Financially troubled Sun Country suddenly for sale
Tony Kennedy
Star Tribune
Published Nov 9 2001
After losing money for more than two straight years as a
competitor of Northwest Airlines, the owner of Sun Country
Airlines has put the low-fare carrier up for sale.
What will happen to Sun Country if investors don't step
forward was unclear Thursday, but its spokeswoman said the
campaign for new investment money is urgent. Beyond its
importance as an employer of more than 1,000 people in the
Twin Cities, Sun Country saves local air travelers millions of
dollars a year by keeping fares down on select routes to major
cities.
"The longer these guys try to make it, the better it is for
Minnesota consumers," said George Wozniak, president of
Hobbit Travel of Minneapolis.
In announcing Thursday that his airline is for sale, owner Bill
La Macchia said in a news release that his decision was
motivated by the epic financial disruption caused by the terror
attacks Sept. 11.
La Macchia, a multimillionaire from the Milwaukee area
whose primary business is selling air-and-hotel vacation
packages through The Mark Travel Corp., was unavailable for
comment Thursday.
He bought Sun Country, then an all-charter carrier, in April
1997 from Minnesota banker B. John Barry for a reported $41
million. In June 1999, La Macchia took the bold step of
converting Sun Country into a scheduled airline in direct
competition against Northwest, the nation's fourth-largest
airline. Since then he personally has underwritten more than
$90 million in operating losses.
La Macchia has assigned David Banmiller, Sun Country's
president and chief executive officer, to the job of
"immediately seeking outside investors necessary for the
long-term operation of the airline," according to Thursday's
release.
La Macchia also gave Banmiller, a 35-year industry veteran,
complete control of Sun Country's board of directors. Bill La
Macchia Jr., the former president and CEO of Sun Country,
will not have any further involvement with the daily
operations or marketing efforts of the airline, the company
said. Instead, he will focus on other family businesses.
"We are now at a point where Mr. La Macchia has made it
clear that we have to stand alone," said Sun Country
spokeswoman Tammy Lee.
She declined to say whether Banmiller has a deadline to attract
buyers. "We have an immediate need to seek new investors,"
she said. "The need for cash is immediate."
Wozniak, who does major business with Sun Country as a seller
of vacation tours, said La Macchia has at least three possible
exit strategies. He can sell Sun Country to a new owner,
reconvert it to an all-charter airline or fold it, he said.
While Lee confirmed that Sun Country, based in Mendota
Heights, continues to lose money, she said advance holiday
bookings are strong and "business will continue as usual."
To help make Sun Country more attractive to potential buyers,
management met with unions Thursday to seek concessions. In
addition, management is reviewing its route structure and fleet
strategy, Lee said.
"We have to really streamline things," she said.
Asked whether a reorganization in U.S. Bankruptcy Court is a
possibility, she said, "Every airline in the country is talking
about reorganization."
Jeff Hamiel, executive director of the Metropolitan Airports
Commission, said Sun Country is current on its monthly
obligations as the main tenant at the newly constructed
Humphrey terminal.
Hamiel said the terminal's finances are not at risk, because its
construction is backed by revenue from the surcharges that
airline passengers pay on their tickets.
If Sun Country were to file for bankruptcy, Hamiel said, he
would expect other carriers to pick up any slack and serve what
he described as one of the nation's leading winter-travel
markets.
He said Sun Country is "very important" to the Twin Cities
because of its low-fare competition on important Northwest
routes. After recently reducing its schedule, Sun Country offers
regularly scheduled service to Washington, D.C., New York, Los
Angeles, San Francisco, Dallas and Phoenix.
When it served more cities, the Minnesota Planning
Department estimated that Sun Country saved travelers about
$300 million a year.
"They've been effective in knocking down prices for Twin
Cities travelers," Hamiel said.
Michael Boyd, an airline consultant in Colorado, said current
conditions in the industry aren't good for attracting investors.
But he said Sun Country has an established name with a good
manager in Banmiller.
"It's not like you're buying a pig in a poke," Boyd said. "But
then again, friends don't let friends buy airlines."
Wozniak said he wouldn't be surprised if Carl Icahn, former
Trans World Airlines owner, becomes a bidder. He also noted
that La Macchia is a friend of Herb Kelleher, former
Southwest Airlines chief executive. There has been wishful
thinking for years among Sun Country employees that Kelleher
would take a stake in the airline.
-- Star Tribune staff writer Dan Wascoe Jr.contributed to
this report.-- Tony Kennedy is at tonyk@startribune.com .
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