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- [00:02]
A
I'm Brett Snyder, author of Cranky Flyer.
- [00:04]
B
And I'm Brian Summers. I write the Airline Observer. You're listening to the Air show, the podcast where we talk about what goes on in the business of the sky. Brett and I sat down recently with Jude Bricker, CEO of Sun country, at the recent Apex Airline Expo in Long Beach. Jude, as you know, is never one to hold back, and we were excited to speak to him about all sorts of topics.
- [00:30]
A
Jude, welcome to the show.
- [00:32]
C
Good to be here.
- [00:33]
A
I think we have to start with the most important news in the ULCC space, which is Spirit's return to Chapter 11 bankruptcy after a few short months out. With Spirit in the situation that it's in, would you be interested in a merger with that airline? Is there something there for Sun Country?
- [00:51]
B
Just so you know, Brett has been pushing this sun country merger idea really hard, and I think he's the only one doing so.
- [00:57]
A
I wasn't. Listen, besides the fact that you may know the president of Spirit pretty well, Detroit is maybe one of the few assets that Spirit has that might be of interest to you guys and could develop in a similar way to Minneapolis.
- [01:12]
C
I mean, they're EBITDA negative. We have 7 billion of debt over there. Plus it came out in the court filings that there's maybe another billion of unaccounted for maintenance obligations and the leases that'll be unsecured claims going forward. I mean, we're a $250 million a year EBITDA business. We can't absorb anywhere near that balance sheet. So in their current form and you know, through the bankruptcy, this may change. There's really no opportunity there for us.
- [01:43]
A
Yeah. And so that has been the same throughout. Yeah, they haven't done enough or anything to get it.
- [01:52]
C
Yeah. You certainly think Dave would be a lot more aggressive in this go round than was hap than happened in the last one. So things may change.
- [02:00]
My base case assumption is that the most synergies exist between them and Frontier and that that's a logical outcome. I think our opportunity there would be, as you point out, there are some markets that will work for us. We would want to operate low utilization in order to take up unit reven. That means the older fleet, that's the one that they probably are going to divest.
- [02:26]
But I don't know. I don't know how it's going to progress. I think we're probably the last option for them if they. If it gets to that. Another thought is, you know, one of the things that's interesting Is that typically you'd start squeezing on the leases lessors through this process and try to take down your lease rates. My understanding is their lease rates are pretty compelling already. Further, they have grounded airplanes with the GTF program. I'm not sure if the warranty will transfer to subsequent operators. So I don't think any of us really know what's going to happen through this restructuring.
- [03:00]
A
Yeah, nobody knows. Although there seem to be some people who are trying to force an outcome with some network initiatives, I suppose. But potentially Detroit is something that might be of interest to you.
- [03:14]
C
Detroit has the demographics that would work for us. Yeah, but a lot of markets are that way. I mean, I think, you know, they don't have assets in Detroit per se like ownership of Gates. So we could go in there whenever we need to with or without buying spirit.
- [03:29]
A
Right. Although of course if they're in there right now.
- [03:33]
C
Exactly.
- [03:34]
A
There's opportunity. Yeah, that's a good point.
- [03:36]
C
But the big debate is if they go away, is that better than just, you know, buying them? I'm sure that's what's happening at Indigo and Frontier right now.
- [03:44]
A
I am not sure how much of a debate there is anymore.
- [03:47]
C
That's fair.
- [03:49]
B
Let me ask you a more broad question about ULCCs and maybe you can put your, your Scott Kirby hat on here. I know that you are technically at least if we're talking about chasm a ulcc, but you don't necessarily operate like one. And here's a question I get all the time from people who are just outside the industry, people who are following it, but maybe not in it. Day to day they're like, Brian, this model works everywhere in the world pretty much and it's not working right now in the United States. And they keep asking me what are the real reasons why. What do you think's going on here?
- [04:26]
C
Well, we've had a lot of cost pressure in the ulcc so the percentage of cost increases have been a lot higher in ULCC's post Covid. So that's been widely talked about. I think the network carriers have done a lot better job in the US of defending against low cost carriers. And they have basic economy product which is basically variable capacity. They can allocate it to off peak periods which is why a lot of the discussion has been in the ULCC space about taking out off peak capacity the loyalty programs in the US there's really nothing around the world that comps to what we produce here in the US with our credit card programs. There was some legislation proposed in the past, which would more equalize the playing field. I don't think there's going to be much legs on that. So I think this will persist. And it takes about seven years. You know, the average contract on a co brand agreement is about seven years. So we're in the second cycle of that. So the, the network carriers have been able to leverage their scale and are producing $7 billion of annual benefits.
