On Friday, United Airlines began operating charter flights to begin the distribution of Pfizer’s COVID-19 vaccine, which is poised to…
Here Comes the Sun: Inside Sun Country’s Transition to a Low-Cost Carrier
As Minnesota’s Sun Country Airlines approaches its one-year anniversary of being introduced into Apollo Global Management, the airline has started to see management and brand changes come to fruition. The Minneapolis-based leisure airline has actively rebranded itself this last fiscal year and is looking for ways to reduce costs for the airline going forward while improving and modernizing its operation.
Inviting media up to Minneapolis to show off the new changes, AirlineGeeks was able to get an in-depth look at Minnesota’s hometown airline as it makes the transition from full-service to low-cost.
Under New Ownership
Sun Country and financial stability have always had a shaky relationship, as seen with the airline filing for bankruptcy twice since 2000. After consistently failing to maintain steady revenue growth in 2017, the company knew that its current business model wasn’t sustainable and decided to look for outside help. Allegiant Air executive Jude Bricker was brought in to be the new Sun King and help revitalize the airline, beginning the transition to low-cost.
Small changes such as adding carry-on bag fees were implemented to help grow revenue in the short-term but it was clear the airline needed an overhaul. By the end of Bricker’s first year at the company, the Davis family had decided to sell the privately-owned airline to New York-based Apollo Global Management with a plan to operate a low-cost business model moving forward focusing solely on leisure travelers.
Since the deal between Apollo and the Davis family closed in early 2018, Sun Country’s new owners were able to raise around $90 million in capital to enable the airline to make the changes necessary for the low-cost operation. Although Sun Country was known for its hometown charm, it was woefully stuck in the past with outdated systems and inefficient operating standards, which all needed to change to make the low-cost operation successful.
Shifting to Low-Cost
According to Bricker, it was blatantly obvious at what needed to be done from the get-go, though making the necessary changes admittedly took him longer than expected. Sun Country had been operating on a system where it was wasting money unnecessarily on everything from leasing its aircraft to not owning its own website. Somehow, the airline managed to survive despite operating in Delta’s shadow in Minneapolis, constantly underperforming financial projections and being the worst financially performing mainline carrier in the U.S.
One of the first things Bricker looked at was the aircraft themselves. Since its first restructuring, Sun Country has operated an all-Boeing 737 fleet; however, it has been leasing those aircraft instead of purchasing them. While aircraft leasing is a common practice, it doesn’t make sense for an airline like Sun Country that doesn’t utilize its fleet as much as other carriers do. Newer leased aircraft lose more money by sitting on the ground the older purchased aircraft and cost more to operate overall with nothing to show for it at the end of the lease.
Having such a low utilization rate, after-market aircraft is where Bricker believes the company can save money and will begin to purchase used aircraft moving forward. According to Bricker, 12 13-year-old Boeing 737-800s are the target aircraft for Sun Country since they happen to be in abundance, are inexpensive and the airline can get at least 10 more years of flying out of them.
By 2026, when the last of the 737 leases are up, the airline expects to own all of the aircraft in its fleet. Additionally, Sun Country plans to retire its smaller Boeing 737-700s, which carry fewer passengers than the 737-800 with nearly the same operating costs of the 737-800, when their leases are up in 2024.
Unlike Frontier and Spirit, however, Sun Country couldn’t go for the new fuel-efficient aircraft such as the Boeing 737 MAX that would save it money on fuel. Although the segment lengths would make sense for a MAX, the aircraft aren’t flying as rigorous a schedule as Frontier, Spirit or Southwest to warrant the investment despite the fuel-savings. Bricker did state, however, that he’d consider investing in split scimitar winglet technology as a potential fuel saving measure for the aircraft, saying they’re a “distinct possibility” for the airline.
Although coming from Airbus-focused Allegiant, Bricker feels as though the Boeing 737-800 is still the best aircraft for Sun Country’s operation based on its performance capabilities. The aircraft are capable of serving all of Sun Country’s destinations, including Hawaii as 12 of the aircraft in the fleet are ETOPS certified. The MAX isn’t out of the question for Sun Country, but any acquisition of the type will likely be down the line when the airline can buy one inexpensively.
