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CURRENT REPORT
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| Item 7.01 | Regulation FD Disclosure. |
Sun Country Airlines Holdings, Inc. intends to conduct an investor presentation at an industry conference beginning on March 9, 2022. A copy of the investor presentation is attached hereto as Exhibit 99.1 and incorporated by reference herein.
The information contained in this report, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Investor Presentation | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: March 8, 2022 | Sun Country Airlines Holdings, Inc. |
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| By: | /s/ Eric Levenhagen | |||
| Name: | Eric Levenhagen | |||
| Title: | Chief Administrative Officer, General Counsel and Secretary | |||
EXHIBIT 99.1
Sun Country Airlines March 2022
Disclaimer This presentation has been prepared by the Company for informational purposes only and not for any other purpose. Nothing con tai ned in this presentation is, or should be construed as, a recommendation, promise or representation by the presenter or the Company or any director, employee , a gent, or adviser of or the Company. This presentation does not purport to be all - inclusive or to contain all of the information you may desire. Market Data We include statements and information in this presentation concerning our industry ranking and the markets in which we operat e, including our general expectations and market opportunity, which are based on information from independent industry organizations and other third - part y sources (including a third - party market study, industry publications, surveys and forecasts). While we believe these third - party sources to be reliable as of the date of this presentation, we have not independently verified any third - party information and such information is inherently imprecise. In addition, projectio ns, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to a high degre e o f uncertainty and risk due to a variety of risks. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. Cautionary Note Regarding Forward - Looking Statements This presentation contains forward - looking statements, which involve risks and uncertainties. These forward - looking statements a re generally identified by the use of forward - looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend, ” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other va rious or comparable terminology. All statements other than statements of historical facts contained in this presentation, including financial guidance and project ion s and statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of mana gem ent and general economic trends and trends in the industry and markets are forward - looking statements. These statements involve known and unknown risks, uncerta inties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, pe rfo rmance or achievements expressed or implied by the forward - looking statements. Certain of these risks are identified and discussed in our filings with the Securi ties and Exchange Commission. These forward - looking statements reflect our views with respect to future events as of the date of this presentation and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward - looking statements. We undertake no obligation to update any forward - looking statements, whether as a result of new information, future events or otherwise after the date of this presentati on. Non - GAAP Financial Measures This presentation includes certain non - GAAP financial measures, including Adjusted EBITDAR, Adjusted EBITDAR Margin, Adjusted Op erating Income, Adjusted Operating Income Margin, Adjusted Net Income, Adjusted CASM and free cash flow. These non - GAAP financial measures are not measu res of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing our financial results. The ref ore, these measures should not be considered in isolation or as an alternative or superior to GAAP measures. You should be aware that our presentation of thes e m easures may not be comparable to similarly - titled measures used by other companies. Please see the reconciliations included in the Appendix to this presentation 2
Business Overview
