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Apollo’s Sun Country to Revive IPO Plans as Soon as Next Year

Apollo’s Sun Country to Revive IPO Plans as Soon as Next Year

Apollo Global Management Inc.’s Sun Country Airlines is planning to restart its push for an initial public offering as soon as next year if travel demand picks up across the industry, said the carrier’s top executive.

Sun Country’s core business of taking Midwest leisure travelers to Florida, Las Vegas and other warm-weather destinations has already recovered enough to turn in a profitable summer, Chief Executive Officer Jude Bricker said Monday. The airline’s charter work for sports teams and casinos is bouncing back, and the company began cargo service in May for Amazon.com Inc.

“We’re going to fly as many flights in October as we flew in February,” Bricker said in a Zoom interview from the annual International Aviation Forecast Summit in Cincinnati. “We’re in the sweet spot of everything that could be good about owning an airline right now but we need to see a recovery of airline traffic.”

Bricker’s upbeat view suggests at least the potential for a revival of Sun Country’s IPO plans despite industry devastation caused by the coronavirus pandemic. Apollo acquired the airline in December 2017 after Bricker began implementing a low-cost strategy by cutting expenses and adding seats to the aircraft. Profits surged and Sun Country began preparing for an IPO as soon as April 2020 -- only for the pandemic to dash those plans.

Valuation Challenge

Even now, “explaining an outperformance in passenger strength in the market could be difficult” without a sustained rebound across the industry, Bricker acknowledged. Any stock offering would also be complicated by the challenge across the industry of valuing airlines amid an unprecedented collapse in commercial flying, he said.

The Minnesota-based company may also face stepped-up competition. Larger carriers such as United Continental Holdings Inc., Alaska Air Group Inc. and JetBlue Airways Corp. have pivoted their networks to capture more leisure traffic given the deep shortfalls in international and business travel.

Sun Country predicts that its summer business next year will be roughly 20% smaller than in 2019. By the end of 2021, however, the carrier will operate at the same size as it did before the pandemic, led by a rebound in leisure markets, Bricker said.

Bolstered by its flights for Amazon, Sun Country plans to increase its cargo fleet in November to 12 Boeing Co. 737-800 jets. Sun Country’s charter work for sports teams and casinos has recovered well but has yet to regain its pre-pandemic revenues, he said.

©2020 Bloomberg L.P.