Sun Country Airlines will end its roller-coaster ride this year with a dramatic financial turnaround.
The carrier lost $17.8 million in the fourth quarter of last year, but it will finish this year with a break-even quarter or better, CEO Stan Gadek said Tuesday.
Gadek is reimbursing employees today for 40 percent of their early October wage sacrifices. The airline filed for bankruptcy in October and made two rounds of wage reductions this year to cope with a cash shortage.
Gadek said he plans to pay back the rest of the deferred wages to employees by April, and they'll get 3 percent interest for Sun Country's use of their earnings to fund the short-term cash crunch.
The 10 to 15 percent pay cuts that took effect at mid-year will expire on Dec. 31 and Sun Country's employees will be back to receiving 100 percent of their pay rates.
"My commitment to them was to give them back their money as quickly as possible, and I feel that we are in a position to do that," Gadek said.
Gadek, who formerly served as chief financial officer at AirTran Airways, inherited a tough financial situation from his predecessor as CEO, Jay Salmen.
Businessman Tom Petters, who owns all of the voting shares in Sun Country, and Salmen pursued a business strategy that emphasized scheduled service with 14 airplanes during last winter's peak flying season.
Sun Country stacked up losses of $7.8 million in the third quarter of last year. That was followed by a $17.8 million loss on $54.5 million in operating revenue in the final quarter.
Petters, now jailed on fraud charges unrelated to Sun Country, provided about $25 million in operating money to subsidize Sun Country's operations.
Gadek, who joined the carrier in March, negotiated a 10 percent pay cut for union employees and began a 10 to 15 percent pay reduction for non-union employees in the middle of the year. He pared Sun Country's fleet and unprofitable flights, raised passenger fees, and secured charter contracts, especially military flying.
By the third quarter of this year, Gadek and the Sun Country employees had reversed the financial fortunes of the Mendota Heights-based carrier.
Sun Country generated $59.8 million in operating revenue in the third quarter and sliced its net loss to $543,000, according to a recent filing with the U.S. Department of Transportation.
In the third quarter, the price of crude oil hit a record $147 a barrel.
Although it had made substantial progress in revising its business model, Sun Country filed for bankruptcy in early October after Petters was arrested on charges that he was the architect of a major fraud scheme. He has pleaded not guilty and is awaiting trial.
Gadek had been counting on Petters to provide a final operating loan before Sun Country's revenue would sharply increase during the winter flying season.
When the Petters charges surfaced, Gadek turned to Sun Country's employees for help and asked them to forgo part of their pay during the final three months of the year. With the Oct. 7 pay checks, employees received just half of their normal pay.
"We took control of events and created our own luck to forge an outcome that many thought was impossible," Gadek said in a Monday e-mail to his 850 employees.
Sun Country also has discovered an upside to this month's bitter cold weather in Minnesota. "Whenever we have a blizzard or cold weather, we do see an increase in bookings," said Wendy Williams Blackshaw, Sun Country's vice president of marketing. With the recession, Gadek said that many passengers now book trips weeks in advance, instead of months before flying.
Gadek expects Sun Country to be profitable for the full year of 2009.
Liz Fedor • 612-673-7709