High oil prices drive Sun Country to cut jobs

In response to historically high fuel costs, Sun Country Airlines on Friday cut 28 full-time and 97 part-time jobs at the low-fare carrier -- about 11 percent of the workforce.

Sun Country is the latest airline to make cuts as persistently high oil prices force the industry to contract.

Northwest Airlines announced capacity cuts this month, but has not resorted to layoffs. ATA Airlines, Aloha Airlines and Skybus ceased passenger flights last week and Bloomington-based Champion Air announced that it will go out of business on May 31. Also Friday, Frontier Airlines filed for bankruptcy protection, but will continue flight operations.

Sun Country CEO Stan Gadek said virtually all of the full-time positions being cut are at the carrier's Mendota Heights headquarters, while the part-time jobs are spread throughout the company.

After watching some airlines abruptly halt operations, Gadek and another top Sun Country leader said that their carrier will not be among the 2008 airline casualties.

Twin Cities businessman Tom Petters, who owns 100 percent of Sun Country's voting stock, has no intention of walking away from Sun Country's financial woes, said Jay Salmen, Sun Country's board vice chairman, in an interview.

"It's important for people to know it is not just Sun Country as a stand-alone entity," Salmen said. He added that Petters and Petters Group Worldwide "are firmly committed to financially support" Sun Country as it adapts to a new fuel environment. "People are pointing fingers as to who is next to go," Salmen said. But he added that Petters has "deep pockets" and will provide Sun Country with the financial backing it needs while Gadek returns the carrier to profitability.

The carrier recently cut its fleet in half. It flew 14 Boeing 737s during the busy winter season, and Sun Country generated $87.6 million in revenue in the first quarter.

Five of those planes it leased from Amsterdam, Netherlands-based Transavia for winter flying.

Sun Country will sublease two of its planes to Transavia for the next several months, which is why the carrier gave temporary layoff notices recently to 45 of its 156 pilots.

Sun Country will operate seven planes for the spring and summer months.

In 2007, Sun Country lost $34 million on total revenue of $234 million. This year, the carrier lost money in the first quarter, but Gadek didn't release that figure.

Gadek, who recently joined Sun Country after serving as AirTran's chief financial officer, said he has recast Sun Country's business strategy. Instead of increasing flight frequencies to entice business travelers to fly on the low-fare carrier, Gadek said Sun Country now will focus on serving the needs of leisure travelers through charters and scheduled-service flights.

He also has added military charters to the mix, and Sun Country flew four military flights last weekend. When competing for those military charters, Gadek said Sun Country is able to include bids with its actual fuel costs.

Sun Country also recently added or increased fees to mirror charges of large carriers. That ancillary revenue will be critical to Sun Country's future, Gadek said. Sun Country boosted its ticket-change fee from $50 to $75 and introduced a $60 fee for overweight bags.

Sun Country emerged from bankruptcy in 2002, and Petters invested in the carrier in late 2006.

Gadek and Salmen acknowledged that they are concerned about speculation in the Twin Cities and within the airline industry that Sun Country may not survive the current shakeout of carriers.

For example, in a Merrill Lynch report, analyst Michael Linenberg referred to Sun Country's plans to recall pilots on Oct. 31, but said "that could be wishful thinking."

But Gadek stressed that Sun Country's bookings have not suffered.

Gadek said, "What differentiates Sun Country from these other airlines is that we have a strong and committed financial backer."

Liz Fedor • 612-673-7709