Sun Country Airlines (SNCY) Q3 2025: Cargo Revenue Soars 51%, Shifting Profit Mix and Peak Strategy

October 30, 2025 | By EarningsIQ Research

Sun Country Airlines’ cargo expansion drove a record 51% jump in segment revenue, reshaping the business mix and operational priorities. The carrier’s unique charter and cargo blend continues to buffer earnings volatility, but the rapid cargo ramp has forced deep cuts to scheduled service capacity. Management signals a return to passenger growth by mid-2026, while highlighting new margin levers as cost inflation and maintenance cycles play out. Investors should watch for how the company balances block hour allocation, labor constraints, and capital deployment as competitive dynamics shift in its core markets.

Summary

• Cargo Ramp Redefines Mix: Record cargo revenue now anchors Sun Country’s flexible model as scheduled service is set to rebound.
• Charter Demand Offsets Passenger Cuts: Surging ad hoc and contract charter flying absorbs excess capacity and supports profitability.
• Margin Expansion Hinges on Peak Recovery: Scheduled service growth and labor efficiency will be decisive for restoring pre-cargo profit levels.

Performance Analysis

Sun Country’s Q3 results reflect a pivotal transition period as the airline completed its cargo fleet expansion, with all 20 Amazon-contracted aircraft now operational. Cargo revenue surged 51% year-over-year to a record $44 million, and cargo block hours jumped nearly 34%, underscoring the scale of the shift. This growth came at the expense of scheduled passenger service, with available seat miles (ASMs) down 10% and passenger revenue declining 3.2%. However, management points to a clear inflection in scheduled service unit revenue (TRASM), up 1.6% for the quarter and over 7% in September, with further acceleration expected into Q4 and early 2026.

Charter operations provided critical ballast, with revenue up 16% and block hours up 11%. The mix of ad hoc charter surged 31%, offsetting slower scheduled service and reflecting Sun Country’s nimble approach to capacity allocation. Cost inflation remains a headwind, with salaries up 15% and maintenance up 13.5%, largely due to pilot wage hikes, expanded headcount, and unplanned heavy checks. Despite these pressures, adjusted pre-tax margin expanded for a fourth consecutive quarter, and the company generated strong free cash flow, aided by working capital tailwinds as it enters the winter peak season.

• Cargo Expansion Drives Revenue Mix Shift: Cargo now represents a larger share of total revenue and block hours, fundamentally altering Sun Country’s earnings profile.
• Charter Flexibility Mitigates Volatility: Record ad hoc charter demand helps offset scheduled service cuts and supports utilization.
• Cost Structure in Flux: Labor and maintenance inflation remain elevated, but efficiency initiatives and contract resets are expected to stabilize unit costs by late 2026.

Sun Country’s ability to flex between cargo, charter, and scheduled service is proving to be a durable advantage, but the company’s margin trajectory will depend on restoring peak-period passenger flying and managing rising input costs as the cargo ramp annualizes.

Executive Commentary

Strategic Positioning

1. Cargo Growth as a Structural Hedge

The expansion to 20 Amazon-contracted cargo aircraft now provides Sun Country with a stable, countercyclical revenue base, enabling the company to absorb shocks in leisure demand and reallocate capacity with agility. Cargo block hour production is expected to hold steady at over 5,000 hours monthly, anchoring the business through 2026 and beyond. Management views cargo not just as incremental revenue, but as a platform to maximize fleet utilization and buffer seasonality.

2. Charter Segment as Earnings Buffer

Charter flying, both under contract and ad hoc, remains a core earnings stabilizer. The company’s charter mix is shifting, with ad hoc flying (sports, military, casino) growing faster than long-term contracts. This flexibility allows Sun Country to monetize surplus capacity and quickly respond to demand spikes, particularly as other charter providers exit the market. While contracted charter still represents the majority, the ability to flex into ad hoc opportunities is increasingly valuable for near-term margin management.

3. Scheduled Service to Rebound in Peaks

Scheduled passenger service is set for a staged comeback, with management targeting positive year-over-year growth by Q3 2026. The company’s strategy is to focus this growth on peak periods—March, summer, and holiday months—where demand and margins are highest. The model’s flexibility enables deep cuts in off-peak months to support cargo, then rapid redeployment of aircraft to high-yield leisure routes as pilot staffing constraints ease and leased aircraft return to the fleet.

