UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~

March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-40217

Sun Country Airlines Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware						82-4092570
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2005 Cargo Road
Minneapolis, Minnesota						55450
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (651) 681-3900

~~Registrant’s telephone number, including area code: (651) 681-3900~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SNCY

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated ~~filer~~ Filer ☑

Smaller reporting company ☐

Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐No ☑

Number of shares outstanding by each class of common stock, as of ~~June 30, 2021:~~

March 31, 2022:

Common Stock, $0.01 par value – ~~57,158,467~~ 57,964,320 shares outstanding

Table of Contents

Sun Country Airlines Holdings, Inc.

Form 10-Q

Table of Contents

Page

Part I. Financial Information

Item 1. Financial Statements
3
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Operations
5
Condensed Consolidated Statements of Changes in Stockholders’ Equity
6
Condensed Consolidated Statements of Cash Flows
7

Notes to the Condensed Consolidated Financial Statements
8

1

Company Background
8
2

Basis of Presentation
9
3

Impact of the COVID-19 Pandemic
10
4

Revenue
12
5

Earnings per Share
14
6

Aircraft
15
7

Debt
17
8

Fuel Derivatives and Risk Management
19
9

Fair Value Measurements
20
10

Income Taxes
21
11

Special Items, net
22
12

Commitments and Contingencies
23
13

Operating Segments
23
14

Subsequent Events
24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
Item 3. Quantitative and Qualitative Disclosures About Market Risk
55
Item 4. Controls and Procedures
55

Part II. Other Information

Item 1. Legal Proceedings
56
Item 1A. Risk Factors
56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
56
Item 3. Defaults Upon Senior Securities
57
Item 4. Mine Safety Disclosures
57
Item 5. Other Information
57
Item 6. Exhibits
58

Signatures

59

Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Operations
5
Condensed Consolidated Statements of Changes in Stockholders’ Equity
6
Condensed Consolidated Statements of Cash Flows
7
Notes to the Condensed Consolidated Financial Statements
1
Company Background
8
2
Basis of Presentation
9
3
Impact of the COVID-19 Pandemic
10
4
Revenue
11
5
Earnings per Share
13
6
Aircraft
14
7
Debt
16
8
Fuel Derivatives and Risk Management
18
9
Fair Value Measurements
18
10
Income Taxes
19
11
Special Items, net
20
12
Commitments and Contingencies
20
13
Operating Segments
21
14
Subsequent Events
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
41
Item 4. Controls and Procedures
41
Part II. Other Information
Item 1. Legal Proceedings
42
Item 1A. Risk Factors
42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
42
Item 3. Defaults Upon Senior Securities
42
Item 4. Mine Safety Disclosures
42
Item 5. Other Information
42
Item 6. Exhibits
42
Signatures
44

- 2 -

Table of Contents

PART I. Financial Information

ITEM 1. FINANCIAL STATEMENTS

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)


	March 31, 2022		December 31, 2021
ASSETS

Current Assets:
Cash and Cash Equivalents	$	272,402	$	309,338
Restricted Cash	8,085		8,447
Investments	6,233		6,283
Accounts Receivable, net of an allowance for credit losses of $376 and $250, respectively	31,733		30,156
Short-term Lessor Maintenance Deposits	6,698		5,505
Inventory, net of a reserve for obsolescence of $1,366 and $1,275, respectively	5,624		5,405
Prepaid Expenses	10,166		8,511
Other Current Assets	8,302		1,798
Total Current Assets	349,243		375,443

Property & Equipment, net:
Aircraft and Flight Equipment	486,374		440,356
Ground Equipment and Leasehold Improvements	24,451		20,876
Computer Hardware and Software	9,125		8,785
Finance Lease Assets	275,547		209,457
Rotable Parts	9,271		9,150
Property & Equipment	804,768		688,624
Accumulated Depreciation & Amortization	(129,119)		(115,013)
Total Property & Equipment, net	675,649		573,611

Other Assets:
Goodwill	222,223		222,223
Other Intangible Assets, net	88,110		89,110
Operating Lease Right-of-use Assets	29,284		61,658
Aircraft Deposits	10,831		10,021
Long-term Lessor Maintenance Deposits	23,071		20,346
Deferred Tax Asset	15,955		18,737
Other Assets	5,226		5,495
Total Other Assets	394,700		427,590
Total Assets	$	1,419,592	$	1,376,644

June 30, 2021

December 31, 2020

(Unaudited)

ASSETS





Current Assets:




Cash and Equivalents

$
310,723

$
62,028
Restricted Cash

4,762

8,335
Investments

6,076

5,624
Accounts Receivable, net of an allowance for credit losses of $297 and $224, respectively

25,989

28,690
Short-term Lessor Maintenance Deposits

1,490

3,101
Inventory, net of a reserve for obsolescence of $1,188 and $996, respectively

5,382

5,407
Prepaid Expenses

14,447

8,002
Derivative Assets

1,598

—
Other Current Assets

779

5,553
Total Current Assets

371,246

126,740

Property & Equipment, net:




Aircraft and Flight Equipment

395,646

331,685
Leasehold Improvements and Ground Equipment

14,025

13,526
Computer Hardware and Software

8,331

7,845
Finance Lease Assets

161,649

117,833
Rotable Parts

9,094

8,691
Property & Equipment

588,745

479,580
Accumulated Depreciation & Amortization

(88,704)

(65,065)
Total Property & Equipment, net

500,041

414,515

Other Assets:




Goodwill

222,223

222,223
Other Intangible Assets, net

91,110

93,110
Operating Lease Right-of-use Assets

70,715

121,269
Aircraft Lease Deposits

7,657

10,253
Long-term Lessor Maintenance Deposits

19,493

22,584
Deferred Tax Asset

21,342

36,216
Other Assets

6,137

6,357
Total Other Assets

438,677

512,012
Total Assets

$
1,309,964

$
1,053,267

See accompanying Notes to Condensed Consolidated Financial Statements

- 3 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

June 30, 2021

December 31, 2020

(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:




Accounts Payable

$
36,847

$
34,035
Accrued Salaries, Wages, and Benefits

17,855

16,368
Accrued Transportation Taxes

12,907

5,883
Air Traffic Liabilities

113,771

101,075
Derivative Liabilities

—

1,174
Over-market Liabilities

4,309

9,281
Finance Lease Obligations

9,601

11,460
Loyalty Program Liabilities

12,337

7,016
Operating Lease Obligations

18,239

34,492
Current Maturities of Long-term Debt

19,795

26,118
Other Current Liabilities

5,145

6,841
Total Current Liabilities

250,806

253,743

Long-term Liabilities:




Over-market Liabilities

12,583

28,128
Finance Lease Obligations

135,091

95,710
Loyalty Program Liabilities

8,540

15,053
Operating Lease Obligations

68,408

112,707
Long-term Debt

267,684

256,345
Income Tax Receivable Agreement Liability

96,500

—
Other Long-term Liabilities

6,119

7,764
Total Long-term Liabilities

594,925

515,707
Total Liabilities

845,731

769,450

Commitments and Contingencies





Stockholders' Equity:




Common Stock

572

468
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,158,467 and 46,839,659 issued at June 30, 2021 and December 31, 2020, respectively.




Loans to Stockholders

—

(3,500)
Additional Paid In Capital

476,368

248,525
Retained Earnings (Deficit)

(12,707)

38,324
Total Stockholders' Equity

464,233

283,817
Total Liabilities and Stockholders' Equity

$
1,309,964

$
1,053,267

(Unaudited)


	March 31, 2022		December 31, 2021
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts Payable	$	49,890	$	39,805
Accrued Salaries, Wages, and Benefits	24,484		28,527
Accrued Transportation Taxes	14,098		12,736
Air Traffic Liabilities	110,946		118,562
Over-market Liabilities	3,063		4,309
Finance Lease Obligations	31,106		11,705
Loyalty Program Liabilities	11,490		11,451
Operating Lease Obligations	10,176		17,231
Current Maturities of Long-term Debt	34,741		29,412
Other Current Liabilities	11,482		7,913
Total Current Liabilities	301,476		281,651

Long-term Liabilities:
Over-market Liabilities	4,730		10,428
Finance Lease Obligations	239,035		180,450
Loyalty Program Liabilities	5,884		8,267
Operating Lease Obligations	23,864		58,810
Long-term Debt	242,544		248,014
Income Tax Receivable Agreement Liability	105,600		98,800
Other Long-term Liabilities	3,168		3,413
Total Long-term Liabilities	624,825		608,182
Total Liabilities	926,301		889,833

Commitments and Contingencies (see Note 12)	0		0

Stockholders' Equity:
Common Stock
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,964,320 and 57,872,452 issued and outstanding at March 31, 2022 and December 31, 2021, respectively.	580		579
Preferred Stock
Preferred stock with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021.	—		—
Additional Paid-In Capital	488,480		485,638
Retained Earnings	4,231		594
Total Stockholders' Equity	493,291		486,811
Total Liabilities and Stockholders' Equity	$	1,419,592	$	1,376,644

See accompanying Notes to Condensed Consolidated Financial Statements

- 4 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
Operating Revenues:








Passenger

$
125,130

$
31,341

$
229,325

$
209,827
Cargo

22,098

3,219

43,684

3,219
Other

1,961

816

3,793

2,660
Total Operating Revenue

149,189

35,376

276,802

215,706

Operating Expenses:








Aircraft Fuel

29,709

677

53,984

56,238
Salaries, Wages, and Benefits

42,316

32,484

86,392

70,575
Aircraft Rent

3,815

5,934

9,414

16,966
Maintenance

11,300

2,426

20,510

8,904
Sales and Marketing

5,822

1,630

10,932

10,202
Depreciation and Amortization

13,460

12,175

26,075

22,702
Ground Handling

6,551

1,614

11,781

10,906
Landing Fees and Airport Rent

8,752

2,667

17,537

13,781
Special Items, net

(38,520)

(31,481)

(65,392)

(31,481)
Other Operating, net

16,746

9,484

31,397

23,917
Total Operating Expenses

99,951

37,610

202,630

202,710
Operating Income (Loss)

49,238

(2,234)

74,172

12,996

Non-operating Income (Expense):








Interest Income

9

63

24

314
Interest Expense

(6,080)

(5,442)

(13,201)

(11,058)
Other, net

18,054

(325)

18,049

(494)
Total Non-operating Income (Expense), net

11,983

(5,704)

4,872

(11,238)

Income (Loss) before Income Tax

61,221

(7,938)

79,044

1,758
Income Tax Expense (Benefit)

9,468

(1,898)

14,875

547
Net Income (Loss)

$
51,753

$
(6,040)

$
64,169

$
1,211

Net Income (Loss) per share to common stockholders:








Basic

$
0.91

$
(0.13)

$
1.21

$
0.03
Diluted

$
0.83

$
(0.13)

$
1.12

$
0.02
Shares used for computation:








Basic

57,156,159

46,805,950

52,850,041

46,805,950
Diluted

61,982,441

46,805,950

57,403,593

48,243,146


	Three Months Ended March 31,
	2022		2021
Operating Revenues:
Passenger	$	202,033	$	104,195
Cargo	21,053		21,585
Other	3,439		1,831
Total Operating Revenue	226,525		127,611

Operating Expenses:
Aircraft Fuel	64,544		24,274
Salaries, Wages, and Benefits	59,617		44,075
Aircraft Rent	3,186		5,599
Maintenance	11,995		9,210
Sales and Marketing	8,628		5,110
Depreciation and Amortization	15,328		12,615
Ground Handling	7,958		5,230
Landing Fees and Airport Rent	10,286		8,785
Special Items, net	—		(26,871)
Other Operating, net	23,150		14,651
Total Operating Expenses	204,692		102,678
Operating Income	21,833		24,933

Non-operating Income (Expense):
Interest Income	24		15
Interest Expense	(8,562)		(7,121)
Other, net	(6,876)		(5)
Total Non-operating Income (Expense), net	(15,414)		(7,111)

Income Before Income Tax	6,419		17,822
Income Tax Expense	2,782		5,406
Net Income	$	3,637	$	12,416

Net Income per share to common stockholders:
Basic	$	0.06	$	0.26
Diluted	$	0.06	$	0.24
Shares used for computation:
Basic	57,907,655		48,496,077
Diluted	61,731,942		52,508,186

See accompanying Notes to Condensed Consolidated Financial Statements

- 5 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

Six Months Ended June 30, 2020

Common Stock

Loans to

Additional

Retained


Warrants

Shares

Amount

Stockholders

Paid-in Capital

Earnings

Total
December 31, 2019

40,005,885

6,800,065

$
68

$
(3,500)

$
244,928

$
42,228

$
283,724
Exercise of Apollo Warrants

(40,005,885)

40,005,885

400

—

(379)

—

21
Net Income

—

—

—

—

—

7,251

7,251
Stock-based Compensation

—

—

—

—

369

—

369
March 31, 2020

—

46,805,950

$
468

$
(3,500)

$
244,918

$
49,479

$
291,365
Net Loss

—

—

—

—

—

(6,040)

(6,040)
Stock-based Compensation

—

—

—

—

388

—

388
June 30, 2020

—

46,805,950

$
468

$
(3,500)

$
245,306

$
43,439

$
285,713

Six Months Ended June 30, 2021

Retained



Common Stock

Loans to

Additional

Earnings

Warrants

Shares

Amount

Stockholders

Paid-in Capital

(Deficit)

Total
December 31, 2020

—

46,839,659

$
468

$
(3,500)

$
248,525

$
38,324

$
283,817
Shares Surrendered by Stockholders

—

(140,737)

(1)

3,500

(3,499)

—

—
Initial Public Offering

—

10,454,545

105

—

224,552

—

224,657
Net Income

—

—

—

—

—

12,416

12,416
Income Tax Receivable Agreement

—

—

—

—

—

(115,200)

(115,200)
Amazon Warrants

—

—

—

—

1,400

—

1,400
Stock-based Compensation

—

—

—

—

2,870

—

2,870
March 31, 2021

—

57,153,467

$
572

$
—

$
473,848

$
(64,460)

$
409,960
Initial Public Offering Expense Adjustment

—

—

—

—

349

—

349
Exercise of Stock Options

—

5,000

—

—

27

—

27
Net Income

—

—

—

—

—

51,753

51,753
Amazon Warrants

—

—

—

—

1,400

—

1,400
Stock-based Compensation

—

—

—

—

744

—

744
June 30, 2021

—

57,158,467

$
572

$
—

$
476,368

$
(12,707)

$
464,233


	Three Months Ended March 31, 2021
	Common Stock			Loans to Stockholders		Additional Paid-in Capital		Retained Earnings (Deficit)		Total
	Shares	Amount
December 31, 2020	46,839,659	$	468	$	(3,500)	$	248,525	$	38,324	$	283,817
Shares Surrendered by Stockholders	(140,737)	(1)		3,500		(3,499)		—		—
Initial Public Offering, net	10,454,545	105		—		224,552		—		224,657
Net Income	—	—		—		—		12,416		12,416
Income Tax Receivable Agreement	—	—		—		—		(115,200)		(115,200)
Amazon Warrants	—	—		—		1,400		—		1,400
Stock-based Compensation	—	—		—		2,870		—		2,870
March 31, 2021	57,153,467	$	572	$	—	$	473,848	$	(64,460)	$	409,960


	Three Months Ended March 31, 2022
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total
	Shares	Amount
December 31, 2021	57,872,452	$	579	$	485,638	$	594	$	486,811
Stock Option Exercises	91,868	1		522		—		523
Net Income	—	—		—		3,637		3,637
Amazon Warrants	—	—		1,400		—		1,400
Stock-based Compensation	—	—		920		—		920
March 31, 2022	57,964,320	$	580	$	488,480	$	4,231	$	493,291

See accompanying Notes to Condensed Consolidated Financial Statements

- 6 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

Six Months Ended June 30,


2021

2020
Net Income

$
64,169

$
1,211
Adjustments to reconcile Net Income to Cash from Operating Activities:




Depreciation and Amortization

26,075

22,702
Tax Receivable Agreement Adjustment

(18,700)

—
Reduction in Operating Lease Right-of-use Assets

9,419

13,585
Non-Cash (Gain) Loss on Asset Transactions, net

(12,668)

381
Unrealized (Gain) Loss on Fuel Derivatives

(3,599)

16,056
Amortization of Over-market Liabilities

(3,081)

(5,781)
Deferred Income Taxes

14,875

570
Amazon Warrants Vested

2,800

—
Stock-based Compensation Expense

3,613

757
Amortization of Debt Issuance Costs

1,911

903

Changes in Operating Assets and Liabilities:




Accounts Receivable

4,265

3,406
Inventory

(224)

(596)
Prepaid Expenses

(6,446)

(797)
Lessor Maintenance Deposits

(3,220)

(6,946)
Aircraft Lease Deposits

1,496

1,290
Other Assets

1,294

(3,033)
Accounts Payable

3,546

(13,144)
Accrued Transportation Taxes

7,024

(11,779)
Air Traffic Liabilities

12,695

(20,587)
Loyalty Program Liabilities

(1,192)

(775)
Reduction in Operating Lease Obligations

(15,826)

(9,718)
Other Liabilities

1,615

(600)
Net Cash Provided by (Used in) Operating Activities

89,841

(12,895)

Cash Flows from Investing Activities:




Purchases of Property & Equipment

(66,736)

(93,677)
Purchase of Investments

(1,436)

(190)
Proceeds from the Sale of Investments

984

227
Net Cash Used in Investing Activities

(67,188)

(93,640)

Cash Flows from Financing Activities:




Cash Received from Stock Offering

235,894

—
Costs of Stock Offering

(8,669)

—
Proceeds from Stock Option and Warrant Exercises

26

21
Proceeds from Borrowings

80,500

220,307
Repayment of Finance Lease Obligations

(7,864)

(85,976)
Repayment of Borrowings

(74,709)

(54,879)
Debt Issuance Costs

(2,709)

(2,764)
Net Cash Provided by Financing Activities

222,469

76,709

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

245,122

(29,826)

Cash, Cash Equivalents and Restricted Cash--Beginning of the Period

70,363

64,478

Cash, Cash Equivalents and Restricted Cash--End of the Period

$
315,485

$
34,652

Supplemental information:




Cash Payments for Interest

$
11,040

$
10,115
Cash Payments (Receipts) for Income Taxes, net

$
40

$
(22)
Non-cash transactions:




Lease Deposits Applied Against the Purchase of Aircraft

$
3,296

$
—
Aircraft and Flight Equipment Acquired through Finance Leases

$
42,911

$
—
Purchases of Property & Equipment in Accounts Payable

$
—

$
555
Costs of Stock Offering in Accounts Payable

$
38

$
—

The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Consolidated Balance Sheets:

June 30, 2021

June 30, 2020
Cash and Equivalents

$
310,723

$
32,084
Restricted Cash

4,762

2,568
Total Cash, Cash Equivalents and Restricted Cash

$
315,485

$
34,652


	Three Months Ended March 31,
	2022		2021
Net Income	$	3,637	$	12,416
Adjustments to reconcile Net Income to Cash from Operating Activities:
Depreciation and Amortization	15,328		12,615
Tax Receivable Agreement	6,800		—
Operating Lease Right-of-use Assets	2,989		5,401
Non-Cash Gain on Asset Transactions, net	(2)		(8,729)
Unrealized Gain on Fuel Derivatives	—		(2,386)
Amortization of Over-market Liabilities	(921)		(2,004)
Deferred Income Taxes	2,782		5,406
Amazon Warrants Vested	1,400		1,400
Stock-based Compensation Expense	920		2,870
Amortization of Debt Issuance Costs	270		272
Loss on Extinguishment of Debt	1,557		1,224

Changes in Operating Assets and Liabilities:
Accounts Receivable	(1,577)		2,358
Inventory	(346)		(173)
Prepaid Expenses	(1,655)		(3,676)
Lessor Maintenance Deposits	(3,919)		(2,219)
Aircraft Deposits	(1,044)		2,226
Other Assets	(6,262)		233
Accounts Payable	9,500		626
Accrued Transportation Taxes	1,362		4,519
Air Traffic Liabilities	(7,616)		(6,343)
Loyalty Program Liabilities	(2,344)		(1,295)
Operating Lease Obligations	(3,240)		(10,722)
Other Liabilities	594		1,820
Net Cash Provided by Operating Activities	18,213		15,839

Cash Flows from Investing Activities:
Purchases of Property & Equipment	(49,683)		(54,399)
Proceeds from the Sale of Property & Equipment	5		—
Purchase of Investments	(3)		(337)
Proceeds from the Sale of Investments	53		184
Net Cash Used in Investing Activities	(49,628)		(54,552)

Cash Flows from Financing Activities:
Cash Received from Stock Offering	—		235,894
Costs of Stock Offering	—		(7,226)
Proceeds from Stock Option and Warrant Exercises	523		—
Proceeds from Borrowings	77,986		68,000
Repayment of Finance Lease Obligations	(4,466)		(3,911)
Repayment of Borrowings	(77,947)		(46,068)
Debt Issuance Costs	(1,979)		(2,721)
Net Cash (Used In) Provided by Financing Activities	(5,883)		243,968

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	(37,298)		205,255

Cash, Cash Equivalents and Restricted Cash--Beginning of the Period	317,785		70,363

Cash, Cash Equivalents and Restricted Cash--End of the Period	$	280,487	$	275,618



SUN COUNTRY AIRLINES HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)


	Three Months Ended March 31,
	2022		2021

Non-cash transactions:
Lease Deposits Applied Against the Purchase of Aircraft	$	—	$	2,766
Aircraft and Flight Equipment Acquired through Finance Leases	$	19,928	$	—
Finance Lease Asset Modifications	$	46,311	$	—

The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets:
	March 31, 2022		March 31, 2021
Cash and Cash Equivalents	$	272,402	$	269,599
Restricted Cash	8,085		6,019
Total Cash, Cash Equivalents and Restricted Cash	$	280,487	$	275,618

See accompanying Notes to Condensed Consolidated Financial Statements

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

1.	~~COMPANY BACKGROUND~~

1. COMPANY BACKGROUND

Sun Country Airlines Holdings, Inc. is the parent company of Sun Country, Inc., which is a certificated air carrier providing scheduled passenger service, air cargo service, charter air transportation and related services. Services are provided to the general public, cargo customers, military branches, wholesale tour operators, individual entities, schools and companies for air transportation to various U.S. and international destinations. Except as otherwise stated, the financial information, accounting policies, and activities of Sun Country Airlines Holdings, Inc. are referred to as those of the Company (the “Company” or “Sun Country”).

~~Stock Split~~

~~In March 2021,~~

Equity Transactions

On April 11, 2018 (the "Acquisition Date"), certain investment funds (the “Apollo Funds”) managed by affiliates of Apollo Global Management, Inc. (“Apollo”) acquired Sun Country, Inc. For more information on the ~~Company effected an approximately 18.8886 for~~Company’s equity transactions, see Note 1 ~~stock split~~ of ~~its common stock (the “Stock Split”), with exercise prices for outstanding warrants and options adjusted accordingly by dividing such prices by~~Notes to the Stock Split ratio. The par value of the common stock was not adjusted as a result of the Stock Split. As a result of the Stock Split, the Company issued an additional 44,226,587 shares of common stock. All references to common stock, warrants to purchase common stock, stock options, per share amounts and related information contained in the accompanying Condensed Consolidated Financial Statements ~~and applicable disclosures have been retroactively adjusted to reflect the effect of the Stock Split for all periods.~~

~~Approval of the Omnibus Incentive Plan~~

In March 2021, the stockholders approved the Sun Country Airlines Holdings, Inc. 2021 Omnibus Incentive Plan (the “Plan”). The Plan authorizes that no more than 3,600,000 shares of Common Stock may be deliveredincluded in Part II, Item 8 “Financial Statements” in the ~~aggregate pursuant to Awards granted under~~Company’s Annual Report on Form 10-K for the Plan. An “Award” means any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award, or Other Cash-Based Award granted underyear ended December 31, 2021 as filed with the ~~Plan.~~

~~Upon implementation of this new Plan, there were 0 more grants under the October 2018 equity incentive plan. Awards already issued under the 2018 plan are not impacted by the new Plan.~~

U.S. Securities and Exchange Commission (“2021 10-K”).

Initial Public Offering of Common Stock ~~and Other Stock Sales~~

On March 16, 2021, the Company priced its initial public offering of 9,090,909 shares of common stock to the public at $24.00 per share. The stock began trading on the NASDAQ on March 17, 2021 under the symbol ~~SNCY.~~"SNCY". The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised. In total, all 10,454,545 shares were issued on March 19, 2021 and the net proceeds to the Company were ~~$225,006~~$225,329 after deducting underwriting discounts and commissions, and other offering expenses.