- [05:28]
B
And what are you producing?
- [05:29]
C
20 million. So the, the, the scale is just a very powerful tool to help the network carriers. You know, it's just a lot more valuable here in the US than it is everywhere else.
- [05:41]
B
All right, you spoke about the network carriers being very good competitors. I don't know if you listen to every show. I presume that you do, but I have proposed something called the Angry Glenn theory, and that's Delta President Glenn Howenstein. And that if you anger Glenn too much, maybe with network moves or pricing moves in Minneapolis or somewhere else, he will come down very hard on you. And this is not just sun country, this is any competitor. So I have posited basically that an airline like sun country only gets to grow if Glenn permits it. Is there something to that? Do you have to be wary of what Delta wants and needs?
- [06:28]
C
We deliver a product that they can't compete with where we're variable in the way we allocate capacity. So to the extent Delta could consume the entirety of the capacity out of Minneapolis in March, for example, then there wouldn't be a place for us. But it's an impossibility. Same in the summertime, in the holidays, wherever. So our opportunity is to triple capacity from peak to trough. You know, in the first half of December, we're about a third the size that we are on scheduled services the back half of December. That level of variability is our differentiating factor. I don't think anybody else can do that and keep unit costs where we do. So I think there's, there's always going to be a place for us.
- [07:13]
B
Has Delta recently at all dropped the hammer on you for something that you've done where you're like, whoa, we didn't expect that response.
- [07:22]
C
I can't think of anything. There was a lot of capacity growth in 2024 in Minneapolis. So you came out of COVID They had a lot of, on their coastal hubs, they grew those really rapidly. Then they turned their attention to some of their Mid Continent hubs, Detroit and Minneapolis. Our yields certainly came down with their growth and they've since rationalized and I think both of us are Doing a really good job in Minneapolis. For point of origin traffic in Minneapolis, we're about 20%. That's 50% of non Delta customers. I think that's about natural share.
- [07:56]
Their share has. Even though we've grown pretty rapidly since I got to sun country, their share in Minneapolis has been very stable. So I think it's a. I think we're both doing just fine there.
- [08:08]
A
Let's talk about that peak, off peak, the variability that you're talking about, because this has been the bane of the existence of the ULCC since the pandemic. Right. Spirit in the second quarter utilized their airplanes less than eight hours a day. So how do you make that work? Is it the charter business that really allows you to have that variability and is it something that you think can scale, that others could do something like this? I know you said they don't now, but do you think it's something others could replicate?
- [08:37]
C
So it's charter and cargo that make up about 40% in aggregate, those two businesses of our total block hour production.
- [08:45]
A
Right. But the cargo's not variable. Right?
- [08:47]
C
Cargo's flat. But the point is that it stabilizes the variability in sched service so that we don't have to pay min guarantees in off peak period. But you also need really low fixed costs. So you have to build an airline to manage through that kind of variability in order to be able to execute in the space. And add to that that we're in major airports, so distinct from allegiant. We're flying to the biggest airports in the world and able to do it on, you know, less than daily schedules and schedules that change for seasonality and things like that.
- [09:17]
A
Yeah. So when you buy Spirit, uh.
- [09:22]
Brian, it's nice to see you shaking your head at me in person.
- [09:26]
B
It was never funny.
- [09:28]
A
He doesn't think anything's funny though. No. But if, let's say you were to go and run Spirit.
- [09:34]
C
Yeah.
- [09:34]
A
You know, is there a world that these bigger ULCCs could do something?
- [09:39]
C
Dave's a great executive and he knows all our secrets. So if, if it could be done there, he'd do it.
- [09:45]
A
Well, you didn't have much time.
- [09:46]
C
Yeah. And that's the point.
- [09:47]
A
Right.
