Why Allegiant and Sun Country is an Obvious Combination
Sun Country is too small to make it on its own. And Allegiant wants to get bigger and diversify its business. That makes this deal a no-brainer.
Dear readers,
Over the last couple of years, whenever I would run into Sun Country CEO Jude Bricker at a conference or cocktail party1, I'd ask him whether he wanted to buy Spirit, almost as a running gag. Usually, he'd respond by saying that the only logical combination would be Sun Country and Allegiant: the only two U.S. leisure-focused carriers that fly older airplanes on less-than-daily routes.
To be clear, I never sensed that Bricker was telling me Sun Country would merge with Allegiant — just that no other partner would make sense. So I can’t say I was shocked on Sunday when the two airlines announced their merger. I was surprised to learn that Allegiant was doing the acquiring, moving to buy Sun Country in a cash-and-stock deal worth about $1.5 billion, a figure that includes Sun Country’s $400 million in net debt. The deal could close as soon as later this year.
Even though Allegiant is a bigger company, I thought Bricker — who loves a deal and was COO at Allegiant until 2017 — would be the acquirer, perhaps with a strategic partner. Yet Bricker is stepping aside. He will join Allegiant's board, but he otherwise has no long-term employment commitment; Greg Anderson will remain Allegiant CEO, with Bricker acting as an integration advisor.
I think this deal, if approved, is a strong combination between two well-run companies that know what their customers want, and have proven they can make money serving them. If we eventually see a Frontier-Spirit merger (no sure thing, as Spirit merely could disappear), that transaction would unite two wounded airlines. But Sun Country is among the more profitable U.S. airlines by operating margin, while Allegiant has told investors that its airline-only EPS for all of 2025 will hit $4.35. Neither carrier is struggling, and they'll probably be stronger together.
Allegiant will get two new business segments (charter and cargo), cheap mid-life airplanes, a motivated customer base in Minneapolis, and new loyalty program members. Meanwhile, Sun Country now has a way out of a problem that insiders have flagged for some time: it has very few options for growth.
Let's look closer at why this was probably the best outcome for both companies.
Sun Country was out of ideas
Sun Country reported an operating margin of 9.9 percent in 2024 and 12.1 percent in 2023. These are big numbers in this industry. Competitors salivate over “double-digit margins” — and yet most of my readers barely talk about the company. I see two reasons why.