Concurrently with the closing of the initial public offering, SCA Horus Holdings, LLC, an affiliate of investment funds managed by affiliates of Apollo ~~Global Management~~ (the “Apollo Stockholder”), also completed a ~~concurrent~~ private placement in which the Apollo Stockholder sold 2,216,312 and 2,216,308 shares of common stock to PAR Investment Partners, L.P. and certain funds or accounts managed by an investment adviser subsidiary of Blackrock, Inc., respectively. Each of the twosales was based on an

~~- 8 -~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

aggregate purchase price of $50,000 and a price per share equal to 94% of the initial public offering price of $24.00 per share.

Secondary Offerings

During May 2021 and October 2021, the Apollo Stockholder and other selling stockholders sold 7,250,000 and 8,500,000 shares of the ~~Company’s~~Company's common stock ~~at a public offering price of $34.50 per share. The underwriters in this offering exercised their option to purchase an additional 1,087,500 shares~~ at the public offering ~~price, bringing~~pricesof$34.50 and $32.50, respectively. Under both transactions, the ~~total~~underwriters were given options to purchase additional shares of the Company's common stock at the public offering price. During the May 2021 and October 2021 offerings, the underwriters elected to ~~8,337,500 shares.~~purchase 1,087,500 and 435,291 of the option shares, respectively. The Company incurred offering expenses of ~~$640 and~~$1,763 in conjunction with the two secondary offerings, and did not receive any of the proceeds from these offerings.

For more information on the ~~offering. All proceeds went~~2021 secondary offerings, see Not e 1 of Notes to the ~~Apollo Stockholder.~~

Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the 2021 10-K.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

Amazon Agreement

On December 13, 2019, the Company signed a six-year contract (with 2, two-year extension options, for a maximum term of 10 years) with Amazon.com Services, Inc. (together with its affiliates, “Amazon”) to provide cargo services under an Air Transportation Services Agreement (the “ATSA”). The agreement is structured for the Company to provide crew, maintenance, and insurance (“CMI”) services to Amazon. Sun Country began flying for Amazon in May 2020. On June 27, 2020, Amazon and the Company signed an amendment to the December 2019 agreement that increased the number of aircraft Sun Country operates from 10 to 12.

In ~~December 2019, in~~ connection with the ATSA, the Company issued warrants to Amazon to purchase an aggregate of up to 9,482,606 shares of common stock at an exercise price of approximately $15.17 per share. ~~The exercise period of these~~There were 632,183 warrants ~~is through the eighth anniversary of the issue date. Of the 9,482,606 total Amazon warrants issued, 632,183~~that vested upon execution of the ATSA ~~in December 2019. Thereafter, an additional~~and 63,217 warrants will vest for each milestone of $8,000 in qualifying payments made by Amazon to the Company. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, 189,652 ~~and 379,304~~ warrants vested in each respective period. As of March 31, 2022 and March 31, 2021, the cumulative vested warrants held by Amazon were 1,833,311 and 1,074,704, respectively. The ~~cumulative~~exercise period of these warrants ~~vested as~~is through the eighth anniversary of ~~June 30, 2021 were 1,264,356. NaN warrants vested during~~ the ~~six months ended June 30, 2020.~~

2.	~~BASIS OF PRESENTATION~~

issue date.

2. BASIS OF PRESENTATION

The Company has prepared the Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (“GAAP”) and has included the accounts of Sun Country Airlines Holdings, Inc. and its subsidiaries. The accompanying unaudited Condensed Consolidated Financial Statements of Sun Country Airlines Holdings, Inc. should be read in conjunction with the ~~consolidated financial statements~~Consolidated Financial Statements contained in the ~~Company’s Annual Report for the year ended December 31, 2020, which is included in the Company’s Final Prospectus dated March 16, 2021. During the six months ended June 30,~~ 2021 ~~there were no significant changes to the Company’s critical accounting policies.~~

Certain prior period Stockholders’ Equity amounts were reclassified to conform to the current period presentation. This involved reducing the Common Stock values to $0.01 times the shares outstanding and reclassifying those dollars to Additional Paid-In Capital. These reclasses were $238,694 as of December 31, 2020, June 30, 2020 and March 31, 2020. The reclass as of December 31, 2019 was $239,073.

10-K. Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited Condensed Consolidated Financial Statements for the interim periods presented. The Company reclassified certain prior period amounts to conform to the current period presentation. All material intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in accordance with ~~accounting principles generally accepted in the United States (“GAAP”)~~GAAP requires management to make certain

~~- 9 -~~

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant areas of judgment relate to passenger revenue recognition, maintenance under the built-in overhaul method, equity-based compensation, tax receivable agreement, lease accounting, impairment of goodwill, impairment of long-lived and intangible assets, air traffic liabilities, the loyalty program, as well as the valuation of Amazon warrants.

During the three months ended March 31, 2022, there were no significant changes to the Company’s critical accounting policies.

Due to ~~severe~~ impacts from the global coronavirus (“COVID-19”) pandemic, seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, uncertainties in pilot staffing and other factors, operating results for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of operating results for future quarters or for the year ~~ended~~ending December 31, ~~2021.~~2022. Air travel is also significantly impacted by general economic conditions, the amount of disposable income available to consumers, unemployment levels, corporate travel budgets, extreme or severe weather and natural disasters, disease outbreaks, fears of terrorism or war, and other factors beyond the ~~Company’s~~Company's control.

~~The Company operates its fiscal year on a calendar year basis.~~

Recently Adopted Accounting Standards

~~Income Taxes~~-~~Simplifying the Accounting for Income Taxes~~ ~~- In December 2019,~~On May 3, 2021, the FASB issued ASU ~~2019-12,~~ ~~Income Taxes~~2021-04, Earnings Per Share (Topic ~~740)~~260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): ~~Simplifying the~~Issuer’s Accounting for ~~Income Taxes, which removes certain exceptions related to the approach for intraperiod tax allocation, recognizing deferred tax liabilities for outside basis differences,~~Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and ~~calculating income taxes~~reduces diversity in ~~interim periods. The guidance also reduces complexity in certain areas, including franchise taxes that are partially based on income and~~an issuer’s accounting for tax law changes in interim periods. The standard was adopted prospectively effective January 1, 2021 and it did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

3.	~~IMPACT OF THE COVID-19 PANDEMIC~~

On March 11, 2020 the World Health Organization declared COVID-19 a global pandemic causing a massive market disruption to the aviation industry. While U.S. domestic passenger volumes have increased to date, those levels are still down when compared to the same time frame in 2019. The growth in the U.S. domestic air traffic since the trough in April 2020 has been led by leisure and visiting family and relatives (“VFR”) travelersmodifications or exchanges of freestanding equity-classified written call options (such as business travel remains more subdued with corporate workforces continuing to “work-from-home” and in-person meetings continuing to be conducted via videoconferencing and other virtual channels. Equity research analysts and other industry executives believewarrants) that the positive trends in leisure and VFR travel will continue as COVID-19 vaccines continue to become more widely distributed in 2021. COVID-19 vaccines have become widely available in the US according to the Centers for Disease Control and Prevention (“the CDC”). The initial beneficiaries of the travel rebound are expected to be leisure and VFR focused Low-Cost Carriers (“LCCs”) and Ultra Low-Cost Carriers (“ULCCs”), while the more international and business travel exposed legacy network airlines are expected to lag behind.

remain equity classified after modification or

As COVID-19 has spread globally, many countries have imposed strict international travel restrictions. The U.S. market has recovered markedly faster than most other countries as a result of widespread vaccine distribution igniting the leisure travel recovery. However, given the uncertainty regarding COVID-19 variants, including but not limited to the Delta variant, the demand recovery may be impacted in both international and domestic travel.

~~- 10 -~~

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~Since~~(Unaudited)

exchange. On January 1, 2022, the ~~beginning~~Company adopted ASU 2021-04 on a prospective basis, as required by the Standard. There was no financial statement impact upon adoption.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. The new standard requires additional disclosures regarding government grants and money contributions. The standard requires disclosures on the nature of the transactions and related accounting policies, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transactions. The Company adopted this standard as of January 1, 2022, see Note 3 for additional information on COVID-19 related government assistance the Company has received.

3. IMPACT OF THE COVID-19 PANDEMIC

The COVID-19 pandemic resulted in a dramatic decline in passenger demand across the U.S. airline industry. Sun Country experienced a significant decline in demand related to the COVID-19 pandemic, which caused a material decline in first quarter 2021 revenues as compared to pre-pandemic levels, and negatively impacted the Company’s financial condition and operating results.

During the first quarter of 2022, Sun Country continued to see recovery in demand from the COVID-19 pandemic relative to demand in 2021, which may impact the comparability of results to prior periods. However, the ongoing impact of the COVID-19 pandemic ~~the~~on overall demand for air ~~cargo market has experienced solid growth both in terms of volumes~~travel remains uncertain and yields. While the pandemic has caused a worldwide economic recession, e-commerce has thrived due to a variety of factors such as consumers being unable or unwilling to visit brick-and-mortar stores due to social distancing, which translated into an acceleration of secular growth in e-commerce. Air cargo operators have been in a unique position to meet e-commerce demands that require a high level of speed, reliability and security.

cannot be predicted at this time.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

~~On March 27,~~

During 2021 and 2020, the Company received certain funds from the CARES Act. The cash awarded to the Company through the CARES Act was ~~passed by~~accounted for as grants, debt, and tax credits based on the ~~U.S. Government. The provisions in~~terms and nature of the act provide for economic relief to eligible individuals and businesses affected by COVID-19. As a provider of scheduled passenger service, air cargo service, charter air transportation and related services, the Company is eligible for and has received certain benefits outlined in the CARES Act including but not limited to payroll tax breaks, government grants and government loans.

funds awarded.

~~The grant amount~~ ~~recognized under the CARES Act Payroll Support Program for the year ended December 31, 2020 was $62,312 and was recorded in Special Items, net.~~ During the first quarter of 2021, the Company received and recognized as income within Special Items, net $32,208 from the Treasury under the Payroll Support Program Extension (“PSP2”). ~~During the second quarter of 2021, the Company received an additional $4,831 from the Treasury as a top-off grant under PSP2.~~

Further, in the second quarter, the Company received a grant of $34,547 under the American Rescue Plan Act of 2021 (“PSP3”) which was enacted on March 11, 2021, and authorizes Treasury to provide additional assistance to passenger air carriers and contractors that received financial assistance under the CARES Act. The grant amount recognized under PSP3 of $34,547 was recorded in Special Items, net during the second quarter.

The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”) which is a refundable tax credit against certain employment taxes. During ~~the year ended December~~March 31, ~~2020,~~2021, the Company recorded ~~$2,328~~$334 related to the CARES Employee Retention Credit within Special Items, net. ~~In the first and second quarters of 2021, an additional $334 and $446, respectively, was recognized within Special Items, net.~~

Under the CARES Act Loan Program, the Company received a $45,000 loan (the “CARES Act Loan”) from the Treasury, ~~on October 26, 2020,~~ which was repaid in full on March 24, ~~2021.~~

2021 using proceeds from the IPO. For more information on funds awarded through the CARES act, see Note 3 of Notes to the Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the 2021 10-K.

In accordance with any grants and/or loans received under the CARES Act, the Company is required to comply with the relevant provisions of the CARES Act and the related implementing agreements which, among other things, include the following: the requirement to use the Payroll Support Payments exclusively for the continuation of payment of crewmember and employee wages, salaries and benefits; the requirement that certain levels of commercial air service be maintained until March 1, ~~2021, or~~2022, if ordered by the ~~DOT, March 1, 2022;~~Department of Transportation ("DOT"); the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends until September 30, 2022; and restrictions on the payment of certain executive compensation until April 1, 2023.

As of March 31, 2022, the Company was in compliance with these provisions.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

4.	~~REVENUE~~

4. REVENUE

Sun Country is a certificated air carrier generating Operating Revenues from Scheduled service, Charter service, Ancillary, Cargo and Other revenue. Scheduled service revenue mainly consists of base fares. Charter service revenue is primarily generated through service provided to the U.S. Department of Defense, collegiate and professional sports teams, and casinos. Ancillary revenues consist of revenue earned from air travel-related services, such asas; baggage fees, seat selection fees, and on-board sales. Cargo consists of revenue earned from flying cargo aircraft under the ATSA. Other revenue consists primarily of revenue from services in connection with Sun Country ~~Vacation~~Vacations products.

The significant categories comprising Operating Revenues are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Scheduled service	$	67,073	$	17,882	$	121,693	$	132,110
Charter service		28,898		8,491		54,703		37,718

										Three Months Ended March 31,
										2022		2021
Scheduled Service									Scheduled Service	$	124,068	$	54,620
Charter Service									Charter Service	32,879		25,805
Ancillary		29,159		4,968		52,929		39,999	Ancillary	45,086		23,770
Passenger		125,130		31,341		229,325		209,827	Passenger	202,033		104,195
Cargo		22,098		3,219		43,684		3,219	Cargo	21,053		21,585
Other		1,961		816		3,793		2,660	Other	3,439		1,831
Total Operating Revenue	$	149,189	$	35,376	$	276,802	$	215,706	Total Operating Revenue	$	226,525	$	127,611

The Company attributes and measures its Operating Revenue by geographic region as defined by the ~~Department of Transportation~~DOT for airline reporting based upon the origin of each passenger and cargo flight segment.

The Company’s operations are highly concentrated in the U.S., but include service to many international locations, primarily based on scheduled service to Latin America during the winter season and on military charter services.

Total Operating ~~Revenue~~Revenues by geographic region are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

										Three Months Ended March 31,
										2022		2021
Domestic	$	142,774	$	34,307	$	262,020	$	197,345	Domestic	$	208,591	$	119,312
Latin America		6,266		1,038		14,228		18,114	Latin America	17,869		7,877
Other		149		31		554		247	Other	65		422
Total Operating Revenue	$	149,189	$	35,376	$	276,802	$	215,706	Total Operating Revenue	$	226,525	$	127,611

Contract Balances

The Company’s contract assets primarily relate to costs incurred to get ~~the 12~~ Amazon cargo aircraft ready for service. The balances are included in Other Current Assets and Other Assets on the Condensed Consolidated Balance Sheets.These deferred up-front costs are being amortized into expense on a pro-rata basis over the initial six years of the ATSA.The amount expensed during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 was ~~$169~~$161 and ~~$307,~~$138, respectively, and is included in Maintenance expense. ~~There was nothing expensed in the six months ended June 30, 2020, since the Amazon cargo services were just getting started.~~

~~- 12 -~~

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

The Company’s significant contract liabilities are comprised of, 1) ticket sales for transportation that has not yet been provided (reported as Air Traffic Liabilities on the Condensed Consolidated Balance Sheets), 2) outstanding loyalty points that may be redeemed for future travel and other non-air travel awards (reported as Loyalty Program Liabilities on the Condensed Consolidated Balance Sheets) and, 3) the Amazon Deferred Up-front Payment received (reported within Other Liabilities on the Condensed Consolidated Balance Sheets).

Contract Assets and Liabilities are as follows:


	June 30, 2021		December 31, 2020

						March 31, 2022		December 31, 2021
Contract Assets					Contract Assets
Costs to fulfill contract with Amazon	$	3,203	$	3,614	Costs to fulfill contract with Amazon	$	2,658	$	2,819

Air Traffic Liabilities	$	113,771	$	101,075	Air Traffic Liabilities	110,946		118,562
Loyalty Program Liabilities		20,877		22,069	Loyalty Program Liabilities	17,374		19,718
Amazon Deferred Up-front Payment		4,772		5,240	Amazon Deferred Up-front Payment	3,959		4,200
Total Contract Liabilities	$	139,420	$	128,384	Total Contract Liabilities	$	132,279	$	142,480

The balance in the Air Traffic Liabilities fluctuates with seasonal travel patterns. Most tickets can be purchased no more than twelve months in advance, therefore any revenue associated with tickets sold for future travel will be recognized within that timeframe. For the ~~six month period~~three months ended ~~June 30, 2021, $82,206~~March 31, 2022, $87,982 of revenue was recognized in Passenger revenue that was included in the Air Traffic Liabilities as of December 31, ~~2020.~~

2021.

As part of the ATSA executed in December 2019, Amazon paid the Company $10,300 toward start-up costs. Upon signing the ATSA, Amazon received 632,183 fully vested warrants to purchase the Company’s common stock, with a fair value of $4,667. This fair value was assigned to a portion of the $10,300 cash received from Amazon and the remaining $5,633 was recorded in Other Liabilities on the ~~Company's~~Company’s Condensed Consolidated Balance ~~Sheet.~~Sheets. This deferred up-front payment is being amortized into revenue on a pro-rata basis over the initial six years of the ATSA. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~$237~~$240 and ~~$468~~$231 was amortized into Cargo revenue, respectively. ~~For each of the three and six months ended June 30, 2020, $38 was amortized into Cargo revenue.~~

Loyalty Program

The Sun Country Rewards program provides loyalty awards to program members based on accumulated loyalty points. Loyalty points are earned as a result of travel and purchases using the Company’s co-branded credit card. The balance of the Loyalty Program Liabilities fluctuates based on seasonal patterns, which ~~impact~~impacts the volume of loyalty points awarded through travel or issued to co-branded credit card and other partners (deferral of revenue) and loyalty points redeemed (recognition of revenue). Due to these reasons, the timing of loyalty point redemptions can vary significantly.

~~- 13 -~~

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

Changes in the Loyalty Program Liabilities are as follows:

2021

2020
Balance - January 1

$
22,069

$
22,892
Loyalty Points Earned

1,904

2,621
Loyalty Points Redeemed⁽¹⁾

(3,096)

(3,395)
Balance - June 30

$
20,877

$
22,118


	2022		2021
Balance – January 1	$	19,718	$	22,069
Loyalty Points Earned	1,819		857
Loyalty Points Redeemed (1)	(4,163)		(2,152)
Balance – March 31	$	17,374	$	20,774

______________________


(1)			~~Principally relates to revenue recognized from the redemption of loyalty points for both air and non-air travel awards.~~ Loyalty points are combined in one homogenous pool and are not separately identifiable. As such, the revenue recognized is comprised of points that were part of the Loyalty Program Liabilities balance at the beginning of the period, as well as points that were earned during the period.

~~The timing of loyalty point redemptions can vary significantly, however most new points, that are not left to expire, are redeemed within two years.~~ Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and will adjust estimates in the future, which could be material.

5.	~~EARNINGS PER SHARE~~

Basic earnings per share, which excludes dilution, is computed by dividing Net Income available to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of incremental shares from the assumed issuance of shares relating to share based awards is calculated by applying the treasury stock method.

5. EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per share:

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
Numerator:








Net Income (Loss)

$
51,753

$
(6,040)

$
64,169

$
1,211

Denominator:








Weighted Average Common Shares Outstanding - Basic

57,156,159

46,805,950

52,850,041

46,805,950
Dilutive effect of Stock Options and Warrants⁽¹⁾

4,826,282

—

4,553,552

1,437,196
Weighted Average Common Shares Outstanding - Diluted

61,982,441

46,805,950

57,403,593

48,243,146

Basic earnings (loss) per share

$
0.91

$
(0.13)

$
1.21

$
0.03
Diluted earnings (loss) per share

$
0.83

$
(0.13)

$
1.12

$
0.02


	Three Months Ended March 31,
	2022		2021
Numerator:
Net Income	$	3,637	$	12,416

Denominator:
Weighted Average Common Shares Outstanding - Basic	57,907,655		48,496,077
Dilutive effect of Stock Options, RSUs and Warrants (1)	3,824,287		4,012,109
Weighted Average Common Shares Outstanding - Diluted	61,731,942		52,508,186

Basic earnings per share	$	0.06	$	0.26
Diluted earnings per share	$	0.06	$	0.24

______________________

	~~(1)~~
(1)			There were ~~3,547,524~~3,550,810 and ~~3,636,773~~3,557,432 performance-based stock options outstanding at ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. As a result of the Company’s initial public offering, 75% of these options are expected to meet the performance conditions and are included in the measure above to the extent they are dilutive at March 31, 2022 and 2021. In March 2022, 25% of the eligible outstanding performance-based stock options ~~at June 30, 2021. At June 30, 2020, these~~vested and were considered exercisable. The vested performance-based stock options ~~were excluded from~~are included in the ~~calculation of diluted EPS since~~measure above to the ~~performance conditions were not considered likely to be met.~~extent they are dilutive.

~~- 14 -~~

The Company's anti-dilutive shares for the periods presented were not material to the Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Prior to their exercise on January 31, 2020, all 40,005,885 warrants held by the Apollo Stockholder were included in basic and diluted weighted average shares outstanding as they were equity classified, had an exercise price of approximately $0.0005, and all necessary conditions for issuance were met.

Warrants held by Amazon are included in dilutive weighted average shares outstanding as of the date the warrants vest. The unvested warrants held by Amazon have not been included in dilutive shares as their performance condition had not been satisfied.

- 13 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

6.	~~AIRCRAFT~~

~~Aircraft Fleet~~

6. AIRCRAFT

As of March 31, 2022, Sun Country operated a fleet of 50 Boeing 737-NG aircraft, consisting of 49 Boeing 737-800s and 1 Boeing 737-700.

The following tables summarize the Company’s aircraft fleet activity for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, respectively:


	December 31, 2021	Additions	Removals	March 31, 2022
Passenger:
Owned	21	1	—	22
Finance leases	9	3	—	12
Operating leases	6	—	(2)	4
Sun Country Airlines’ Fleet	36	4	(2)	38
Cargo:
Aircraft Operated for Amazon	12	—	—	12
Total Aircraft Operated	48	4	(2)	50

	December 31, 2020	Additions	Removals	March 31, 2021
Passenger:
Owned	14	5	—	19
Finance leases	5	—	—	5
Operating leases	12	—	(5)	7
Sun Country Airlines’ Fleet	31	5	(5)	31
Cargo:
Aircraft Operated for Amazon	12	—	—	12
Total Aircraft Operated	43	5	(5)	43

During the three months ended March 31, 2022, the Company executed lease amendments to purchase 2 aircraft at the end of the lease term, which modified the lease classification from operating leases to finance leases with expiration dates in fiscal year 2026. The Company also acquired 2 additional 737-800 aircraft, one of which was financed using proceeds from the issuance of Class A and ~~2020, respectively:~~

Class B pass-through trust certificates (the "2022-1 EETC") and another through a finance lease arrangement that is set to expire in fiscal year 2030.

Subsequent to March 31, 2022, the Company committed to lease an aircraft for a period of six years at approximately

December 31, 2020

Additions

Removals

June 30, 2021
Passenger:

Owned

14

6

—

20
Finance leases

5

2

—

7
Operating leases

12

—

(6)

6
Sun Country Airlines' Fleet

31

8

(6)

33
Cargo:

Aircraft Operated for Amazon

12

—

—

12
Total Aircraft Operated

43

8

(6)

45

$2,220

per year. The 6Company expects to take delivery of the aircraft during fiscal year 2022. The Company also purchased an aircraft that was previously under a finance lease before the end of the lease term for a purchase price of $16,784 and took delivery of 4 incremental aircraft for a total purchase price of approximately $75,000. The Company financed these purchases using incremental 2022-1 EETC funds that were drawn upon subsequent to March 31, 2022.

The 5 aircraft purchased during the ~~six~~three months ended ~~June 30,~~March 31, 2021 were financed through the Delayed Draw Term Loan Facility (see Note 7)7). All ~~6 of these~~5 additions were previously ~~under~~accounted for as operating leases. ~~During June 2021, the Company obtained an additional 2 aircraft under finance leases.~~

December 31, 2019

Additions

Removals

June 30, 2020
Passenger:

Owned

5

9

—

14
Finance leases

10

—

(5)

5
Operating leases

14

—

(2)

12
Seasonal leases

2

—

(2)

—
Sun Country Airlines' Fleet

31

9

(9)

31
Cargo:

Aircraft Operated for Amazon

—

7

—

7
Total Aircraft Operated

31

16

(9)

38

The 9 aircraft purchased during the six months ended June 30, 2020 were financed through equipment trust certificates (see Note 7). NaN of these aircraft were previously under operating leases, 5 were previously under finance leases, and the other 2 aircraft were new to the Company’s fleet. In addition, the Company refinanced 3 previously owned and financed aircraft in January 2020 utilizing equipment trust certificates (see Note 7).