Approximately 1/3 of fuel usage is paid for by charter and cargo customers Unique, Diversified Business Model Sun Country’s symbiotic business lines share assets to maximize operating leverage 4 Sun Country Business Line Synergies Shared Foundational Assets Aircraft Pilots Shared Services Charter (~20% of Revenue (1) ) Passenger Leisure (~64% of Revenue (1) ) Cargo (~15% of Revenue (1) ) Standard fleet of 36 Boeing 737s that are used across scheduled service and charter; 12 737 Freighters used for Cargo 456 (2) Pilots that serve across the entire set of assets An already lean operation supporting the entire set of assets 1 2 3 1. Percentage of total revenue as of Dec 31, 2021 2. As of Dec 31, 2021 • Unique low cost airline with focus on leisure travel • Flexible capacity model focused on peak demand • Greater resilience and growth opportunities than other passenger carriers • A leader in U.S. narrowbody charter • Contracted recurring revenue with pass - through costs (including fuel) • Large, stable customer base • Long - term asset - light contract with pass - through costs • High margins and cash flows • Partnership with one of the fastest growing companies globally
Sun Country Route Network 5 Broad and Growing Network – No Long - Haul International Exposure ~97% of our markets are seasonal which reflects demand trends of our customer
6 Seasonal Demand Dictates Monthly Schedule Day - of - Week Capacity Determined by Demand Patterns (2) Unlike other passenger airlines, we quickly shift our capacity to focus flying when and where demand is high, resulting in higher yields 1 – Source Diio Mi 2 – Based on FY2021 data 5.00¢ 6.00¢ 7.00¢ 8.00¢ 9.00¢ 25% 50% 75% 100% Mon Tue Wed Thu Fri Sat Sun Capacity Index (% of peak day) TRASM (% of Peak Day ASMs) ( TRASM ) 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 110.0% 120.0% ULCC SAVE SNCY Monthly seats as % of July 2021 (1) Agile Passenger Capacity Built to Capture Peak Demand Charter and Cargo operations peak in the Fall when leisure demand is weakest
Weighted Average Seat Pitch Seat Recline In - Flight Entertainment In - Seat Power Free Beverage 31” P P P P 32” P P O P 30” O O O O 30” O O O O 28” O O O O 7 We Offer A Higher Quality Product
Ancillary Revenue Growth Potential 8 Ancillary Revenue per Passenger Growth Range (1) Initiative Areas Ancillary revenue per passenger is expected to continue to grow, driven by better merchandising, new products and pricing initiatives • Enhanced Merchandising – improved offer and product presentation on suncountry.com, including bundled ancillary products • New Products – introduction of new product offerings • Pricing Optimization – improved technology enabling enhanced pricing practices, including machine learning • 3 rd Party Products – continued expansion and optimization of the 3 rd party product portfolio 1 - Includes ancillary and other revenue per passenger 2 - There can be no assurance that projections or estimates of future performance will be realized $21.70 $33.14 $40.53 $42.89 2018 2019 2020 2021 2024E $2 to $5 per pax of upsize 2
Differentiated, Leading Charter Business… • High growth and high margin market leader in narrow - body charter market • Only U.S. scheduled passenger airline with a meaningful charter business • Scheduled seamlessly with passenger business • Contract based business provides recurring revenues • Pass - through fuel and other costs • Largely insulated from economic cycles 9 Overview Charter Revenue per Block Hour $8,767 $8,793 $8,101 $8,508 2018 2019 2020 2021 Return of track charter flying that had stopped during COVID is underway NCAA and professional sports, casino/VIP, US military, among other customers COVID recovery underway
…Coupled With Unique, Stable Cargo Business… 10 • 12 Boeing 737 - 800 freighter aircraft operated on behalf of Amazon (Amazon owns the aircraft) • 10 year contract, initial term six years and two, two - year extension options • Generates strong cash flow with significant revenues, shared costs (including fuel pass - through) and minimal ongoing capex • Since contract was signed with Amazon in 2019, all of Amazon’s new 737 cargo aircraft have been assigned to Sun Country Annual Cargo Revenue ($mm) $0.0 $36.8 $91.4 2019 2020 2021 Fully ramped to 12 aircraft Only partnership between Amazon and a scheduled passenger service carrier with stable, high margin revenue and cash flow Overview
0 100 200 300 400 500 600 Scheduled service Cargo Charter Total system Daily block hours …Allows Us to Smooth Schedule Volatility 11 Steady cargo and countercyclical charter businesses offset variability of scheduled service Daily Block Hour Variance by Business Relative standard deviation (std dev as percent of average) of 2021 daily block hours Peak demand scheduling strategy maximizes unit revenue, while cargo and charter smooth overall schedule volatility. Result is resilient TRASM - maximizing business resistant to competition 44% 11% 51% 25%