4. Labor and Operational Efficiency Initiatives

Labor remains the gating factor for capacity growth, particularly pilot upgrades and staffing. Sun Country is rolling out new crew rostering technology (PBS, preferential bidding system) and opening a new base in Cincinnati to support its largest cargo operation. These steps are expected to unlock further efficiency, reduce cost per block hour, and support the return to mid-teen operating margins as peak flying resumes.

5. Capital Allocation and Aircraft Market Dynamics

With strong liquidity and limited near-term CapEx needs, Sun Country is prioritizing share repurchases in the absence of attractively priced aircraft. The company owns most of its fleet, with additional leased aircraft returning through 2026 to fuel passenger network growth. Management remains disciplined, citing a tight used aircraft market and elevated engine maintenance values as constraints on opportunistic fleet expansion.

Key Considerations

Sun Country’s Q3 marks a strategic inflection as the cargo ramp annualizes and management prepares for a passenger growth cycle. The company’s multi-segment model is being tested by cost inflation and labor constraints, but structural flexibility remains a core differentiator.

Key Considerations:

• Block Hour Allocation Is Pivotal: The ability to dynamically shift flying between cargo, charter, and scheduled service will determine margin resilience as demand and input costs fluctuate.
• Labor Constraints Are the Growth Governor: Pilot hiring and captain upgrades are currently limiting the pace of scheduled flying recovery and peak period expansion.
• Unit Cost Stabilization Is on the Horizon: Management expects inflationary pressures from labor and maintenance to moderate, with cost per block hour flattening by late 2026 as efficiency gains materialize.
• Competitive Capacity Remains Benign in Core Markets: Minneapolis and other key bases face little near-term competitive incursion, supporting yield and load factor strength.
• Capital Deployment Is Disciplined: Share buybacks are favored over aircraft purchases due to tight supply and high engine maintenance costs, preserving balance sheet strength.

Risks

Sun Country faces several material risks as it transitions from cargo ramp to passenger growth: persistent labor shortages could delay capacity recovery, while maintenance cost volatility and inflationary airport fees may pressure margins. The tight used aircraft and engine market limits opportunistic expansion, and any unexpected competitive capacity increases in core leisure markets could challenge the yield narrative. The company’s reliance on Amazon for cargo revenue also concentrates counterparty risk.

Forward Outlook

For Q4 2025, Sun Country guided to:

• Total revenue between $270 and $280 million
• Block hours up 8% to 11% year-over-year
• Operating margin of 5% to 8%, with maintenance costs pulled forward from 2026

For full-year 2025, management maintained guidance:

• CapEx of $80 to $90 million

Management highlighted several factors that will shape the next phase:

• All incremental block hours post-cargo ramp will be allocated to scheduled service growth, supporting margin recovery
• Labor and efficiency initiatives are expected to drive unit cost stabilization by late 2026

Takeaways

Sun Country’s Q3 underscores its evolution into a multi-segment operator where cargo, charter, and scheduled service are flexed for margin optimization.

• Cargo Ramp Now Complete: Cargo’s stable revenue base enables Sun Country to absorb demand shocks and redeploy aircraft as market conditions dictate.
• Charter and Scheduled Service Will Drive Next Leg: As labor constraints ease and leased aircraft return, expect passenger flying and charter to rebound, especially in peak periods.
• Margin Expansion Relies on Execution: Investors should track labor efficiency, cost discipline, and the ability to capture peak demand in leisure markets as the key to restoring and growing profitability.

Conclusion

Sun Country’s record cargo revenue and charter resilience have repositioned the carrier for the next phase of growth, but the real test will be restoring scheduled service profitability as labor and cost headwinds moderate. Management’s disciplined capital allocation and operational flexibility provide a solid foundation, but execution on pilot hiring and peak-period flying will determine whether mid-teen margins are achievable in 2026 and beyond.

Industry Read-Through

Sun Country’s results highlight the growing value of diversification in the airline sector, especially for smaller carriers exposed to leisure demand swings. The ability to dynamically allocate capacity across cargo, charter, and passenger segments is a structural hedge against volatility that other regionals and niche operators may seek to emulate. The tight market for used aircraft and engine maintenance capacity is a sector-wide constraint, supporting residual values but impeding fleet growth for opportunistic buyers. Finally, the slow return of competitive capacity in core markets suggests a more rational industry supply environment, which could support yields for carriers with local relevance and flexible business models.

SNCY Industrials Airlines Cargo Charter Leisure Block Hours Capital Allocation