~~- 15 -~~

- 14 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~As of June 30, 2021, Sun Country operated a fleet of Boeing 737-NG aircraft, consisting of 44 Boeing 737-800s~~(Unaudited)

Depreciation, amortization, and ~~1 Boeing 737-700.~~

~~The Accumulated Depreciation on owned assets was $67,495 and $52,048 as of June 30, 2021 and December 31, 2020, respectively. Depreciation~~rent expense on these assets was $9,642 and $6,370 for the three months ended June 30, 2021 and 2020, respectively. Depreciation expense was $18,442 and $11,491 for the six months ended June 30, 2021 and 2020, respectively.

~~The Accumulated Amortization on Finance Lease Assets was $21,209 and $13,018~~aircraft are as of June 30, 2021 and December 31, 2020, respectively. Amortization Expense on these assets was $2,692 and $4,665 for the three months ended June 30, 2021 and 2020, respectively. Amortization Expense was $5,384 and $8,955 for the six months ended June 30, 2021 and 2020, respectively.

follows:


		Three Months Ended March 31,
Aircraft Status	Expense Type	2022		2021
Owned	Depreciation	$	8,673	$	7,830
Finance Leased	Amortization	4,069		2,435
Operating Leased	Aircraft Rent (1)	3,186		5,599
		$	15,928	$	15,864


(1)			Aircraft Rent expense includes credits for the amortization of over-market liabilities established at the Acquisition Date.

Depreciation expense on owned ~~assets~~aircraft and amortization expense on ~~Finance Lease Assets~~finance leased aircraft are ~~each~~both classified in Depreciation and Amortization on the Condensed Consolidated Statements of Operations.

Aircraft ~~Lease Payment Deferrals~~

~~During~~Maintenance Deposits Contra-Assets

As of the ~~year ended December 31, 2020~~Acquisition Date, the Company ~~negotiated rent payment deferrals with~~established a ~~majority of its aircraft lessors due~~maintenance deposit contra-asset to ~~COVID-19 cash flow impacts. There were 0 amounts deferred as of June 30, 2021 since~~offset the ~~final payments were made~~acquired maintenance deposits assets included in the second quarter of 2021. The amount deferred as of December 31, 2020 was $7,569, consisting of $2,133 under finance leases and $5,436 under operating leases. These deferrals were classified within the current portion of the respective lease liabilitiesShort-term Lessor Maintenance Deposits on the Condensed Consolidated Balance ~~Sheet as~~Sheets. The assets represent funds paid by the previous owners of ~~December 31, 2020.~~

~~Aircraft Maintenance Deposits Contra-Assets~~

~~At April 11, 2018 (the “Acquisition Date”),~~ the Company ~~established a~~to the lessor that were kept as funds on deposit ~~contra-asset to~~for maintenance events and the contra-assets represent the Company’s obligation to perform planned maintenance events on leased aircraft held as of the Acquisition ~~Date.~~date. As reimbursable maintenance events are performed and Maintenance Expense is incurred, a portion of the contra-asset is recognized as a reduction to Maintenance Expense on the Condensed Consolidated Statements of Operations due to the fact that the previously acquired maintenance deposit is partially funding the maintenance event. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the remaining balance of the contra-asset was $22,792 and $36,729, respectively. Of the $13,937 reduction in the contra-asset during the six months ended June 30, 2021, $12,749 related to the purchase of 6 aircrafts previously leased, whereupon the contra-assets and related maintenance deposits were written-off concurrently to Aircraft lease buy-out expense in Special Items, net (see Note 11). For the three months ended June 30, 2021 and 2020, the Company recognized $850 and NaN respectively, of the contra-asset as a reduction to Maintenance expense on the accompanying Condensed Consolidated Statements of Operations. For the six months ended June 30, 2021 and 2020, the Company recognized $850 and $328, respectively, of the contra-asset as a reduction to Maintenance expense.

$22,348.

Over-market Liabilities

At the Acquisition Date, the Company acquired liabilities related to its over-market lease rates and over-market maintenance reserve payments.

As of the Acquisition Date, the Company recognized a liability representing lease terms which are unfavorable compared with market terms of similar leases. ~~Upon adopting ASU 2016-02, Leases (Topic 842) effective January 1, 2019, this~~The over-market lease liability ~~was reclassified~~is recorded as ~~an offset to~~a contra-asset offsetting the ~~Operating Lease Right-of-~~

~~- 16 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~use Assets.~~corresponding lease asset. The remaining unamortized balance of this contra-asset as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$11,444~~$383 and ~~$16,501,~~$10,363, respectively and is recorded within the Operating Lease Right-of-Use Assets. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company ~~purchased 6~~executed lease amendments which modified 2 aircraft ~~which were previously under~~from operating leases ~~with unfavorable terms, contributing~~ to ~~$3,765~~finance leases. As a result of the ~~decrease.~~

modifications, the Company reclassified $9,687 of the over-market lease liability from Operating Lease Right-of-Use Assets to Finance Lease Assets. The resulting reclassification reduces the Depreciation and Amortization for the related Finance Lease Assets.

As of the Acquisition Date, Sun Country’s existing leases included payments for maintenance reserves in addition to the stated aircraft lease payments. For a substantial portion of these maintenance reserve payments, the Company does not expect to be reimbursed by the lessor. Therefore, a liability was established representing over-market maintenance reserve lease terms compared to market terms of similar leases. The remaining balance of this liability at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$16,892~~$7,793 and ~~$37,409,~~$14,737, respectively. Of the ~~$20,517~~$6,944 reduction in the over-market maintenance reserve liabilities during the six months ended June 30, 2021, $17,435 related to the purchase of 6 aircrafts previously leased. The over-market liabilities for those aircraft are included in Aircraft lease buy-out expense in Special Items, net (see Note 11).

~~Aircraft Rent expense for the~~ three months ended ~~June 30, 2021 and 2020, includes credits~~March 31, 2022, $6,023 was incorporated into the Finance Lease Assets in accordance with the terms of ~~$1,618 and $3,726, respectively, for~~ the ~~amortization~~executed lease amendments, as described above.

- 15 -

Table of over-market liabilities established at the Acquisition Date related to lease rates and maintenance reserves. The Aircraft Rent expense credits for the six months ended June 30, 2021 and 2020 were $4,373 and $7,830, respectively.

Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

7.	~~DEBT~~

~~Lines of~~

7. DEBT

CreditFacilities – On February 10, 2021, the Company executed a five-year credit agreement (the “Credit Agreement”) with a group of lenders that replaced the Company’s prior $25,000 asset-based revolving credit ~~facility (the “ABL Facility”).~~facility. The ~~agreement provides for~~Credit Agreement includes a $25,000 Revolving Credit Facility (the "Revolving Credit Facility") and a $90,000 Delayed Draw Term Loan Facility (“DDTL”), which are collectively referred to as the “Credit Facilities.” The interest rate ~~on borrowings is determined by various alternative base rates plus an applicable margin ranging from 4% to 5%. The interest rate currently~~ in effect ~~on the Delayed Draw Term Loan facility is~~as of March 31, 2022 was 6%, which is the minimum interest rate allowed under the Credit ~~Facilities agreement.~~Agreement. Borrowings ~~on the Delayed Draw Term Loan Facility~~ are subject to a possible interest rate adjustment in ~~February~~June 2022. In addition, there is a commitment fee on the unused Revolving Credit Facility of 0.5%. The proceeds from the Revolving Credit Facility can be used for general corporate ~~purposes. The~~purposes, whereas the proceeds from the ~~Delayed Draw Term Loan Facility~~DDTL are to be used solely to finance the acquisition of aircraft or engines to be registered in the U.S. During the six months ended June 30, 2021, the Company drew $80,500 on the Delayed Draw Term Loan Facility to purchase 6 aircrafts, which were previously under operating leases. In June 2021, the Company made its first principal payment on this debt of $1,006, bringing the June 30, 2021 balance to $79,494.United States. The Credit ~~Facilities have~~Agreement includes financial covenants that require a minimum trailing 12-month EBITDAR ~~(ranging from $62,100 as of September 30, 2021, $78,100 as of December 31, 2021, and $87,700~~($87,700 as of March 31, 2022 and beyond) and a minimum liquidity of $30,000 at the close of any business day.

The Company was in compliance with these covenants as of March 31, 2022.

During 2021, the Company drew $80,500 on the DDTL to purchase 6 aircraft, which were previously under operating leases.The Company repaid the outstanding balance of the DDTL in full as of March 31, 2022 using proceeds it received from the 2022-1 EETC, which terminated the DDTL. As a result, no amounts under the DDTL were available to the Company as of March 31, 2022. The Company recorded a $1,557 loss on extinguishment of debt related to the refinancing of the DDTL, which represents the write-off of the unamortized deferred financing costs. As of March 31, 2022, the Revolving Credit Facility remained undrawn and available to the Company.

Long-term Debt – In December 2019, the Company arranged for the issuance of Class A, Class B and Class C pass-through trust certificates Series 2019-1 (the “2019-1 EETC”), in an aggregate face amount of $248,587 for the purpose of financing or refinancing 13 used aircraft, which was completed in 2020. ~~Payments have been made each June and December, which reduced~~

In March 2022, the ~~balance as~~Company arranged for the issuance of ~~June 30, 2021 to $211,605.~~the 2022-1 EETC in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft. The Company recorded $1,979 in debt issuance costs associated with the 2022-1 EETC. NaN of the 13 aircraft ~~serve as security for~~were owned fleet assets previously financed by the ~~loan~~DDTL, 2 of the aircraft were owned outright, 5 of the aircraft were acquired during the beginning of the second quarter of 2022, and the ~~total~~remaining aircraft is currently under lease and is expected to be purchased from the lessor later in 2022. The Company received gross proceeds of $77,986 with respect to 7 of the aircraft on March 31, 2022, and an incremental $94,521 subsequent to March 31, 2022 with respect to 5 of the aircraft. The remaining $15,770 of gross proceeds is expected to be received on or before September 15, 2022 in connection with purchasing the thirteenth aircraft from the lessor. The Company is required to make semi-annual principal and interest payments each March and September beginning with the first payment on September 15, 2022. The 2022-1 EETC will be secured by a lien on the financed or refinanced aircraft and will be cross-collateralized by the other aircraft financed through the issuance. Total appraised value of ~~these~~the 12 aircraft was approximately $237,936 as of ~~December 2019 was approximately $292,450.~~

~~- 17 -~~

the original date of the agreement.

- 16 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~Under the CARES Act Loan Program, on October 26, 2020, the Company was awarded a $45,000 loan, which~~ ~~was secured by the Company’s loyalty program and certain cash deposit accounts.~~ The loan bore interest at a rate per annum equal to the Adjusted LIBO Rate plus 6.50% and was due to be repaid on the earlier of (i) October 24, 2025 or (ii) six months prior to the expiration date of any material loyalty program securing the loan. On March 24, 2021, the CARES Act Loan was repaid in full, including outstanding principal and accrued interest for a total repayment amount of $46,260.

~~The Company was in compliance with all covenants in its debt agreements at June 30, 2021.~~

(Unaudited)

Long-term Debt ~~included~~includes the following:

June 30, 2021

December 31, 2020
Notes payable under the Company's 2019-1 EETC agreement dated December 2019, with original loan amounts of $248,587 payable in bi-annual installments, in June and December, through December 2027. These notes bear interest at an annual rate of between 4.13% and 6.95% and the weighted average interest rate is 4.78%.

$
211,605

$
227,347

Delayed Draw Term Loan Facility (see terms and conditions above)

79,494

—

U. S. Department of the Treasury CARES Act Loan (see terms and conditions above)

—

45,419

Notes payable to Wilmington Trust Company. Notes bear interest at an annual rate of 8.45% and were scheduled to mature Nov. 2023 to Feb. 2024. In April 2021, these notes were repaid.

—

12,506

Other Notes payable. These notes bear interest at an annual rate of approximately 5.0% and mature March 2029.

493

529

Total Debt

291,592

285,801

Less: Unamortized debt issuance costs

(4,113)

(3,338)

Less: Current Maturities of Long-term Debt

(19,795)

(26,118)
Total Long-term Debt

$
267,684

$
256,345

~~- 18 -~~



	March 31, 2022		December 31, 2021
Notes payable under the Company's 2019-1 EETC agreement dated December 2019, with original loan amounts of $248,587 payable in bi-annual installments, in June and December, through December 2027. These notes bear interest at an annual rate between 4.13% and 6.95% and the weighted average interest rate is 4.76% as of March 31, 2022.	$	202,984	$	202,984

Notes payable under the Company's 2022-1 EETC agreement dated March 2022, with a face amount of $188,277 payable in bi-annual installments, in March and September, through March 2031. These notes bear interest at an annual rate between 4.84% and 5.75% and the weighted average interest rate is 5.06% as of March 31, 2022.	77,986		—

Delayed Draw Term Loan Facility (see terms and conditions above)	—		77,481

Other Notes payable. These notes bear interest at an annual rate of approximately 5.00% and were repaid in full in February 2022.	—		466

Total Debt	280,970		280,931

Less: Unamortized debt issuance costs	(3,685)		(3,505)

Less: Current Maturities of Long-term Debt	(34,741)		(29,412)
Total Long-term Debt	$	242,544	$	248,014

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Future maturities of the outstanding Debt are as follows:

Debt Principal

Amortization of Debt


Payments

Issuance Costs

Net Debt
Remainder of 2021

$
10,661

$
(509)

$
10,152
2022

30,367

(983)

29,384
2023

42,358

(908)

41,450
2024

44,000

(785)

43,215
2025

49,087

(670)

48,417
Thereafter

115,119

(258)

114,861
Total as of June 30, 2021

$
291,592

$
(4,113)

$
287,479


	Debt Principal Payments		Amortization of Debt Issuance Costs		Net Debt
Remainder of 2022	$	30,917	$	(613)	$	30,304
2023	47,534		(757)		46,777
2024	49,173		(633)		48,540
2025	54,257		(518)		53,739
2026	34,684		(348)		34,336
Thereafter	64,405		(816)		63,589
Total as of March 31, 2022	$	280,970	$	(3,685)	$	277,285

The ~~table below presents the Company’s~~fair value of debt ~~measured at fair value:~~

June 30, 2021

December 31, 2020
Carrying Amount

$
291,592

$
285,801
Fair Value

$
281,640

$
279,119

was $271,837 as of March 31, 2022 and $272,004 as of December 31, 2021. The fair value of the Company’s debt was based on the discounted amount of future cash flows using the Company’s end-of-period incremental borrowing rate for similar obligations. The estimates were primarily based on Level 3 inputs.

- 17 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

8.	~~FUEL DERIVATIVES AND RISK MANAGEMENT~~

8. FUEL DERIVATIVES AND RISK MANAGEMENT

The Company’s operations are inherently dependent upon the price of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into fuel option and swap contracts. The Company does not apply hedge accounting to its fuel derivative contracts, nor does it hold or issue them for trading purposes.

As of March 31, 2022 and December 31, 2021, the Company had no outstanding fuel derivative contracts.

Fuel derivative contracts are recognized at fair value on the Condensed Consolidated Balance Sheets as Derivative Assets, if the fair value is in an asset position, or as Derivative Liabilities, if the fair value is in a liability position. ~~The Company did not have any collateral held by counterparties to these agreements as of June 30, 2021 and December 31, 2020.~~ Derivatives where the payment due date is greater than one year from the balance sheet date are classified as long-term.

~~Changes in Derivative Assets (Liabilities) were as follows:~~

Six Months Ended June 30,

2021

2020
Balance - January 1

$
(1,174)

$
2,233
Non-cash Gains (Losses)

3,599

(16,056)
Contract Settlements

(827)

4,990
Balance - June 30

$
1,598

$
(8,833)

~~- 19 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Fuel Derivative Gains (Losses) consisted of the following:~~

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
Non-cash Gains (Losses)

$
1,213

$
5,695

$
3,599

$
(16,056)
Cash Premiums Paid

—

(1,617)

—

(1,901)
Total Fuel Derivative Gains (Losses)

$
1,213

$
4,078

$
3,599

$
(17,957)

Fuel derivative gains and losses are classified in Aircraft Fuel on the Condensed Consolidated Statements of Operations.

Changes in Derivative Assets (Liabilities) are as follows:


	Three Months Ended March 31,
	2022		2021
Balance - January 1	$	—	$	(1,174)
Non-cash Gains	—		2,386
Contract Settlements	—		(7)
Balance - March 31	$	—	$	1,205

Fuel Derivative Gains consist of ~~June 30, 2021,~~ the ~~Company had outstanding fuel derivative contracts covering 5.8 million gallons~~following:


	Three Months Ended March 31,
	2022		2021
Non-cash Gains	$	—	$	2,386
Cash Premiums Paid	—		—
Total Fuel Derivative Gains	$	—	$	2,386

9. FAIR VALUE MEASUREMENTS

For a description of ~~crude oil~~the methods and ~~jet fuel~~assumptions that ~~will settle between July 2021 and September 2021.~~

9.	~~FAIR VALUE MEASUREMENTS~~

~~Accounting standards define~~are used to estimate the fair value asand determine the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy ~~which requires an entity~~classification of each class of financial instrument, see Note 12 of the Notes to ~~maximize~~ the ~~use of observable inputs and minimize~~Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the ~~use of unobservable inputs when measuring fair value. Under GAAP,~~2021 10-K.

Excluding the items discussed below, there ~~are three levels of inputs that may be used to measure fair value:~~

~~Level 1~~ ~~– Quoted prices for identical~~were no additional assets or liabilities ~~in active markets.~~

~~Level 2~~ – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

~~Level 3~~ ~~– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.~~

~~The Company uses the following valuation methodologies for financial instruments~~ measured at fair value on a recurring ~~basis.~~

basis as of March 31, 2022 or December 31, 2021.

Financial Instruments – Financial instruments including Cash and Cash Equivalents, Restricted Cash, Investments, Accounts Receivable, Accounts Payable and all other Current Liabilities have carrying values that approximate fair value.

Derivative Instruments – Derivative instruments are accounted for as either assets or liabilities and are carried at fair value. The fair value for fuel derivative options and swaps is determined utilizing an option pricing model that uses inputs that are readily available in active markets or can be derived from information available in active markets and are classified within Level 2.

~~- 20 -~~

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~The following table summarizes the assets and liabilities measured at fair value on a recurring basis:~~

(Unaudited)

Non-Financial Assets

June 30, 2021


Level 1

Level 2

Level 3

Total
Assets

Fuel Derivative Contracts

$
—

$
1,598

$
—

$
1,598
Total Assets measured at fair value on a recurring basis

$
—

$
1,598

$
—

$
1,598

��


December 31, 2020


Level 1

Level 2

Level 3

Total
Liabilities

Fuel Derivative Contracts

$
—

$
1,174

$
—

$
1,174
Total Liabilities measured at fair value on a recurring basis

$
—

$
1,174

$
—

$
1,174

– Certain assets are measured at fair value on a nonrecurring basis. The Company’s non-financial assets, which primarily consist of ~~property~~Property & Equipment, Goodwill and ~~equipment, goodwill and other intangible assets~~Other Intangible Assets are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial assets are assessed for impairment and, if applicable, written down to fair value using significant unobservable inputs, classified as Level 3.

~~The Company’s debt portfolio consists of 2019-1 EETC certificates, borrowings under the Delayed Draw Term Loan Facility, and fixed-rate notes payable.~~

Debt – See Note 7 for more information on the Company's debt financings and related fair values.

~~10.~~

~~INCOME TAXES~~

10. INCOME TAXES

The ~~Company’s~~Company's effective tax rate for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 was ~~15.5%~~43.3% and ~~18.8%, respectively. The effective tax rate for the three and six months ended June 30, 2020 was 23.9% and 31.1%~~30.3%, respectively. The effective tax rate represents a blend of federal and state taxes and includes the impact of certain nondeductible or nontaxable items. The ~~decrease~~increase in the ~~three and six month~~effective tax rate is primarily due to a ~~favorable permanent difference~~non-deductible expense related to the Tax Receivable Agreement (the "Tax Receivable Agreement" or "TRA") liability, partially offset by ~~nondeductible expense related to executive~~stock compensation ~~disallowed under Internal Revenue Code Section 162(m).~~

benefits.

Tax Receivable Agreement

In connection with the Company’s IPO, wethe Company entered into ~~an income Tax Receivable Agreement (the “Tax Receivable Agreement” or “TRA”)~~the TRA with our pre-IPO stockholders (the “TRA holders”). The ~~Tax Receivable Agreement~~TRA provides for the payment by the Company to the TRA holders of 85% of the amount of cash savings, if any, in U.S. federal, state, local, and foreign income tax that the Company actually realizes (or are deemed to realize in certain circumstances) as a result of certain tax attributes that existed at the time of the IPO (the “Pre-IPO Tax Attributes”). The Company will retain the benefit of the remaining 15% of these cash savings.

Payments under the Tax Receivable Agreement will not begin until at least 12 months after the closing of the Company’s IPO. In the event that the Company is prohibited from making payments under the Tax Receivable Agreement for tax benefits utilized during any periods pursuant to the CARES Act or other

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

governmental programs, the Company is not required to make payments under the Tax Receivable Agreement for Pre-IPO Tax Attributes utilized in such periods. Based on our current participation in the CARES Act Program, the Company does not expect to make payments under the Tax Receivable Agreement until 2023.

If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA payments. Upon the closing of the IPO in the first quarter of 2021, the Company recognized a non-current liability of $115,200, which represented undiscounted aggregate payments that wewere expected to ~~pay~~be paid to the TRA holders under the ~~Tax Receivable Agreement,~~TRA, with an offset to ~~Stockholders'~~Stockholders’ Equity. ~~Subsequent changes in the measurement~~The TRA balance as of ~~the liability are being adjusted through the Consolidated Statements of Operations.~~March 31, 2022 and December 31, 2021 was $105,600 and $98,800, respectively. The ~~Tax Receivable Agreement~~TRA liability is an estimate and actual amounts payable under the Tax Receivable Agreement could differ from this ~~estimate based on, among other things, (i) generation of future taxable income over~~estimate. During the ~~term of~~three months ended March 31, 2022, the ~~Tax Receivable Agreement, (ii) the Company’s participation in future government programs, (iii) stock option activity during periods prior~~Company recorded an adjustment to the ~~commencement~~estimated TRA liability of payments under the Tax Receivable Agreement and (iv) future changes in tax laws. These factors could result in an increase or decrease in the related liability which would be recognized in the Company’s earnings in the period of such change. In the second quarter of 2021, the Company reduced$6,800. Adjustments to the TRA ~~liability balance by $18,700, from $115,200 to $96,500. The offsetting credit was~~are recorded in Other, ~~Non-operating Income. The decrease~~net Non-Operating Income (Expense) on the Company’s Condensed Consolidated Statements of Operations.

For more information on the TRA, see Note 13 of the Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the ~~TRA liability was mainly due~~2021 10-K.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

11. SPECIAL ITEMS, NET

Special Items, net reflects expenses, or credits to expense, that are not representative of our ongoing costs for the ~~receipt of the PSP3 grant of $34,547, which extended the time~~period presented and may vary from period to period in ~~which distributions made to shareholders are restricted from March 31, 2022 to September 30, 2022,~~nature, frequency, and also resulted in an increase in forecasted 2021 pre-tax income. The remaining TRA liability balance of $96,500 is presented in “Long-term Liabilities” on the Condensed Consolidated Balance Sheet as of June 30, 2021.

~~11.~~

~~SPECIAL ITEMS, NET~~

amount.

Special Items, net on the Condensed Consolidated Statements of Operations ~~consisted~~consist of the following:

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
CARES Act grant recognition ⁽¹⁾

$
(39,378)

$
(31,516)

$
(71,587)

$
(31,516)
CARES Act employee retention credit ⁽²⁾

(446)

—

(780)

—
Aircraft lease buy-out expense ⁽³⁾

1,299

—

6,963

—
Other

5

35

12

35
Total Special Items, net

$
(38,520)

$
(31,481)

$
(65,392)

$
(31,481)


	Three Months Ended March 31,
	2022		2021
CARES Act grant recognition (see Note 3)	$	—	$	(32,208)
CARES Act employee retention credit (See Note 3)	—		(334)
Aircraft lease buy-out expense (1)	—		5,664
Other	—		7
Total Special Items, net	$	—	$	(26,871)

~~(1)~~

In the quarter ended March 31, 2021, the Treasury awarded the Company a grant of $32,208 under PSP2. On April 22, 2021, the Company received an additional $4,831 from the Treasury as a top-off grant under PSP2. Further, during the quarter ended June 30, 2021, the Company received a grant of $34,547 under PSP3.

