Sun Country Airlines Holdings, Inc.

Welcome to the Sun Country Airlines first quarter 2024 earnings call. My name is Jill and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. We will now turn the call over to Chris Allen, Director of Investor Relations. Mr. Allen, you may begin.

Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer, Dave Davis, President and Chief Financial Officer, and a group of others to help answer questions. Before we begin, I'd like to remind everyone that during this call, the company may make certain statements that constitute forward-looking statements. Our remarks today may include forward-looking statements which are based upon management's current belief, expectations, and assumptions, and are subject to risk and uncertainties. Actual results may differ materially. We encourage you to review the risks and cautionary statements outlined in our earnings release and our most recent SEC filing. We have no obligation to update any forelooking statement. You can find our first quarter 2024 earnings press release on the investor relations portion of the website at ir.suncountry.com. With that said, I'd like to turn it over to Jude.

Thank you, Chris. Good morning, everyone. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we're able to deliver the most flexible scheduled service capacity in the industry. The combination of our schedule flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe due to our structural advantages, we're able to reliably deliver industry-leading profitability throughout all cycles. Operational excellence is a core tenant of our product. It's critical to our scheduled service customers and justifies our growth with our charter and cargo customers. Among the 11 public mainline carriers, Sun Country again had the best completion factor at 99.7% for 1Q. Congratulations to our employees, especially our front lines, for delivering excellence this past quarter. In the first quarter, we saw yields reset off their post pandemic highs. These fair declines were partially absorbed by our continued momentum on costs. Our CASMX declined slightly in one queue in spite of significant increase in heavy aircraft visits. Diligent cost control, scheduled service growth, along with the effects of our buyback program produced flat EPS for last year. Our adjusted operating margin of just over 18% was at the lower end of our expectations coming into the quarter. This variance is mostly due to close in March bookings finishing less strong than in 2023. March is still a great month for us. We had gross margins, profit success in excess of variable costs approaching 50%. However, March bookings made through January would have indicated an even stronger month. As lows remained high, most of the variance can be attributed to industry capacity growth across our largest markets. Our response to changes in the fare environment or fuel price inputs is to adjust marginal capacity so that we continue to produce positive and industry-leading results. When possible, we may allocate surplus capacity into our charter and cargo segments. So looking into the rest of the year, we're currently allocating too much capacity growth in off-peak periods based on selling fares. While we're committed to May, I expect us to make some significant capacity trims in September through November. Some of that displaced capacity will provide growth opportunities in cargo and charter. Summer peak continues to sell well and should remain mostly as scheduled. Also, a quick note on the Easter shift. An early Easter reduces the peak winter season and explains about 10 percentage points in fare drop in April 2024, or about $3 million. This revenue isn't recoverable in March because it's already at peak capacity. Finally, on fleet activities, with our recent aircraft purchase, we now have a controlled fleet of 63 aircraft. Seven of these aircraft remain out on operating lease, and two more are in induction process to enter service in late 2Q. Once all these aircraft are in operation by late 2025, we'll have fleet capacity to produce about 40% more block hours than we currently operate. As we already paid for that growth, we won't require any aircraft CapEx and so expect CapEx to fall to maintenance levels, which is about $50 to $75 million per year. With that, I'll turn it over to Dave.