Sun Country Airlines employees, who took 50 percent pay cuts last week, caught a break Wednesday when CEO Stan Gadek restored some of their wages.
Only nine days after the carrier filed for bankruptcy, Gadek decided that Sun Country will have enough cash flowing into the company to pay employees 70 percent of their wages.
"Based upon continued customer support for our business in the form of new bookings, I am comfortable in taking this action," Gadek said in a Wednesday memo to employees.
Gadek had been counting on a $7 million operating loan from Tom Petters to act as a financial bridge until the airline reaches its high revenue winter flying season. Petters owns all of the voting stock in Mendota Heights-based Sun Country and was its chairman. He is in custody on federal fraud and money-laundering charges.
Petters' legal problems forced Sun Country to break away from him, and Gadek announced in late September that wages would be cut in half beginning with early October paychecks.
He promised to reimburse employees for the deferred wages next year.
Now employees will be grappling with a temporary 30 percent pay cut.
"I must emphasize that we are still at risk and that I have not yet brought in new cash to the airline," Gadek cautioned in his employee memo.
But the pay restoration and report of strong customer bookings were welcome news for Sun Country employees, who have been buffeted with a string of bad financial developments since Petters Group Worldwide headquarters in Minnetonka was raided by federal agents three weeks ago.
Sun Country's fleet of Boeing 737s will increase from seven to nine on Nov. 1 as the carrier prepares for heavy winter flying.
In U.S. Bankruptcy Court Tuesday, Judge Robert Kressel authorized Sun Country to pay American Airlines for maintenance on a Sun Country airplane that is set to reenter the flying schedule in a few days.
"Many people who fly on Sun Country have flown on us for years and years" and remain loyal, Sun Country spokeswoman Wendy Williams Blackshaw said Wednesday. "I don't think that people automatically associate us with Petters," she added. "The [Sun Country] brand is so strong in the market."
However, Blackshaw said that over the past three weeks, Sun Country experienced an "immediate dip" of 5 to 10 percent in bookings on some days when there was bad news in the Petters fraud case.
Now, she said, "sales are back to where they were before all of this happened," a reference to the Petters fraud case and the Sun Country bankruptcy.
In the past few years, several carriers, including Northwest Airlines and Delta Air Lines, entered Chapter 11 and continued to operate normal schedules.
With that history, Blackshaw said, people still are buying tickets on Sun Country as it reorganizes in bankruptcy.
"We've been really clear about the fact that we didn't go into bankruptcy because our business model is broken," she said. "This happened because of the situation with Petters."
Liz Fedor • 612-673-7709