Model Generates High TRASM, Competitive CASM 12 TRASM Stage Length Adjusted (1) 9.12 8.32 7.38 6.94 SNCY ALGT SAVE ULCC Spread between passenger unit revenue and unit cost among the best in the industry. Results exclude cargo flying which further improves earnings Source – public filing 1 – Stage length adjusted to SNCY stage length of 1,183 See appendix for Adjusted CASM reconciliation SNCY – Sun Country, ALGT – Allegiant, SAVE – Spirit, ULCC – Frontier Sun Country TRASM excludes cargo revenue 5.62 6.27 6.35 6.44 ALGT SAVE ULCC SNCY Adj CASM Stage Length Adjusted (1) TRASM – Adj CASM 2.70 2.68 1.11 0.59 ALGT SNCY SAVE ULCC Full year 2021 – numbers in cents Expect 2022 < 6.31
Continued Reduction in CASM as Sun Country Grows 13 CASM expected to improve as recovery and growth continue 7.80 7.05 6.31 7.57 6.44 9.8 9.7 9.6 5.1 6.8 2017 2018 2019 2020 2021 2022E 2023E Adjusted CASM - cents Total Utilization - hours Expect to be lower than 2019 1 Expect to be lower than 6 cents 1 Adjusted CASM vs Historical Utilization During COVID See appendix for Adjusted CASM reconciliation 1 - There can be no assurance that projections or estimates of future performance will be realized Utilization in 2022 and beyond continues improvement from pandemic - era lows • Capex - free growth • High margin flying
• First airline to ratify new pilot contract post - COVID, providing predictable costs • Improves retention • Ability to attract new hire pilots in competitive market • Adds flexibility and unlocks potential future cargo growth • Improves pilot quality of life Ratified Pilot Contract Unlocks Growth 14 Negotiated in less than 4 months – Cooperation between pilots and management 1 - Adj cost per block hour = GAAP total operating expense – fuel expense – special items, net / total block hours 2 - There can be no assurance that projections or estimates of future performance will be realized Key Provisions • Top of scale wages above ULCC average, on par with current legacy rates by 2025 • Retirement benefits competitive with ULCC peers • Pilots able to start trips from home locations, increasing attractiveness to commuters • Ability to assign reserve pilots to bases outside of MSP – key to cargo growth • Preferential bid system increases pilot efficiency in 2023 and beyond, mitigating future costs Key Benefits Higher pilot cost starting in 2022 mitigated by solid cost control in other parts of the business Pilot cost per block hour 2 34% Strong cost control elsewhere offsets increase Total Adj op cost per block hour 1,2 2% 2021 to 2022 2021 to 2022
Decline in Key Cost Categories Over Time 15 Declining Aircraft Costs $266 $246 $246 $194 2018 2019 2020 2021 Distribution Costs per Passenger (2) $9.78 $8.68 $8.01 $7.69 2018 2019 2020 2021 USD in 000s Strong focus on overall cost reduction throughout the business 1 – Passenger aircraft only, includes rent, debt service and reserve payments 2 – Includes call center, GDS fees, OTA fees, and credit card fees Mix Indirect Direct 59% 52% 74% 74% 41% 48% 26% 26% Total expense per AC (1) per month
Positioned for Growth
63 96 9 26 2022E 2023E 2024E 2025E MSP Non-MSP Sun Country expects to continue to grow at reasonable rates based on “playbook” that has demonstrated successes Scheduled Service Growth Builds On Capabilities Non - MSP • Super - scraper : high seasonal peaks in large markets (DFW - CUN, LAX - HNL) • Upper Midwest : brand extends well, similar seasonalities to MSP • Strong profitability : 2021 margins outperformed MSP • Added 17 new Non - MSP markets in 2021 MSP • Existing markets: ability to continue growth based on share gains in the market (5 core mkts) • Significant growth: still have over 80 unserved markets with more than 30 daily pax from MSP • New market success: grown nonstop markets by over 40% vs. ‘19, nearly all met performance threshold • Added 17 new MSP markets in 2021 Sun Country's Scheduled Service Growth Plan 1 Average Daily Roundtrips (MSP and non - MSP) 17 1 - There can be no assurance that projections or estimates of future performance will be realized