- [09:48]
C
Is like I think they need to rebrand. I think they need to focus on leisure and therefore be variable in the way they think about the capacity. It's very difficult to do that when you're paying four or five hundred thousand dollars a month on a lease rate on a new airplane before maintenance. I think it's a, I mean Bankruptcy gives you a lot of levers to.
- [10:08]
A
Pull, but.
- [10:10]
C
Without a bankruptcy process, I don't know how you change that business.
- [10:15]
B
So I listen to a lot of the Frontier earnings calls and I'm paraphrasing here, but it sounds to me sometimes like Barry Biffle's strategy is we're just going to wait out this cycle. Things always change. They changed in the 90s, they changed after 9 11. I want to ask you specifically about just this Tuesday, Wednesday, Saturday thing because you were pretty good after Covid about saying that some of these trends that we thought forever, we're not actually going to last forever. Tuesday, Wednesday, Saturday, are those just going to be bad days for discount carriers?
- [10:51]
C
Every day is different, right? I mean, so I think it's unfair to classify all Tuesdays as crap. I mean, we have really good Tuesdays in certain seasons of the year. So the way we think about capacity is the plane's going to do the best thing it can do on that day. If we run out of planes, we're fully allocated, we're not things to do, the rest of the fleet is grounded and we make that decision independently of what the day of the week is. It's just, just, you know, how we think about the business. So if you take our best 150 days, this is really interesting. If you look over the last 365 days and compare that to the 365 days prior to Covid, the best 150 days have the exact same margin. In other words, we're higher fuel price, we have higher labor costs, we have higher airport costs, higher maintenance costs and it's all been able to be passed through to the consumer. But on the other side of that, you know, the worst days are much worse. And we've responded to that by concentrating our flying more on the best days. And so that I think that sort of summarizes the struggle of the high frequency carriers in the post Covid environment is that there's, you know, costs have gone up and fares in off peak periods just haven't responded because there's plenty of capacity.
- [12:05]
A
So a lot of this I think does revolve around fleet, right. And what you can and can't do, you may be able to go and fly on peak days and park airplanes on off peak days because you have a fleet that's low fixed cost for the most part. Other recent news, we have Avelo buying brand new E2s. They previously had a similar model to you using, you know, NGs that were lower cost.
- [12:38]
So why, why is That a bad idea.
- [12:42]
C
I don't know the details of the deal obviously, but we spent some time looking at the E195 both at Sun country and SAS, which I'm involved in, and they ended up ordering it at sas. It's a great airplane. Andrew is one of the smartest people I know. I mean, it's the best thing for them if they're doing it. Our, our focus is gauge really. You know, when you're flying into Newark and LAX and some of the most expensive airports in the world, you really need to put as many seats behind the cockpit as you can. And that significantly handicaps a smaller gauge airplane, regardless of the cost. But I think it's a good machine. I think it's a, you know, he clearly needed to make a change to the direction they were going in. And you know, I'm sure that it's, it's the right thing for them.
- [13:33]
A
So it doesn't work for you, but does.
- [13:35]
C
Well, not yet. I mean, we're still looking at it, but yeah, sure. As of now, don't expect an order.
- [13:40]
A
All right.
- [13:41]
C
Immediately.
- [13:41]
A
Well, now that they have a US carrier, the price probably just went up for years apparently. But does a new aircraft work for you?
- [13:50]
C
I think that you could, yeah, like a new. So a couple of considerations. One is when you get the scale big enough, a new order and you say that these airplanes are more efficient than your older ones, we're going to allocate it on the first and longest leg of the day. So that utilization is going to be concentrated on this newer equipment type. We have the scale in Minneapolis and with the 737 platform to take 10, 15 or so airplanes and operate them double digit hours on average. And so yeah, we have an application for a new airplane. It, the problem though is that, you know, it's not a replacement. I mean we still need planes that operate six, five and a half hours a day at the bottom end of the opportunity spectrum. And right now that really needs to be an older airplane. By the way, the ownership cost can be low with a new airplane. You just need to finance it and take the ownership benefit over a really long period of time. And when you do say a lease back, you take the benefit up front and then you pay over the life of the lease and over time is a much more expensive way to own an airplane.
- [14:58]
B
Jude, I have heard from some airlines that it is tough right now to source new airplanes and get a good deal on them. I'm wondering if you call Airbus and you call Boeing, leave Embraer out of it for a moment. Do the salespeople say, I'm sorry, I'm on the other line with Ed Bastian and Scott Kirby. They want hundreds of airplanes and I don't have time to sell you 12 airplanes. Or do they take you seriously?
