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Former Sun Country owner Davis sees big things ahead for airline

September 15, 2018 GMT

Former Sun Country Chairman Marty Davis was humbled and enriched over seven years of ownership that ended earlier this year.

Brothers Marty and Mitch Davis, who bought Sun Country out of the bankruptcy in 2011, benefited from the postrecession boom for most carriers.

The Twin Cities-based airline, which went from 10 to 27 Boeing 737s on their watch, posted much-improved profits of $35 million in the 12-month period ended in March, on revenue that grew 17 percent to $617 million, according to a recent filing with the U.S. Department of Transportation.

Sun Country revenue per available seat mile jumped 12 percent. It carried 15 percent more passengers, to 2.1 million last year. And 80 percent of its seats were occupied, an increase of 2 percentage points over 2016.

Sun Country rebounded from a 2016 that saw diminished profit and lower revenue, thanks to CEO turnover and fare wars waged by huge carriers, including Delta, which flies the majority of passengers out of the Twin Cities. That was a shock to Davis, who sold the carrier earlier this year.

“It was a tough year and 2016 shook us,” said Davis, who grew up in a southern Minnesota dairy and cheese operation that was a lot less volatile. “The cheese business is a wonderful business without cycles. You don’t control lots of things in airlines no matter how you perform.

“And that got our attention. We were lucky. And we learned a lot.”

The chastened Davis brothers, who also own the $500 million-plus revenue Cambria countertop manufacturer, hired an investment banker last year.

Before that, Davis hired Jude Bricker, the fourth chief executive on his watch.

Bricker previously was chief operating officer of no-frills, low-cost Allegiant Air of Las Vegas.

Sun Country had flown between strategies: as a low-cost, scheduled-service alternative, with a first-class cabin and free baggage. However, it couldn’t successfully compete to Boston or New York or California for cost-conscious business travelers, supplemented by vacationers, with one or two flights a day against the multiple flights of Delta or other titans.

They can also wage elephant-vs.-ant fare wars on an insurgent contender.

“After we hired Jude, it became clear to us that to grow we had to build a business around a cost-conscious vacation traveler,” Davis said. “We had a mid-level model.

Critics said Sun Country also had a muddied strategy and inconsistent, albeit homey, execution.

“Sun Country didn’t know what it wanted to be,” said airline analyst Michael Boyd. “You had too many cooks, including from Cambria, messing with it.”

For example, instead of a Sun Country-branded magazine in seat pockets, there was a Cambria house publication.

Davis said the brothers profited from the unspecified-price sale of Sun Country.

““I doubted we could grow it more,” Davis said “We weren’t going to make the investments and take the risks.”

The Davis boys sold to an investment fund of New York-based Apollo Capital Management, one of the world’s largest private-equity fund managers. The new overseer is Apollo partner Antoine Munfakh.

He saw opportunity in Bricker’s strategy; a scalable no-frills, low-fare model that also imposes variable charges for bags, best seats and soft drinks.

Apollo has invested $90 million this year for two new planes, cabin refreshes and a tighter-seating configuration.

Apollo founder Leon Black, a 40-year Wall Street veteran, doesn’t invest without a plan, said Boyd.

“Jude Bricker knows what he wants,” Boyd said. “Apollo will invest and keep it if Sun Country makes enough money.”

Bricker got off to a rocky start with employees and the public.

In April, Minnesota snowstorm-related flight cancellations left passengers stranded in Mexico. After saying the carrier had no planes available amid seasonal route changes, Sun Country relented.

That came amid a 48-hour blizzard of criticism and bad publicity.

Sun Country eventually agreed to pay the added travel costs for 250 stranded passengers.

Also last spring, Sun Country terminated 350 ground-service workers, including ticket and gate agents and wheelchair assistants, after it had it hired a contractor to do that work, as well as baggage handling and airplane cleaning services.

That didn’t exactly inspire employee or customer loyalty.

In July, Sun Country ended the relationship with Global Aviation over staffing and service issues. It started hiring and training its own ground workers to service its 45 daily flights.

In the interim, Bricker asked headquarters’ employees to volunteer at ticket counters or pick up trash between flights.

Sun Country also may try again to farm out ground operations at a later date to focus on flying and sales.

“Jude probably moved too fast on some things,” Davis said. “I don’t think Apollo or Jude understand the closeness of this community and the transparency. You don’t fly under the radar here.

“Apollo likes Minnesota and our operation. And they have confidence in Jude. Check on it in three years. I’d be shocked if [Sun Country has not doubled] to 60 planes.”

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.