~~(2)~~

~~The CARES Act Employee Retention credit relates to a refundable tax credit against certain employment taxes.~~

	~~(3)~~
(1)			NaN aircraft were purchased in March 2021 that were previously under operating leases. ~~NaN additional aircraft was purchased in April 2021 that was previously under an operating lease.~~ Aircraft lease buy-out expense represents the net costs incurred to terminate the leases on those 65 aircraft. This includes

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~~SUN COUNTRY AIRLINES HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

the associated lease termination costs, write-off of previously capitalized maintenance deposits, and the write-off of over-market ~~liabilities (see Note 6).~~liabilities.

12. COMMITMENTS AND CONTINGENCIES

~~12.~~

~~COMMITMENTS AND CONTINGENCIES~~

The Company has contractual obligations and commitments primarily with regard to lease arrangements, repayment of debt (see Note 7)7), payments under the TRA (see Note 10), and probable future purchases of aircraft.

As of March 31, 2022, the Company had a commitment of approximately $75,000 to purchase 4 aircraft using proceeds from the 2022-1 EETC, which were delivered in the second quarter of 2022. A deposit totaling $7,500 was remitted to the seller during the first quarter of 2022 and has been accounted for within Other Current Assets on the Condensed Consolidated Balance Sheets as of March 31, 2022. The remaining purchase amount was financed using incremental proceeds from the 2022-1 EETC and were remitted to the seller upon delivery of the aircraft.

During the first quarter of 2022, the Company executed an agreement to purchase a flight simulator at a total purchase price of $9,745. An initial installment of $2,934 was remitted to the seller during the first quarter of 2022 and is accounted for within Property & Equipment on the Condensed Consolidated Balance Sheets as of March 31, 2022. The remaining purchase price is to be remitted upon shipment of the simulator.

The Company is subject to various legal proceedings in the normal course of business and expenses legal costs as incurred. Management ~~believes~~does not believe these proceedings will ~~not~~ have a materially adverse effect on the Company.

~~13.~~

~~OPERATING SEGMENTS~~

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker and is used in resource allocation and performance assessments. The Company’s Chief Operating Decision Maker is considered to be the Company’s Chief Executive Officer. The Company’s Chief Operating Decision Maker makes resource allocation decisions to maximize the Company’s consolidated financial results. Substantially all the Company’s tangible assets are located in the U.S. or relate to flight equipment, which is mobile across geographic markets. The Company has 2 operating segments: Passenger and Cargo.

The Company’s Passenger segment has 2 internal passenger groups (Scheduled and Charter), but since they share resources and expenses are combined, they are considered one Passenger operating segment. The Company’s Passenger operations are highly concentrated in the U.S. but include service to many international locations, primarily based on scheduled service to Latin America during the winter season and on military charter services. All goodwill is related to the Passenger Operating Segment.

The Cargo segment began providing air cargo services under the ATSA in May 2020. Fuel consumed in Cargo operations is directly reimbursed by Amazon and therefore aircraft fuel revenue is presented net of such reimbursements on the Condensed Consolidated Statements of Operations. Fuel consumed in Cargo maintenance activities is included in the Cargo segment. Certain operating expenses are directly attributable to this operating segment.

Certain operating expenses are allocated between the operating segments. Non-Fuel operating expenses are allocated based on metrics such as block hours, fleet count and departures, which best align with the nature of the respective expense. CARES Act credits, included in Special Items, net, are allocated based on the respective segment salaries, wages, and benefits.

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SUN COUNTRY AIRLINES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

13. OPERATING SEGMENTS

The following tables present financial information for the Company’s 2 operating segments: Passenger and Cargo. ~~Assets by segment are not reviewed by~~For more information on the ~~Chief Operating Decision Maker and have not been presented herein.~~

Company’s segments, see Note 17

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

Passenger

Cargo

Consolidated

Passenger

Cargo⁽¹⁾

Consolidated
Operating Revenues

$
127,091

$
22,098

$
149,189

$
32,157

$
3,219

$
35,376
Non-Fuel Operating Expenses

92,361

16,401

108,762

63,507

4,907

68,414
Aircraft Fuel

29,657

52

29,709

677

—

677
Special Items, net

(28,784)

(9,736)

(38,520)

(28,111)

(3,370)

(31,481)
Total Operating Expenses

93,234

6,717

99,951

36,073

1,537

37,610
Operating Income (Loss)

$
33,857

$
15,381

49,238

$
(3,916)

$
1,682

(2,234)
Interest Income

9

63
Interest Expense

(6,080)

(5,442)
Other, net

18,054

(325)
Income (Loss) before Income Tax



$
61,221



$
(7,938)

of the Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2021 10-K.


	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
	Passenger		Cargo		Consolidated		Passenger		Cargo⁽¹⁾		Consolidated

														Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
														Passenger		Cargo		Consolidated		Passenger		Cargo		Consolidated
Operating Revenues	$	233,118	$	43,684	$	276,802	$	212,487	$	3,219	$	215,706	Operating Revenues	$	205,472	$	21,053	$	226,525	$	106,026	$	21,585	$	127,611
Non-Fuel Operating Expenses		179,566		34,472		214,038		173,046		4,907		177,953	Non-Fuel Operating Expenses	120,810		19,338		140,148		87,205		18,070		105,275
Aircraft Fuel		53,912		72		53,984		56,238		—		56,238	Aircraft Fuel	64,544		—		64,544		24,253		21		24,274
Special Items, net		(46,991)		(18,401)		(65,392)		(28,111)		(3,370)		(31,481)	Special Items, net	—		—		—		(18,206)		(8,665)		(26,871)
Total Operating Expenses		186,487		16,143		202,630		201,173		1,537		202,710	Total Operating Expenses	185,354		19,338		204,692		93,252		9,426		102,678
Operating Income	$	46,631	$	27,541		74,172	$	11,314	$	1,682		12,996	Operating Income	$	20,118	$	1,715	21,833		$	12,774	$	12,159	24,933
Interest Income						24						314	Interest Income					24						15
Interest Expense						(13,201)						(11,058)	Interest Expense					(8,562)						(7,121)
Other, net						18,049						(494)	Other, net					(6,876)						(5)
Income before Income Tax					$	79,044					$	1,758
Income Before Income Tax													Income Before Income Tax					$	6,419					$	17,822

14. SUBSEQUENT EVENTS

~~(1)~~

~~As air cargo operations commenced in May 2020, there are limited Cargo amounts included in the three and six month periods ended June 30, 2020.~~

~~14.~~

~~SUBSEQUENT EVENTS~~

The Company evaluated subsequent events for the period from the Balance Sheet date through ~~July 28, 2021,~~May 6, 2022, the date that the Condensed Consolidated Financial Statements were available to be issued.

For more information on the subsequent events, see Note 6 "Aircraft" and Note 7 "Debt" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this report.

* * * * * *

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

ITEM 2. ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, the terms ~~"Sun~~“Sun Country,~~" "we," "us"~~” “we,” “us” and ~~"our"~~“our” refer to Sun Country Airlines Holdings, Inc., and its subsidiaries.

Critical Accounting Policies and Estimates

Our unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and the accompanying notes thereto included elsewhere inis this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of ~~consolidated financial statements~~the Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, ~~costs and~~ expenses, and ~~related disclosures. We base our estimates on historical experience and on~~ various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

There have been no material changes to our critical accounting policies and estimates as compared to the ~~critical accounting policies and estimates discussed in our Final Prospectus dated March 16, 2021.~~

2021 10-K.

Recently Adopted Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recently adopted accounting pronouncements.

Forward-Looking Statements

The following discussion and analysis presents factors that had a material effect on our results of operations during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. Also discussed is our financial position as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. This section should be read in conjunction with our unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited ~~consolidated financial statements~~Consolidated Financial Statements and ~~the~~ related notes and ~~the~~ discussion under the heading ~~"Management's~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations" for the fiscal year ended December 31, 2020 included~~Operations” in our ~~Registration Statement on Form S-1 (File No. 333-252858), as amended, including the final prospectus dated March 16,~~ 2021 ~~included therein (the “Final Prospectus”).This~~10-K. This discussion contains forward-looking statements that involve risk, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions and forecasts. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this report titled “Risk Factors” and elsewhere in this report. You should carefully read the ~~“Risk Factors”~~“Risk Factors” included in our 2021 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Business Overview

Sun Country is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter, and cargo businesses. By doing so, we believe we are able to generate

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~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

high growth, high margins and strong cash flows with greater resilience than other passenger airlines. We focus on serving leisure and visiting friends and relatives ~~(“VFR”~~("VFR") passengers and charter customers ~~and~~as well as providing crew, maintenance and insurance (“CMI”) services to Amazon, with flights throughout the United States and to destinations in Canada, Mexico, Central America and the Caribbean. Based in Minnesota, we operate an agile network that includes our scheduled service business, ~~and~~ our synergistic charter, and cargo businesses. We share resources, such as flight crews, across our scheduled service, charter, and cargo business lines with the objective of generating higher returns and margins and mitigating the seasonality of our

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

route network. We optimize capacity allocation by market, time of year, day of week, and line of business by shifting flying to markets during periods of peak demand and away from markets during periods of low demand with far greater frequency than nearly all other large U.S. passenger airlines. We believe our flexible business model generates higher returns and margins while also providing greater resiliency to economic and industry downturns than a traditional scheduled service carrier.

Our scheduled service business combines low costs with a ~~high quality~~high-quality product to generate higher Total Revenue per Available Seat Mile (“TRASM”) than Ultra Low-Cost Carriers (“ULCCs”) while maintaining lower Adjusted Cost per Available Seat Mile (“CASM”) than Low Cost Carriers (“LCCs”), resulting in best-in-class unit profitability. Our business includes many cost characteristics of ULCCs (which ~~include~~includes Allegiant Travel Company, Frontier Airlines and Spirit Airlines), such as an unbundled product (which means we offer a base fare and allow customers to purchase ancillary products and services for an additional fee), point-to-point service and a single-family fleet of Boeing 737-NG aircraft, which allow us to maintain a cost base comparable to these ULCCs. However, we offer a ~~high quality~~high-quality product that we believe is superior to ULCCs and consistent with that of LCCs (which ~~include~~includes Southwest Airlines and JetBlue Airways). For example, our product includes more legroom than ULCCs, complimentary beverages, in-flight entertainment, and in-seat power, none of which are offered by ULCCs.

Our charter business, which is one of the largest narrow body charter operations in the United States, is a key component of our strategy ~~both~~ because it provides both inherent diversification and downside protection ~~as well as~~ because it is synergistic with our other businesses. Our charter business has several favorable characteristics, ~~including~~including: large repeat customers, more stable demand than scheduled service flying, and the ability to pass through certain costs, including fuel. Our diverse charter customer base includes casino operators, the U.S. Department of Defense, college, ~~sports teams~~ and professional sports teams. We are the primary air carrier for the National Collegiate Athletic Association (“NCAA”) Division I National Basketball Tournament (known as “March Madness”), and we flew over 100 college sports teams during 2019, but 2020 was lower due to the pandemic. Our charter business includes ad hoc, repeat, short-term and long-term service contracts with pass through fuel arrangements and annual rate escalations. Most of our business is non-cyclical because the U.S. Department of Defense and sports teams ~~still~~continue to fly during normal economic downturns and our casino contracts are long-term in nature.

On December 13, 2019, we signed the ATSA with Amazon to provide air cargo services. ~~Flying under the ATSA began in May 2020 and, as of the date of this filing, we~~We are currently flying 12 Boeing 737-800 cargo aircraft for Amazon. Our CMI service is asset-light from a Sun Country perspective as Amazon supplies the aircraft and covers many of the operating expenses, including fuel, and provides all cargo loading and unloading services. We are responsible for flying the aircraft under our air carrier certificate, crew, aircraft line maintenance and insurance, all of which allow us to leverage our existing operational expertise from our scheduled service and charter businesses. Our cargo business also enables us to leverage certain assets, capabilities, and fixed costs to enhance profitability and promote growth across our Company.

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~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Operations in Review

We believe a key component of our success is establishing Sun Country as a high growth, low-cost carrier in the United States by attracting customers with low fares and garnering repeat business by delivering a ~~high quality~~high-quality passenger experience, offering state-of-the-art interiors, free streaming of in-flight entertainment to passenger devices, seat ~~recline~~reclining and seat-back power in all of our aircraft.

The COVID-19 pandemic resulted in a dramatic decline in passenger demand across the U.S. airline industry. We ~~have~~ experienced a significant decline in demand related to the COVID-19 pandemic, which ~~has~~ caused a material decline in our ~~2020 and~~ first ~~half~~quarter 2021 ~~revenues~~as compared to pre-pandemic levels, and negatively impacted our financial condition and operating results. ~~With~~

During the ~~expectation that~~first quarter of 2022, we have continued to see recovery in demand from the COVID-19 ~~vaccines continue~~pandemic relative to ~~become more widely distributed~~demand in 2021, ~~we believe~~which may impact the ~~airline industry will continue to rebound~~comparability of results presented. However, the ongoing impact of the COVID-19 pandemic on overall demand for air travel remains uncertain and cannot be predicted

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

at this time. In addition, the impact of COVID-19 vaccine mandates and uncertainties in pilot staffing, as well as higher fuel prices, could impact our business and results of operations in the ~~back half of 2021 and normalize in 2022.~~

On February 10, 2021, Sun Country, Inc., our wholly-owned subsidiary (the “Borrower”), entered into a new Credit Agreement which provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility. We received CARES Act grants totaling $62,312 during 2020, and a CARES Act loan of $45,000 in October 2020. During the quarter ended March 31, 2021, we received a grant of $32,208 under the Payroll Support Program Extension under the Consolidated Appropriations Act of 2021. On April 22, 2021, we received $4,831 from the Treasury as a top-off grant under Payroll Support Program Extension (“PSP2”). Further, during the quarter ended June 30, 2021, the Company received a grant of $34,547 under the American Rescue Plan Act of 2021 (“PSP3”).

near term. While the COVID-19 ~~induced~~pandemic-induced industry downturn has delayed our growth in 2020 and 2021, ~~to date,~~ we believe that our investments have positioned us to profitably grow our business in the long term following a rebound in the U.S. airline industry.

For more information on our business and strategic advantages, see the "Business" and “Management’s Discussion and Analysis of Operations” sections within Part I, Item 1 and Part II, Item 7, respectively, in our 2021 10-K.

Components of Operations

~~Operating Revenues~~

~~Scheduled service~~~~. Scheduled service revenue consists~~For a more detailed discussion on the nature of ~~base fares~~transactions included in the separate line items of our Condensed Consolidated Statement of Operations, see “Management’s Discussion and ~~expired passenger travel credits.~~

~~Charter service~~~~. Charter service revenue consists~~Analysis of ~~revenue earned from~~Operations” in Part II, Item 7 in our ~~charter operations, primarily generated through our service to the U.S. Department of Defense, collegiate and professional sports teams, and casinos.~~

~~Ancillary~~~~. Ancillary revenue consists of revenue generated from air travel-related services such as baggage fees, seat selection and upgrade fees, itinerary service fees and on-board sales.~~

~~Cargo~~~~. Cargo revenue consists of air cargo transportation services under the ATSA with Amazon, primarily related to e-commerce delivery services.~~

~~Other~~. Other revenue consists primarily of revenue from services in connection with our Sun Country Vacations products, including organizing ground services, such as hotel, car and transfers. Other revenue also includes services not directly related to providing passenger services such as the advertising, marketing and brand

2021 10-K.

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SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~elements resulting from our co-branded credit card program. This component~~(Unaudited)

Operating Statistics


	Three Months Ended March 31, 2022 (1)								Three Months Ended March 31, 2021 (1)
	Scheduled Service			Charter		Cargo	Total		Scheduled Service			Charter		Cargo	Total
Departures (2)	6,227			1,620		2,574	10,487		4,323			1,511		2,565	8,452
Block hours (2)	22,433			3,804		7,390	33,805		15,207			3,331		8,242	26,932
Aircraft miles (2)	9,100,714			1,379,448		2,809,782	13,334,873		6,233,184			1,222,451		3,285,525	10,784,543
Available seat miles (ASMs) (thousands) (2)	1,684,532			235,705		—	1,928,149		1,158,012			211,721		—	1,376,796
Total revenue per ASM (TRASM) (cents)	10.25			13.95			10.66		6.93			12.19			7.70
Average passenger aircraft during the period (3)							34.1								31.0
Passenger aircraft at end of period (3)							38								31
Cargo aircraft at end of period							12								12
Average daily aircraft utilization (hours) (3)							8.6								6.7
Average stage length (miles)							1,336								1,278
Revenue passengers carried (4)	922,652								553,032
Revenue passenger miles (RPMs) (thousands) (4)	1,338,459								774,999
Load factor (4)	79.5		%						66.9		%
Average base fare per passenger (4)	$	134.47							$	98.77
Ancillary revenue per passenger (4)	$	48.87							$	42.98
Charter revenue per block hour (4)				$	8,643							$	7,747
Fuel gallons consumed (thousands) (2)	17,401			2,758		—	20,245		11,557			2,357		—	13,993
Fuel cost per gallon, excluding derivatives							$	3.20							$	1.91
Employees at end of period							2,316								1,768
Cost per available seat mile (CASM) (cents) (5)							10.62								7.46
Adjusted CASM (cents) (6)							6.21								6.15

______________________

(1)Certain operating statistics and metrics are not presented as they are not calculable or are not utilized by management.

(2)Total System operating statistics for Departures, Block hours, Aircraft miles, ASMs and Fuel gallons consumed include amounts related to flights operated for maintenance; therefore the Total System amounts are higher than the sum of ~~our revenues also includes revenue from mail on regularly scheduled passenger~~Scheduled Service, Charter Service and Cargo amounts.

(3)Scheduled service and charter service utilize the same fleet of aircraft.

~~Operating Expenses~~

Aircraft ~~Fuel~~~~. Aircraft fuel expense includes jet fuel, federal~~counts and state taxes, other fees and the mark-to-market gains and losses associated with our fuel derivative contracts as we do not apply hedge accounting. Aircraft fuel expense can be volatile, even between quarters, due to price changes and mark-to-market gains and losses in the value of the underlying derivative instruments as crude oil prices and refining margins increase or decrease.

~~Salaries, Wages, and Benefits~~. Salaries, wages, and benefits expense includes salaries, hourly wages, bonuses, equity-based compensation, and profit sharing paid to employees for their services, as well as related expenses associated with medical benefits, employee benefit plans, employer payroll taxes and other employee related costs.

~~Aircraft Rent~~~~. Aircraft rent expense consists of monthly lease charges for aircraft and spare engines under the terms of the related operating leases and is recognized~~utilization metrics are shown on a straight-line basis. Aircraft rent expense also includes supplemental rent, which consists of maintenance reserves paid to aircraft lessors in advance of the performance of significant maintenance activities thatsystem basis only.

(4)Passenger-related statistics and metrics are ~~not probable of being reimbursed to us~~shown only for scheduled service. Charter service revenue is driven by ~~the lessor during the lease term,~~flight statistics.

(5)CASM is a key airline cost metric. CASM is defined as ~~well as lease return~~operating expenses divided by total available seat miles.

(6)Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, ~~which consist of all~~ costs that would be incurred at the return of the aircraft, including costs incurred to return the airframe and engines to the condition required by the lease. Aircraft rent expense is partially offset by the amortization of over-market liabilities related to unfavorable terms of our operating leases and maintenance reserves which existed as of the date of our acquisition by certain investment funds (the “Apollo Funds”) managed by affiliates of Apollo Global Management, Inc., which were established as part of the acquisition. See Note 6 to our Condensed Consolidated Financial Statements for further information on the over-market liabilities.

~~Maintenance~~~~. Maintenance expense includes the cost of all parts, materials and fees for repairs performed by us and our third-party vendors to maintain our fleet. It excludes direct labor cost~~ related to our ~~own mechanics, which~~cargo operations, special items, and certain other costs that are included in salaries, wages, and benefits expense. It also excludes maintenance expenses, which are deferred based on the built-in overhaul method for owned aircraft and subsequently amortized as a component of depreciation and amortization expense. Our maintenance expense is reduced due to recognizing a liability (or contra-asset) that offsets expenses for maintenance events incurred by the new owners of Sun Country but paid for by the previous owners. For more information on these maintenance expense credits, see Note 6unrelated to our ~~Condensed Consolidated Financial Statements.~~

~~Sales and Marketing~~. Sales and marketing expense includes credit card processing fees, travel agent commissions and related global distribution systems fees, advertising, sponsorship and distribution costs, such as the costs of our call centers, and costs associated with our loyalty program. It excludes related salary and wages of personnel, which are included in salaries, wages, and benefits expense.

~~Depreciation and Amortization~~. Depreciation and amortization expense includes depreciation of fixed assets we own and leasehold improvements, amortization of finance leased assets, as well as the amortization of finite-lived intangible assets. It also includes the depreciation of significant maintenance expenses we deferred under the built-in overhaul method for owned and certain finance leased aircraft.

airline operations.

- 2825 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~Ground Handling.~~ ~~Ground handling includes ground services at airports including baggage handling, ticket counter~~(Unaudited)

Results of Operations

For the Three Months Ended March 31, 2022 and ~~other ground services.~~

~~Landing Fees and Airport Rent.~~ ~~Landing fees and airport rent includes aircraft landing fees and charges~~2021


	Three Months Ended March 31,				$ Change		% Change
	2022		2021
Operating Revenues:
Scheduled Service	$	124,068	$	54,620	$	69,448	127	%
Charter Service	32,879		25,805		7,074		27	%
Ancillary	45,086		23,770		21,316		90	%
Passenger	202,033		104,195		97,838		94	%
Cargo	21,053		21,585		(532)		(2)	%
Other	3,439		1,831		1,608		88	%
Total Operating Revenues	226,525		127,611		98,914		78	%

Operating Expenses:
Aircraft Fuel	64,544		24,274		40,270		166	%
Salaries, Wages, and Benefits	59,617		44,075		15,542		35	%
Aircraft Rent	3,186		5,599		(2,413)		(43)	%
Maintenance	11,995		9,210		2,785		30	%
Sales and Marketing	8,628		5,110		3,518		69	%
Depreciation and Amortization	15,328		12,615		2,713		22	%
Ground Handling	7,958		5,230		2,728		52	%
Landing Fees and Airport Rent	10,286		8,785		1,501		17	%
Special Items, net	—		(26,871)		26,871		(100)	%
Other Operating, net	23,150		14,651		8,499		58	%
Total Operating Expenses	204,692		102,678		102,014		99	%
Operating Income	21,833		24,933		(3,100)		(12)	%

Non-operating Income (Expense):
Interest Income	24		15		9		60	%
Interest Expense	(8,562)		(7,121)		(1,441)		20	%
Other, net	(6,876)		(5)		(6,871)		NM
Total Non-operating Income (Expense), net	(15,414)		(7,111)		(8,303)		117	%

Income Before Income Tax	6,419		17,822		(11,403)		(64)	%
Income Tax Expense	2,782		5,406		(2,624)		(49)	%
Net Income	$	3,637	$	12,416	$	(8,779)	(71)	%


(1)			"NM" stands for not meaningful

Total Operating Revenues increased $98,914, or 78%, to $226,525 for the ~~use of airport facilities.~~

~~Special Items, net.~~ ~~Special items, net reflects expenses, or credits to expense, that are not representative of our ongoing costs~~three months ended March 31, 2022 from $127,611 for the ~~period presented and may vary from period to period~~three months ended March 31, 2021. The increase was largely driven by an increase in ~~nature, frequency and amount.~~

~~Other Operating.~~ Other operating expenses include crew and other employee travel, interrupted trip expenses, information technology, property taxes and insurance, including hull-liability insurance, supplies, legal and other professional fees, facilities and all other administrative and operational overhead expenses.

~~Non-operating Income (Expense)~~

~~Interest Income~~. Interest income includes interest on our cash and equivalent and investment balances. Interest income is generally immaterial to our results of operations, reflecting the current low interest rate environment and our unrestricted cash balances.

~~Interest Expense~~~~. Interest expense includes interest and fees related to our outstanding debt and our finance/capital leases, as well as the amortization of debt financing costs.~~

~~Other, net~~. Other expenses include activities not classified in any other area of the Condensed Consolidated Statements of Operations, such as gain or loss on sale or retirement of assets and certain consulting expenses. The change in the TRA liability is also included here.

