St. Anthony: Sun Country Vacation Closure, Insider Sales May Damage Reputation

Sun Country Airlines experienced financial and reputational turmoil over the Christmas holidays.

Passengers were shocked by the collapse of widely publicized software by an airline supplier. The shutdown and restart on December 27 and 28 displaced 8,000 passengers. The mess was made worse by COVID-19 and bad weather which taxed the entire airline industry.

“It’s mind-blowing,” said Paul Omodt, a communications veteran who travels over 100,000 miles a year. “Sun Country has a smart CEO, but they made unforced errors. And those are the hardest to forgive.”

Sun Country, said Omodt, has a long way to go in regaining the confidence of passengers.

“Sun Country is a vacation airline that doesn’t have a lot of flights,” he said. “You say, ‘Next time, I’m just going to go to a bigger carrier. When you ask people about Sun Country they say [management] couldn’t get out of a paper bag. “

CEO Jude Bricker said the software crash came at the worst time for a leisure airline, during a weekend with peak demand. AIMS Airline Software’s backup system also failed.

The result was the cancellation of 32 return flights. Customer service lines were blocked and aggrieved passengers mocked Sun Country on Twitter and Facebook. The carrier always tries to compensate disturbed travelers.

The financial damage will be quantified in the next 2021 results report.

“We are evaluating [financial] damage as you go, ”Bricker said in an interview last week. “The hardest part is assessing the damage to the brand and reputation. We probably won’t know for a while. We were doing very well with improved punctuality [and other] performance.”

Omodt and other observers have said it could haunt Sun Country for years to come.

Sun Country, under Bricker’s four-year tenure, has grown from a lag among US carriers to a high-level record in terms of reliability, better customer service and profitable growth. Today it has 2,000 local employees.

The 35-aircraft airline, a fraction of the size of globe-spanners like Delta and United, posted a record operating profit of $ 96.2 million on revenues of $ 450.5 million over the past nine first months of 2021 thanks to its regular domestic, charter and cargo services.

Apollo Management, a New York-based investment firm, bought Sun Country in April 2018 for $ 188 million and spent more than $ 200 million on fleet and technology upgrades, according to filed documents. . After its IPO in March 2021, the company’s value jumped to $ 2 billion, before recently hitting around $ 1.5 billion, or about $ 28 per share.

Sun Country insiders, including Apollo, have done very well thanks to stock sales since the IPO. Even though Sun Country says Bricker still holds the second-largest stake among airline CEOs, he has sold more than 90% of the shares he held directly, according to securities records.

Bricker said he invested approximately $ 6.5 million, or nearly all of his net worth, in shares of Sun Country in 2017 at an adjusted price of $ 5.30 per share. After announcing he would, he sold 1.2 million shares last fall for $ 31.28, or nearly $ 38 million in gross proceeds, according to public documents. This left Bricker with 77,000 shares held directly.

Bricker still owns an additional 1.5 million shares through stock options granted to him by the board of directors.

Rosanna Landis Weaver, Executive Compensation Program Manager at As You Sow, which advises institutional and other investors on executive compensation, said: “It is not good governance practice to sell such a high percentage of holdings only shortly after the IPO – or at any time. In fact. , there is growing interest among [outside] shareholders to demand longer holding periods on the shares just for this reason. ”

Bricker profited from the increase in its share value through improved performance of Sun Country which led to the IPO in a warm market. Bricker, who also received $ 540,000 in salary and bonuses in 2020, said the stock option grant demonstrates his interests are aligned with the long-term interests of Sun Country shareholders.

According to Yahoo Finance, five of the six stock analysts who follow Sun Country continue to call it a “buy.”

But the airline industry is volatile and has lost more money than it has made in its history, noted Biff Robillard, a veteran Twin Cities investment manager who does not own a Sun Country shares, but said his performance improved under Bricker. Still, Robillard wouldn’t be comfortable as an investor until he saw insiders buying more shares.

“They only buy for one reason and that’s because they think the stock is going up,” Robillard said. “They sell for many reasons. None are optimistic.”

Omodt said Sun Country’s path to public buyback is to be transparent about what the airline is doing to fix its systems to avoid another crisis like in December.

“They have to be explicit about what they need to be,” he said, “and they have to prove that over time.”