Next, Bricker had to design a low-cost business model for the airline and decide what additional fees would be implemented to generate revenue. Looking at the fee structure that Sun Country has implemented, it doesn’t immediately strike one as on par with Frontier, Allegiant and Spirit. The airline will be charging for checked and carry-on bags and advanced seat assignments but won’t charge extra for services such as in-flight entertainment, in-seat power or soft drinks.
It’s clear that the airline isn’t diving head first into low-cost and isn’t on the same level as Spirit, Frontier or Allegiant by any means, rejecting the notion that it’s a “no-frills” carrier. However, the option to charge for those services is there should the airline need to do that down the line.
One important consideration the airline also had to take into account was the community it serves. Minnesotans have come to know Sun Country and the change to low-cost couldn’t be perceived as detrimental or else they’d abandon the airline. Other low-cost airlines aren’t as beholden to a particular city and frequently enter into and leave various markets throughout the country. Sun Country doesn’t have that luxury as it is Minnesota’s hometown airline.
The decision was also made to focus solely on leisure travelers since the airline can’t compete with Delta on servicing business travelers. As Bricker put it, leisure travelers pay for fares with their own dollars and care about what they’re spending it on, driving them to choose Sun Country over Delta. Instead of trying to cater to business travelers using costly features such as a first class cabin, the airline is going all in on the leisure traveler.
A New Airplane for a New Airline
One of Sun Country’s largest struggles was with consistency in its fleet. It’s estimated by the company that its 737s have a total of 11 different interior configurations, including a lime green interior on its aircraft leased from Transavia, and a variety of exterior paints. The lack of consistency both inside and out means that a passenger never knows what to expect when stepping onboard and it’s hard to sell onboard products accordingly.
In order to maintain consistency across its fleet and as part of the refresh, Sun Country unveiled a new livery and a new cabin interior to be featured on all of its aircraft. The new exterior livery was designed and voted on by Sun Country employees and still features the blue, orange and white colors that Sun Country is known for. Although the airline has experimented with different font types on its aircraft, the font found on the new livery is consistent with current branding and signage.
The first aircraft to be painted in the new livery was N861AM, previously operated by Aeromexico and recently brought up to Minneapolis from maintenance in North Carolina. The aircraft is special to the airline in that it features the new exterior livery and interior seating and configuration, but it’s also the first Boeing 737-800 to be owned by the aircraft and not leased. With this aircraft, so begins the end of leasing aircraft at Sun Country.
The aircraft will be configured in an all-economy layout, removing the airline’s famously inexpensive first class cabin completely, and a Boeing 737-800 will feature 183-seats. The seats with the greatest legroom are the “Best” seats, featuring 34-inches of pitch and 5-inches of recline, as well as adjustable headrests, 100v AC power outlets and USB charging ports. Next are the “Better” seats, with 32-inches of pitch and 2-inches of recline, and then the “Standard” seats with 29-30-inches of pitch, depending on location, and 2-inches of recline.
All seats will feature in-seat power via USB charging ports, though only Best seats will feature 110v AC power outlets. In-flight entertainment will be offered through a closed circuit WiFi network and will feature movies, TV shows, games, magazines and a seat-to-seat chat function. Sun Country will be the only ancillary-fee based carrier to offer in-flight entertainment and in-seat power not only free of charge but at all as neither Frontier, Spirit or Allegiant offer those services.
The seats themselves also dispel the notion of Sun Country being a no-frills carrier. Although they are slim and the Standard and Better seats don’t feature an adjustable headrest, they are 30 percent larger than those found on Frontier, Spirit and Allegiant and all seats recline. Manufactured by B/E Aerospace, the blue seats also feature full, movable tray tables and eye-level seatback pockets to allow for greater shin space.
Another oddity for a low-cost carrier is that Sun Country opted not to go for maximum density with these seats. While the aircraft are fitted with 183 seats, they have the capacity for 189 seats. Instead, the airline used the extra space to allow for reclining seats and the extra legroom sections.
