Sun Country Airlines is set to see a significant boost in cargo revenue, thanks to an expanded partnership with Amazon. Although cargo revenue inched up by 1.7% in the second quarter to $25 million, the real growth is expected to come when Amazon supplies additional Boeing 737-800 freighters to the carrier starting in March 2025. This move will transition eight converted cargo jets from current contractor Atlas Air to Sun Country, with all aircraft transferred by the third quarter of 2025.
Sun Country has operated a dozen Amazon-supplied Boeing narrowbody cargo jets since 2020. The new agreement not only increases Sun Country’s freighter fleet to 20 aircraft but also extends the contract for crews, maintenance, and insurance through 2030. This extension provides better rates for Sun Country and is expected to make cargo a much larger portion of their business.
Chief Financial Officer Dave Davis highlighted the financial benefits of this expansion during an earnings call, projecting that by 2026, cargo revenue could constitute nearly 20% of Sun Country’s total revenue, up from approximately 10% in 2024. This growth will be achieved with minimal capital expenditure, improving profitability and cash flow.
The Amazon deal is part of Sun Country’s strategy to diversify its revenue base and reduce reliance on the more volatile passenger and charter business. As part of this strategy, Sun Country plans to temporarily suspend some passenger services next year to allocate resources for ramping up the Amazon cargo service.
Despite the promising outlook for cargo, Sun Country’s overall revenue fell by 2.6% to $254 million in the second quarter, impacted by overcapacity in the domestic market and flight cancellations. However, the airline managed to reduce unit costs by nearly 5% and maintained profitability for the eighth consecutive quarter, albeit with a significant drop in net income to $1.8 million.
Sun Country’s cargo segment has been a bright spot, with a 10.4% year-over-year increase in cargo revenue to $100 million in 2023. This growth is notable given the downturn in the broader air cargo industry. The airline benefited from Amazon’s increasing market share, overtaking FedEx and UPS in total domestic deliveries last year.
Source:
https://www.freightwaves.com/news/amazon-flying-to-generate-20-of-sun-country-airlines-revenue
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