Sun Country Airlines outlines plans to IPO on Nasdaq

Sun Country Airlines (SY, Minneapolis/St. Paul) has outlined plans for an Initial Public Offering (IPO) on the NASDAQ stock exchange, although majority shareholder, Apollo Global Management, intends to retain control over the company. Scant on details, the prospectus did not point to any timelines but did specify a maximum offering value of USD100 million. Sun Country Airlines did not reveal the exact structure of its current ownership but indicated that the only shareholder with a stake exceeding 5% is SCA Horus Holdings, LLC, an affiliated unit of Apollo Global Management. It is impossible to determine how much the fund currently owns and the extent to which it will reduce its shareholding following the listing. Apollo acquired Sun Country Airlines in 2018. The carrier underlined that its business case was backed up by its diversified operating model, combining scheduled passenger operations on leisure-heavy and nearly all-seasonal routes, charter flights, and recently inaugurated cargo operations on behalf of Amazon.com. “As a result of our diversified and resilient business model, we believe we have been the best performing mainline US passenger airline in 2020 during the current COVID-19 induced industry downturn based on pre-tax and operating income margins for the nine months ended September 30, 2020,” it said. Currently, scheduled services amount to around 70% of Sun Country’s total fleet block hours. The airline said it posted an operating profit of USD21.8 million for the first nine months of 2020 with an operating profit of 7.4%. Its 2019 full-year operating profit was USD78.1 million. The IPO is being underwritten by Barclays, Morgan Stanley, and Deutsche Bank, and co-managed by Apollo’s in-house Apollo Global Securities unit. According to the ch-aviation fleets advanced module, Sun Country Airlines currently operates a single B737-700, thirty B737-800s, and twelve B737-800(BCF)s. The dedicated freighters operate exclusively for Amazon under a CMI agreement which Sun Country Airlines called “asset-light”. The twelve B737-800(BCF)s are owned by GECAS and leased by Amazon, which then uses Sun Country Airlines to operate them. The carrier emphasised its focus on adding mid-life aircraft and said that it did not have “large future capital expenditures” related to planned fleet changes. The airline said its future strategy would focus on growing its Minneapolis/St. Paul hub for passenger operations, while at the same time leveraging new opportunities in the cargo sector. It expects the leisure and visiting-friends-and-relatives (VFR) segments to rebound faster than business travel, providing an extra boost to ultra-low-cost carriers such as itself. “We had also been rapidly growing outside of Minneapolis/St. Paul prior to the COVID-19 pandemic, and we expect to do so again once the air travel market rebounds… Our long-term strategic plans have identified potential growth opportunities outside of MSP of 5 to 8 aircraft, as well as an additional 3 to 4 aircraft to support our charter operations,” the airline said.