Although the painting will take a little longer, as Sun Country has opted to paint the aircraft when they’re due for routine paintings, all of Sun Country’s Boeing 737 fleet will feature the new interiors within 90 days, according to the airline. Once completed, the interior of the aircraft will be virtually indistinguishable from each other.
Improving the Airline
While some changes had to be made in the transition to low-cost, including removing the airline’s first class cabin and axing the $5 cheeseburgers from the menu, the airline aims to maintain its best aspects following the changeover. Improvement, however, is also vital to the transition as the airline is investing in new equipment and technology to modernize and streamline the passenger experience.
Currently, the airline is limited by the IT system that it uses. The outdated system doesn’t allow for basic functions such as randomly assigning seats at check-in for those who don’t pre-purchase one or automatically rebooking passengers when flights do cancel for reasons such as weather. Modernizing that system will allow the airline to streamline numerous processes that once required an agent to perform.
Additionally, Sun Country doesn’t utilize self-service kiosks in Minneapolis or at outstations because its reservation system isn’t compatible with them. All passengers who need to check a bag, change their seat or just want to print a boarding pass must do so at a ticket counter. To ease the workload of the ticket counter and reduce unnecessary counter visits, new software from Amadeus will allow for the airline to have its reservation computer linked to shared-use kiosks for customer use beginning in June 2019.
Bricker, who worked the ticket counter over the summer when Sun Country was experiencing difficulties with its ground service provider, estimated that it took seven minutes per passenger to check a bag when it should take around two minutes. To remedy this, the airline will also be investing in better training for its agents. A self-serve bag drop, used by many airlines at hub airports, however, will not be implemented and all passengers with checked baggage will need to visit the counter.
In another interesting quirk, Sun Country also doesn’t own its own website, rather leasing it from a developer. The next year will see Sun Country own and operate a new desktop and mobile website. An application for smartphones is still being debated as most of the functionality exists on the mobile website, including tapping into the phone’s payment system and the ability to add the mobile boarding pass to a mobile wallet, and the average traveler on Sun Country doesn’t fly enough where an app would make a big enough difference.
Being located in a city such as Minneapolis where poor weather is common during the peak winter season, Sun Country and Minneapolis-St. Paul International Airport are used to dealing with weather disruptions. However, a blizzard in late April that shut down the airport highlighted Sun Country’s shortcomings in dealing with irregular operations, which the airline is striving to fix to be better prepared for operations such as this.
One of the problems with the blizzard was that it shut down access to the call center in addition to the airport. Reservation agents couldn’t leave or come in because of the weather, calls were flooding in and there wasn’t enough demand to meet everybody’s needs, leading to stranded passengers with canceled flights. Preparing the call center, the sole point of contact for most passengers, is key for the upcoming winter season and the airline’s commitment to improving its customer service.
To prevent a situation like that from reoccurring, Sun Country has introduced preventative measures such as issuing home-based setups for reservation agents in case weather prevents access to the call center and allowing for rebooking or a refund via email instead of calling an agent. The airline is still limited, however, in its functionality for rebooking until the new reservation system is installed. Once active, the new reservation system will allow for more self-service options if the passenger wanted to rebook on the next flight or cancel the trip outright.
To assuage any fears of a reoccurrence where passengers are stranded on the last day of service, Sun Country has pledged to purchase trip insurance on behalf of its passengers booked on the last flight to an international destination for the season. The insurance will allow those passengers to have a backup option in case irregular operations strike, which will reassure passengers who are wary of flying on the final flight of a service to an international destination on an airline with few backups.
New Markets, Point-to-Point Routes and More Hawaii
Since the transition to low-cost, Sun Country has announced a large point-to-point route expansion primarily from Portland, Oregon; Dallas, Texas and Nashville, Tenn. The point-to-point routes are a staple of low-cost airlines looking to capitalize on underserved or already popular routes. From Portland, a newly-minted focus city, Sun Country flies to already-existing destinations in the Southwest while routes from Nashville mainly serve Florida and the Gulf Coast and routes from Dallas, another focus city, include a mixture of domestic routes and international routes to Central America and the Caribbean.
