Sun Country's strategy: adapt, overcome, persevere

For Sun Country Airlines, Minnesota's bitter winter was a blessing.

After a mostly weak 2013, strong passenger bookings from December through March to warm and comfortable vacation spots kept the airline strong.

But being in the black doesn't mask the stiff competition that Sun Country faces in the bare-knuckle world of low-cost airlines where even big-boy legacy carriers sometimes vie for the budget-minded traveler. Nor does it lessen the carrier's strategic dilemma as it tries to balance its interests among leisure, business and charter service.

"We've always survived on our ability to adapt to a changing world, and that's what we continue to do today," said CEO John Fredericksen in an interview last week. For example:

• When charter flying for the military dropped off as deployments declined, Sun Country picked up charter service between Florida and Cuba for Cuban-Americans and Cuban citizens who now have more freedom to travel between the two countries for religious, educational and family reasons.

• When twice-daily service to Chicago's Midway Airport didn't pan out with business travelers as expected, the airline reduced flights to seven weekly over four days — Thursday, Friday, Sunday and Monday.

"We're going to measure growth on what the marketplace tells us," Fredericksen said. "We're not in business just to grow."

The last year has been one of transition for the Mendota Heights-based carrier as it adapted to new ownership and new leadership and experimented with new routes in an effort to gin up additional business. Fredericksen replaced CEO Stan Gadek, who departed abruptly just over a year ago after navigating Sun Country through its most recent reorganization.

For Sun Country, 2013 was the carrier's fifth consecutive year of profitability since near-catastrophic back-to-back losses in 2007 and 2008 when the airline was owned by since-convicted businessman Tom Petters.

A court-appointed trustee and successful reorganization in U.S. Bankruptcy Court put the airline on a serendipitous route to eventual ownership in 2011 by the Davis family of southern Minnesota. The family's business interests range from Cambria quartz countertops to mortgage lending, protein supplements and one of the largest dairy-and-cheese operations in the region.

Marty Davis, Sun Country's chairman of the board, said he is satisfied with the direction the carrier has taken.

"We're comfortable with the size the airline is now," Davis told the Star Tribune. "We can be nimble and move quickly."

Sun Country's strength is its vacation routes to popular destinations in the Caribbean and Mexico. But it also offers service to cities such as New York, Los Angeles, Boston, Dallas and Seattle, which also appeal to business travelers. Sun Country's passenger traffic from MSP rose 27 percent overall for December, January and February compared with the same months a year ago. Figures for March, typically its busiest month, are not yet available but are expected to be good.

But, because of its size, Sun Country is in a difficult position to be all things to all travelers.

"Sun Country has to decide what it wants to be," said Rudy Maxa, host of a syndicated national travel radio show. "It's certainly not [low-fare] Spirit, I say happily. But it's certainly not a full-service airline, either."

Maxa said Sun Country operates best as an airline that serves leisure travelers and warm-weather destinations. Without multiple flights each day into traditional business destinations, it "will not be convenient" for business travelers who require more options and flexibility, Maxa said.

But that hasn't stopped Sun Country from taking some cues from major carriers in terms of customer service.

In June, Sun Country also will launch a branded Visa card that will allow Ufly members to earn points on non-airline purchases in the same way the holders of Delta's SkyMiles American Express card do.

Sun Country's presence at Terminal 2 at Minneapolis-St. Paul International Airport is viewed as a plus for the carrier, given the terminal's relative easy access and less-harried pace compared to Terminal 1.

But that presence also puts Sun Country side-by-side with two of its closest discount-fare competitors — Southwest Airlines and Spirit Airlines.

Southwest has become an established carrier out of the Twin Cities with Spirit as the upstart in the market, offering deeply discounted fares but fee-based service for everything from carry-on luggage to seat assignments. In the last year, Spirit has doubled its traffic out of MSP.

"When Southwest and Spirit arrived, Sun Country was clearly the king. Terminal 2 was called the Sun Country terminal," said Terry Trippler, an airline analyst who runs the Plane Rules, a consumer airline website. "Today, Southwest has certainly grown, and Spirit is growing very rapidly. They are seeing openings that Sun Country is not filling. Sun Country should be looking over its shoulder."

"We're a dramatically different airline," Fredericksen said, noting that gate congestion and access at the increasingly busy Terminal 2 is a big concern for keeping a smooth flight schedule.

Passengers have varying loyalties to different carriers, but price often trumps everything else.

David Dorle, a media relations consultant with clients in both Minnesota and Florida, says he's had good experiences on Sun Country, Spirit and Delta on trips between the Twin Cities and Fort Myers, Fla.

"But anytime Delta is priced below the competition, I will take the full-service airline. There are lots of minor advantages that make the travel experience better," Dorle said.

As far as Sun Country, Dorle added, "I haven't flown them for while. Their pricing hasn't been as good as Delta or Spirit."