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Sun Country Airlines Holdings, Inc. (SNCY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $263.6M, up 3.6% YoY, with GAAP diluted EPS of $0.12 and adjusted diluted EPS of $0.14; operating margin was 6.2% and adjusted operating margin was 6.8% .
  • The quarter featured a diversified revenue mix: cargo revenue rose 36.8% to $34.8M on a 9.5% increase in cargo block hours, charter revenue grew 6.4% to $54.3M, while scheduled service ASMs declined 6.2% with scheduled TRASM up 3.7% .
  • Q2 beat Wall Street consensus on both EPS and revenue: EPS $0.14 vs $0.114* and revenue $263.6M vs $255.8M*; management guided Q3 2025 revenue to $250–$260M with operating margin 3–6% as cargo ramps and scheduled service remains constrained .
  • Key near-term narrative drivers: completion of Amazon cargo fleet to 20 aircraft by end of Q3, elevated CASM until scheduled growth resumes in 2H26, and flexible capacity allocation to maximize profitability amid industry capacity shifts .

Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Cargo ramp ahead: delivered all eight incremental cargo aircraft; five in service at Q2 end, with all 20 expected in service by end of Q3; cargo revenue +36.8% YoY on higher rates and more aircraft .
  • Pricing power in scheduled service: total fare per scheduled passenger rose 6.5% YoY; scheduled TRASM +3.7% despite capacity reduction, highlighting demand resilience .
  • Consistent profitability: 12th consecutive profitable quarter with YoY expansion in pre-tax margins; adjusted pre-tax margin rose to 3.9% (+210bps) .

Quoted management:

  • “We are steadily incorporating our eight additional cargo aircraft… expect all 20 freighters to be in-service by the end of the third quarter.”
  • “Our second quarter shows tangible results of our diversified business model.”
  • “We expect margins to expand as we build back our scheduled service… [and] add in our own fleet of leased-out aircraft… through 2026.”

What Went Wrong

  • Elevated unit costs: CASM +6.3% and adjusted CASM +11.3% YoY, driven by reduced scheduled service capacity and fixed-cost absorption; landing fees and airport rent +9.1% .
  • Cargo induction timing: cargo block hours were “slightly lower than expected” due to delivery timing, pressuring mix and utilization in peak summer months (notably July) .
  • Load factor and utilization softness: scheduled service load factor -130bps YoY; daily utilization fell to 7.0 hours (from 7.5), reflecting cutbacks to accommodate cargo ramp .

Analyst concerns raised:

  • Near-term margin drag from underutilized scheduled fleet; management quantified ~$10M impact in Q3 and suggested gradual amelioration thereafter .
  • Q3 guide embeds lower “other revenue” due to fewer leased-out aircraft and prior lease redelivery benefit unwinding, trimming reported revenue growth despite higher block hours .

Financial Results

Key Consolidated Metrics

MetricQ4 2024Q1 2025Q2 2025
Total Operating Revenue ($USD Millions)$260.4 $326.6 $263.6
GAAP Diluted EPS ($USD)$0.24 $0.66 $0.12
Adjusted Diluted EPS ($USD)$0.27 $0.72 $0.14
Operating Margin %10.0% 17.2% 6.2%
Adjusted Operating Margin %10.6% 18.3% 6.8%

Segment Revenue Breakdown

Metric ($USD Millions)Q4 2024Q1 2025Q2 2025
Scheduled Service$96.1 $143.5 $88.1
Charter$48.0 $54.7 $54.3
Ancillary$71.2 $87.7 $72.3
Passenger (Sched.+Charter+Anc.)$215.3 $285.9 $214.7
Cargo$28.6 $28.2 $34.8
Other$16.5 $12.6 $14.2
Total Operating Revenue$260.4 $326.6 $263.6

KPIs and Unit Economics

KPIQ4 2024Q1 2025Q2 2025
Scheduled Service TRASM (cents)10.62 11.63 10.40
Scheduled Service Load Factor (%)81.6% 83.5% 81.8%
Total Fare per Scheduled Passenger ($)$159.88 $198.44 $150.99
Total TRASM (cents)11.14 12.23 11.26
CASM (cents)11.94 11.41 12.79
Adjusted CASM (cents)7.83 7.34 8.34
Fuel Cost per Gallon ($)$2.47 $2.66 $2.43
Scheduled Service ASMs (000s)1,608,432 2,020,545 1,571,210
Total System Block Hours36,610 40,681 37,086
Daily Utilization (hours)6.9 8.4 7.0

Actual vs Consensus (S&P Global)

MetricQ4 2024Q1 2025Q2 2025
Revenue Consensus ($USD Millions)258.0*327.5*255.8*
Revenue Actual ($USD Millions)260.4 326.6 263.6
EPS Consensus ($USD)0.205*0.697*0.114*
EPS Actual (Adj/Primary) ($USD)0.27 0.72 0.14

Values marked with * are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)Q3 2025N/A$250–$260 New
Economic Fuel per Gallon ($)Q3 2025N/A$2.61 New
Operating Income Margin (%)Q3 2025N/A3%–6% New
Effective Tax Rate (%)Q3 2025N/A23% New
Total System Block Hours (000s)Q3 2025N/A38–39 (+5–8% YoY) New
Total Revenue ($M)Q2 2025$250–$260 Actual $263.6 Outperformed guidance
Economic Fuel per Gallon ($)Q2 2025$2.44 Actual $2.43 Slightly better
Operating Income Margin (%)Q2 20254%–7% Actual 6.2% Within range

