Sun Country Airlines Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Sun Country Airlines fourth quarter and full year 2024 earnings call. My name is Michelle 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 this session, you would need to press star 11 on your telephone You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being 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 Ricker, Chief Executive Officer, Dave Davis, President and Chief Financial Officer, and a group of others that will answer questions. Before we begin, I would 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 on Madison's current beliefs, expectations, and assumptions and are subject to risks and uncertainties. Actual results may differ materially. We encourage you to review the risk factors and cautionary statements outlined in our earnings relief and our most recent SEC filing. We assume no obligations to update any forward-looking statement You can find our fourth quarter and full year 2024 earnings press release on the investor relations portion of our website at ir.suncountry.com. With that said, I'd like to turn it over to you.

Thanks, Chris. Good morning, everyone. Before we get into our financial results, I want to take a moment to address the tragic accident last week in Washington, D.C. Our thoughts are with the families and loved ones affected by this event. Our industry is highly competitive, but we've always worked together with other airlines, the OEMs, and regulators to make sure we deliver the safest possible operations Once all the facts are gathered, there will surely be lessons that will be applied across the industry. We will continue to maintain the highest safety standards across our operations to earn and keep the trust of our passengers and the public. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we were 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 will be able to reliably deliver industry-leading profitability throughout all cycles. I want to first highlight a few developments. First, last month, we reached agreements in principle with the unions of both our flight attendants and our dispatchers. We expect these agreements to go to vote among the respective work groups in the next month or so. I'm excited to be able to deliver improved rates and work rules to all these team members. Also, we took delivery of our first cargo aircraft from our latest agreement with Amazon. This aircraft has yet to enter service, but by summer we will have all eight aircraft growing the cargo fleet to 20. I expect cargo revenue will roughly double by this time next year. We also executed redelivery off lease of our first 737-900. This aircraft will also go into service this summer. We still have six aircraft that we own that are out on lease, redelivering through the end of 2026. These aircraft will provide the growth in our passenger fleet in the coming years. Including the freighters, we'll be able to grow block hours by about 30% through 2027, without a change in utilization or additional aircraft acquisitions. In scheduled service, and similar to the rest of the industry, we are seeing capacity rationalization starting to inflect unit revenues to the positive. Our TRASM was flat year-on-year for the fourth quarter. However, in December, we saw scheduled service TRASM increase almost 5%, which is where January is. Capacity trends remain positive through the selling schedules. As underlying demand remains strong, I expect unit revenues continue to perform well. Our staff continues to deliver for our customers. Of note, our completion factor and mishandled bag rate, operational metrics that are particularly important to our low-frequency model, are near the best in the industry. After a strong 2024, you should expect more of the same from us in 2025. Margins at or near the top of the industry, high levels of free cash production, healthy growth at about 10% black hour increase, operational excellence, and continued balance sheet strengthening.