18 Cumulative Change in MSP Passenger Share Since 2017 (1 ) 0% 1% 4% 6% 2% 3% 1% 3% (2%) (4%) (5%) (9%) (12%) (9%) (6%) (3%) 0% 3% 6% 9% 2017 2018 2019 2020 2021 SNCY DAL Others Sun Country is the second largest carrier in MSP and continues to strengthen its position Current Share 58% 23% 18% Source: Diio Mi, DOT O&D. 1 - Based on year - end Q3 passengers per day. SNCY – Sun Country, DAL - Delta Sun Country Has Been Growing its Share at MSP Second largest carrier at MSP with significant room to continue taking share from smaller players in the market
Charter Flying Growth 19 Charter flying under contract has grown by 150% since 2019. Return of ad hoc business will drive growth in 2022 and 2023 2019 2022E Growth Plan 78% 150% 150% 100% 2019 charter block hours = 19,852 % of 2019 total block hours Return of ad hoc flying to 2019 levels + fleet growth Charter Flying 1 Ad hoc charter flying Charter flying under contract 1 - There can be no assurance that projections or estimates of future performance will be realized
Sustainable Charter Growth Over Time 20 29% 19% 13% 10% 29% 2014 Domestic Narrowbody Charter Block Hours 29% 23% 23% 24% 2021 Domestic Narrowbody Charter Block Hours (1) Source: Diio Mi, DOT T - 100. 1 - Based on year - end October 2021 passenger block hours 2 - Includes airlines that provide less than 10% Other(2) Other(2) More than doubled share of charter market in recent years
21 $150 $174 $206 $291 $341 $392 $450 $512 2017 2018 2019 2020 2021 2022 2023 2024 U.S. Amazon E - Commerce Revenue (1) $bn Market Share 34% Source: BofA Global Research, “Global eCommerce Outlook” 10/13/2021 1 \ Includes 3 rd party sales, excludes Whole Foods Market New pilot contract contains provisions which facilitate additional cargo growth for Sun Country Amazon Shipping Requirements to Continue to Grow YoY Change 22% 16% 14% 15% 15% 17% 41% 18% 34% 36% 38% 41% 41% 41% 41% $22 $28 $38 $61 $77 2017 2018 2019 2020 2021 Historic Amazon Delivery Expenditures YoY Change 34% 28% 37% 61% 26%
36 50 62 48 62 74 25 35 45 55 65 75 85 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Passenger Passenger + Cargo Responsible Fleet Growth 22 Aircraft in Service Strategy in Place to Support Fleet Growth With no aircraft order book and extensive experience purchasing mid - life aircraft, Sun Country can opportunistically acquire aircraft at best prices • Restructured fleet with a focus on ownership of Boeing 737 - 800s with low capital commitments • The 737 - 800 is the LCC stalwart for airlines such as Southwest and Ryanair • Sun Country maintains no order book and acquires aircraft based on demand needs • COVID and re - start of 737 Max deliveries has created unique opportunities to acquire mid - life aircraft at favorable prices (# of aircraft) 50 passenger aircraft target by YE 2023 • 8 expected in 2022 - Signed/identified 7 to date • 6 expected in 2023 • ~5 to 7 expected aircraft per year thereafter 1 No order book is an advantage vs. our competitors that are locked into expensive pre - COVID aircraft prices 1 - There can be no assurance that projections or estimates of future performance will be realized
737 - 800 an Outstanding Platform For Used Aircraft 23 0 50 100 150 200 250 300 350 400 450 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Boeing 737 - 800 Production Sizeable market of 8 - 12 - year - old aircraft Source: Boeing 2021 data, excludes retired aircraft Year of Manufacture 1,693 aircraft Significant supply of 737 - 800s means that aircraft acquisition is not a growth constraint
Financials
Industry Leading Profitability During 2021 Recovery … 25 Multi - segment business strategy offsets some of leisure demand weakness Source: Company filings See appendix for Adjusted EBITDAR margin reconciliation 2021 Adjusted EBITDAR Margin 19.8% 18.4% 7.6% 5.8% 3.4% 1.2% (0.4%) (4.5%) (6.3%) (6.9%)
… And A Profitable Carrier During Depths of COVID 26 Source: Company filings using results adjusted to remove identified one - time items See appendix for Adjusted EBITDAR margin reconciliation 2020 Adjusted EBITDAR Margin 9.7% 4.5% (5.6%) (18.6%) (27.8%) (34.3%) (39.4%) (40.6%) (44.3%) (46.6%) Sun Country was the leading airline and one of only two profitable airlines in 2020; Amazon was not fully ramped up until Nov ‘20
10% 22% 54% 48% 2019 2020 2021 2021 liquidity vs 2019 revenue Balance Sheet Positions Sun Country for Growth 27 • $334m of liquidity at year end 2021 provides ample capital to support growth • Manageable CAPEX requirements given mid - life passenger fleet; cargo segment asset - lite • Sole positive free cash flow U.S. airline in 2021 Liquidity (1) / TTM Revenue $40 ($71) $58 2019 2020 2021 Free Cash Flow (2) Millions - USD 1 – Liquidity is cash balance + undrawn portion of revolver 2 – Free cash flow defined as cash flow from operations less maintenance capex (non aircraft CAPEX). 2020 and 2021 excludes cas h receipts from CAREs Act grants See appendix for Free Cash Flow reconciliation
