Sun Country Airlines (NASDAQ: SCNY), known more for ferrying vacationers to beach destinations, said Tuesday that revenue from its dedicated Amazon cargo business dipped 2.9% to $24 million in the third quarter due to a special circumstance.
The Minneapolis-based carrier attributed the decline to a one-time payment from Amazon (NASDAQ: AMZN) during the third quarter of 2021 for flown, but not yet billed, flying done last year. Excluding the catch-up payment, cargo revenue was the same year over year.
Cargo block hours, a measure of time in service for Amazon, increased 2% from the prior-year quarter. Amazon makes fixed payments per aircraft regardless how much they are used in addition to money per block hour.
Executives said Amazon volumes have been consistent.
Sun Country has a unique business model in which it provides scheduled passenger service; charter flights for collegiate and professional sports teams, the U.S. Department of Defense, casinos and other customers; and cargo service as a contractor for Amazon Air, the online retailer’s in-house cargo airline.
Sun Country has 12 Boeing 737-800 converted freighters under its operating certificate that are subleased from Amazon.
During the first nine months of 2022, the airline posted $65.9 million in cargo revenue, 3.2% less than a year ago. The decline reflects the one-off Amazon payment and the slower growth in e-commerce this year.
Overall, Sun Country’s adjusted earnings fell 28.6% to $16 million due to higher costs associated with fuel, Hurricane Ian, capacity constraints due to staffing and a new contract for pilots. Operating revenue increased by more than a quarter year over year to $221.7 million. Cargo represents about 10% of total revenues.
Management said demand for leisure travel is high.
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