~~Income Taxes~~

We account for income taxes using the asset and liability method. We record a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We record deferred taxes based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. In assessing our ability to utilize our deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will be realized. We consider all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis.

~~- 29 -~~

- 26 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~Operating Statistics~~

~~Key Operating Statistics and Metrics~~

Three Months Ended June 30, 2021 (1)

Three Months Ended June 30, 2020 (1)

Scheduled

Scheduled


Service

Charter

Cargo

Total

Service

Charter

Cargo

Total
Departures ⁽²⁾

4,921

1,727

2,752

9,445

1,376

520

413

2,324
Block hours ⁽²⁾

15,900

3,656

8,198

27,874

4,177

1,321

1,076

6,604
Aircraft miles ⁽²⁾

6,478,328

1,360,043

3,222,967

11,098,716

1,710,153

526,261

454,980

2,700,328
Available seat miles (ASMs) (thousands) ⁽²⁾

1,198,768

237,723

—

1,442,744

318,049

97,827

—

417,538
Total revenue per ASM (TRASM) (cents) ⁽³⁾







8.81





7.70
Average passenger aircraft during the period ⁽³⁾







31.0





31.0
Passenger aircraft at end of period ⁽³⁾







33





31
Cargo aircraft at end of period







12





7
Average daily aircraft utilization (hours) ⁽³⁾







7.0





2.0
Average stage length (miles)







1,179





1,180
Revenue passengers carried ⁽⁴⁾

700,019







121,922




Revenue passenger miles (RPMs) (thousands) ⁽⁴⁾

919,034







153,098




Passenger revenue per ASM (PRASM) (cents) ⁽⁴⁾

5.60







5.62




Load factor ⁽⁴⁾

76.7
%







48.1
%




Average base fare per passenger ⁽⁴⁾

$
95.81







$
146.66




Ancillary revenue per passenger ⁽⁴⁾

$
41.66







$
40.74




Charter revenue per block hour



$
7,904







$
6,426


Fuel gallons consumed (thousands) ⁽²⁾

12,267

2,622

—

14,955

3,028

946

—

3,991
Fuel cost per gallon, excluding derivatives







$
2.07





$
1.17
Employees at end of period







1,815





1,660
Cost per available seat mile (CASM) (cents) ⁽⁵⁾





6.93



9.01
Adjusted CASM (cents) ⁽⁶⁾





6.35



14.57
(Unaudited)

~~(1)~~	~~Certain operating statistics and metrics are not presented as they are not calculable or are not utilized by management.~~

~~(2)~~

Total System operating statistics for Departures, Block hours, Aircraft miles, ASMs and Fuel gallons consumed include amounts related to flights operated for maintenance; therefore the Total System amounts are higher than the sum of Scheduled Service, Charter Service and Cargo amounts.

demand for passenger service during 2022 as compared to 2021, which was significantly impacted by a decline in passenger demand due to the COVID-19 pandemic.

Scheduled Service.

~~(3)~~

Scheduled ~~service and charter service utilize the same fleet of aircraft. Aircraft counts and utilization metrics are shown on a system basis only.~~

~~(4)~~

~~Passenger-related statistics and metrics are shown only for scheduled service. Charter~~ service revenue ~~is driven by flight statistics.~~

~~(5)~~

~~CASM is a key airline cost metric. CASM is defined as operating expenses divided by total available seat miles.~~

~~(6)~~

~~Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, special items, and certain other costs.~~

~~- 30 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Key Operating Statistics and Metrics~~

Six Months Ended June 30, 2021 (1)

Six Months Ended June 30, 2020 (1)

Scheduled

Scheduled


Service

Charter

Cargo

Total

Service

Charter

Cargo

Total
Departures ⁽²⁾

9,244

3,238

5,317

17,897

7,182

2,156

413

9,847
Block hours ⁽²⁾

31,107

6,987

16,440

54,806

24,419

4,933

1,076

30,691
Aircraft miles ⁽²⁾

12,711,512

2,582,494

6,508,492

21,883,259

9,867,739

1,837,794

454,980

12,234,888
Available seat miles (ASMs) (thousands) ⁽²⁾

2,356,780

449,444

—

2,819,540

1,826,245

334,690

—

2,174,605
Total revenue per ASM (TRASM) (cents) ⁽³⁾







8.27





9.77
Average passenger aircraft during the period ⁽³⁾







31.0





31.5
Passenger aircraft at end of period ⁽³⁾







33





31
Cargo aircraft at end of period







12





7
Average daily aircraft utilization (hours) ⁽³⁾







6.8





5.2
Average stage length (miles)







1,225





1,254
Revenue passengers carried ⁽⁴⁾

1,253,051







935,860




Revenue passenger miles (RPMs) (thousands) ⁽⁴⁾

1,694,033







1,303,004




Passenger revenue per ASM (PRASM) (cents) ⁽⁴⁾

5.16







7.23




Load factor ⁽⁴⁾

71.9
%







71.3
%




Average base fare per passenger ⁽⁴⁾

$
97.12







$
141.16




Ancillary revenue per passenger ⁽⁴⁾

$
42.24







$
42.74




Charter revenue per block hour



$
7,829







$
7,646


Fuel gallons consumed (thousands) ⁽²⁾

23,824

4,979

—

28,948

18,779

3,646

—

22,562
Fuel cost per gallon, excluding derivatives







$
1.99





$
1.71
Employees at end of period







1,815





1,660
Cost per available seat mile (CASM) (cents) ⁽⁵⁾





7.19



9.32
Adjusted CASM (cents) ⁽⁶⁾





6.25



7.81

~~(1)~~

~~Certain operating statistics and metrics are not presented as they are not calculable or are not utilized by management.~~

~~(2)~~

~~(3)~~

~~Scheduled service and charter service utilize the same fleet of aircraft. Aircraft counts and utilization metrics are shown on a system basis only.~~

~~(4)~~

~~Passenger-related statistics and metrics are shown only for scheduled service. Charter service revenue is driven by flight statistics.~~

~~(5)~~

~~CASM is a key airline cost metric. CASM is defined as operating expenses divided by total available seat miles.~~

~~(6)~~

~~Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, special items, and certain other costs.~~

~~- 31 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Statement of Operations Analysis~~

~~Results of Operations~~

~~For the Three Months Ended June 30, 2021 and 2020~~

Three Months Ended June 30,

$

%


2021

2020

Change

Change

Operating Revenues:

Scheduled Service

$
67,073

$
17,882

$
49,191

275
%
Charter Service

28,898

8,491

20,407

240
%
Ancillary

29,159

4,968

24,191

487
%
Passenger

125,130

31,341

93,789

299
%
Cargo

22,098

3,219

18,879

586
%
Other

1,961

816

1,145

140
%
Total Operating Revenue

149,189

35,376

113,813

322
%

Operating Expenses:









Aircraft Fuel

29,709

677

29,032

4,288
%
Salaries, Wages, and Benefits

42,316

32,484

9,832

30
%
Aircraft Rent

3,815

5,934

(2,119)

(36)
%
Maintenance

11,300

2,426

8,874

366
%
Sales and Marketing

5,822

1,630

4,192

257
%
Depreciation and Amortization

13,460

12,175

1,285

11
%
Ground Handling

6,551

1,614

4,937

306
%
Landing Fees and Airport Rent

8,752

2,667

6,085

228
%
Special Items, net

(38,520)

(31,481)

(7,039)

22
%
Other Operating, net

16,746

9,484

7,262

77
%
Total Operating Expenses

99,951

37,610

62,341

166
%
Operating Income (Loss)

49,238

(2,234)

51,472

(2,304)
%

Non-operating Income (Expense):









Interest Income

9

63

(54)

(86)
%
Interest Expense

(6,080)

(5,442)

(638)

12
%
Other, net

18,054

(325)

18,379

(5,655)
%
Total Non-operating Income (Expense), net

11,983

(5,704)

17,687

(310)
%

Income (Loss) before Income Tax

61,221

(7,938)

69,159

(871)
%
Income Tax Expense (Benefit)

9,468

(1,898)

11,366

(599)
%
Net Income (Loss)

$
51,753

$
(6,040)

$
57,793

(957)
%

~~Total operating revenues~~ increased by ~~$113,813,~~$69,448, or ~~322%~~127%, to ~~$149,189~~$124,068 for the three months ended ~~June 30, 2021~~March 31, 2022 from ~~$35,376~~$54,620 for the three months ended ~~June 30, 2020. The increase is due to a significant decline in passenger service in 2020 as a result of the COVID-19 pandemic.~~

~~Scheduled Service.~~ ~~Scheduled service revenue increased by $49,191, or 275%, to $67,073 for the three months ended June 30, 2021 from $17,882 for the three months ended June 30, 2020. The increase in~~

~~- 32 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

scheduled service revenue was largely driven by a decline in passenger service demand for the three months ended June 30, 2020 due to government travel restrictions and quarantine requirements related to the COVID- 19 pandemic. Departures increased 258% in the second quarter of 2021, as compared to the second quarter of 2020.

March 31, 2021. The table below presents select operating data for scheduled service, expressed as quarter-over-quarter changes:

Three Months Ended June 30,

Increase

%


2021

2020

(Decrease)

Change

Passengers

700,019

121,922

578,097

474
%
Average base fare per passenger

$
95.81

$
146.66

(50.85)

(35)
%
RPMs (thousands)

919,034

153,098

765,936

500
%
ASMs (thousands)

1,198,768

318,049

880,719

277
%
PRASM (cents)

5.60

5.62

(0.02)

(0)
%
Passenger load factor

76.7
%

48.1
%
28.6 pts

na


	Three Months Ended March 31,						Change			% Change
	2022			2021
Departures	6,227			4,323			1,904			44	%
Passengers	922,652			553,032			369,620			67	%
Average base fare per passenger	$	134.47		$	98.77		$	35.70		36	%
RPMs (thousands)	1,338,459			774,999			563,460			73	%
ASMs (thousands)	1,684,532			1,158,012			526,520			45	%
TRASM (cents)	10.25			6.93			3.32			48	%
Passenger load factor	79.5		%	66.9		%	12.6		pts	N/A

The ~~474%~~significant quarter-over-quarter increases in all scheduled service operating data was the result of the continued recovery in demand from the COVID-19 pandemic in the first quarter of 2022 relative to the same period in 2021. The quarter-over-quarter increase in demand is demonstrated by a 44% increase in departures, a 67% increase in passengers, and a 36% increase in the number of scheduled service passengers in the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, was primarily due to COVID-19 pandemic related demand reductions in the prior year period. For the three months ended June 30, 2021, our average base fare ~~was $95.81, compared~~per passenger.

Charter Service. Charter service revenue increased $7,074, or 27%, to ~~$146.66~~$32,879 for the three months ended ~~June 30, 2020. The net change is the result of the impact of indirect revenue related transactions (such as deferred revenue breakage) spread over significantly fewer passengers during 2020.~~

~~Charter Service.~~ ~~Charter service revenue increased by $20,407, or 240%, to $28,898~~March 31, 2022, from $25,805 for the three months ended June 30, 2021, from $8,491 for the three months ended June 30, 2020. The COVID-19 pandemic drove a decrease in our 2020 quarter casino charter service revenue. There was a 177% increase in block hours for the 2021 quarter as compared to the 2020 quarter.March 31, 2021. Charter revenue per block hour was ~~$7,904~~$8,643 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$6,426~~$7,747 for the three months ended ~~June 30, 2020,~~March 31, 2021, for an increase of ~~23%~~12%. ~~This~~The increase in Charter service revenue ~~per~~was driven by the increase in rates and a 14% increase in Charter block ~~hour increase is~~hours due to the ~~ongoing~~continued recovery from the ~~impacts~~COVID-19 pandemic and a new charter agreement with Caesars Entertainment, Inc. that began operations in the first quarter of ~~COVID-19.~~

~~Ancillary.~~2022. Rates in 2021 suffered from significant competitive pressure because other carriers had excess aircraft, crew, and resources to operate charter capacity.

Ancillary. Ancillary revenue increased by ~~$24,191,~~$21,316, or ~~487%~~90%, to ~~$29,159~~$45,086 for the three months ended ~~June 30, 2021,~~March 31, 2022, from ~~$4,968~~$23,770 for the three months ended ~~June 30, 2020.~~March 31, 2021. The ~~number of~~67% increase in scheduled ~~service~~ passengers ~~was 700 thousand in~~during the three months ended June 30, 2021, up 474% from 122 thousand in the three months ended June 30, 2020. The decline in passenger demand in 2020 due to the COVID-19 pandemic drove a decrease in capacity, whichperiod resulted in ~~a corresponding decline in~~greater sales of air travel-related services, such asas; baggage fees, seat selection and upgrade fees, and on-board sales. Ancillary revenue was ~~$41.66~~$48.87 per passenger in the three months ended ~~June 30, 2021,~~March 31, 2022, up $5.89, or 14%, from ~~$40.74 per passenger in~~ the three months ended ~~June 30, 2020.~~

~~Cargo.~~March 31, 2021. The increase in ancillary revenue per passenger was due to increased demand for air-travel related services.

Cargo. Revenue from cargo services ~~was $22,098~~slightly decreased by $532, or 2%, to $21,053 for the three months ended ~~June 30, 2021, with $3,219 comparative revenue~~March 31, 2022, from $21,585 for the three months ended ~~June 30, 2020. All~~March 31, 2021. The number of ~~our cargo service revenue related~~departures were materially consistent quarter-over-quarter; however, block hours declined 10% over the same period due to the ~~air cargo transportation services under the ATSA with Amazon that commenced in May 2020. For the three months ended June 30, 2021, departures increased to 2,752, as compared to 413~~timing of planned heavy maintenance events.

Other. Other revenue was $3,439 for the three months ended ~~June 30, 2020.~~

~~- 33 -~~

March 31, 2022, as compared to $1,831 for the three months ended March 31, 2021. The increase was primarily driven by an increase in revenue from Sun Country Vacations as a result of higher quarter-over-quarter bookings due to more scheduled service passengers.

- 27 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~Other.~~ Other revenue was $1,961 for the three months ended June 30, 2021 compared to $816 for the three months ended June 30, 2020. This was mainly the result of an increase in revenue from Sun Country Vacations due to improved bookings and an increase in mail revenue due to increased departures.

(Unaudited)

Operating Expenses

Aircraft Fuel. We believe Aircraft Fuel expenses, excluding derivatives and other items, is the best measure of the effect of fuel prices on our business as it consists solely of items associated with fuel for our operations and is consistent with how management analyzes our operating performance. This measure is defined as GAAP Aircraft Fuel expense, ~~was $29,709 for~~excluding gains related to fuel hedge derivative contracts and other items not individually significant.

The primary components of Aircraft Fuel expense are shown in the ~~three months ended June 30, 2021, as compared to $677 for the three months ended June 30, 2020.~~ following table:


	Three Months Ended March 31,				Change		% Change
	2022		2021
Total Aircraft Fuel Expenses	$	64,544	$	24,274	$	40,270	166	%
Exclude: Fuel Derivative Gains	—		2,386		(2,386)		(100)	%
Other Excluded Items	318		66		252		382	%
Aircraft Fuel Expenses, Excluding Derivatives and Other Items	$	64,862	$	26,726	$	38,136	143	%
Fuel Gallons Consumed (thousands)	20,245		13,993		6,252		45	%
Fuel Cost per Gallon, Excluding Derivatives and Other Items	$	3.20	$	1.91	$	1.29	68	%

The increase was mainly driven by the 68% increase in the average price per gallon of fuel, and a ~~275%~~45% increase in fuel gallons consumed resulting from a recovery in demand as demonstrated by a ~~281%~~42% increase in passenger service block hours. The increase was also partly driven by a $2,865 lower net gain from our fuel derivative contracts, consisting of a $1,213 gain in the three months ended June 30, 2021, compared to a $4,078 gain in the three months ended June 30, 2020. There was also a 77% increase in the average price per gallon of fuel.

Salaries, Wages, and Benefits. Salaries, wages, and benefits expense increased ~~by $9,832,~~$15,542, or ~~30%~~35%, to ~~$42,316~~$59,617 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$32,484~~$44,075 for the three months ended ~~June 30, 2020. A portion~~March 31, 2021. The increase was driven by the new Collective Bargaining Agreement ("CBA") for our pilots, which went into effect in the beginning of 2022, and an increase in passenger service related block hours. The employee headcount as of March 31, 2022 was 2,316, as compared to 1,768 as of March 31, 2021, for an increase of 548, or 31%. The increase in employee headcount was to support all lines of business during the ongoing recovery from the impacts of the ~~increase was due~~COVID-19 pandemic.

Aircraft Rent. Aircraft Rent expense decreased $2,413, or 43%, to ~~insourcing MSP ground handling. Our cargo segment was responsible for $10,159 of the consolidated salaries, wages, and benefits expense~~$3,186 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to a $3,367 in the three months ended June 30, 2020. The $6,792 increase over prior year quarter is driven by additional headcount to support the operations and aircraft associated with the ATSA with Amazon, which commenced in May 2020.

~~Aircraft Rent~~~~. Aircraft rent expense decreased by $2,119, or 36%, to $3,815~~$5,599 for the three months ended ~~June 30, 2021, as compared to $5,934 for the three months ended June 30, 2020.~~March 31, 2021. Aircraft ~~rent~~Rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases ~~(for which~~(the expense is recorded within ~~aircraft rent)~~Aircraft Rent) to owned ~~aircraft.~~aircraft or finance leases (expense is recorded through Depreciation and Amortization and Interest Expense). Specifically, in ~~late~~the first ~~quarter 2021 to early second quarter, we purchased six aircraft previously under operating leases. During the~~ three months ~~ended June 30, 2020, one~~of 2022, we executed lease amendments which modified two aircraft ~~was purchased that was previously under an~~from operating ~~lease.~~leases to finance leases. For the three months ended ~~June 30,~~March 31, 2022 and 2021, there were four and ~~2020, there was an average of~~ seven ~~and twelve~~ aircraft under operating leases, ~~respectively.~~

respectively.

Maintenance. Maintenance materials and repair expense increased ~~by $8,874,~~$2,785, or ~~366%~~30%, to ~~$11,300~~$11,995 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$2,426~~$9,210 for the three months ended ~~June 30, 2020.~~March 31, 2021. The increase in maintenance expense was primarily driven by increased departures and block hours across the Passenger segment. Additionally, the cost of heavy checks increased ~~$2,583,~~quarter-over-quarter due to ~~six heavy checks performed in~~ the ~~three months ended June 30, 2021, as compared~~timing of required maintenance events.

Sales and Marketing. Sales and Marketing expense increased $3,518, or 69%, to ~~one~~$8,628 for the three months ended ~~June 30, 2020. There was a $1,662 increase in costs driven by increased departures. Our cargo segment was responsible for $2,662 of the consolidated maintenance expense~~March 31, 2022, as compared to $5,110 for the three months ended June 30, 2021, as compared to $509 for the prior year quarter since cargo segment shipments did not begin until May 2020. The cargo segment expense primarily relates to line maintenance, since heavy maintenance is reimbursed under the ATSA.

~~Sales and Marketing~~~~. Sales and marketing expense increased by $4,192, or 257%, to $5,822 for the three months ended June 30, 2021, as compared to $1,630 for the three months ended June 30, 2020. The passenger~~March 31, 2021. Passenger revenue increase between these two periods was 299%, and was primarily responsible for a $1,666 increase in credit card processing fees and $1,567 in global distribution system fees. The remaining increase primarily relates to higher advertising costs and travel agent commissions. Also, the 2020 costs were unusually low due to the COVID-19 pandemic.

~~- 34 -~~

- 28 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

increased 94% between these two periods leading to a $2,808 increase in credit card processing and global distribution system fees.

Depreciation and Amortization. Depreciation and ~~amortization~~Amortization expense increased ~~by $1,285,~~$2,713, or ~~11%~~22%, to ~~$13,460~~$15,328 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$12,175~~$12,615 for the three months ended ~~June 30, 2020.~~March 31, 2021. The increase was primarily due to the impact of a change in the composition of our aircraft fleet to an increased number of owned aircraft ~~in connection with our 2019-1 EETC~~ and aircraft under finance leases ~~(for which~~(the expense is recorded ~~within depreciation~~as Depreciation and ~~amortization)~~Amortization and Interest Expense). For the three months ended ~~June 30,~~March 31, 2022 and 2021, there were 22 and ~~2020, there was an average of 20 and 11~~19 owned aircraft and 12 and five finance leases, respectively.

Ground Handling. Ground ~~handling~~Handling expense increased ~~by $4,937,~~$2,728, or ~~306%~~52%, to ~~$6,551~~$7,958 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$1,614~~$5,230 for the three months ended ~~June 30, 2020.~~March 31, 2021. The increase was primarily due to the ~~258%~~44% increase in scheduled departures during the same time periods. ~~Additionally, a minor increase in rates in the 2021 quarter as compared to the 2020 quarter contributed $302 to the increase.~~

Landing Fees and Airport Rent. Landing ~~fees~~Fees and ~~airport rent~~Airport Rent increased ~~by $6,085,~~$1,501, or ~~228%~~17%, to ~~$8,752~~$10,286 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$2,667~~$8,785 for the three months ended ~~June 30, 2020.~~March 31, 2021. The increase was primarily driven by the ~~258%~~44% increase in scheduled departures for the three months ended June 30, 2021. During the three months ended June 30, 2021, we received a $1,416 MSP terminal user fee airline relief credit, which partially offset the increase. Additionally, a minor decrease in rates in the 2021 quarter as compared to the 2020 quarter offset $570 against the increase.

March 31, 2022.

Special Items, net. There were no Special ~~items, net was a contra-expense of $38,520~~Items recorded for the three months ended ~~June 30, 2021 and $31,481~~March 31, 2022. Special Items had a net benefit of $26,871 for the three months ended ~~June 30, 2020. For~~March 31, 2021. The net benefit was primarily driven by the three months ended June 30, 2021, Special items, net included $39,378 of contra-expense related to funds received under PSP2 and PSP3 of the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits, and $446 in refundable tax credits related to employee retention under the CARES Act. This was partially offset by a $1,299 net charge relating to the purchase of an aircraft during the quarter that was previously under an operating lease. For the three months ended June 30, 2020, Special items, net included $31,516 of contra-expense related to fundspayroll support received under the CARES Act, ~~to be used exclusively for~~of which the ~~continuation of payments for salaries, wages, and benefits. Our cargo~~Cargo segment was ~~responsible for $9,736 of the consolidated income from Special items, net for the three months ended June 30, 2021 and $3,370 for the three months ended June 30, 2020.~~allocated $8,665. These credits ~~were driven by allocated amounts received under~~within the ~~CARES Act,~~Cargo segment results were based on the respective segment salaries, wages, and benefits.

For more information on Special Items, see Note 11 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Other Operating, net. Other operating, net expense increased ~~by $7,262,~~$8,499, or ~~77%~~58%, to ~~$16,746~~$23,150 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$9,484~~$14,651 for the three months ended ~~June 30, 2020,~~March 31, 2021, mainly due to increased ~~departures. The passenger~~departures within the Passenger segment, ~~increase of $4,803 was primarily driven by the higher level of operations~~ which resulted in higher crew and other employee travel costs, catering expenses, and other operational overhead costs. ~~Our cargo segment was responsible for $3,426 and $967 of our consolidated other operating, net~~

Non-operating Income (Expense)

Interest Expense. Interest expense increased $1,441, or 20%, to $8,562 for the three months ended ~~June 30, 2021 and 2020, respectively, driven by overhead expenses~~March 31, 2022, as ~~well as crew and employee travel costs.~~

~~Non-operating Income (Expense)~~

~~Interest Expense~~~~. Interest expense increased by $638, or 12%,~~compared to ~~$6,080~~$7,121 for the three months ended ~~June 30, 2021, as compared to $5,442 for the three months ended June 30, 2020.~~March 31, 2021. The increase was primarily due to ~~debt issued~~a larger mix of owned aircraft and aircraft accounted for as finance leases during the three months ended March 31, 2022.

Other, net. Other, net for the ~~acquisition~~three months ended March 31, 2022 was a net expense of ~~new aircraft and spare engines, including new debt incurred~~$6,876 primarily due to the $6,800 adjustment to increase the estimated TRA liability, see N ote 10 of the Condensed Consolidated Financial Statements included in ~~connection with~~Part I, Item I of this report. Other, net for the ~~2019-1 EETC, and~~three months ended March 31, 2021, was not significant.