- [15:21]
C
They tell you that they're sold out through the end of the decade, but.
- [15:25]
B
They'Re not sold out for Scott Kirby.
- [15:27]
C
Well, Scott already made his order, so.
- [15:31]
B
All right, well, if Robert Eisen called up, they might not be.
- [15:34]
C
They might not be.
- [15:35]
A
Boeing is probably not sold out for Ed Bastian.
- [15:38]
C
I mean, look, look, they're making less than 40 units a month. Boeing is. And they need to get that higher or else we're going to have a sustained shortage.
- [15:46]
B
Let's take a short break here and we'll be back soon.
- [15:50]
A
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- [16:09]
B
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- [16:12]
A
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- [16:13]
B
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- [16:28]
A
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- [16:34]
B
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- [16:46]
A
Honestly, that's when I really know what I want. If I've had a long day, I'll pay more for a little comfort and quiet and maybe a good meal.
- [16:54]
B
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- [17:12]
A
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- [17:17]
B
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- [17:28]
A
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- [18:03]
B
Of our interview with Sun Country CEO Jude Bricker.
- [18:08]
All right, take me through what I assume is one of your more brilliant ideas, because all of your ideas are brilliant. You have some 737, nine hundreds that are entering the fleet very soon. And my understanding is that you bought them, they were on lease to Oman Air. You, you collected lease payments for a while, and now you're taking them back. I assume that you're brilliant, but has that transaction worked out the way you wanted? And how did you even come up with the idea to do that? Because I think it's kind of rare.
- [18:38]
C
It's an excellent deal. Yeah. I mean, so we did a lot of transactions coming out of COVID Planes were pretty cheap then with the CARES act, the US Carriers had a lot of capital compared to carriers around the world. And so we did a lot of buying and we couldn't take all the airplanes we bought in at the same time. So this was just an opportunity. It was, it was a little bit different of an airplane. It's not as big a market as the 800. So the owners probably had some concerns about remarketing Oman Air. The current operator was looking to get out of the type, and so they were certainly going to come back. And so it just kind of all worked out. I mean, we have a philosophy of evaluating everything. And this deal was, it was a great deal. So, yeah, we're going to take our first 900 in next week and all five will be in service with sun country by the end of 2026.
- [19:31]
A
Where do you see that airplane fitting best? I mean, you talked about gauge being important because of the cities that you're in, but this is even more gauge. So you know, where, where does that fit best for you?
- [19:41]
C
Yeah, it'll be pretty concentrated across our network, mostly out of Minneapolis and into some of our bigger markets. You'll probably see it in LAX, but. But certainly expected into Boston, JFK, Newark, Seattle, LA and Dallas.
- [19:54]
A
Yeah, so gauge is certainly something that has been top of mind lately. I think we see we've seen such a push toward gauge. A lot of 321s with 230 seats that is exceedingly hard to Fill as you continue to grow. Not you, but in general.
- [20:13]
So how do you view that with your gauge? Is it because of your size that you still need more gauge?
- [20:21]
Do you hit a point where you start saying, well, we need to go back and think about that 195 again and you know, how do you think about this?
- [20:28]
C
Well, things are either really good or not appropriate to operate. You know, like there's not like these, there's not as many shades of okay where you can say, look, if we down gauge a little bit, we'll make this market work. We don't think about it in those terms. The Boeing spill model that probably you grew up with, I don't think is appropriate for us. We're maybe a quarter or less of the capacity in the market at any given time. So our gauge is, you know, those seats are either needed or they're not, in which case we're not flying. So it's, it's not about fine tuning. It's really more about putting as many seats in the market at that given time. And then, you know, the plane's still zero when it's parked.
- [21:13]
A
But you say you're still interested in potentially the E2 down the line?
- [21:17]
C
Yeah. What's interesting about the E2 is, is you can, you know, under certain assumptions, you know, one of which is how much the airplane costs, get to a chasm, neutral opportunity, and at the same utilization. If you can fly the airplane at the same utilization with the same chasm, then it's probably worth looking at and it gets pretty close under, you know, and there's issues with the engine and a lot of risk associated with a new airplane. Our investors certainly wouldn't initially like it, so there's a lot of hair on that deal for us. But I think the same chasm, smaller gauge, that works.
