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United States securities and exchange commission logo
January 19, 2021
Jude Bricker
Chief Executive Officer
Sun Country Airlines Holdings, Inc.
2005 Cargo Road
Minneapolis, MN 55450
Re: Sun Country
Airlines Holdings, Inc.
Amendment No. 2 to
Draft Registration Statement on Form S-1
Submitted December
22, 2020
CIK No. 0001743907
Dear Mr. Bricker:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Amendment No. 2 to Draft Registration Statement on Form S-1 Submitted
December 22, 2020
Prospectus Summary, page 1
1. Where you make
qualitative statements about your business during the COVID-19
pandemic, please
provide objective support or identify the statements as your belief. For
example, beginning on
page 1, you make the following statements:
"In addition, low
cost, leisure focused carriers, similar to Sun Country, have been
more resilient
during economic downturns, including the current COVID-19 induced
downturn, when
compared to business-travel-focused legacy carriers."
"While all
scheduled service airlines were negatively impacted by the COVID-19
induced industry
downturn, low-cost leisure focused airlines, such as Sun Country
Jude Bricker
FirstName LastNameJude Bricker
Sun Country Airlines Holdings, Inc.
Comapany
January 19,NameSun
2021 Country Airlines Holdings, Inc.
January
Page 2 19, 2021 Page 2
FirstName LastName
Airlines, outperformed business-travel-focused legacy network
airlines."
In addition, please clarify your references to "more resilient" and
"outperformed" in
connection with such statements.
COVID-19 Induced Downturn, page 3
2. Your disclosure at the beginning of this section briefly states that
you "were not
unaffected by this downturn" but then focuses on how you mitigated the
impact of
COVID-19 "better than any other large U.S. passenger airline." Please
briefly discuss in
this section the adverse impact of the pandemic on your business,
operating results,
financial condition and liquidity. For example, we note your
disclosure on page 4 that
your financial and operating results and business operations for your
scheduled service
and charter businesses have been materially and adversely impacted by
COVID-19, which
impact is likely to continue during the duration of the pandemic. We
also note your related
risk factor disclosure on pages 23-25, and your discussion on page 76
regarding trends and
uncertainties related to the pandemic.
3. We note your statement that "[d]uring 2020, we generated higher
operating income
margins than any other mainline U.S. passenger airline while being the
only mainline U.S.
airline to also have positive pre-tax income margins." Please balance
this disclosure to
address whether such positive margins were due to your charter and
cargo businesses as
opposed to your passenger business. In addition, please clarify, if
true, that such
statement is based on results through the third quarter of 2020 only.
We note your related
tabular presentation on page 4.
Prospectus Summary
COVID-19 Induced Downturn, page 3
4. We note your presentation of the bar graph on page 4 showing operating
income margin
for yourself and eight other airlines and the explanation you provide
in footnote 1 which
indicates that you have adjusted the results of your competitors to
remove identified one-
time items such as asset sales, impairment charges and non-cash stock
compensation
expense. Tell us your basis for presenting this information for the
other airlines and
clarify how you derived the operating income margin and ensured
consistent calculation
of the margin for each of them.
5. Further to the above, we note from your disclosure on page 123 that
you also consider
Hawaiian Airlines to be a key competitor. Please clarify why this
airline is not presented
in your bar graph on page 4.
Prospectus Summary
Our Competitive Strengths, page 4
6. We note your disclosure on page 7 that your Adjusted CASM declined
from 7.80 cents for
the year ended December 31, 2017 to 6.31 cents for the year ended
December 31, 2019,
Jude Bricker
FirstName LastNameJude Bricker
Sun Country Airlines Holdings, Inc.
Comapany
January 19,NameSun
2021 Country Airlines Holdings, Inc.
January
Page 3 19, 2021 Page 3
FirstName LastName
and your disclosure that Adjusted CASM for all U.S. airlines increased
in 2020 as a result
of the COVID-19 induced downturn. Please balance your disclosure in
this section to
disclose your Adjusted CASM for the nine months ended September 30,
2020. We note
your related disclosure on page 21.
Our Competitive Strengths
Tactical Mid-Life Fleet with Flexible Operations, page 5
7. We note your statement that you maintain low aircraft ownership
costs by purchasing
mid-life Boeing 737-800 aircraft, which have a lower purchase price,
when compared to
new Boeing 737 aircraft, that more than offsets their moderately
higher operating costs.
However, we note in your prior submission a statement that Older
aircraft on average
require higher ongoing maintenance and repair costs," which provided a
more balanced
perspective of the ownership of mid-life versus new aircraft. Describe
the assumptions
underlying your statement that your lower aircraft purchase price more
than offsets the
moderately higher operating costs to support the revised
disclosure.
