Sun Country Shares Soar 50 Percent on First Day as Wall Street Gives Airlines Vote of Confidence

Photo credit: Sun Country raised at least $218 million from its IPO on Wednesday. Sun Country Airlines / Courtesy of Sun Country

Shares of regional discount carrier Sun Country Airlines soared 52 percent in their debut on Wall Street Wednesday, underscoring investors’ confidence through this rare airline IPO in travel’s recovery.

Shares of Minneapolis-based Sun Country debuted at $24 per share — a dollar more than the high-end of expectations a week ago — on the Nasdaq stock exchange before closing at $36.38.

“That’s definitely a really positive opening,” Sun Country CEO Jude Bricker told Airline Weekly on the day the company went public. The IPO, which the airline first disclosed in February, was 13-times oversubscribed.

In total, the offering netted Sun Country at least $218 million. That number could exceed $250 million if the banks managing the sale, which include Barclays, Morgan Stanley, and Deutsche Bank, exercise their options. Proceeds will go, first, to repaying the airline’s $45 million CARES Act loan and the balance will go toward funding the airline’s ambitious growth plans over the next two years.

Private equity firm Apollo Global Management, which acquired Sun Country in 2017, retains a stake in the airline.

Sun Country, a niche discount carrier with businesses carrying both passengers and cargo, had the good fortune of coming to market during a boom. Even though the U.S. economy continues to reel from the coronavirus pandemic, the Nasdaq Composite Index is up more than 5 percent year-to-date, and 86 percent compared to March 2020, Bloomberg data show. Airbnb used this bull run to more than double its share price on the day it debuted in December.

Frontier Airlines also hopes to take advantage of the buoyant environment. The Denver-based budget carrier disclosed plans to raise $100 million — an amount that is understood to be a temporary placeholder — in its own IPO earlier in March. If Frontier joins Sun Country in going public, it would make 2021 a record year for airline debuts in the U.S., the last two being Mesa Airlines in 2018 and Virgin America in 2014.

The debuts come as U.S. airlines see glimmers of a sustained recovery. After numerous ups and downs since the market bottomed last April, everything from an upward inflection in bookings in February to Transportation Security Administration screening data holding above 1 million people a day suggest the recovery is here to stay.

Sun Country has seen a “pretty dramatic recovery in demand” over the past few weeks, Bricker said. This gives him confidence that the airline is right to plan a “big” summer schedule as people who have been stuck at or near home for the past year break out to see family or just take a holiday.

“We should always be cautious, but it’s hard to be pessimistic with what we’re seeing right now,” he said.

Sun Country is faring well with a customer base almost exclusively made up of the domestic leisure flyers who are returning to the skies. Business and long-haul international travelers — two segments the airline does not compete in — have yet to come back in any meaningful way, industry executives said at a J.P. Morgan conference on Monday.

A leisure-first recovery that Sun Country stands to benefit from has the airline scouring the market for more jets, said Bricker. It hopes to add as many as five used 737-800s to its passenger fleet of 31 737s by year-end. The carrier aims to source at least another 14 used 737s over the next two years for a 50-aircraft strong passenger fleet by the end of 2023.

And the airline is not necessarily wedded to just used 737-800s. Sun Country would consider new 737 Max jets at the right price, said Bricker. The carrier and Boeing have been in “constant negotiations” over the possibility since before the Max was re-certified in November.

“They know my number,” he said referring to Boeing. “I assume they just have better opportunities than the price points we’re looking at.”

Sun Country’s passenger aircraft ambitions are separate from the 12 737 freighters it flies for Amazon. The cargo business was a boon for the airline in 2020, helping propel it to an operating profit when nearly all carriers lost money. However, Bricker said that for the time being the focus is on growing Sun Country’s passenger business.

At least 60 percent of the new passenger jets that join Sun Country’s fleet are slated for its Minneapolis/St. Paul base, according to its February prospectus and reiterated by Bricker. The balance of new aircraft will support additional peak-period flying from other cities, including Dallas/Fort Worth, Madison, Wis., Portland, Ore., and St. Louis.

Even Sun Country’s partnership with Landline, a ground transportation provider that offers flight-like connections on a bus, is due for expansion. Bricker said travelers can look forward to “new bus connectivity opportunities” in the near future. Landline serves seven cities, including its inaugural destinations Duluth and Mankato, from the Minneapolis airport with both coaches and private cars under the pact.