- [21:55]
B
Jude, somehow here in the air show, I've become the only person that asks about brand, as if these, these companies are not consumer facing companies. And I believe your, your CMO is sitting right behind you. He is as we speak today. I don't want to offend you too much. I have a habit of offending CEOs sometimes. But outside of Minneapolis, where I think your brand resonates pretty well and people understand it. No, nobody has any idea what, what, what sun country is. I know you fly here to la. Okay. Nobody is a little much. I see how you're, you're looking at.
- [22:28]
A
Me here, but I hear they're big in Detroit.
- [22:30]
B
Yeah, you have to go into other markets. Maybe you do at Some point, have a bigger operation in Detroit as Brett wants. How do you persuade people to fly sun country if they've never heard of your airline, which has a bit of a funny name.
- [22:43]
C
Yeah, fair point. I think honestly it's going to be on price initially, which is a big hurdle. So you're going to have to spend a lot of money both on discounts and on marketing merchandising to try to get your name out there. So I think it's a big hurdle to start a new market in this environment. So that's kind of one of the hope is we see rationalization in the low cost space and then those opportunities become a lot more appealing to us to invest that kind of capital. But I think you're right. I mean, we have a good brand in Minneapolis. I think that justifies, if you look at a flight from us versus one from Spirit of Frontier at the same time to the same place out of Minneapolis, we have about A$25 or so premium over them. That's pretty material.
- [23:24]
B
But everywhere else it's tough, right?
- [23:26]
C
Yeah, everywhere else it's hard. I think we'd be a similar value proposition, at least initially to the consumer.
- [23:32]
A
Is a third party distribution then really important to you?
- [23:37]
C
It's lessening, but yeah, I mean we definitely would lean on GDSs to get the word out as we move into a new market.
- [23:45]
We do. Another one would be we have a partnership with Apple. So to call out our Dallas operation and that helps take a lot of the capacity that we have to sell out of the market. We, we do block deals with them. So that helps as a startup initiative. So I think that there's. Look, right now, I look out there, planes have gotten a lot more expensive. As I mentioned earlier. There's about 150 days where we can justify adding a lot more capacity. There's not a whole lot of growth to be had. More expensive airplanes, same amount of utilization opportunities. So you think, you know, I mentioned earlier, if it's a new airplane, it's operating 1015. If it's a used airplane, it's at the other end of that operating maybe six hours a day on average. And it's, it's tough out there right now. Now that, you know, we're all looking for the catalyst to change that. It can be kind of continued cost increase from the network carriers such that they continue to raise prices. Rationalization at the lower level on the back of bankruptcy spirit, I think all that will make it more appealing. But right now, I mean, we're looking at airplanes that are 50, 60% more expensive than they were pre Covid for the same airplane. The opportunity set is 150 days across the calendar.
- [25:05]
To buy an airplane, to go after something, a new market, a non Minneapolis market, is really hard to make that math work at this point.
- [25:12]
A
Does that make you less nimble then? I know you guys kind of pride yourself on the variability, but let's say there is the opportunity. Let's say Spirit goes chapter seven.
- [25:22]
C
Yeah.
- [25:22]
A
And you say, all right, Detroit. I know Brian's gonna yell at me. I'm using this as a. As a construct, Brian. But, you know, let's say that you wanted that. You know, you can go back to Southwest when Midway failed and they went in and said, okay, we're gonna take this. Right. Do you have that ability, or is it too hard to do something like that right now?
- [25:42]
C
We have some ability, but to go out and get more airplanes isn't really an opportunity right now. But I would call out. I mean, we. We grew cargo, eight airplanes this year already, so cargo's roughly doubled on a revenue basis. And we did that with, you know, by drawing down Minneapolis. We'll rebuild Minneapolis, and certainly if there was an opportunity on sched service outside of Minneapolis, we could temporarily draw down Minneapolis, reallocate those aircraft into that opportunity, and then rebuild Minneapolis. I don't think anybody's going to come for many. So we can. That's our variable capacity allocation.
- [26:19]
A
Angry, Glenn?
- [26:21]
B
Yeah.
