Sun Country Airlines' Q2 2025: Navigating Contradictions in Fleet Utilization, Margins, and Capacity Growth

Fleet utilization and asset readiness, margin expectations and cargo impact, Amazon fleet utilization and timing, cargo and scheduled service fleet utilization, capacity growth and hiring are the key contradictions discussed in Sun Country Airlines Holdings' latest 2025Q2 earnings call.



Consecutive Profitability and Diverse Business Model:
- Sun Country marked its 12th consecutive quarter of profitability, with $263.6 million in total revenue for Q2 2025.
- The company's diverse business model, combining scheduled service flexibility and low fixed costs, allows it to adapt to market fluctuations and exogenous industry shocks.

Cargo Business Expansion and Revenue Growth:
- Sun Country expects its cargo business to double revenue once 8 new aircraft reach mature utilization, with all aircraft in service by Q4 2025.
- The growth in cargo revenue, up 36.8% year-over-year, is driven by increased contractual rates and fleet expansion.

Challenges in Scheduled Service Due to Cargo Growth:
- Scheduled service ASMs declined by 6.2% in Q2 2025, reflecting a pullback in service to support cargo growth.
- This reduction in capacity impacted margins, especially during peak months like July when unit cost pressures outweighed unit revenue improvements.

Cost and Margin Pressures:
- Adjusted CASM increased by 11.3% due to a decline in scheduled service ASMs, impacting profitability.
- The rise in costs is attributed to a 7% headcount increase, higher pilot contractual rates, and elevated landing fees, among other factors.

Capacity and Growth Strategy:
- Sun Country plans to increase total block hours by 5% to 8% in Q3, with cargo hours up 40% to 50%, while scheduled service decreases by high single digits.
- The strategy revolves around rebalancing capacity across segments to maximize profitability while awaiting Amazon's peak season and potential capacity growth in 2027.