Low Debt Levels Provide Flexibility and Reduces Risk 28 Source – public filings 1 – See appendix for Sun Country Adjusted EBITDAR reconciliation • Net Debt to Adjusted EBITDAR among best in industry • No non - aircraft debt • Reduced debt levels during COVID 1.9x 2.2x 12.4x 33.1x 2021 Net Debt to Adjusted EBITDAR
Guidance Guidance for First Quarter 2022 Q1 2022 H/(L) VS Q1 2019 Total revenue - millions $215 to $225 9% to 14% Economic fuel cost per gallon $2.79 24% Adjusted operating income margin 8% to 12% (15.5)pp to (11.5)pp Effective tax rate 23% Total system ASMs - millions 1,900 to 2,000 5% to 10% 29
Appendix
Description of Special Items Special Items, Net – in millions USD FY 2018 FY 2019 FY 2020 FY 2021 CARES Act grant recognition $0.0 $0.0 ($62.3) ($71.6) CARES Act employee retention credit - - (2.3) (0.8) Contractual obligations for retired technology - 7.6 - - Sale of airport slot rights - (1.2) - - Sun Country Rewards program modifications (8.5) - - - Early - out payments and other outsourcing expenses 2.0 - - - Aircraft purchases impacts - - - 7.0 Other - 0.7 - - Total Special Items, net ($6.4) $7.1 ($64.6) ($65.5) Numbers may not add due to rounding 31
Non - GAAP Reconciliation – Adj EBITDAR Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization and Aircraft Rent (“EBITDAR”) is included as a suppleme nta l disclosure because we believe it is a useful indicator of our operating performance. Adjusted EBITDAR is a well recognized performance measurement in the airl ine industry that is frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performa nce of companies in our industry. 1. See Description of Special Items table in this Appendix. 2. Other adjustments for FY 2020 include expenses related to a voluntary employee leave program in response to the COVID - 19 pandemi c, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of special items. Other adjustments for FY 2019 includ e e xpenses incurred in terminating work on a planned new crew base. Other adjustment for represents expenses for secondary stock offering by Apollo and other stockholders and pilot CBA vacation adjus tme nt 3. This represents the one - time costs to establish the Tax Receivable Agreement (“TRA”) with our pre - IPO stockholders 4. This represents the adjustment to the TRA for the period, which is recorded in Non - operating (Income) / Expense Numbers may not add due to rounding Adjusted EBITDAR Reconciliation – in millions USD FY 2018 FY 2019 FY 2020 FY 2021 Net income (loss) $25.5 $46.1 ($3.9) $77.5 Provision for income taxes 0.2 14.1 (0.8) 18.0 Interest expense 6.4 17.2 22.1 26.3 Interest income (0.4) (0.9) (0.4) (0.1) Special items, net (1) (6.4) 7.1 (64.6) (65.5) Tax receivable agreement expense (3) - - - 0.3 Tax receivable agreement adjustment (4) - - - (16.4) Stock compensation expense 0.4 1.9 2.1 5.6 Loss (gain) on asset transactions, net (0.8) 0.7 0.4 - Other adjustments (2) - 0.2 4.9 4.8 Depreciation and amortization 16.9 34.9 48.1 55.0 Aircraft rent 65.2 49.9 31.0 17.7 Adjusted EBITDAR 107.0 171.1 38.9 123.1 Adjusted EBITDAR margin 18.4% 24.4% 9.7% 19.8% Adjusted EBITDA 41.8 121.2 7.9 105.4 Adjusted EBITDA margin 7.2% 17.3% 2.0% 16.9% Total revenue $582.4 $701.4 $401.5 $623.0 32
Non - GAAP Reconciliation – Adj Operating Income Adjusted Operating Income is included as a supplemental disclosure because we believe it is a useful indicator of our operati ng performance. Adjusted Operating Income is a well recognized performance measurement in the airline industry that is frequently used by our management, as wel l a s by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry. Adjusted Operating Income Reconciliation – in millions USD FY 2019 FY 2020 FY 2021 Operating Income $78.1 $17.4 $107.0 Special items, net (1) - (64.6) (65.5) Stock compensation expense 1.9 2.1 5.6 Employee relocation and costs to exit Sun Country’s prior headquarters building and base closures 0.7 - - Contractual obligations for retired technology 7.6 - - Sale of airport slot rights (1.2) - - Tax receivable agreement expense (2) 0.3 Voluntary leave expense (3) 4.9 - Other adjustments 0.2 - 3.0 Adjusted operating income 87.3 (40.2) 50.5 Total revenue $701.4 $401.5 $623.0 Adjusted operating income margin 12.5% (10.0%) 8.1% 1. See Description of Special Items table in this Appendix 2. This represents the one - time costs to establish the Tax Receivable Agreement (“TRA”) with our pre - IPO stockholders 3. This includes expenses related to a voluntary employee leave program in response to the COVID - 19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of special items Numbers may not add due to rounding 33