The airline has largely avoided opening routes up and down the East Coast because the market is too crowded by both major carriers and low-cost carriers such as Frontier and Spirit. Plus, there’s no suitable opening with Boston, New York, Philadelphia and Baltimore already taken by other low-costs. However, the airline did state it is currently in talks to open service to Washington Dulles Airport from Minneapolis, which would be the first mainline service between Dulles and Minneapolis, giving Washington-area passengers more options for flying to the West Coast.
Sun Country is also the first low-cost airline to fly between the mainland United States and Hawaii, currently flying summer seasonal service from Portland and Los Angeles, while strongly hinting at the addition of San Francisco as well. Although Hawaii isn’t a major part of the airline’s strategy, it allows the airline to increase revenue during an off-peak season for Minnesota-based travel.
The airline estimates that around 80 percent of passengers originate in West Coast cities on Hawaii flights, although timed for connections from Minneapolis. West Coast passengers have responded well to the service, despite having little experience with Sun Country and the airline opting not to invest in marketing in those cities, which Bricker attributes to having more attractive fares and schedules compared to its competition.
Although Southwest will undoubtedly impact Sun Country’s Hawaii operations, the abundance of demand and Sun Country’s lower fares will likely be enough to maintain profitability on those routes, according to Bricker. Southwest is a low-cost carrier but doesn’t offer the same price point as Sun Country as it doesn’t operate an ancillary-fee based business model.
With its international destinations, there are not many more tropical locales that the airline can serve from Minneapolis that it doesn’t already with most of coastal Mexico covered and service to five Caribbean islands. The range of the Boeing 737 limits the destinations it can serve from Minneapolis, so the future for international expansion would be from its smaller focus cities in the southern regions of the U.S.
The airline is also gradually returning to hurricane-affected regions such as St. Thomas and Sint Maarten as they recover and prepare to welcome back tourists. Although showing an initial interest in Cuba, Bricker has no plans to serve the island, citing a lack of demand and ever-changing regulations.
However, Bricker did express interest in growing its interline agreements with international carriers at Minneapolis, as well as in international destinations. A prime airline for such an agreement, Bricker said, would be Mexico’s VivaAerobus. In addition to having a personal relationship with VivaAerobus CEO Juan Carlos Zuazua, an agreement with VivaAerobus would give Sun Country passengers access to Mexico’s interior and other Central American destinations, similar to Frontier’s codeshare agreement with Volaris.
Although continuing to grow the Dallas focus city, the airline has no current plans to open up a second transcontinental hub largely because connecting traffic isn’t the airline’s focus, except in the summer when transcontinental demand is high. Myrtle Beach and Savannah passengers traveling to the West Coast will still have to fly up to Minneapolis to connect to the West Coast.
When the last Boeing 737 lease ends in 2026, Sun Country expects to have doubled its staff, aircraft and route network. Growing by 3 to 6 fully-owned aircraft per year, Sun Country plans on having a fleet of 50 strong with 700 pilots, 1,400 flight attendants and 8 million yearly passenger segments. Although it will still be one of the smallest mainline airlines in the U.S., the Sun Country brand will have likely spread across the country with an increase of point-to-point routes outside of Minnesota.
It’s the beginning of a new era for low-cost travel in the U.S. and if successful, Sun Country has the potential to be the new light to look towards in a sector of the aviation industry that has been plagued with a negative perception.
Updated on 12/21 with minor grammatical changes.
- A Portuguese Flying Adventure: Flying TAP Air Portugal on Its Newest Airbus Products - January 12, 2020
- Onboard the Newest Aircraft on the Longest Flight: Flying JetBlue’s New Airbus A321neo - December 13, 2019
- Qantas Retires Final Boeing 747 from American Skies - December 4, 2019
After being hit hard by the coronavirus for several months, a large merger and acquisition is going to happen in…
Norwegian Air Shuttle is facing an uncertain future after the government of Norway this week advised that the airline would…