- [26:21]
A
Are you?
- [26:22]
B
Perhaps Delta isn't going to be coming for Minnesota, but Barry Biffle seems to be sending airplanes wherever he desires right now. Are you sure nobody's coming from Minnesota?
- [26:31]
C
Yeah, well, he came to Minnesota and he's left. They're down about 80% versus pre Covid levels. I think you can call Minnesota two aircraft, two airline market at this point.
- [26:40]
A
Which is funny, because I believe Barry used Minneapolis as an example of the types of places he wanted to deploy capacity into.
- [26:47]
C
He had mentioned that at one time. Yeah.
- [26:49]
A
Vegas and Orlando were not working.
- [26:51]
B
I want to ask you a question about my new favorite airline because I had the honor and the pleasure this summer of visiting Europe, and I got to fly Jet2.
- [27:01]
C
Yeah.
- [27:02]
B
It was just an extraordinary experience. And they are not the only airline in the world similar to yours that has gone pretty much all into the vacation package business. We've got EasyJet, we've got Jet2 here in the United States. JetBlue thinks it's going to save its company. And I hear from people at these airlines that potentially these margins are as good or Perhaps better than loyalty and that LCCs and ULCCs are in a good space for this. My understanding is that you are not all in on the vacation package business. Do you look at it? Do you salivate over these possible margins?
- [27:40]
C
So Jet2 is probably the closest allegory to our airline that exists in the world. Philippines, the majority owner over there and former CEO is a good friend of mine. They're a fantastic operator. They focus on used airplanes, variable capacity model. They also used to have a cargo.
- [27:56]
B
Business and they have a great jingle.
- [27:58]
C
Yeah, they used to have a trucking business as well. They have a great jingle.
- [28:01]
A
That's all the kids know it.
- [28:03]
C
So I love the airline, I love the business and I think about them a lot and read their reports, etc. So holidays in Europe are just more widely accepted. I just don't think that it's the same opportunity in the U.S.
- [28:20]
And further, I think they subsidize those holidays with discounted airfares. And so you know, to me, if you're going to attach a third party product to an itinerary, the itinerary has to yield more for the airline. So you know, we spent a lot of time at Allegiant in my past looking at trying to do packages. The math never really worked out. Hotels were pretty good in Vegas, cars were pretty good in Florida. But beyond that it was a pretty challenging space. I mean we have a lot of international markets at sun country that would be perfect for that kind of setup. We, we do focus on some hotel packages and take rates are pretty low. So I think it's always going to be a product for us. It's never going to be to the scale of Jet2holidays and you know, things may change but I see things probably moving in the opposite direction.
- [29:15]
B
Does that mean that you are bearish on JetBlue paisley? Because they've been talking my ear off about how this is really going to help the company with.
- [29:24]
A
No either.
- [29:25]
C
I am bearish. Yes. Yeah, I don't think there's that much opportunity.
- [29:28]
A
Let's talk about loyalty for a second. You talked about this earlier about the issues maybe for ULCCs in the US that the whole loyalty business, the credit card business is so much bigger here for the big guys.
- [29:42]
C
Yeah.
- [29:42]
A
And the haves and have nots. Should these things be made illegal? Should the.
- [29:48]
C
I think they should open up. Yeah, I think they should open up the network. Except for competition because what happens is merchants are paying two if you have a premium card up to 4% exchange rates on the Transactions. Those merchant fees are then for my points, then I'm coming come for his points. Then they're monetized into, into loyalty programs for the airlines, which is the most popular loyalty program for consumers. And so, you know, you're basically taking small business, you're increasing the cost to the consumer for merchants everywhere. You're taking small business margin and reallocating it to some of the wealthiest Americans in the country. I don't think it's an appropriate scheme. You just have to look at what we've done to debit cards in the U.S. those fees have gone down dramatically and then what the Europe has done to credit card fees, which are about, you know, 20% of ours. And that's a much better model in my view.
- [30:46]
A
So then if we take that further, what likely happens, right, is the biggest guys in the US that are raking in cash on this right now, that goes away or shrinks significantly. Fares have to go up and creates more opportunity for you. Let's say you weren't running an airline. Do you think that's better for consumers then? Even though it's going to result in higher airfares overall to have.
