Increased Amazon flight activity boosts Sun Country cargo revenue

Sun Country Airlines on Thursday reported record cargo revenue of $48 million for the fourth quarter primarily driven by the addition of eight freighter aircraft last year under its transportation service agreement with Amazon. 

Cargo has become an increasingly important prong in the Minneapolis-based carrier’s diversified business model — it is best known for passenger service to leisure destinations and also operates charter flights. It agreed last month to be sold to Allegiant (NASDAQ: ALGT), another passenger airline that mostly serves secondary markets. Allegiant has said it welcomes the Amazon business.

Cargo revenue increased 68% year over year behind 50.6% growth in flight hours. Sun Country (NASDAQ: SCNY) has operated a dozen Boeing 737-800 converted freighters in Amazon’s network for six years. Last year, Amazon transferred eight more aircraft from another vendor to Sun Country. Full-year cargo revenue jumped 44.6% to $155 million. The cargo business doesn’t generate huge amounts of revenue compared to all-passenger airlines like Delta or even American, which benefit from widebody international routes. But at 17% of total revenue, cargo represents a much bigger share of the pie than at the big passenger airlines where cargo accounts for about 3% of revenue, and it serves as a hedge against up-and-down passenger demand.

The carrier reiterated that it plans to add two freighters, supplied by Amazon, bringing the fleet to 22 cargo aircraft. The new planes are expected to be operational in July. One of the new freighters will be utilized as a spare to ensure schedule reliability for Amazon, according to the earnings report.