Prospectus Summary
The Offering, page 14
8. Where you discuss your dividend policy on page 15, please also
disclose the
prohibition on dividends imposed by the CARES Act Loan Agreement.
Use of Proceeds, page 64
9. We note that you intend to allocate your proceeds for general
corporate purposes and
"anticipate using a significant portion...to implement [your] growth
strategies and generate
funds for working capital." If more detailed information is known
regarding plans for the
proceeds, please revise this section accordingly. In this regard, we
note your disclosure on
page 9 regarding your focus, following the end of the COVID-19
pandemic to "grow
[your] passenger aircraft fleet" and initiatives to convert to an
"owned (versus leased)
model for aircraft ownership" as well as your risk factor disclosure
on page 59 indicating
that you may invest the proceeds in "short-term, investment-grade,
interest-bearing
securities."
Management s Discussion and Analysis of Financial Condition and Results of
Operations
Non-GAAP Financial Measures, page 90
10. We note from your response to prior comment 6 that you believe the
presentation of
Adjusted EBITDAR is useful information for investors since it is
utilized by the
Company s management for measuring the Company s financial
performance excluding
the cost of its legacy operating leased aircraft. However, you also
state on page 91 that
Adjusted EBITDAR should not be viewed as a measure of overall
performance since it
excludes aircraft rent, which is a normal, recurring cash operating
expense that is
necessary to operate [y]our business. Because of this limitation,
Adjusted EBITDAR
Jude Bricker
FirstName LastNameJude Bricker
Sun Country Airlines Holdings, Inc.
Comapany
January 19,NameSun
2021 Country Airlines Holdings, Inc.
January
Page 4 19, 2021 Page 4
FirstName LastName
should not be referred to as a performance measure. Therefore, revise
your disclosure to
refer to Adjusted EBITDAR solely as a valuation measure and to further
emphasize the
limitations of its use.
Adjusted CASM, page 93
11. Where you provide a discussion of Adjusted CASM, please revise to
include discussion of
the most directly comparable GAAP measure of CASM with equal or
greater prominence.
Refer to Item 10(e)(1)(i)A of Regulation S-K and Question 102.10 of
the Compliance and
Disclosure Interpretation of Non-GAAP Financial Measures.
Financial Statements
Consolidated Statements of Cash Flows, page F-7
12. Tell us the nature of the amounts presented in the line item Reduction
of Operating Lease
Right-of-Use-Assets in the statements of cash flows for the year ended
December 31,
2019 and the nine months ended September 30, 2020 and 2019. In your
response, address
why these amounts are classified as cash flows from operating
activities.
Notes to Consolidated Financial Statements
Note 1. Company Background
Amazon Agreement, page F-9
13. Please clarify the following as it relates to the description of terms
in the contract with
Amazon.com Services, Inc. ( Amazon ):
You indicate that Amazon will supply the aircraft to be used to
provide the air cargo
services. However, we also note disclosure on page 128 that
indicates you will
sublease the aircraft directly from Amazon. Revise your
disclosure to explain how
you will account for the sublease of the aircraft under this
agreement;
With regard to the reimbursement of expenses by Amazon under
this agreement, we
note disclosure on page F-57 which states that Revenues for
items that are
reimbursed through airline service agreements, including
consumption of aircraft
fuel, are generally recognized net, as the costs are incurred.
Based on this disclosure,
it is not clear whether the reimbursement of such costs is
recognized as revenue or
recognized as an offset to the costs incurred. Clarify how you
account for reimbursed
costs under this agreement and provide reference to the relevant
accounting guidance
you relied upon;
We note that a component of the fee you receive under this
agreement is based on a
set rate per cycle and block hour flown. However, we note only
the definition of
"block hours" is provided in the Glossary of Terms on page iii.
Revise to provide the
definition of "cycle" as well; and
Jude Bricker
Sun Country Airlines Holdings, Inc.
January 19, 2021
Page 5
Expand your disclosure, where applicable, to describe how you
determined that the
fair value of the Amazon warrants as of December 31, 2019 was
$139.43 per share.
You may contact Jennifer O'Brien, Staff Accountant, at (202) 551-3721,
or Shannon
Buskirk, Staff Accountant, at (202) 551-3717 if you have questions regarding
comments on the
financial statements and related matters. Please contact Anuja A. Majmudar,
Attorney-Advisor,
at (202) 551-3844 or, in her absence, Laura Nicholson, Special Counsel, at
(202) 551-3584 with
any other questions.
Sincerely,
FirstName LastNameJude Bricker
Division of
Corporation Finance
Comapany NameSun Country Airlines Holdings, Inc.
Office of Energy &
Transportation
January 19, 2021 Page 5
cc: Brian M. Janson, Esq.
FirstName LastName