Sun Country Airlines Holdings, Inc.

Welcome to the Sun Country Airlines second quarter 2024 earnings call. My name is Crystal and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this call will be recorded. I 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 poor-looking statements. Our remarks today may include poor-looking statements which are based upon a manager's current beliefs, expectations, and assumptions, or are subject to risks and uncertainties. Actual results may differ materially. We encourage you to review our risk factors and cautionary statements outlined in our earnings release and our most recent SEC filing. We assume no obligation to update any forward-looking statements. You can find our second quarter of 2024 earnings press release on the Investor Relations website at ir.suncountry.com. With that said, I'd now like to turn the call over to Jude.

Thanks, 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'll be able to reliably deliver industry-leading profitability throughout all cycles. I want to start by acknowledging our employees that have worked so hard through this challenging summer. In both June and July, we've grown schedule service departures in excess of 15% year-on-year, while facing some extended aircraft out of service events and an IT outage that temporarily disabled the key operational system. Our employees, like usual, delivered for our customers, and I'm personally grateful. There's been a lot of discussion about overcapacity in our industry. For us, in our key market of Minneapolis, the domestic seat growth rate peaked in July and subsides through the rest of the year and into the next spring. As such, we expect lessening fare pressure as we move through the year. It's encouraging to see the industry move aggressively to right size schedules. Our reaction to changes in market environment will always be to adjust capacity. Our July Minneapolis seats were up 29% year on year. By September, our seats will be down 9% year on year. July's schedule service volume will be two and a quarter times larger than September. September always being the most challenging month for leisure demand. As already announced, we will move capacity aggressively into our other segments, charter and cargo. We still expect a strong winter season for leisure and are planning mid-single-digit capacity growth for our peak upcoming winter. I want to point out that June and July continue to be strong demand months for our scheduled service product. We had sold loads in excess of 85% during both months, with unit revenues up nearly 20% versus pre-COVID comps, even considering our growth. Our ability to manage off-peak capacity while maintaining our unit cost advantage mostly explains the outperformance of our scheduled business as compared to other domestic leisure carriers. In cargo, we have contractual growth along with rate improvements through the end of 2025. For charter, while volumes were generally flat, we've been able to manage to higher margins as we adjust our pre-COVID long-term contracts to the new cost environment. As mentioned before, we have fleet expansion plans to 71 aircraft from our current in-service fleet of 56. All this growth will come from our leased-out fleet, seven aircraft, and from committed cargo deliveries, eight aircraft. In both cases, this growth won't require additional capex. So we expect to continue to deliver high free cash flow yields in the near midterm. And with that, I'll turn it over to Dave. Thanks, Jude.