Income Tax Expense. The Company's effective tax rate for the ~~Delayed Draw Term Loan Facility.~~

~~- 35 -~~

three months ended March 31, 2022 was 43.3% compared to 30.3% for the three months ended March 31, 2021. The increase in the effective tax rate was primarily due to the non-deductible expense related to the adjustment of the TRA liability, partially offset by stock compensation benefits.

- 29 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

~~Other, net~~~~. Other, net for~~(Unaudited)

Segments

For the three months ended June 30, 2021 was a net income of $18,054 primarily due to a credit of $18,700 for the adjustment of our Tax Receivable Agreement liability. The decrease in the TRA liability was mainly due to the receipt of the PSP3 grant of $34,547, which extended the time period in which distributions made to shareholders are restricted fromThree Months Ended March 31, 2022 ~~to September 30, 2022,~~ and ~~also resulted in an increase in forecasted~~ 2021 ~~pre-tax income.~~

~~Results of Operations~~

~~For the Six Months Ended June 30, 2021 and 2020~~

Six Months Ended June 30,

$

%


2021

2020

Change

Change

Operating Revenues:

Scheduled Service

$
121,693

$
132,110

$
(10,417)

(8)
%
Charter Service

54,703

37,718

16,985

45
%
Ancillary

52,929

39,999

12,930

32
%
Passenger

229,325

209,827

19,498

9
%
Cargo

43,684

3,219

40,465

1,257
%
Other

3,793

2,660

1,133

43
%
Total Operating Revenue

276,802

215,706

61,096

28
%

Operating Expenses:









Aircraft Fuel

53,984

56,238

(2,254)

(4)
%
Salaries, Wages, and Benefits

86,392

70,575

15,817

22
%
Aircraft Rent

9,414

16,966

(7,552)

(45)
%
Maintenance

20,510

8,904

11,606

130
%
Sales and Marketing

10,932

10,202

730

7
%
Depreciation and Amortization

26,075

22,702

3,373

15
%
Ground Handling

11,781

10,906

875

8
%
Landing Fees and Airport Rent

17,537

13,781

3,756

27
%
Special Items, net

(65,392)

(31,481)

(33,911)

108
%
Other Operating, net

31,397

23,917

7,480

31
%
Total Operating Expenses

202,630

202,710

(80)

(0)
%
Operating Income

74,172

12,996

61,176

471
%

Non-operating Income (Expense):









Interest Income

24

314

(290)

(92)
%
Interest Expense

(13,201)

(11,058)

(2,143)

19
%
Other, net

18,049

(494)

18,543

(3,754)
%
Total Non-operating Income (Expense), net

4,872

(11,238)

16,110

(143)
%

Income before Income Tax

79,044

1,758

77,286

4,396
%
Income Tax Expense

14,875

547

14,328

2,619
%
Net Income

$
64,169

$
1,211

$
62,958

5,199
%

~~- 36 -~~


	Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
	Passenger		Cargo		Total		Passenger		Cargo		Total
Operating Revenues	$	205,472	$	21,053	$	226,525	$	106,026	$	21,585	$	127,611

Operating Expenses:
Aircraft Fuel	64,544		—		64,544		24,253		21		24,274
Salaries, Wages, and Benefits	47,531		12,086		59,617		32,839		11,236		44,075
Aircraft Rent	3,186		—		3,186		5,599		—		5,599
Maintenance	9,103		2,892		11,995		6,603		2,607		9,210
Sales and Marketing	8,628		—		8,628		5,110		—		5,110
Depreciation and Amortization	15,302		26		15,328		12,589		26		12,615
Ground Handling	7,954		4		7,958		5,230		—		5,230
Landing Fees and Airport Rent	10,171		115		10,286		8,655		130		8,785
Special Items, net	—		—		—		(18,206)		(8,665)		(26,871)
Other Operating, net	18,935		4,215		23,150		10,580		4,071		14,651
Total Operating Expenses	185,354		19,338		204,692		93,252		9,426		102,678
Operating Income	$	20,118	$	1,715	$	21,833	$	12,774	$	12,159	$	24,933

Adjustment for Special Items, net	—		—		—		(18,206)		(8,665)		(26,871)

Operating Income, Excluding Special Items, net	$	20,118	$	1,715	$	21,833	$	(5,432)	$	3,494	$	(1,938)

Operating Margin %, Excluding Special Items, net	10%		8%		10%		(5)%		16%		(2)%

~~Table of Contents~~Passenger.

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Total~~ Passenger operating ~~revenues~~income increased by ~~$61,096, or 28%,~~$7,344 to $276,802 for the six months ended June 30, 2021, from $215,706 for the six months ended June 30, 2020. The increase is primarily due to $40,465 increase in cargo revenue and a $16,985 increase in charter service revenue.

~~Scheduled Service.~~ Scheduled service revenue decreased by $10,417, or 8%, to $121,693 for the six months ended June 30, 2021, from $132,110 for the six months ended June 30, 2020. The decrease in scheduled service revenue was driven by a decline in passenger demand due to government travel restrictions and quarantine requirements related to the COVID-19 pandemic.

~~The table below presents select operating data for scheduled service:~~

Six Months Ended June 30,

Increase

%


2021

2020

(Decrease)

Change

Passengers

1,253,051

935,860

317,191

34
%
Average base fare per passenger

$
97.12

$
141.16

(44.04)

(31)
%
RPMs (thousands)

1,694,033

1,303,004

391,029

30
%
ASMs (thousands)

2,356,780

1,826,245

530,535

29
%
PRASM (cents)

5.16

7.23

(2.07)

(29)
%
Passenger load factor

71.9
%

71.3
%
0.6
pts
na

The 34% increase in the number of scheduled service passengers in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, was primarily due to 2020 COVID-19 pandemic related demand reductions. For the six months ended June 30, 2021, our average base fare was $97.12, compared to $141.16 for the six months ended June 30, 2020. The net change is the result of the impact of indirect revenue related transactions (such as deferred revenue breakage) spread over significantly fewer passengers during 2020.

~~Charter Service.~~ Charter service revenue increased by $16,985, or 45%, to $54,703 for the six months ended June 30, 2021, from $37,718 for the six months ended June 30, 2020. There was a 42% increase in charter service block hours for the six months ended June 30, 2021 vs 2020. This block hour increase is due to the ongoing recovery from the impacts of COVID-19. Charter revenue per block hour was $7,829 for the six months ended June 30, 2021, as compared to $7,646 for the six months ended June 30, 2020, for an increase of 2%.

~~Ancillary.~~ Ancillary revenue increased by $12,930, or 32%, to $52,929 for the six months ended June 30, 2021, from $39,999 for the six months ended June 30, 2020. The number of scheduled service passengers was 1.3 million in the six months ended June 30, 2021, up 34% from 936 thousand in the six months ended June 30, 2020. There was a small decline in ancillary revenue per passenger due to reductions in sales of air travel-related services such as baggage fees, seat selection and upgrade fees, and on-board sales. Specifically, ancillary revenue was $42.24 per passenger in the six months ended June 30, 2021, down from $42.74 per passenger in the six months ended June 30, 2020.

~~Cargo.~~ Revenue from cargo services was $43,684 for the six months ended June 30, 2021, compared with $3,219 for the six months ended June 30, 2020. All of our 2021 and 2020 cargo service revenue is related to flights operated under the ATSA with Amazon. Cargo service began in May of 2020, so the increase is due to the year-over-year ramp up of operations . Cargo service departures were 5,317 in the six months ended June 30, 2021, as compared to 413 for the six months ended June 30, 2020.

~~- 37 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Other.~~ Other revenue was $3,793 for the six months ended June 30, 2021 compared to $2,660 for the six months ended June 30, 2020. This was mainly the result of an increase in revenue from Sun Country Vacations due to improved bookings and an increase in mail revenue due to increased departures.

~~Operating Expenses~~

~~Aircraft Fuel~~. Aircraft fuel expense decreased by $2,254, or 4%, to $53,984 for the six months ended June 30, 2021, as compared to $56,238 for the six months ended June 30, 2020. The decrease was largely driven by a $21,556 change in the mark-to-market gains/losses from our fuel derivative contracts, consisting of a $3,599 gain in the six months ended June 30, 2021 compared to a $17,957 loss in the six months ended June 30, 2020. Offsetting this derivative gain 2021 vs 2020 was a 28% increase in fuel gallons consumed, due to our increased level of operations as demonstrated by a 27% increase in passenger service block hours and a 17 % increase in the average price per gallon of fuel.

~~Salaries~~, ~~Wages, and Benefits~~. Salaries, wages, and benefits expense increased by $15,817, or 22%, to $86,392 for the six months ended June 30, 2021, as compared to $70,575 for the six months ended June 30, 2020. Approximately $2,100 of the increase relates to insourcing MSP ground handling operations starting in April 2020. The increase was also the result of increased stock-compensation expense. Our IPO made it probable that a portion of our performance-based stock options would vest over a specific timeframe. Therefore, we expensed $2,496 related to these options$20,118 for the three months ended March 31, ~~2021, plus an additional $320~~2022 from $12,774 for the three months ended June 30, 2021. No expense was recorded in the six months ended June 30, 2020 for performance-based stock options. Our cargo segment was responsible for $21,395 of the consolidated salaries, wages, and benefits expense for the six months ended June 30, 2021, compared to a $3,367 in the six months ended June 30, 2020. There has been increased pilot pay and per diems to support operations under the ATSA. The Cargo segment began in May 2020, driving additional headcount required to support the operations and aircraft under the ATSA.

~~Aircraft Rent~~. Aircraft rent expense decreased by $7,552, or 45%, to $9,414 for the six months ended June 30, 2021, as compared to $16,966 for the six months ended June 30, 2020. Aircraft rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (for which expense is recorded within aircraft rent) to owned aircraft. Specifically, in late first quarter 2021 and early second quarter 2021, we purchased six aircraft previously under operating leases. There were also aircraft acquisitions completed in 2020 that reduced aircraft rent by $3,431 in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. For the six months ended June 30, 2021 and 2020, there was an average of nine and thirteen aircraft under operating leases, respectively.

~~Maintenance~~. Maintenance materials and repair expense increased by $11,606, or 130%, to $20,510 for the six months ended June 30, 2021, as compared to $8,904 for the six months ended June 30, 2020. The cost of heavy checks increased $4,030 due to ten heavy checks performed in the six months ended June 30, 2021, as compared to two for the six months ended June 30, 2020. There was a $1,344 increase in costs, including wheels, brakes, consumables, and expendables, driven by increased departures. Our cargo segment was responsible for $5,268 of the consolidated maintenance expense for the six months ended June 30, 2021, as compared to $509 for the prior year six-month period since cargo segment service did not begin until May 2020. The cargo segment expense primarily relates to line maintenance, since heavy maintenance is reimbursed under the ATSA.

~~- 38 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Sales and Marketing~~. Sales and marketing expense increased by $730, or 7%, to $10,932 for the six months ended June 30, 2021, as compared to $10,202 for the six months ended June 30, 2020. The passenger revenue increase between these two periods was 9%, which drove a $1,300 increase in global distribution system fees, partially offset by $700 lower interchange rates.

~~Depreciation and Amortization~~. Depreciation and amortization expense increased by $3,373, or 15%, to $26,075 for the six months ended June 30, 2021, as compared to $22,702 for the six months ended June 30, 2020. The increase was primarily due to the impact of a change in the composition of our aircraft fleet to an increased number of owned aircraft in connection with our 2019-1 EETC, Delayed Draw Term Loan Facility, and aircraft under finance leases (for which expense is recorded within depreciation and amortization). For the six months ended June 30, 2021 and 2020, there was an average of 17 and 10 owned aircraft, respectively.

~~Ground Handling~~. Ground handling expense increased by $875, or 8%, to $11,781 for the six months ended June 30, 2021, as compared to $10,906 for the six months ended June 30, 2020. There was an increase of $3,100, primarily due to the 29% increase in scheduled departures during the same time periods. However, we insourced our MSP operations in April 2020, contributing to a reduction of $2,200 in ground handling expenses for the six months ended June 30, 2021, compared to June 30, 2020, but resulting in higher salaries, wages, and benefits.

~~Landing Fees and Airport Rent~~. Landing fees and airport rent increased by $3,756, or 27%, to $17,537 for the six months ended June 30, 2021, as compared to $13,781 for the six months ended June 30, 2020. There was a $4,700 increase driven by the 29% increase in scheduled departures for the six months ended June 30, 2021, over 2020. During the six months ended June 30, 2021, we also received a $1,416 MSP terminal user fee airline relief credit, which partially offset the increase discussed above.

~~Special Items, net~~. Special items, net was a contra-expense of $65,392 for the six months ended June 30, 2021 and $31,481 for the six months ended June 30, 2020. For the six months ended June 30, 2021, Special items, net included $71,587 of contra-expense related to funds received under PSP2 and PSP3 of the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits, and $780 in refundable tax credits related to employee retention under the CARES Act. This was partially offset by a $6,963 net charge relating to the purchase of six aircraft during the six months that were previously under operating leases. For the six months ended June 30, 2020, Special items, net included $31,516 of contra-expense related to funds received under PSP2 of the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits. Our cargo segment was responsible for $18,401 of the consolidated income from Special items, net for the six months ended June 30, 2021, and $3,370 for the six months ended June 30, 2020. The segment allocation of these credits is based on the respective segment salaries, wages, and benefits.

~~Other Operating, net~~. Other operating, net expense increased by $7,480, or 31%, to $31,397 for the six months ended June 30, 2021, as compared to $23,917 for the six months ended June 30, 2020. A passenger segment increase of $949 was primarily driven by our higher level of operations for 2021, which resulted in increased crew and other employee travel costs, catering expenses, and other operational overhead costs. Our cargo segment was responsible for $7,498 and $967 of our consolidated Other Operating, net expense for the six months ended June 30, 2021 and 2020, respectively, driven by overhead expenses as well as crew and employee travel costs.

~~- 39 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Non-operating Income (Expense)~~

~~Interest Expense~~. Interest expense increased by $2,143, or 19%, to $13,201 for the six months ended June 30, 2021, as compared to $11,058 for the six months ended June 30, 2020. The increase was primarily due to debt issued for the acquisition of new aircraft and spare engines, including new debt incurred in connection with the 2019-1 EETC, and the Delayed Draw Term Loan Facility. During the six months ended June 30, 2021, the Company expensed $1,224 of debt financing costs due to the $46,260 pay-off of the CARES Act Loan and the replacement of the $25,000 ABL Facility.

~~Other, net~~. Other, net for the six months ended June 30, 2021 was $18,049 and includes a credit of $18,700 for the adjustment of our Tax Receivable Agreement liability. The decrease in the TRA liability was mainly due to the receipt of the PSP3 grant of $34,547, which extended the time period in which distributions made to shareholders are restricted from March 31, ~~2022 to September 30, 2022, and also resulted in an increase in forecasted 2021 pre-tax income.~~

~~- 40 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Segment Information~~

~~For the Three Months Ended June 30, 2021 and 2020~~

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020 (1)


Passenger

Cargo

Total

Passenger

Cargo

Total

Operating Revenues

$
127,091

$
22,098

$
149,189

$
32,157

$
3,219

$
35,376

Operating Expenses:

Aircraft Fuel

29,657

52

29,709

677

—

677

Salaries, Wages, and Benefits

32,157

10,159

42,316

29,117

3,367

32,484

Aircraft Rent

3,815

—

3,815

5,934

—

5,934

Maintenance

8,638

2,662

11,300

1,917

509

2,426

Sales and Marketing

5,822

—

5,822

1,630

—

1,630

Depreciation and Amortization

13,434

26

13,460

12,154

21

12,175

Ground Handling

6,551

—

6,551

1,614

—

1,614

Landing Fees and Airport Rent

8,624

128

8,752

2,624

43

2,667

Special Items, net

(28,784)

(9,736)

(38,520)

(28,111)

(3,370)

(31,481)

Other Operating, net

13,320

3,426

16,746

8,517

967

9,484

Total Operating Expenses

93,234

6,717

99,951

36,073

1,537

37,610

Operating Income (Loss)

$
33,857

$
15,381

$
49,238

$
(3,916)

$
1,682

$
(2,234)

Adjustment for Special Items

(28,784)

(9,736)

(38,520)

(28,111)

(3,370)

(31,481)

Operating Income (Loss), Excluding Special Items

$
5,073

$
5,645

$
10,718

$
(32,027)

$
(1,688)

$
(33,715)

Operating Margin %, Excluding Special Items

4
%

26
%

7
%

(100)
%

(52)
%

(95)
%

~~(1)~~

~~Air cargo operations with Amazon commenced in May 2020.~~

~~Passenger.~~ ~~Passenger operating income increased by $37,773 to $33,857 for the three months ended June 30, 2021 from a loss of $3,916 for the three months ended June 30, 2020.~~2021. For more information on the changes in the components of operating income for the ~~passenger~~Passenger segment, refer to the ~~consolidated results~~Condensed Consolidated Results of ~~operations~~Operations discussion ~~above.~~

above.

Cargo. Cargo operating income ~~was $15,381~~decreased by $10,444 to $1,715 for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to ~~$1,682~~$12,159 for the three months ended ~~June~~March 31, 2021. The decrease was primarily driven by the allocated payroll support received under the CARES Act during the first quarter of 2021, recognized within Special Items, net, and quarter-over-quarter increase in Salaries, Wages, and Benefits driven by the new CBA

- 30 ~~2020. As air cargo operations commenced~~-

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in ~~May 2020,~~thousands, except per share amounts)

(Unaudited)

for our pilots that went into effect in the ~~cargo segment had limited comparable operations for the three months ended June 30, 2020.~~beginning of 2022. For more information on the components of operating income for the ~~cargo~~Cargo segment, refer to the ~~consolidated results~~Condensed Consolidated Results of ~~operations~~

~~- 41 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Operations discussion above, where we ~~more fully~~ describe the cargo expenses embedded within each financial statement line item.

~~For the Six Months Ended June 30, 2021 and 2020~~

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020 (1)


Passenger

Cargo

Total

Passenger

Cargo

Total

Operating Revenues

$
233,118

$
43,684

$
276,802

$
212,487

$
3,219

$
215,706

Operating Expenses:

Aircraft Fuel

53,912

72

53,984

56,238

—

56,238

Salaries, Wages, and Benefits

64,997

21,395

86,392

67,208

3,367

70,575

Aircraft Rent

9,414

—

9,414

16,966

—

16,966

Maintenance

15,242

5,268

20,510

8,395

509

8,904

Sales and Marketing

10,932

—

10,932

10,202

—

10,202

Depreciation and Amortization

26,022

53

26,075

22,681

21

22,702

Ground Handling

11,781

—

11,781

10,906

—

10,906

Landing Fees and Airport Rent

17,279

258

17,537

13,738

43

13,781

Special Items, net

(46,991)

(18,401)

(65,392)

(28,111)

(3,370)

(31,481)

Other Operating, net

23,899

7,498

31,397

22,950

967

23,917

Total Operating Expenses

186,487

16,143

202,630

201,173

1,537

202,710

Operating Income

$
46,631

$
27,541

$
74,172

$
11,314

$
1,682

$
12,996

Adjustment for Special Items

(46,991)

(18,401)

(65,392)

(28,111)

(3,370)

(31,481)

Operating Income (Loss), Excluding Special Items

$
(360)

$
9,140

$
8,780

$
(16,797)

$
(1,688)

$
(18,485)

Operating Margin %, Excluding Special Items

0
%

21
%

3
%

(8)
%

(52)
%

(9)
%

~~(1)~~

~~Air cargo operations with Amazon commenced in May 2020.~~

~~Passenger.~~ Passenger operating income increased by $35,317, or 312%, to $46,631 for the six months ended June 30, 2021 from $11,314 for the six months ended June 30, 2020. For more information on the changes in the components of operating income for the passenger segment, refer to the consolidated results of operations discussion above.

~~Cargo.~~ Cargo operating income was $27,541 for the six months ended June 30, 2021, as compared to $1,682 for the six months ended June 30, 2020. As air cargo operations commenced in May 2020, the cargo segment had limited comparable operations for the six months ended June 30, 2020. For more information on the

~~- 42 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

components of operating income for the cargo segment, refer to the consolidated results of operations discussion above, where we more fully describe the cargo expenses embedded within each financial statement line item.

Non-GAAP Financial Measures

We sometimes use information that is derived from the ~~consolidated financial statements,~~Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this report to the most directly comparable GAAP financial measures.

Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income

Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of operating income and net income are well recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry.

Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income have limitations as analytical tools. Some of the limitations applicable to these measures include: Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and other companies in our industry may calculate Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income should not be considered in isolation or as a substitute for performance measures calculated in accordance with ~~GAAP.~~

~~As a derivation of Adjusted Operating Income Margin, Adjusted Net Income is not determined in accordance with~~ GAAP ~~such measure is susceptible to varying calculations~~ and ~~not all companies calculate the measure in the same manner. As a result, derivations of net income, including Adjusted Operating Income Margin and Adjusted Net Income, as presented~~ may not be ~~directly~~the same as or comparable to similarly titled measures presented by other ~~companies.~~ companies due to the possible differences in the method of calculation and in the items being adjusted.

For the foregoing reasons, Adjusted Operating Income, Adjusted Operating Income Margin and Adjusted Net Income have significant limitations which affect ~~its~~their use as ~~an indicator~~indicators of our profitability and valuation. Accordingly, ~~you~~readers are cautioned not to place undue reliance on this ~~information.~~

~~- 43 -~~

information.

- 31 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

The following table presents the reconciliation of Operating Income ~~(Loss)~~ to Adjusted Operating Income, ~~(Loss),~~and Adjusted Operating Income Margin ~~(Loss)~~ for the periods presented below.

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

Adjusted Operating Income Margin (Loss) reconciliation:

Operating Revenue

$
149,189

$
35,376

$
276,802

$
215,706

Operating Income (Loss)

49,238

(2,234)

74,172

12,996

Special Items, net ^(a)

(38,520)

(31,481)

(65,392)

(31,481)

Stock compensation expense

744

388

3,613

757

Voluntary leave expense ^(b)

—

2,541

—

2,541

TRA establishment expense ^{(c )}

51

—

315

—

Adjusted Operating Income (Loss)

$
11,513

$
(30,786)

$
12,708

$
(15,187)

Operating Income Margin (Loss)

33.0
%

(6.3)
%

26.8
%

6.0
%
Adjusted Operating Income Margin (Loss)

7.7
%

(87.0)
%

4.6
%

(7.0)
%


	Three Months Ended March 31,
	2022			2021
Adjusted Operating Income Margin Reconciliation:
Operating Revenue	$	226,525		$	127,611
Operating Income	21,833			24,933

Special Items, net (a)	—			(26,871)
Stock compensation expense	920			2,870
TRA expenses (b)	—			264
Adjusted Operating Income	$	22,753		$	1,196

Operating Income Margin	9.6		%	19.5		%
Adjusted Operating Income Margin	10.0		%	0.9		%

_________________________

~~(a)~~
(a)			The adjustments include Special Items, net, as presented in Note 11 of the ~~Company’s~~Company's Condensed Consolidated Financial Statements.

(b)

This represents expenses related to a voluntary employee leave program in response to the COVID-19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of Special Items, net.

~~(c)~~

This represents the one-time costs to establish the ~~Tax Receivable Agreement (“TRA”)~~TRA liability with our ~~pre-IPO stockholders.~~TRA holders. See Note 10 of the Company’s Condensed Consolidated Financial Statements.

~~- 44 -~~

- 32 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

The following table presents the reconciliation of Net Income ~~(Loss)~~ to Adjusted Net Income (Loss) for the periods presented below.

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
Adjusted Net Income (Loss) reconciliation:








Net Income (Loss)

$
51,753

$
(6,040)

$
64,169

$
1,211

Special Items, net ^(a)

(38,520)

(31,481)

(65,392)

(31,481)
Stock compensation expense

744

388

3,613

757
Voluntary leave expense ^(b)

—

2,541

—

2,541
Loss on asset transactions, net

—

309

—

381
Early pay-off of US Treasury loan

—

—

842

—
Loss on refinancing credit facility

—

—

382

—
Secondary Offering Costs

640

—

640

—
TRA establishment expense ^(c)

51

—

315

—
TRA adjustment ^(d)

(18,700)

—

(18,700)

—
Income tax effect of adjusting items, net ^(e)

8,530

6,496

13,708

6,395
Adjusted Net Income (Loss)

$
4,498

$
(27,787)

$
(423)

$
(20,196)


	Three Months Ended March 31,
	2022		2021
Adjusted Net Income (Loss) Reconciliation:
Net Income	$	3,637	$	12,416

Special Items, net (a)	—		(26,871)
Stock Compensation Expense	920		2,870
Gain on Asset Transactions, net	(2)		—
Early pay-off of US Treasury loan	—		842
Loss on refinancing credit facility	1,557		382
TRA expenses (b)	—		264
TRA adjustment (c)	6,800		—
Income tax effect of adjusting items, net (d)	(568)		5,178
Adjusted Net Income (Loss)	$	12,344	$	(4,919)

_________________________

~~(a)~~
(a)			The adjustments include Special Items, net, as presented in Note 11 of the ~~Company’s~~Company's Condensed Consolidated Financial Statements.