- [31:12]
C
Yeah. I mean, airfares as a percent of the consumer budget is a relatively small line item. I would much rather see prices go down for food and beverage and everything else you spend on, on your credit card, dining, etc. And make small businesses more viable by increasing their margins out of the gate by 2%. Yeah, I think it's. I think it's a good thing for the country.
- [31:36]
B
Jude, I know you're going to stay at sun country for forever.
- [31:40]
A
I think he's going to run for office.
- [31:41]
B
I think that you have a lot of talent and I can't wait, someday you're going to be the CEO of maybe a big four airline.
- [31:48]
C
Oh, goodness.
- [31:48]
B
And we're going to interview you and you're going to say, oh, interchange is fantastic. These are great programs.
- [31:54]
C
Got to give the consumer what they want.
- [31:56]
A
That's right.
- [31:57]
C
That will be my. Yeah, I'm glad that you already wrote that speech for me. I appreciate it.
- [32:01]
B
You're welcome. All right. So Brett spent a lot of time today.
- [32:05]
C
Yeah.
- [32:06]
B
Talking to you about Spirit. Yeah, he loves that much time for some reason.
- [32:10]
C
Yeah.
- [32:11]
B
You and I have had prior conversations where we talked more broadly about consolidation, and I feel like you've told me that not just one airline maybe needs to consolidate, but there needs to be a lot more consolidation, especially in the lower cost space. So leave Spirit out for a second.
- [32:29]
C
Yeah.
- [32:29]
B
What do you think needs to happen below, say the biggest. But they're really the big five now in terms of consolidation of airlines.
- [32:38]
C
Well, so Alaska and Hawaiian already happened. So there is some consolidation happening in the space.
- [32:46]
I think you could characterize what JetBlue and United are doing is kind of a little bit of consolidation, at least rationalization.
- [32:56]
So I think it's ongoing that we're just kind of eating around the edges of the issue at this point. I don't know. I mean, I'm mostly a spectator because we have a very different business with high margins. So it'd be, you know, it'd be a challenge, I think for us to participate, but it certainly makes sense. And I'm, I'm pro consolidation, but I don't. It's clearly an administrative backdrop that is constructive.
- [33:27]
There's. Yeah, you know, the, the low cost space is struggling. They're looking for catalysts. I don't know what else it's going to take to get, to get airlines together.
- [33:38]
A
What do you think this country can support in terms of the ULCC space? You know, obviously I think Southwest doesn't count. You know, JetBlue probably going in the other direction. But if we're talking more about, you know, pretty much all the airlines run by people you've worked with.
- [33:59]
C
Yeah, sure. I mean, we benefit from a lot of the same things that the majors would benefit from, but more so. So more access would be better to airports, more efficient. ATC would be have an outsized impact on ULCCs that operate thinner schedules. So there's a lot of things that benefit the whole industry that would benefit us more that the, that the regulators should focus on. There's been talk about rolling back some of the consumer rules. One of the benefit, there's maybe some downside, but one of the benefits will be more transparency so that you can see where your taxes are. I think that'll be a positive.
- [34:35]
You know, if there is consolidation opportunities, I think the administration should support that. We want strong offsets and competitors to the big four.
- [34:45]
There's been a lot of escalation behind the scenes that I wish that the, that there was just more awareness about. So the OEMs have been really aggressive on escalating material costs and, and that's just bad for the consumer at the end of the day because those costs have to be passed through. I don't know if there's a whole lot that the, that the regulators could do to support that. But you know, we spend a lot of time talking about labor availability, particularly Pilots, that's over. There's a surplus now.
- [35:19]
I think if I were a regulator, I'd focus on making the system more efficient so that you can operate thinner schedules without, you know, managing the disruption. One other thought would be just around risk. So when we launch a once weekly schedule to a market, the, you know, there's some risk that we're going to have these relatively expensive operational disruptions. And if, if you want to make it worse by consumer protection rules that it's even more expensive. You may not get what you're looking for. Where you're looking for, you know, fairness for the consumer, I want that too. What you may get instead is just no service.
- [36:03]
B
Jude, I'm sorry, I have to go here, but are you saying that you again want to strand passengers in.
- [36:08]
C
I never want Mexico.
- [36:10]
B
That was kind of a big deal when you did that. I don't know how many years ago it was before the pandemic never went.
