Sun Country Airlines debut jumps 51% as investors expect a bounce back in the industry

Despite the effects of the coronavirus pandemic on the airline and travel sector, Sun Country Airline saw a 51% jump in its trading debut.

The airline is the first U.S. airline to go public in more than two years. The Sun Country IPO signals that investors are optimistic that the travel industry will soon rebound, with airline stock recovering back to pre-COVID levels and above.

“The reception was awesome. We think we have some really blue-chip shareholders in the stock, so very, very pleased,” said Dave Davis, president, and chief financial officer at Sun Country.

Sun Country said it raised $218 million in its initial public offering. The last airline company that had an IPO was the Apollo Management Group, the first U.S. carrier to go public since the Mesa Air Group in 2018. According to Dealogic, it is also the largest U.S. airline IPO, following Virgin America’s IPO in 2014.

“For the first time since the Covid crisis came, we’ve been able to get sales back to what they were at pre-Covid levels, so we’re feeling really good about a recovery,” said Sun Country CEO Jude Bricker in an interview with CNBC. He added that the new funds will help the airline company expand its operations and experience more growth this year. It also said that it has resumed hiring.

The cash Sun Country raised in the IPO will be used to pay off the $45 million loan it received from the federal government under the CARES Acts, last year. The rest of the money will be channeled toward the purchase of new airplanes, and the growth of the airline.

“It doesn’t go toward financing losses,” Bricker said. “We’re making money now and we are cash flow positive.”

In its IPO, the airline sold up to 9.1 million shares at $24 a share, valuing the company at $1.34 billion. Last week, the company said it estimates the share price between $21 and $23. The shares closed at $36.38 on Wednesday under the symbol “SNCY” on the Nasdaq Global Select Market.

New York investment firm, Apollo Global Management bought Sun Country Airline in April 2018 for about $188 million. It spent more than $200 million on technology and fleet upgrades, according to its SEC filing. Apollo owns majority stake in the airline worth $2.03 billion, based on Wednesday’s closing price.

The public filing also carried that Sun Country’s employees own nearly 6 million shares or options for shares. The airline has about 55 million shares in all.