Jul. 22--Sun Country Airlines will add planes, serve more cities, and intensify its marketing efforts under its new ownership, said Tom Petters, chairman and CEO of Petters Group Worldwide.
On Friday, privately held Sun Country said its investors agreed to sell the Mendota Heights-based airline to Petters Aviation, a new subsidiary of PGW, and Whitebox Advisors, a Minneapolis investment firm. However, some unhappy Sun Country minority investors say they'll try to block the sale.
The sale price and other terms were not disclosed.
The deal is subject to regulatory approvals, which Petters expects could take 30 to 60 days.
"Our vision is to grow it," Petters said Friday. "I can't tell you today what the markets and the (flight) frequencies will be. But I can tell you we plan on expanding."
Petters Group Worldwide is a Minnetonka-based conglomerate with ownership or investments in over 60 companies around the world, including catalog retailer Fingerhut and Sunbeam Appliances. It purchased Polaroid for $426 million last year.
While Sun Country will grow, Petters said it will not compete head-on with Eagan-based market leader Northwest Airlines, as it did -- disastrously -- in a previous incarnation.
"We're not going to do what La Macchia did," he said, referring to Bill La Macchia Sr., who bought Sun Country in 1997. "We will not be brazen enough to try to compete with the red tail. This is not about competing with Northwest."
Sun Country was profitable as a vacation charter airline for about 16 years. Then La Macchia, a Milwaukee travel-company owner, bought it and tried to compete against Northwest with scheduled airline service, which started in 1999. But fare wars with Northwest got Sun Country into deep financial trouble. It lost more than $100 million in three years and ended up in bankruptcy; some 900 workers lost their jobs.
Burnsville attorney Bob Daly, Hobbit Travel owner George Wozniak and other investors got Sun Country flying again, providing scheduled service. They bought the Sun Country name and assets for about $5 million.
Once again, Sun Country is second only to Northwest in carrying Twin Cities travelers.
Sun Country now serves 16 destinations year-round and 16 on a seasonal basis. It has about 700 employees and flies seven planes during its slow season and 13 in the winter, when folks are streaming to Florida, Mexico and other sunny destinations.
Last year, Sun Country carried 1.6 million passengers, a 30 percent increase over 2004.
Sun Country estimated that for 2005, it carried about 4.5 percent of travelers whose trips began and ended in the Twin Cities. Northwest carries about 62 percent.
In 2005, Sun Country lost $11 million on revenue of $204 million. But during that same period the airline's fuel bill jumped 94 percent to $63 million from $32 million.
"Fuel hedging is definitely something we need," Petters said, referring to the practice of purchasing contracts to lock in prices for future fuel use.
Petters and Whitebox will provide Sun Country with a much-needed capital infusion, Wozniak said.
"The airline needed someone with access to a lot more capital than the current group has," he said. "You've got to have money to get airplanes. The people who lease them don't want to give them to you unless you have a very strong balance sheet. And we needed a stronger balance sheet."
Considering the possibility of fuel prices going even higher and the difficulty of pushing through higher fares, "you need someone who has pretty deep pockets to be in that business," said Wozniak.
But Dan Stevens and another minority owner in Sun Country contend they can block the sale. Earlier this year, they sued Sun Country's corporate parent and eight executives and shareholders, alleging a conspiracy to dilute their stake and force them out of the company.
"We have preemptive rights (to buy the airline)," Stevens said, "As long as I give the same offer as Petters, I can move in front of him. We have people from the local community who are very well-known and want to come in on this with us."
Woznaik argues that Stevens can't stop the sale.
News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.