few business decisions made just before COVID-19 gripped the country proved fortunate for the scrappy, Minnesota-based airline. It took back control of ground operations and employment at its main hub, Minneapolis-St. Paul International Airport. And a new contract to fly Amazon Air, sometimes called Prime Air, cargo operations for the giant e-commerce company began in May.

When the April-to-June quarter ended, Sun Country achieved something no other U.S. airline did: a pretax profit.

"We're not out of the woods, but we are outperforming the rest of the industry and that's a unique circumstance for Sun Country to be in," Bricker said in an extensive interview this month.

The profit was small, around $8 million, and would have been a loss without government help. But as other airlines foreshadow big job cuts with the looming end of government aid, Sun Country may be able to hang on to its 1,500 workers.

Bricker said staffing decisions are made month-to-month. At this point, he added, "We don't have plans for furloughs in October. I think we will be OK through the end of the year."

The global spread of the novel coronavirus and the ensuing pandemic has sent the airline industry into its worst-ever economic crisis. This past spring, air travel came to a near halt as shelter-in-place orders took hold across the U.S. and corporate policies forbade workers from traveling for business.

Congress gave airlines and aviation contractors payroll assistance to avoid mass layoffs. But it wasn't enough for some.

Several regional airlines, including Compass Airlines, folded, while some large airlines, such as Aeromexico and Virgin Atlantic, filed for bankruptcy protection. Even highly profitable carriers with a reputation for stability, such as Delta Air Lines, frantically cut costs and shored up balance sheets by shedding aircraft.

Sun Country also took the federal assistance and asked its flight attendants to sacrifice by taking unpaid time off lasting as long as a month.

"Nearly all flight attendants in the U.S. are unionized and nearly all of them have a minimum payment regardless of the amount of flying they do and that's why cutting costs in airlines, in respect to cutting capacity, can be difficult," Bricker said. "That's why airlines are talking furloughs."

But Sun Country had "incredible participation" in the voluntary leave option.

"We cut capacity by about 80% and cut crew costs by about 70%," Bricker said. "Our flight crews are being really collaborative. I'm just really proud of the group."

Sun Country had decided to bring its airport staff jobs back in-house after a botched outsourcing effort at MSP in 2018 led to long lines and countless lost bags. Its previous contract with DGS, a subcontractor partly owned by Delta, was already scheduled to end in late March — just as the pandemic was taking root in the U.S. And while hiring and managing staff in-house is generally more costly, the timing allowed Sun Country the flexibility to manage its own staff as part-time employees in the sudden downturn.

But perhaps the biggest life raft for the airline came from the cargo service deal struck with Amazon in December. The move put Sun Country, which has long specialized in passenger flights to vacation destinations, into the cargo business for the first time.

Executives initially expected the Amazon deal would quickly grow to represent 20% of all its flying. But with the collapse in demand for passenger flights, Sun Country in September will be flying more flights per day for Amazon, around 30, than it is for travelers.

During the peak demand for winter getaways early this year, Sun Country flew around 120 passenger flights a day.

"Luck is important through this process," Bricker said. "The cargo business ... is becoming a more important part of our business in the short term than I thought it would be."

Fall is a slow season and Sun Country's new cargo business, like its charter business, was developed to make better use of its pilots and assets during that time.

By September, Sun Country will have taken delivery of all 10 of its blue-and-white Prime Air planes. "It is still a relatively small portion of what we do, but it is the healthiest part of what we do during the pandemic," Bricker said.

Will Outlaw, a Sun Country pilot and spokesman for the union that represents its pilots, said, "We seem to be in a lot better position than the other airlines in terms of not looking at furloughs. The Amazon flying has definitely helped keep our pilots employed and obviously we hope that continues."

Since its transition two years ago to an ultra-low-cost model, Sun Country has established itself as an agile opportunist, entering markets where it sees a sliver of opportunity to drive down leisure airfares. Brinker said it may get a chance to enter new markets as the industry slowly revives.

"Airlines will get smaller and then the leisure travelers that all want to go [on their trips] at the same time will have to pay a price, so we can come in to markets and lower the fares and deliver a great product," Bricker said.

He also expects Sun Country will ultimately have a bigger presence at MSP as other carriers slim down.

"I definitely think Minneapolis is an opportunity for us to take [market] share in the recovery. We are a powerful competitive force in Minneapolis because our crew is based here and our costs are as low as anybody's," Bricker said. "We've seen Spirit and Frontier pull back dramatically in the market during this crisis."

This past spring, airlines were focused on preventing catastrophe. This summer, they were just trying to stabilize the business and plan for a downsized future. The fall is expected to be another pivotal point for the industry when the government's aid expires.

The Treasury Department approved more than $60.5 million in payroll protections for Sun Country for the six months the program covers. The largest recipients were American Airlines and Delta Air Lines, which received more than $5.8 billion and $5.4 billion, respectively.

With the Amazon flights, Sun Country will need all its pilots working at full pay if sales for its December schedule are strong.

The airline is now trying to create its March 2021 spring-break schedule with no idea what the virus situation will be.

"Demand could be like it was in March 2019 or it could be down 40%, 50%," Bricker said. "That's just such dramatic volatility we have to plan for."

Still, Sun Country sees opportunity in the crisis.

"While the rest of the industry is out borrowing all this money — and I think that's going to mortgage their future somewhat — we are just really competitive," Bricker said. "Our midterm strategy is basically not to do anything that would have a long-term detrimental effect to Sun Country to survive this, and that means being really nimble in the near term."

Kristen Leigh Painter • 612-673-4767 • kristen.painter@startribune.com