(b)

~~(c)~~

~~(d)~~ (c)			This represents the adjustment to the TRA for the period, which is recorded in ~~Non-operating~~Non-Operating Income (Expense).
(d)			The tax effect of adjusting items, net is calculated at the Company's statutory rate for the applicable period. The TRA adjustment is not included within the income tax effect calculation.

~~(e)The tax effect of adjusting items, net is calculated at the Company’s statutory rate for the applicable period.~~

Adjusted EBITDAR

Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("(“Adjusted ~~EBITDAR"~~EBITDAR”) is a non-GAAP measure included as supplemental disclosure because we believe it is a valuation measure commonly used by investors, securities analysts, and other interested parties in the industry to compare airline companies and derive valuation estimates without consideration of airline capital structure or aircraft ownership methodology. We believe that while items excluded from Adjusted EBITDAR may be recurring in nature and should not be disregarded in evaluation of our earnings performance, Adjusted EBITDAR is useful because its calculation isolates the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by finance lease or by operating lease, each of which is presented differently for accounting purposes), and income taxes,

~~- 45 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

which may vary significantly between periods and for different companies for reasons unrelated to overall operating performance. Adjusted EBITDAR should not be viewed as a measure of overall performance or considered in isolation or as an alternative to net income because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. We have historically incurred substantial rent expense due to our legacy fleet of operating leased aircraft, which are currently being transitioned to owned aircraft.

Adjusted EBITDAR has limitations as an analytical tool. Some of the limitations ~~applicable to this measure~~of Adjusted EBITDAR include: ~~Adjusted EBITDAR~~it does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our

- 33 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

ongoing operations; ~~Adjusted EBITDAR~~ does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; ~~Adjusted EBITDAR~~ does not reflect changes in, or cash requirements for, our working capital needs; it does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and ~~Adjusted EBITDAR~~it does not reflect any cash requirements for such replacements; and other companies in our industry may calculate Adjusted EBITDAR differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

The following table presents the reconciliation of Net Income ~~(Loss)~~ to Adjusted EBITDAR for the periods presented below.

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020
Adjusted EBITDAR Reconciliation:

Net Income (Loss)

$
51,753

$
(6,040)

$
64,169

$
1,211
Special Items, net ^(a)

(38,520)

(31,481)

(65,392)

(31,481)
Stock Compensation expense

744

388

3,613

757
Voluntary leave expense ^(b)

—

2,541

—

2,541
Loss on asset transactions, net

—

309

—

381
Secondary Offering Costs

640

—

640

—
TRA establishment expense ^(c)

51

—

315

—
TRA adjustment ^(d)

(18,700)

—

(18,700)

—
Interest Income

(9)

(63)

(24)

(314)
Interest expense

6,080

5,442

13,201

11,058
Provision for income taxes

9,468

(1,898)

14,875

547
Depreciation and Amortization

13,460

12,175

26,075

22,702
Aircraft rent

3,815

5,934

9,414

16,966
Adjusted EBITDAR

$
28,782

$
(12,693)

$
48,186

$
24,368


	Three Months Ended March 31,
	2022		2021
Adjusted EBITDAR Reconciliation:
Net Income	$	3,637	$	12,416
Special Items, net (a)	—		(26,871)
Stock Compensation Expense	920		2,870
Gain on Asset Transactions, net	(2)		—
TRA expenses (b)	—		264
TRA adjustment (c)	6,800		—
Interest Income	(24)		(15)
Interest Expense	8,562		7,121
Provision for Income Taxes	2,782		5,406
Depreciation and Amortization	15,328		12,615
Aircraft Rent	3,186		5,599
Adjusted EBITDAR	$	41,189	$	19,405

_________________________

~~(a)~~
(a)			The adjustments include Special Items, net, as presented in Note 11 of the ~~Company’s~~Company's Condensed Consolidated Financial Statements.

~~- 46 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

(b)

~~(c)~~

This represents the one-time costs to establish the ~~Tax Receivable Agreement~~TRA liability with our ~~pre-IPO stockholders.~~TRA holders. See Note 10 of the Company’s Condensed Consolidated Financial Statements.

~~(d)~~

(c)

This represents the adjustment to the TRA for the period, which is recorded in ~~Non-operating~~Non-Operating Income (Expense).

CASM and Adjusted CASM

Cost per Available Seat Mile (“CASM”) is a key airline cost metric defined as operating expenses divided by total available seat miles. Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations, ~~(starting in 2020 when we launched our cargo operations),~~ certain commissions and other costs of selling our ~~vacations product~~vacation products from this measure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is an important measure used by management and by our ~~board~~Board of ~~directors~~Directors in assessing quarterly and annual cost performance. Adjusted CASM is commonly used by industry analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain other costs in their calculation of Adjusted CASM. The measure is also the subject of frequent questions from investors.

Adjusted CASM excludes fuel costs. By excluding volatile fuel expenses that are outside of our control from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost

- 34 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact and trends in company-specific cost drivers, such as labor rates, aircraft costs and maintenance costs, and productivity, which are more controllable by management.

~~Starting in 2020 when we launched our cargo operations, we~~

We have excluded costs related to the cargo operations as these operations do not create ASMs. The cargo expenses in the reconciliation below are different from the total operating expenses for our ~~cargo~~Cargo segment in the “Segment Information” table presented above, due to several items that are included in the ~~cargo~~Cargo segment but have been captured in other line items used in the Adjusted CASM calculation. ~~We also exclude certain commissions and other costs of selling our vacations product from Adjusted CASM as these costs are unrelated to our airline operations and improve comparability to our peers.~~ Adjusted CASM further excludes special items and other adjustments, as defined in the relevant reporting period, that are not representative of the ongoing costs necessary to our airline operations and may improve comparability between periods. We also exclude stock compensation expense when computing Adjusted CASM. The Company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives and is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any ~~particular~~ period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any ~~particular~~ period.

~~- 47 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

As derivations of Adjusted CASM are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of Adjusted CASM as presented may not be directly comparable to similarly titled measures presented by other companies. Adjusted CASM should not be considered in isolation or as a replacement for CASM. For the foregoing reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Accordingly, ~~you~~readers are cautioned not to place undue reliance on this information.

The following ~~table presents~~tables present the reconciliation of CASM to Adjusted CASM.

Three Months Ended June 30,

2021

2020

Operating

Per ASM

Operating

Per ASM


Expenses

(in cents)

Expenses

(in cents)
CASM

$
99,951

6.93

$
37,610

9.01
Less:

Aircraft fuel

29,709

2.06

677

0.17
Stock Compensation expense

744

0.05

388

0.09
Special items, net ^(a)

(38,520)

(2.67)

(31,481)

(7.54)
Voluntary leave expense ^(b)

—

—

2,541

0.61
Tax Receivable Agreement Expense^(c)

51

—

—

—
Cargo expenses, not already adjusted above

16,183

1.12

4,523

1.08
Sun Country Vacations

173

0.01

144

0.03
Adjusted CASM

$
91,611

6.35

$
60,818

14.57

Available Seat Miles (ASMs)

1,442,744



417,538

Six Months Ended June 30,

2021

2020

Operating

Per ASM

Operating

Per ASM


Expenses

(in cents)

Expenses

(in cents)
CASM

$
202,630

7.19

$
202,710

9.32
Less:

Aircraft fuel

53,984

1.91

56,238

2.59
Stock Compensation expense

3,613

0.13

757

0.03
Special items, net ^(a)

(65,392)

(2.32)

(31,481)

(1.45)
Voluntary leave expense ^(b)

—

—

2,541

0.12
Tax Receivable Agreement Expense^(c)

315

0.01

—

—
Cargo expenses, not already adjusted above

33,379

1.18

4,523

0.21
Sun Country Vacations

387

0.01

332

0.02
Adjusted CASM

$
176,344

6.25

$
169,800

7.81

Available Seat Miles (ASMs)

2,819,540



2,174,605


	Three Months Ended March 31,
	2022			2021
	Operating Expenses		Per ASM (in cents)	Operating Expenses		Per ASM (in cents)
CASM	$	204,692	10.62	$	102,678	7.46
Less:
Aircraft Fuel	64,544		3.35	24,274		1.76
Stock Compensation Expense	920		0.05	2,870		0.21
Special Items, net (a)	—		—	(26,871)		(1.95)
TRA expense (b)	—		—	264		0.02
Cargo expenses, not already adjusted above	19,112		0.99	17,195		1.25
Sun Country Vacations	402		0.02	214		0.02
Adjusted CASM	$	119,714	6.21	$	84,732	6.15

ASM	1,928,149			1,376,796

_________________________

~~(a)~~
(a)			The adjustments include Special Items, net, as presented in Note 11 of the Company's Condensed Consolidated Financial Statements.
(b)			This represents the one-time costs to establish the TRA liability with our TRA holders. See Note 10 of the Company’s Condensed Consolidated Financial Statements.

- 4835 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

~~(b)~~	This represents expenses related to a voluntary employee leave program in response to the COVID-19 pandemic, a portion of which is offset by the CARES Act Payroll Support Program as the benefit of this program is also adjusted as a component of Special Items, net.

~~(c)~~

~~This represents the one-time costs to establish the Tax Receivable Agreement with our pre-IPO stockholders. See Note 10 of the Company’s Condensed Consolidated Financial Statements.~~

Liquidity and Capital Resources

The airline business is capital ~~intensive and our~~intensive. Our ability to successfully execute our business strategy is largely dependent on the continued availability of capital on attractive terms and ~~our ability~~ to maintain sufficient liquidity. We have historically funded our operations and capital expenditures primarily through cash from operations, proceeds from stockholders’ capital contributions, the issuance of promissory notes, ~~our 2019-1 EETC financing,~~ and the Delayed Draw Term Loan Facility. In March 2021, the Company offered 9,090,909 shares of common stock to the public at $24.00 per share. The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised. In total, all 10,454,545 shares were issued and the net proceeds to the company were $225,006 after deducting underwriting discounts and commissions, and other offering expenses.

debt financing.

Our primary sources of liquidity as of ~~June 30, 2021~~March 31, 2022 included our existing cash and cash equivalents of ~~$310,723~~$272,402 and short-term investments of ~~$6,076,~~$6,233, our expected cash generated from operations, and our $25,000 Revolving Credit ~~Facility, which had availability of $25,000 as of June 30, 2021.~~Facility. In addition, we had restricted cash of ~~$4,762~~$8,085 as of ~~June 30, 2021,~~March 31, 2022 which consists of cash received as prepayment for chartered flights that is maintained in separate escrow accounts in accordance with DOT regulations requiring that charter revenue receipts received prior to the date of transportation are maintained in a separate third-party escrow account. The restrictions are released once the charter transportation is provided.

We received a total of $62,312 in assistance from Treasury in 2020 as part of the Payroll Support Program under the CARES Act in response to the extensive impact of the COVID-19 pandemic on the U.S. airline industry. In accordance with any grants and/or loans received under the CARES Act, we are required to comply with the relevant provisions of the CARES Act and the related implementing agreements which, among other things, include the following: the requirement to use the Payroll Support Payments exclusively for the continuation of payment of crewmember and employee wages, salaries and benefits; the requirement that certain levels of commercial air service be maintained until March 1, 2021, or if ordered by the DOT, March 1, 2022; the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends until September 30, 2022 under PSP3; and restrictions on the payment of certain executive compensation until April 1, 2023 under PSP3. A portion of the proceeds from our initial public offering was used to repay in full all amounts outstanding under the CARES Act Loan.

During the first quarter of 2021, we received a grant of $32,208 under PSP2. On April 22, 2021, we received a PSP2 top-off grant of $4,831. All funds provided by Treasury to PSP2 participants may only be used for the continuation of payment of employee wages, salaries, and benefits. Further, during the second quarter of 2021, we received a grant of $34,547 under PSP3.

On February 10, 2021, Sun Country, Inc., our wholly-owned subsidiary (the “Borrower”), entered into the Credit Agreement, which provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan

~~- 49 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Facility, which we refer to collectively as the “Credit Facilities,” and repaid in full all borrowings outstanding under the ABL Facility. The Revolving Credit Facility matures on the earlier of (i) February 10, 2026 and (ii) to the extent the sum of (x) the amount unused commitments under the Delayed Draw Term Loan Facility and (y) the amount of loans under the Delayed Draw Term Loan Facility exceeds $25,000 on such date, the date that is 180 days prior to February 10, 2026. The Delayed Draw Term Loan Facility matures on February 10, 2026. The Delayed Draw Term Loan Facility is available only to finance the acquisition of aircraft and engines and is not available for working capital or other general corporate purposes. Only the $25,000 Revolving Credit Facility portion of the Credit Facilities is available for general corporate purposes and as a general source of liquidity. During the six months ended June 30, 2021, we drew $80,500 on the Delayed Draw Term Loan Facility and $79,494 remained outstanding at June 30, 2021.

Our primary uses of liquidity are for operating expenses, capital expenditures, lease rentals and maintenance reserve deposits, debt repayments and working capital requirements. Our single largest capital expenditure requirement relates to the acquisition of aircraft, which we have historically acquired through operating ~~and~~leases, finance leases, and debt.

Our management team retains broad discretion to allocate liquidity.

We believe that our unrestricted cash and cash equivalents, short-term investments, and availability under our Revolving Credit Facility, combined with expected future cash flows from operations, will be sufficient to fund our operations and meet our debt payment obligations for at least the next twelve months. However, we cannot predict what the effect on our business and financial position might be from a change in the competitive environment in which we operate or from events beyond our control, such as volatile fuel prices, economic conditions, pandemics, weather-related disruptions, the impact of airline bankruptcies, restructurings or consolidations, U.S. military actions, regulations, or acts of terrorism.

Aircraft – As of March 31, 2022, we operated a fleet of 50 Boeing 737-NG aircraft. This includes 38 aircraft in the passenger fleet and 12 of cargo operated aircraft through the ATSA. We plan to grow the passenger fleet to an estimated 50 aircraft by the end of 2023. We may finance additional aircraft through debt financing or finance leases based on market conditions, our prevailing level of liquidity and capital market availability. We may also enter into new operating leases on an opportunistic basis.

For more information on our fleet, see Note 6 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

Subsequent to March 31, 2022, the Company committed to lease an aircraft for a period of six years at approximately $2,220 per year. The Company expects to take delivery of the aircraft during fiscal year 2022. The Company also purchased an aircraft that was previously under a finance lease before the end of the lease term for a purchase price of $16,784 and took delivery of four incremental aircraft for a total purchase price of approximately $75,000. The Company financed these purchases using incremental 2022-1 EETC funds that were drawn upon subsequent to March 31, 2022.

Maintenance Deposits - In addition to funding the acquisition of aircraft, we are required by our aircraft lessors to fund reserves in cash in advance for scheduled maintenance to act as collateral for the benefit of lessors. Qualifying payments that are expected to be recovered from lessors are recorded as Lessor Maintenance Deposits on our Condensed Consolidated Balance ~~Sheet.~~Sheets. A portion of our deposits is therefore unavailable until after we have completed the scheduled maintenance in accordance with the terms of the aircraft leases.

CARES Act - During 2021, we received grants totaling $71,587 from the Treasury under PSP2 and PSP3. We ~~believe that our unrestricted cash~~also received a CARES Act Loan of $45,000 in October 2020, which was repaid in full on March 24, 2021 using the proceeds from the IPO.

In accordance with the $71,587 of grants received under the CARES Act, we are required to comply with the relevant provisions of the CARES Act and ~~equivalents, short-term investments and availability under our Revolving Credit Facility, combined~~the related implementing agreements. We were in compliance with expected future cash flows from operations, will be sufficient to fund our operations and meet our debt payment obligations for at least the next 12 months. However, we cannot predict what the effect on our business and financial position might be from a change in the competitive environment in which we operate or from events beyond our control, such as volatile fuel prices, economic conditions, pandemics, weather-related disruptions, the impact of airline bankruptcies, restructurings or consolidations, U.S. military actions or acts of terrorism.

~~- 50 -~~

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Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

the CARES Act provisions as of March 31, 2022. For more information on the CARES Act provisions, see Note 3 of the Consolidated Financial Statements included in Part II, Item 8 of the 2021 10-K.

Credit Facilities - The Company uses its Credit Facilities to provide liquidity support for general corporate purposes and to finance the acquisition of aircraft. On February 10, 2021, we entered into a Credit Agreement which includes a $25,000 Revolving Credit Facility and a $90,000 DDTL. The proceeds from the Revolving Credit Facility can be used for general corporate purposes, whereas the proceeds from the DDTL are to be used solely to finance the acquisition of aircraft or engines to be registered in the United States. The Credit Agreement includes financial covenants that require a minimum trailing 12-month EBITDAR ($87,700 as of March 31, 2022 and beyond) and a minimum liquidity of $30,000 at the close of any business day. The Company was in compliance with this covenant as of March 31, 2022.

During 2021, the Company drew $80,500 on the DDTL to purchase six aircraft, which were previously under operating leases.The Company repaid the outstanding balance for the DDTL in full in March 2022 using proceeds it received from the 2022-1 EETC. No amounts under the DDTL are available to the Company as of March 31, 2022. As of March 31, 2022, the Revolving Credit Facility had no balance drawn, leaving a total of $25,000 undrawn.

Debt - At our discretion, we obtain debt financing through the issuance of pass-through trust certificates to purchase, or refinance, aircraft. In December 2019, we issued the 2019-1 EETC, for the purpose of financing or refinancing 13 used aircraft.

In March 2022, the Company arranged for the issuance of the 2022-1 EETC, in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft. As of the date of this report, the Company received gross proceeds of $172,507 in order to finance or refinance 12 of the 13 aircraft, and expects to receive an additional $15,770 of gross proceeds in respect to the thirteenth aircraft on or before September 15, 2022. The 2022-1 EETC will be secured by a lien on the financed or refinanced aircraft and will be cross collateralized by the other aircraft financed through the issuance. Total appraised value of the 12 aircraft was approximately $237,936 as of the original date of the agreement.

For more information on our credit facilities or debt, see Note 7 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.

The table below presents the major indicators of financial condition and liquidity:

June 30, 2021

December 31, 2020
Cash and Equivalents

$
310,723

$
62,028
Investments

6,076

5,624

Long-term Debt

287,479

282,463
Finance Lease Obligations

144,692

107,170
Operating Lease Obligations

86,647

147,199
Total Debt and Lease obligations

$
518,818

$
536,832
Stockholders' Equity

464,233

283,817
Total Invested Capital

$
983,051

$
820,649

Debt-to-Capital

0.53

0.65

~~Sources and Uses of Liquidity~~

~~Cash Flow Activity~~

Six Months Ended June 30,

2021

2020
Total Operating Activities

$
89,841

$
(12,895)
Investing Activities:

Purchases of Property & Equipment

(66,736)

(93,677)
Other

(452)

37
Total Investing Activities

(67,188)

(93,640)

Financing Activities:

Cash from Stock Offering, net

227,225

—
Proceeds from Borrowings

80,500

220,307
Repayment of Finance Leases

(7,864)

(85,976)
Repayment of Borrowings

(74,709)

(54,879)
Debt Issuance Costs

(2,709)

(2,764)
Other

26

21
Total Financing Activities

222,469

76,709

Net Increase (Decrease) in Cash

$
245,122

$
(29,826)

~~"Cash" consists of Cash, Cash Equivalents and Restricted Cash~~

~~Operating Cash Flow Activities~~

Operating activities in the six months ended June 30, 2021 provided $89,841, as compared to using $12,895 in the six months ended June 30, 2020. During those two six-month periods, Net Income was $64,169 and $1,211, respectively.

March 31, 2022 December 31, 2021
Cash and Cash Equivalents $ 272,402 $ 309,338
Amount Available Under Revolving Credit Facility 25,000 25,000
Long-term Debt 277,285 277,426
Finance Lease Obligations 270,141 192,155
Operating Lease Obligations 34,040 76,041
Total Debt and Lease obligations $ 581,466 $ 545,622
Stockholders' Equity 493,291 486,811
Total Invested Capital $ 1,074,757 $ 1,032,433
Debt-to-Capital 0.54 0.53

- 5137 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

~~(Unaudited)~~

(Unaudited)

Sources and Uses of Liquidity


	Three Months Ended March 31,
	2022		2021
Total Operating Activities	$	18,213	$	15,839
Investing Activities:
Purchases of Property & Equipment	(49,683)		(54,399)
Other, net	55		(153)
Total Investing Activities	(49,628)		(54,552)

Financing Activities:
Cash Received from Stock Offering, net	—		228,668
Proceeds from Stock Option and Warrant Exercises	523		—
Proceeds from Borrowings	77,986		68,000
Repayment of Finance Lease Obligations	(4,466)		(3,911)
Repayment of Borrowings	(77,947)		(46,068)
Debt Issuance Costs	(1,979)		(2,721)
Total Financing Activities	(5,883)		243,968

Net (Decrease) Increase in Cash	$	(37,298)	$	205,255

"Cash" consists of Cash, Cash Equivalents and Restricted Cash

Operating Cash Flow Activities

Operating activities in the three months ended March 31, 2022 provided $18,213, as compared to providing $15,839 in the three months ended March 31, 2021. During the first quarter 2022 and 2021, Net Income was $3,637 and $12,416, respectively, as Net Income in the first quarter of 2021 was benefited by a number of one-time transactions that are adjusted for operating cash flow purposes.

Our operating cash flow is primarily impacted by the following factors:

Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in Air Traffic Liabilities. Air Traffic Liabilities typically increase during the ~~winter~~fall and ~~spring~~early winter months as advanced ticket sales grow prior to the ~~summer~~late winter and spring peak travel season and decrease during the summer ~~and fall~~ months.

Fuel. Fuel expense represented approximately ~~27%~~32% and ~~28%~~24% of our total operating expense for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. ~~We expect fuel~~Fuel consumption ~~to increase through~~increased during the ~~end~~first quarter of ~~2021~~2022 compared to prior year, ~~periods,~~ consistent with increased passengers as the impact of the pandemic subsides.

Additionally, the cost per gallon increased by 68% year-over-year. We expect fuel costs to be higher year over year for comparable periods.

- 38 -

CARESAct. During the ~~six~~three months ended ~~June 30,~~March 31, 2022 we did not receive any funding from the CARES Act. During the three months ended March 31, 2021 we received ~~$71,587~~$32,208 in CARES Act ~~grants. During the six months ended June 30, 2020 we received $31,516~~grants and $334 in ~~CARES Act grants.~~

employee retention tax credits.

Investing Cash Flow Activities

Capital

~~Capital~~ Expenditures. Our capital expenditures were ~~$66,736~~$49,683 and ~~$93,677~~$54,399 for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Our capital expenditures during the ~~six~~three months ended ~~June 30,~~March 31, 2022 primarily included the purchase of one aircraft, the purchase of three spare engines, the first installment payment to purchase a flight simulator, and other miscellaneous projects. Our capital expenditures during the three months ended March 31, 2021 were primarily related to the purchases of five existing aircraft ~~that were financed through draws on the Delayed Draw Term Loan Facility. We invested $63,118~~previously under operating leases. Subsequent to March 31, 2022, we used incremental 2022-1 EETC financing to purchase ~~six~~an aircraft ~~in the first six months~~previously under a finance lease for a purchase price $16,784 and took delivery of ~~2021, as compared to investing $88,473 on~~ four incremental aircraft ~~and one engine in the first six months~~for a total purchase price of ~~2020.~~

approximately $75,000.

Financing Cash Flow Activities

IPO.

~~IPO.~~ On In March ~~16,~~ 2021, the Company offered 9,090,909 shares of common stock to the public at $24.00 per share. The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised.we completed our IPO. In total, ~~all~~ 10,454,545 shares were issued and the net proceeds to the ~~company~~Company were ~~$225,006~~$225,329 after deducting underwriting discounts and commissions, and other offering expenses.