Non - GAAP Reconciliation – Adj Net Income Adjusted Net Income is included as a supplemental disclosure because we believe it is a useful indicator of our operating per for mance. Adjusted Net Income is a well recognized performance measurement in the airline industry that is frequently used by our management, as well as by investors , s ecurities analysts and other interested parties in comparing the operating performance of companies in our industry. Adjusted Net Income Reconciliation – in millions USD FY 2018 FY 2019 FY 2020 FY 2021 Net income (loss) $25.5 $46.1 ($3.9) $77.5 Special items, net (1) (6.4) 7.1 (64.6) (65.5) Stock compensation expense 0.4 1.9 2.1 5.6 Loss (gain) on asset transactions, net (0.8) 0.7 0.4 - Early pay - off of US Treasury loan - - - 0.8 Loss on refinancing credit facility - - - 0.4 Tax receivable agreement expense (2) 0.3 Tax receivable agreement adjustment (3) (16.4) Voluntary leave expense (4) 4.9 - Other adjustments - 0.2 - 4.8 Income tax effect of adjusting items, net 1.6 (2.3) 13.1 12.3 Adjusted net income (loss) $20.3 $53.7 ($47.9) $19.8 1. See Description of Special Items table in this Appendix 2. This represents the one - time costs to establish the Tax Receivable Agreement (“TRA”) with our pre - IPO stockholders 3. This represents the adjustment to the TRA for the period, which is recorded in Non - operating (Income) / Expense 4. This includes expenses related to a voluntary employee leave program in response to the COVID - 19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of special items Numbers may not add due to rounding 34
Non - GAAP Reconciliation – Adj CASM Adjusted CASM, which is a non - GAAP financial measure, is also a key airline cost metric and excludes fuel costs, costs related t o our freighter operations (starting in 2020 when we launched our freighter operation), certain commissions and other costs of selling our vacations product from thi s m easure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is one of the most important measur es used by management and by our board of directors in assessing quarterly and annual cost performance. Adjusted CASM is also a measure commonly used by indus try analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain oth er costs in their calculation of Adjusted CASM. Adjusted CASM Reconciliation – in millions USD, except for ASMs and Adjusted CASM FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Operating expense – as reported $530.0 $549.0 $623.3 $384.1 $516.0 Aircraft fuel (118.4) (165.3) (165.7) (83.4) (129.1) Cargo expenses, not already adjusted - - - (31.4) (67.2) Sun Country Vacations (2.1) (4.5) (2.4) (0.6) (0.8) Special items, net (1) - 6.4 (7.1) 64.6 65.5 Stock compensation expense - (0.4) (1.9) (2.1) (5.6) Tax receivable agreement expense (2) - - - - (0.3) Voluntary leave expense (3) - - - (4.9) - Other adjustments - - (0.2) - (3.0) Adjusted operating expense $409.5 $385.2 $445.9 $326.3 $375.4 Available seat miles (ASMs) – millions 5,250.5 5,463.2 7,064.6 4,311.1 5,826.8 Adjusted CASM - cents 7.80 7.05 6.31 7.57 6.44 1. See Description of Special Items table in this Appendix 2. This represents the one - time costs to establish the Tax Receivable Agreement (“TRA”) with our pre - IPO stockholders 3. This includes expenses related to a voluntary employee leave program in response to the COVID - 19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of special items Numbers may not add due to rounding 35
Non - GAAP Reconciliation – Free Cash Flow Free Cash Flow is included as a supplemental disclosure because we believe it is a useful indicator of our financial performa nce . Free Cash Flow is a well recognized performance measurement in the airline industry that is frequently used by our management, as well as by investors, securitie s a nalysts and other interested parties in comparing the financial performance of companies in our industry. 36 Free Cash Flow – in millions USD FY 2019 FY 2020 FY 2021 Cash from operations $63.3 $0.4 $153.6 Less maintenance CAPEX (non - aircraft CAPEX) 23.3 9.0 24.5 Less cash receipts from CARES Act grants - 62.3 71.6 Free Cash Flow $40.0 ($71.0) 57.5