Sun Country seeks $50M in state aid to cope with oil prices

In yet another sign of turbulence in the airline industry, Sun Country is in preliminary stages of requesting as much as $50 million in aid from the Minnesota Legislature and the Metropolitan Airports Commission.

Sun Country hosted a dozen members of the state Senate's Business, Industry and Jobs Committee, including Chairman James Metzen, DFL-South St. Paul, at its Mendota Heights headquarters Wednesday. Sun Country President and CEO Stan Gadek presided over the meeting, which 60 Sun Country employees also attended.

"We believe that we have self-helped to the greatest extent that we can," Gadek said in an interview, referring to recent job reductions and pay cuts for top executives. "We're not looking for a handout ... we're looking for some help here in the interim."

Metzen said that the estimated need is about $25 million a year over the next two years, and that the funds could possibly come in the form of a loan guarantee.

"We were receptive to try and help in some fashion," he said. "It's not unusual for the state to help out in some of these instances."

Most airlines are already in crisis mode in response to oil prices that have more than doubled in the past year. All major airlines have been raising fares and fees, scaling back routes once the summer travel season ends and slashing planes from their fleets.

But in contrast to oil, Gadek noted that average ticket prices at Sun Country have only gone up about 17 percent.

And despite Sun Country's dismal financial performance -- it lost $43 million on operating revenue of $243 million in its most recent four quarters -- the company says it isn't on the brink of bankruptcy.

"We're not in danger of going out of business," Gadek said. "This is simply a recognition of the rapid pace at which fuel prices are going up."

Although Gadek said company officials "haven't determined what venue we would be seeking aid from," the Metropolitan Airports Commission knows that it is a likely candidate because the Legislature isn't scheduled to meet again until January. MAC spokesman Patrick Hogan said Sun Country has not submitted a formal proposal, but might meet with the commissioners in July.

The MAC provided some assistance to Sun Country this year by spreading out its gate-fee payments over a 12-month period, Hogan said. Because Sun Country flies more frequently during the winter, most of its fees are accrued from January through April.

In 1991, MAC partnered with the state to provide support for Northwest Airlines, but Hogan said that was a very rare effort, to try to increase air travel and protect jobs. He said he was unsure yet as to what Sun Country would be requesting or if it would be feasible. "We certainly have an interest in seeing Sun Country survive," Hogan said. "The question is seeing how much we can do to make that happen."