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Nov. 15, 2007: Petters buys all of Sun Country
The entrepreneur bought out his hedge-fund partner to take 100 percent ownership of the low-fare but money-losing airline.
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Petters Group Worldwide, led by CEO Tom Petters, will become the sole owner of Sun Country Airlines today.
A year ago, Petters and Whitebox Advisors, an investment firm in Minneapolis, bought the low-fare airline based in Mendota Heights.
In the ensuing four quarters, Sun Country has lost nearly $27 million. Now Petters is acquiring Whitebox's stock in the airline.
"They are a hedge fund. We are an operating company," Petters said Thursday in an interview. "I made a decision to buy out their interest and operate the airline."
Minnetonka-based Petters Group didn't disclose terms of the transaction.
When Petters and Whitebox acquired the carrier in October 2006, Petters said he knew "what a superior product it was." The airline operates new Boeing 737-800s, serves hot sandwiches in coach class and has received high marks in national surveys for its friendly customer service.
"I knew going into this that we would incur losses for sure, unless I was a magician," Petters said. He said he was prepared to lose money for a while.
"We knew we needed to make certain investments," he said, including upgrading information technology, creating a passenger rewards program and expanding marketing efforts. The airline also took delivery of two new planes this year, boosting its year-round fleet to nine. Sun Country leases additional airplanes for the heavy winter travel season.
Sun Country has not had a full year of profitability since 2003. Its total losses for the past four quarters were deeper than for the previous four.
The privately held company is required to file quarterly financial statements with the U.S. Department of Transportation. Those records show a $9.5 million net loss for the fourth quarter of 2006, a $389,000 loss for the first quarter of this year and a $9.1 million loss for the second quarter.
Sun Country executives said they will file a report that shows a $7.8 million net loss for the third quarter of this year, when the carrier had total revenue of $52 million. Total revenue over the past four quarters was about $230 million.
In contrast, Eagan-based Northwest Airlines had net income of $244 million on operating revenue of $3.4 billion in the third quarter.
Sun Country flies to 13 cities year-round, including Las Vegas, New York, Washington and Los Angeles. It serves 20 cities on a seasonal basis, including tourist destinations such as Acapulco and Puerto Vallarta in Mexico.
Petters said he wants to continue to make Sun Country grow and attract both leisure and business travelers. The airline employs about 1,100 people.
Sun Country has undergone several ownership changes in recent years. In the late 1990s, Sun Country was purchased by Bill La Macchia of Milwaukee, and the airline piled up huge debts as it expanded rapidly and tried to compete with Northwest for business travelers.
Sun Country ended up in bankruptcy in early 2002, and key assets were purchased by an investor group led by Twin Cities businessman and lawyer Robert Daly. The Daly group sold the carrier to Petters and Whitebox last year.
Liz Fedor • 612-673-7709
Liz Fedor • lfedor@startribune.com
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