Notes: Management reiterated that CASM/adjusted CASM will remain elevated until scheduled service growth resumes in 2H26 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Cargo ramp & Amazon contract economics“Improved economics” and staged rate increases in 2H24; plan to add 8 freighters in 2025 All 8 delivered; 15 in service at Q2 end, 20 by end-Q3; annual escalators and final step-up upon last induction Accelerating; slight induction delays impacting utilization
Scheduled service capacity disciplineQ4 balanced capacity; Q1 planned ~7% ASM decline for Q2 Scheduled ASMs -6.2% YoY; further ~10% decline in Q3 to accommodate cargo Contraction through 2025; re-growth planned 2H26
Unit costs (CASM)Q4 adj. CASM +7.6% YoY Q1 adj. CASM +3.5% YoY Q2 adj. CASM +11.3% YoY; elevated until scheduled growth resumes
Capital allocationNo buyback in Q4; strong FCF New $25M repurchase authorization Balanced between buybacks, asset deals, and dry powder for ULCC shake-up
Technology/loyaltySynchrony card partnership (launch in 2025) Launching loyalty program and PBS to improve productivity Execution phase
Regional demand & competitive landscapeNAStrong Northeast/Midwest; weaker SoCal; MPLS trending to a two-airline market (Southwest pullback, Allegiant absent) Favorable competitive capacity backdrop

Management Commentary

  • Diversified model and long-term earnings power: “We believe… we’ll be able to reliably deliver industry-leading profitability throughout all cycles… expect roughly $1.5B in revenue, $300M in EBITDA, and $2.5 in EPS by Q2 2027” (assumes ~10% growth, normalized utilization, current fuel, conservative assumptions) .
  • Near-term margin dynamics: “During peak months… unit revenue improvements won’t overcome unit cost pressures of lower utilization… most impactful in Q3 2025” .
  • Cost outlook: “Adjusted CASM will remain elevated… we do not anticipate to resume growth of our scheduled passenger service until the back half of 2026” .
  • Cargo induction timing: “Utilization… delayed… fleet isn’t as committed because we want to make sure that we’re executing well” .
  • Capital strategy: “We run the business for EPS… balance between returning cash, asset deals, and keeping dry powder” .

Q&A Highlights

  • Long-term EPS target: Management outlined a path to ~$2.50 EPS by Q2 2027 under normalized utilization and current fuel costs; linear improvement expected in 2026 with possible efficiency upside from PBS and new pilot base .
  • Amazon contract rates: Annual escalators with a final step-up when the last aircraft enters service; Q3 reflects the new higher level .
  • Margin drag quantification: ~$10M (~4%) drag expected in Q3 due to peak-season scheduled reductions and induction-related cost pressure; gradual improvement into Q4 and early 2026 .
  • Bookings and pricing: Strong close-in bookings and fares; accepting lower load factors to hold seats for expected demand; robust Midwest/Northeast, weaker SoCal/desert destinations .
  • Charter trajectory: Long-term contracts stable; Ad Hoc opportunities likely up in 2H due to availability; charter unit revenue growing ~4% per block hour annually .

Estimates Context

  • Q2 2025 beat: Adjusted/Primary EPS $0.14 vs $0.114*; revenue $263.6M vs $255.8M* — a clear beat on both lines; Q1 and Q4 also exceeded EPS consensus, with Q1 revenue slightly below consensus by ~$0.9M* .
  • Potential estimate revisions: Near-term EPS/revenue estimates may need to reflect lower “other revenue” in Q3 (fewer leased aircraft and no lease redelivery benefit), elevated CASM through 2026, but stronger cargo rates and capacity completion by end-Q3 .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Cargo-driven mix shift is the core 2025–2026 story; full 20-aircraft cargo fleet by end-Q3 should stabilize utilization and revenue mix even as scheduled service remains constrained .
  • Expect elevated CASM until scheduled growth resumes in 2H26; margin expansion hinges on reintroducing profitable scheduled flying and absorbing returning leased aircraft .
  • Demand/pricing resilience: Scheduled TRASM up 3.7% YoY despite capacity cuts; strong close-in bookings, particularly in Midwest/Northeast, support revenue quality .
  • Capital optionality: With debt/lease obligations trending down and share repurchase authorization in place, management is poised to balance buybacks with opportunistic asset acquisitions as ULCC capacity shifts unfold .
  • Near-term trading setup: Q3 guide implies lower margins (3–6%) and revenue $250–$260M as July/August cost pressure peaks; watch for confirmation of cargo inductions, charter Ad Hoc strength, and booking trends into winter peaks .
  • Long-term thesis: Structural diversification and contractual cargo/charter exposure underpin management’s confidence in ~$1.5B revenue/$300M EBITDA by 2027; monitor execution on PBS, new pilot base, and asset redeployments .
  • Estimate risk: Consensus likely underappreciates Q3 “other revenue” decline and short-term margin drag; upside bias from cargo rate escalators and Minneapolis competitive capacity backdrop .