~~Debt.~~ In The proceeds from the ~~six months ended June 30, 2021, we incurred $80,500 in new debt under the $90,000 Delayed Draw Term Loan Facility, primarily~~IPO were immediately used to purchase six aircraft which were previously under operating leases. In the first six months of 2020 we incurred $220,307 in debt under the 2019-1 EETC, primarily to purchase two aircraft new to the Company, purchase two aircraft which were previously under operating leases, purchase five aircraft which were previously under finance leases, as well as to refinance three other owned aircraft. In the first quarter of 2021, we repaidrepay our $45,000 loan with the Treasury, plus ~~accrued~~ interest. ~~During~~

Debt. In the three months ended March 31, 2022, the Company arranged for the issuance of the 2022-1 EETC in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft. We obtained $77,986 in gross proceeds during the first ~~six months~~quarter of ~~2021,~~2022 for the purpose of refinancing seven aircraft. Subsequent to March 31, 2022, we ~~also~~issued an incremental $94,521 of 2022-1 EETC proceeds for the purpose of financing five aircraft, which were received in the second quarter of 2022. The remaining $15,770 of gross proceeds is expected to be received on or before September 15, 2022 in connection with purchasing the thirteenth aircraft from the lessor. Five of these aircraft were owned fleet assets previously financed by the DDTL, which was repaid ~~$29,709 of other debt. In~~with the ~~first six months of 2020, we paid $85,976 toward finance lease obligations, primarily related to~~proceeds from the ~~buy-out of five aircraft. In the first six months of 2020 we repaid $54,879 of outstanding debt, primarily related to the refinancing of three aircraft.~~

2022-1 EETC.

For additional information regarding these financing arrangements, see Note 7 of the Notes to the Condensed Consolidated Financial ~~Statements.~~

~~- 52 -~~

Statements included in Part I, Item I of this report.

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Undrawn Lines of Credit~~

On February 10, 2021, we executed a new five-year credit agreement that provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility, which are collectively referred to as the “Credit Facilities.” During the six months ended June 30, 2021, we drew $80,500 on the Delayed Draw Term Loan Facility to purchase six aircraft. These activities resulted in approximately $34,500 undrawn on the Credit Facilities as of June 30, 2021. The Delayed Draw Term Loan Facility is available only to finance the acquisition of aircraft and engines and is not available for working capital or other general corporate purposes. Only the $25,000 Revolving Credit Facility portion of the Credit Facilities is available for general corporate purposes and as a general source of liquidity.

~~Covenants~~

For a description of certain covenants of our debt agreements, see Note 7 of the Notes to the Condensed Consolidated Financial Statements. We were in compliance with all covenants in these debt agreements as of June 30, 2021.

Off Balance Sheet Arrangements

Indemnities. Our aircraft, equipment and other leases and certain operating agreements typically contain provisions requiring us, as the lessee, to indemnify the other parties to those agreements, including certain of those parties’ related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or such other equipment. We believe that our insurance ~~would cover~~covers most of our exposure to liabilities and related indemnities associated with the leases described above.

Pass-Through Trusts. We have equipment notes outstanding issued under the 2019-1 EETC and 2022-1 EETC. Generally, the structure of the EETC financings consists of pass-through trusts created by us to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and are not obligations of Sun Country. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued by us and secured by our aircraft. The payment obligations under the equipment notes are those of Sun Country. ~~Through June 2020, we purchased~~We use these certificates to finance or ~~refinanced 13~~refinance aircraft purchases utilizing these certificates and the obligations are listed in Note 7 ~~– Debt.~~

of the Condensed Consolidated Financial Statements. As of March 31, 2022, $94,521 of financing was available to us through the 2022-1 EETC, but was not reported on our Condensed Consolidated Balance Sheets because we had not issued

- 39 -

Table of Contents
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
equipment notes as of the Balance Sheet date. As of the date of this report, the remaining $94,521 had been drawn upon for the purpose of financing the purchase of five aircraft, which were received in the second quarter of 2022. Accordingly, no additional off balance sheet amounts exist related to the 2022-1 EETC.

Fuel Consortia. We currently participate in fuel consortia at Minneapolis-Saint Paul International Airport, Las Vegas International Airport, Dallas-Fort Worth International Airport, San Diego International Airport, Los Angeles International Airport, Seattle Tacoma International Airport, Portland International Airport, Phoenix Sky Harbor International Airport, Orlando International Airport and Southwest Florida International Airport and we expect to expand our participation with other airlines in fuel consortia and fuel committees at our airports where economically beneficial. These agreements generally include cost-sharing provisions and environmental indemnities that are generally joint and several among the participating airlines. Consortia that are governed by interline agreements are either, (i) not variable interest entities (“VIEs”) because they are not legal entities, or (ii) are variable interest entities, but the Company is not deemed the primary beneficiary. Therefore, these agreements are not reflected on our ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. There are no assets or liabilities on our balance sheets related to these VIEs, since our participation is limited to purchasing aircraft fuel.

We have no other off-balance sheet arrangements.

~~- 53 -~~

~~Table of Contents~~

~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Commitments and Contractual Obligations

We have contractual obligations comprised of aircraft leases and supplemental maintenance reserves, ~~payment~~payments of debt, ~~and~~ interest, ~~and~~ other lease ~~arrangements.~~ arrangements, and the TRA.

As of ~~June 30, 2021 we also have~~March 31, 2022, the Company had a ~~contractual obligation~~commitment of approximately $75,000 to ~~pay our pre-IPO stockholders under~~purchase four aircraft using proceeds from the ~~terms~~2022-1 EETC, which were delivered in the second quarter of 2022. A deposit totaling $7,500 was remitted to the seller during the first quarter of 2022. The remaining purchase amount was financed using incremental proceeds from the 2022-1 EETC and were remitted to the seller upon delivery of the ~~Tax Receivable Agreement (see below).~~

aircraft.

During the first quarter of 2022, the Company executed an agreement to purchase a flight simulator at a total purchase price of $9,745. An initial installment of $2,934 was remitted to the seller during the first quarter of 2022. The remaining purchase price is to be remitted upon shipment of the simulator.

For additional information, refer to Note 12 Commitments and Contingencies to our ~~unaudited~~ Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. Except as described herein, there have been no material ~~change~~changes in our contractual obligations and commitments other than in the ordinary course of business since our fiscal year ended December 31, ~~2020. Also, see our Final Prospectus for additional information regarding our contractual obligations.~~

In connection with the Company’s IPO, we entered into an income Tax Receivable Agreement with our pre-IPO stockholders. The agreement provides for the payment by the Company to the pre-IPO stockholders of 85% of the amount of cash savings, if any, in U.S. federal, state, local, and foreign income tax that the Company realizes. For additional information regarding this agreement, see Note 10 of the Notes to the Condensed Consolidated Financial Statements.

2021.

- 5440 -

Table of Contents

SUN COUNTRY AIRLINES HOLDINGS, INC

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risks in the ordinary course of our business. These risks include commodity price risk, specifically with respect to aircraft fuel, as well as interest rate risk. The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. ~~Actual~~Accordingly, actual results may ~~differ.~~

differ from the information provided below.

Aircraft Fuel. Unexpected pricing changes of aircraft fuel could have a material adverse effect on our business, results of operations and financial condition. To hedge the economic risk associated with volatile aircraft fuel prices, we periodically enter into fuel collars, which allows us to reduce the overall cost of hedging, but may prevent us from participating in the benefit of downward price movements. In the past, we have also entered into fuel option and swap contracts. We ~~have~~had no hedges in place for approximately 23% of our projected fuel requirements for scheduled service operations in the second half of 2021, with all of our existing options expected to be exercised or expire by the end of 2021.at March 31, 2022. We do not hold or issue option or swap contracts for trading purposes. We currently do not expect ~~to continue~~ to enter into these types of contracts prospectively, although significant changes in market conditions could affect our decisions. Based on our forecasted scheduled service and charter fuel consumption for the second ~~half~~quarter of ~~2021,~~2022, we estimate that a one cent per gallon increase in the average aircraft fuel price would increase aircraft fuel expense by approximately ~~$328~~$177 excluding any impact associated with fuel derivative instruments held and reimbursed cargo fuel.

Interest ~~Rates~~Rates. . We have exposure to market risk associated with changes in interest rates related to the interest expense from our variable-rate debt. A change in market interest rates would impact interest expense under the Revolving Credit ~~Facilities,~~Facility, totaling ~~$115,000~~$25,000 in principal capacity. During the quarter, we repaid the outstanding balance of the DDTL using proceeds from the 2022-1 EETC, which terminated the DDTL. We are unable to draw any additional amounts from the DDTL and no longer face any exposure to market risk on this portion of our Credit Facilities. Assuming the Revolving Credit ~~Facilities are~~Facility is fully drawn, a 100 basis point increase in interest rates would result in a corresponding increase in interest expense of approximately ~~$1,150~~$250 annually.

ITEM 4. CONTROLS AND PROCEDURES

As of ~~June 30, 2021,~~March 31, 2022, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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SUN COUNTRY AIRLINES HOLDINGS, INC

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. We currently believe that the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on our financial position, liquidity or results of operations.

ITEM 1A. RISK FACTORS

We have disclosed under the heading ~~“Risk Factors”~~“Risk Factors” in our ~~Registration Statement on Form S-1 (File No. 333-252858), as amended, and the Final Prospectus included therein,~~2021 10-K, the risk factors which materially affect our business, financial condition or results of operations. There have been no material changes from the risk factors previously disclosed. You should ~~carefully consider the risk factors set forth in the Registration Statement and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should~~ be aware that these risk factors and other information may not describe every risk facing our ~~company.~~Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Unregistered Sales of Equity Securities~~

~~During the three months ended June 30, 2021, we did not conduct any sales of equity securities that were not registered under the Securities Act of 1933, as amended.~~

~~Use of Proceeds~~

The Registration Statement on Form S-1 (File No. 333-252858) for our initial public offering (“IPO”) of our common stock, par value $0.01 per share was declared effective by the SEC on March 16, 2021, pursuant to which we issued and sold 10,454,545 shares of our common stock at $24.00 per share, which included 1,363,636 shares issued upon the exercise of the underwriters’ over-allotment option to purchase additional shares. We received net proceeds of $225,006 after deducting underwriting discounts and commissions, and other offering expenses. The managing underwriters for our IPO were Barclays Capital Inc. and Morgan Stanley & Co. LLC. Shares of our common stock began trading on the NASDAQ on March 17, 2021. We used approximately $46,260 of the proceeds from the IPO to repay all amounts outstanding under the CARES Act Loan. A portion of the proceeds were used to pay fees and expenses in connection with the IPO and the remainder will be used for general corporate purposes, including the acquisition of additional aircraft. At June 30, 2021, $38 of expenses incurred in connection with our IPO had not yet been paid.

Our management team will retain broad discretion to allocate the net proceeds of the IPO for general corporate purposes. Pending use as described above, we may invest the net proceeds from the IPO in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.

~~Issuer Purchases of Equity Securities~~

The Company does not have a share repurchase program and no shares were repurchased during the three months ended June 30, 2021. Under the CARES Act, we are restricted from conducting certain share repurchases through the later of March 31, 2022 and one year following repayment.

~~- 56 -~~

None.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None~~

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not ~~applicable~~

Applicable.

ITEM 5. OTHER INFORMATION

~~None~~

~~- 57 -~~

None.

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~~SUN COUNTRY AIRLINES HOLDINGS, INC~~

ITEM 6. EXHIBITS

(a)Exhibits

~~(a)~~

~~Exhibits~~


~~10.1~~ 4.1			~~Payroll Support Program~~Trust Supplement No. 2022-1A, dated as of March 29, 2022, between Wilmington Trust, National Association, as trustee, and Sun Country, Inc., to Pass Through Trust Agreement, dated as of December 9, 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on April ~~27, 2021,~~5, 2022)

4.2			Trust Supplement No. 2022-1B, dated as of March 29, 2022, between Wilmington Trust, National Association, as trustee, and Sun Country, Inc., to Pass Through Trust Agreement, dated as of December 9, 2019 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on April 5, 2022)

4.3			Intercreditor Agreement, dated as of March 29, 2022, among Wilmington Trust, National Association, as pass through trustee under the pass through trusts, and Wilmington Trust, National Association, as subordination agent (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on April 5, 2022)

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SUN COUNTRY AIRLINES HOLDINGS, INC


4.4			Note Purchase Agreement, dated as of March 29, 2022, among Sun Country, Inc., Wilmington Trust, National Association, as pass through trustee under the pass through trusts, and Wilmington Trust, National Association, as subordination agent (incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on April 5, 2022)

4.5			Form of Participation Agreement (Participation Agreement between Sun Country, Inc. and Wilmington Trust, National Association, not in its individual capacity but solely as mortgagee, subordination agent under the ~~Department of~~Intercreditor Agreement and pass through trustee under the ~~Treasury.~~pass through trusts) (Exhibit B to Note Purchase Agreement) (included in Exhibit 4.4)

~~31.1~~ 4.6			Form of Indenture (Trust Indenture and Mortgage between Sun Country, Inc. and Wilmington Trust, National Association, not in its individual capacity, except as expressly stated therein, but solely as mortgagee) (Exhibit C to Note Purchase Agreement) (included in Exhibit 4.4)

4.7			Form of Sun Country, Inc. Pass Through Certificate, Series 2022-1A (included in Exhibit 4.1)

4.8			Form of Sun Country, Inc. Pass Through Certificate, Series 2022-1B (included in Exhibit 4.2)

31.1*			Certification by Sun Country's Chief Executive Officer with respect to Sun Country's Quarterly Report on Form 10-Q for the quarterly period ended ~~June 30, 2021~~March 31, 2022

~~31.2~~ 31.2*			Certification by Sun Country’s President and Chief Financial Officer with respect to Sun Country's Quarterly Report on Form 10-Q for the quarterly period ended ~~June 30, 2021~~March 31, 2022

32 32*			Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Sun Country Airlines Holdings, Inc.’s Chief Executive Officer and President and Chief Financial Officer with respect to Sun Country's Quarterly Report on Form 10-Q for the quarterly period ended ~~June 30, 2021~~March 31, 2022

~~101.INS~~ 101.INS*			Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

~~101.SCH~~ 101.SCH*			Inline XBRL Taxonomy Extension Schema Document

~~101.CAL~~ 101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~ 101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~ 101.LAB*			Inline XBRL Taxonomy Extension Labels Linkbase Document

~~101.PRE~~ 101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document

~~104~~ 104*			Cover Page Interactive Data Files (formatted as inline XBRL and contained in Exhibit 101)



*			Filed herewith

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SUN COUNTRY AIRLINES HOLDINGS, INC

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Sun Country Airlines Holdings, Inc. (Registrant)
		~~(Registrant)~~

	/s/ Dave Davis
		Dave Davis
		President and Chief Financial Officer
	(Principal Financial and Accounting Officer)
~~July 28, 2021~~
May 6, 2022

- 5944 -


		Page

Part I. Financial Information
Item 1. Financial Statements		3
Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of Operations		5
Condensed Consolidated Statements of Changes in Stockholders’ Equity		6
Condensed Consolidated Statements of Cash Flows		7

Notes to the Condensed Consolidated Financial Statements		8

1	Company Background	8
2	Basis of Presentation	9
3	Impact of the COVID-19 Pandemic	10
4	Revenue	12
5	Earnings per Share	14
6	Aircraft	15
7	Debt	17
8	Fuel Derivatives and Risk Management	19
9	Fair Value Measurements	20
10	Income Taxes	21
11	Special Items, net	22
12	Commitments and Contingencies	23
13	Operating Segments	23
14	Subsequent Events	24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		55
Item 4. Controls and Procedures		55

Part II. Other Information
Item 1. Legal Proceedings		56
Item 1A. Risk Factors		56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		56
Item 3. Defaults Upon Senior Securities		57
Item 4. Mine Safety Disclosures		57
Item 5. Other Information		57
Item 6. Exhibits		58

Signatures		59


	Six Months Ended June 30, 2020
		Common Stock			Loans to		Additional		Retained
	Warrants	Shares	Amount		Stockholders		Paid-in Capital		Earnings		Total
December 31, 2019	40,005,885	6,800,065	$	68	$	(3,500)	$	244,928	$	42,228	$	283,724
Exercise of Apollo Warrants	(40,005,885)	40,005,885		400		—		(379)		—		21
Net Income	—	—		—		—		—		7,251		7,251
Stock-based Compensation	—	—		—		—		369		—		369
March 31, 2020	—	46,805,950	$	468	$	(3,500)	$	244,918	$	49,479	$	291,365
Net Loss	—	—		—		—		—		(6,040)		(6,040)
Stock-based Compensation	—	—		—		—		388		—		388
June 30, 2020	—	46,805,950	$	468	$	(3,500)	$	245,306	$	43,439	$	285,713


	December 31, 2020	Additions	Removals	June 30, 2021
Passenger:
Owned	14	6	—	20
Finance leases	5	2	—	7
Operating leases	12	—	(6)	6
Sun Country Airlines' Fleet	31	8	(6)	33
Cargo:
Aircraft Operated for Amazon	12	—	—	12
Total Aircraft Operated	43	8	(6)	45


	December 31, 2019	Additions	Removals	June 30, 2020
Passenger:
Owned	5	9	—	14
Finance leases	10	—	(5)	5
Operating leases	14	—	(2)	12
Seasonal leases	2	—	(2)	—
Sun Country Airlines' Fleet	31	9	(9)	31
Cargo:
Aircraft Operated for Amazon	—	7	—	7
Total Aircraft Operated	31	16	(9)	38


	Debt Principal		Amortization of Debt
	Payments		Issuance Costs		Net Debt
Remainder of 2021	$	10,661	$	(509)	$	10,152
2022		30,367		(983)		29,384
2023		42,358		(908)		41,450
2024		44,000		(785)		43,215
2025		49,087		(670)		48,417
Thereafter		115,119		(258)		114,861
Total as of June 30, 2021	$	291,592	$	(4,113)	$	287,479


	June 30, 2021		December 31, 2020
Carrying Amount	$	291,592	$	285,801
Fair Value	$	281,640	$	279,119


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets
Fuel Derivative Contracts	$	—	$	1,598	$	—	$	1,598
Total Assets measured at fair value on a recurring basis	$	—	$	1,598	$	—	$	1,598

							��
	December 31, 2020
	Level 1		Level 2		Level 3			Total
Liabilities
Fuel Derivative Contracts	$	—	$	1,174	$	—		$	1,174
Total Liabilities measured at fair value on a recurring basis	$	—	$	1,174	$	—		$	1,174


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
	Passenger		Cargo		Consolidated		Passenger		Cargo⁽¹⁾		Consolidated
Operating Revenues	$	127,091	$	22,098	$	149,189	$	32,157	$	3,219	$	35,376
Non-Fuel Operating Expenses		92,361		16,401		108,762		63,507		4,907		68,414
Aircraft Fuel		29,657		52		29,709		677		—		677
Special Items, net		(28,784)		(9,736)		(38,520)		(28,111)		(3,370)		(31,481)
Total Operating Expenses		93,234		6,717		99,951		36,073		1,537		37,610
Operating Income (Loss)	$	33,857	$	15,381		49,238	$	(3,916)	$	1,682		(2,234)
Interest Income						9						63
Interest Expense						(6,080)						(5,442)
Other, net						18,054						(325)
Income (Loss) before Income Tax					$	61,221					$	(7,938)


	Three Months Ended June 30, 2021 (1)								Three Months Ended June 30, 2020 (1)
	Scheduled								Scheduled
	Service			Charter		Cargo	Total		Service			Charter		Cargo	Total
Departures ⁽²⁾		4,921			1,727	2,752		9,445		1,376			520	413		2,324
Block hours ⁽²⁾		15,900			3,656	8,198		27,874		4,177			1,321	1,076		6,604
Aircraft miles ⁽²⁾		6,478,328			1,360,043	3,222,967		11,098,716		1,710,153			526,261	454,980		2,700,328
Available seat miles (ASMs) (thousands) ⁽²⁾		1,198,768			237,723	—		1,442,744		318,049			97,827	—		417,538
Total revenue per ASM (TRASM) (cents) ⁽³⁾								8.81								7.70
Average passenger aircraft during the period ⁽³⁾								31.0								31.0
Passenger aircraft at end of period ⁽³⁾								33								31
Cargo aircraft at end of period								12								7
Average daily aircraft utilization (hours) ⁽³⁾								7.0								2.0
Average stage length (miles)								1,179								1,180
Revenue passengers carried ⁽⁴⁾		700,019								121,922
Revenue passenger miles (RPMs) (thousands) ⁽⁴⁾		919,034								153,098
Passenger revenue per ASM (PRASM) (cents) ⁽⁴⁾		5.60								5.62
Load factor ⁽⁴⁾		76.7	%							48.1	%
Average base fare per passenger ⁽⁴⁾	$	95.81							$	146.66
Ancillary revenue per passenger ⁽⁴⁾	$	41.66							$	40.74
Charter revenue per block hour				$	7,904							$	6,426
Fuel gallons consumed (thousands) ⁽²⁾		12,267			2,622	—		14,955		3,028			946	—		3,991
Fuel cost per gallon, excluding derivatives							$	2.07							$	1.17
Employees at end of period								1,815								1,660
Cost per available seat mile (CASM) (cents) ⁽⁵⁾								6.93								9.01
Adjusted CASM (cents) ⁽⁶⁾								6.35								14.57


	Six Months Ended June 30, 2021 (1)								Six Months Ended June 30, 2020 (1)
	Scheduled								Scheduled
	Service			Charter		Cargo	Total		Service			Charter		Cargo	Total
Departures ⁽²⁾		9,244			3,238	5,317		17,897		7,182			2,156	413		9,847
Block hours ⁽²⁾		31,107			6,987	16,440		54,806		24,419			4,933	1,076		30,691
Aircraft miles ⁽²⁾		12,711,512			2,582,494	6,508,492		21,883,259		9,867,739			1,837,794	454,980		12,234,888
Available seat miles (ASMs) (thousands) ⁽²⁾		2,356,780			449,444	—		2,819,540		1,826,245			334,690	—		2,174,605
Total revenue per ASM (TRASM) (cents) ⁽³⁾								8.27								9.77
Average passenger aircraft during the period ⁽³⁾								31.0								31.5
Passenger aircraft at end of period ⁽³⁾								33								31
Cargo aircraft at end of period								12								7
Average daily aircraft utilization (hours) ⁽³⁾								6.8								5.2
Average stage length (miles)								1,225								1,254
Revenue passengers carried ⁽⁴⁾		1,253,051								935,860
Revenue passenger miles (RPMs) (thousands) ⁽⁴⁾		1,694,033								1,303,004
Passenger revenue per ASM (PRASM) (cents) ⁽⁴⁾		5.16								7.23
Load factor ⁽⁴⁾		71.9	%							71.3	%
Average base fare per passenger ⁽⁴⁾	$	97.12							$	141.16
Ancillary revenue per passenger ⁽⁴⁾	$	42.24							$	42.74
Charter revenue per block hour				$	7,829							$	7,646
Fuel gallons consumed (thousands) ⁽²⁾		23,824			4,979	—		28,948		18,779			3,646	—		22,562
Fuel cost per gallon, excluding derivatives							$	1.99							$	1.71
Employees at end of period								1,815								1,660
Cost per available seat mile (CASM) (cents) ⁽⁵⁾								7.19								9.32
Adjusted CASM (cents) ⁽⁶⁾								6.25								7.81


	Three Months Ended June 30,						Increase	%
	2021			2020			(Decrease)	Change
Passengers		700,019			121,922		578,097	474	%
Average base fare per passenger	$	95.81		$	146.66		(50.85)	(35)	%
RPMs (thousands)		919,034			153,098		765,936	500	%
ASMs (thousands)		1,198,768			318,049		880,719	277	%
PRASM (cents)		5.60			5.62		(0.02)	(0)	%
Passenger load factor		76.7	%		48.1	%	28.6 pts	na


	June 30, 2021		December 31, 2020
Cash and Equivalents	$	310,723	$	62,028
Investments		6,076		5,624

Long-term Debt		287,479		282,463
Finance Lease Obligations		144,692		107,170
Operating Lease Obligations		86,647		147,199
Total Debt and Lease obligations	$	518,818	$	536,832
Stockholders' Equity		464,233		283,817
Total Invested Capital	$	983,051	$	820,649

Debt-to-Capital		0.53		0.65