- [36:15]
C
A stranded passenger ever. I just think if you, what consumers want is nonstop low fare service, that's just what they want and they react to that. I can show it to you in real time on my bookings. If I lower fares, bookings accelerate. You can watch it immediately response. It's very elastic and I think we're, you know, you build in all these protections and I see it in Europe and the outcome may be that you just don't have that service. You end up hurting the consumer you're looking to protect.
- [36:43]
A
I guess. You know, you talk about people want a low fare non stop service but Brian doesn't want that. He wants a nice cushy seat and he wants all his points and miles and his upgrades and you know, all that kind of stuff. The premium boom is a real thing.
- [37:00]
B
And it's going to last forever.
- [37:01]
A
That's the question. Is it going to last forever? Everyone's, well, we have all these Apex.
- [37:06]
C
I mean we're talking about onboard connectivity here. I think that, yeah, the product.
- [37:14]
Discount of a baseline product will widen. In other words, people will be willing to spend a little bit more. But still fair is by far the driving factor. I don't think that's going to change. And, and let's be clear, there's sec. It's not a homogeneous group of consumers. We're focused on the median household income earner. You know, Delta Fair, $400 one way, family of five, four grand to go see grandma. Ours is 100 bucks. I think we're, we're trying to provide a service here to enable more people to Fly. That.
- [37:48]
Is kind of the motto of the low cost space. I think it's alive and well.
- [37:53]
And, you know, the people that most care about product are the ones that aren't paying for their tickets. So business customers hold on though, because.
- [38:01]
A
Spirit, you know, they have a four pronged plan in their bankruptcy and one of those is first class premium economy. Yeah, it's not actually a bankruptcy strategy, but it's something they've had for about a year. Frontier did the same thing after. Yeah, some personnel shifts from Spirit, but so, you know, what does that say about that? Do you think they're missing the point here?
- [38:22]
C
So we have a premium economy product at Sun Country. The.
- [38:28]
Price point of that has widened relative to our basic economy seating option. So, yes, we've seen some acceleration in premium, but it's minor. And I think they're going to see the same thing. It's much more, much more relevant into someone's willingness to pay. As to what the, the going rate on the airfare is of Delta, say, than what the product offering is, I think it's a. I don't think they're going to get a lot of yield premium based on, based on those product improvements.
- [38:58]
A
So you're not bringing, you're not bringing back the old sun country first class. You don't have those seats sitting in the back.
- [39:03]
C
That's not going to happen.
- [39:04]
A
Just throw them on the play.
- [39:06]
C
No.
- [39:08]
B
All right, Jude, I am pleased to see that you are still America's coolest airline CEO, even though today you are not wearing the cowboy boots. Thank you for coming on the Air Show.
- [39:21]
C
Good to see you guys.
- [39:22]
A
Thanks.
- [39:23]
C
Thanks, guys.
- [39:28]
A
You've been listening to the Air Show. If you have suggestions or questions for us, or if you're interested in sponsors sponsoring the podcast, go to our website, theairshowpodcast.com to get in touch.
- [39:38]
B
The Air show podcast was produced and edited by Benjamin Gottlieb. Our theme music is by Joshua Mosher. Thanks for listening and we'll be back soon.
- [40:00]
C
There wasn't any questions that hard. Actually. I'm surprised y' all weren't more aggressive.
- [40:04]
B
What do you want?
- [40:05]
C
Well, we can.
- [40:05]
B
We can go back, right insert. Did you have something to say?
- [40:09]
C
No, no, I'm good.
- [40:10]
A
All right. Scott Kirby says you should all die. What about that?
- [40:13]
B
I asked you that question, remember, at a conference and.
- [40:16]
C
Yeah, I mean, look, Scott is so. His comments at the most.
- [40:21]
B
Are we still rolling?
- [40:22]
C
Yeah. No, no, no, it's good, it's good. Look. So he's clearly focused on margin now. Which is really positive for the industry. The. I think it indicates capacity rationalization, which is positive. Further, he doesn't consider us a competitor, else he wouldn't be able to make the claims about superior margins. So that feels so. No, I think it's great. And look, I mean, if Scott runs a great airline and if he works hard and stays focused, I think he can get his margins up to ours.