Sun Country Doubles Target for Its Rare Airline IPO With $240 Million Ambition

Photo credit:  Sun Country Airlines / Courtesy of Sun Country

Sun Country Airlines has more than doubled what it hopes to raise from its initial public offering, outlining plans for a revised target of $240 million in gross proceeds from its public debut.

Stock in the Minneapolis-based carrier will initially price at $21 to $23 per share, Sun Country said Monday. The offering includes 9.1 million shares of common stock listed on the Nasdaq under the SNCY ticker, plus the option of another 1.4 million shares offered to the banks managing the listing.

Sun Country did not indicate in Monday’s release when its shares will begin trading.

The offering adds up to between $220 million and $240 million in gross proceeds from the IPO. The amount far exceeds the $100 million initial fund raising expectations outlined in Sun Country’s prospectus in February.

IPOs are rare for airlines. In the U.S., regional carrier Mesa Air Group was the last to go public in 2018, with former Virgin America the last major airline to debut when it listed in 2014. However, the Covid-19 crisis has proved to be something of a boon to travel company listings with the valuation of AirBnB surpassing $100 billion after it listed in December.

Sun Country is a unique carrier. The budget airline primarily connects its Minneapolis/St. Paul hub with warmer weather locales, however, it also has a sizable charter business and — since 2020 — a lucrative cargo segment flying Boeing 737 Freighters for Amazon.

During the first nine months of 2020, Sun Country achieved the rare pandemic profit as most carriers racked up millions — or billions — of dollars in losses. The airline reported a net profit of $4.1 million on an operating profit of $21.8 million during the period. However, it did accept $62 million in federal aid through the CARES Act during the period.

Repaying those CARES Act loans are Sun Country’s top priority with proceeds from the IPO. After that, the carrier will pay listing fees and use the balance for general corporate purposes — or, essentially, anything it wants.

Sun Country has long been privately held before being bought by private equity firm Apollo Global Management in 2018. The company invested more than $200 million in the airline to transform it into a low-cost carrier under the leadership of CEO Jude Bricker.

In February, Raymond James analyst Savanthi Syth told Airline Weekly that a successful IPO could give Apollo a “pathway to exit” its Sun Country stake over the next few years.

Sun Country is bullish on its prospects coming out of the crisis. In its prospectus, it outlined plans to add as many as five used 737-800s to its 43-aircraft strong fleet in 2021. It targets a fleet of 50 737s by 2025 with much of its planned growth focused on its Minneapolis/St. Paul base.

“We believe the airline industry will rebound in the back half of 2021 and normalize in 2022,” the carrier said at the time. Sun Country has plans for nine new destinations and 16 routes this summer. Discounters Allegiant Air and Spirit Airlines also plan to recover to 2019 capacity levels by the middle of this year.

Barclays, Morgan Stanley, and Deutsche Bank, together with Apollo are underwriting Sun Country’s IPO.