REVENUE

12 Months Ended

Dec. 31, 2021

REVENUE

REVENUE

4. REVENUE

Sun Country is a certificated air carrier generating Operating Revenues from Scheduled service, Charter service, Ancillary, Cargo and Other revenue. Scheduled service revenue mainly consists of base fares. Charter service revenue is primarily generated through service provided to the U.S. Department of Defense, collegiate and professional sports teams, and casinos. Ancillary revenues consist of revenue earned from air travel-related services such as baggage fees, seat selection and upgrade fees, itinerary service fees, and on-board

sales. Cargo consists of revenue earned from flying cargo aircraft under the ATSA. Other revenue consists primarily of revenue from services in connection with Sun Country Vacations products.

The significant categories comprising Operating Revenues are as follows:

	Year Ended December 31,
	2021		2020		2019
Scheduled service	$	279,377	$	193,047	$	396,113
Charter service		127,331		98,130		174,562
Ancillary		117,237		68,055		118,158
Passenger		523,945		359,232		688,833
Cargo		91,428		36,809		—
Other		7,642		5,445		12,551
Total Operating Revenue	$	623,015	$	401,486	$	701,384

The Company attributes and measures its Operating Revenue by geographic region as defined by the DOT for airline reporting based upon the origin of each passenger and cargo flight segment.

The Company’s operations are highly concentrated in the U.S. but include service to many international locations, primarily based on scheduled service to Latin America during the winter season and on military charter services.

Total Operating Revenues by geographic region are as follows:

	Year Ended December 31,
	2021		2020		2019
Domestic	$	597,005	$	382,463	$	666,332
Latin America		24,646		18,515		33,716
Other		1,364		508		1,336
Total Operating Revenue	$	623,015	$	401,486	$	701,384

Contract Balances

The Company’s contract assets primarily relate to costs incurred to get the 12 Amazon cargo aircraft ready for service.  The balances are included in Other Current Assets and Other Assets on the Consolidated Balance Sheets. These deferred up-front costs are being amortized into expense on a pro-rata basis over the initial six years of the ATSA. The amount expensed during fiscal years 2021 and 2020 was $691 and $271 respectively, and is included in Maintenance expense on the Company’s Consolidated Statements of Operations.

The Company’s significant contract liabilities are comprised of 1) ticket sales for transportation that has not yet been provided (reported as Air Traffic Liabilities on the Consolidated Balance Sheets), 2) outstanding loyalty points that may be redeemed for future travel and other non-air travel awards (reported as Loyalty Program Liabilities on the Consolidated Balance Sheets) and 3) the Amazon deferred up-front payment received (reported within Other Current Liabilities and Other Long-term Liabilities on the Consolidated Balance Sheets).

Contract Assets and Liabilities are as follows:

	December 31,
	2021		2020
Contract Assets
Costs to fulfill contract with Amazon	$	2,819	$	3,614
Air Traffic Liabilities		118,562		101,075
Loyalty Program Liabilities		19,718		22,069
Amazon Deferred Up-front Payment		4,200		5,240
Total Contract Liabilities	$	142,480	$	128,384

The balance in the Air Traffic Liabilities fluctuates with seasonal travel patterns. Most tickets can be purchased no more than twelve months in advance, therefore any revenue associated with tickets sold for future travel will be recognized within that timeframe. For the year ended December 31, 2021, $95,982 of revenue was recognized in Passenger revenue that was included in the Air Traffic Liabilities as of December 31, 2020.

As part of the ATSA executed in December 2019, Amazon paid the Company $10,300 toward start-up costs. Upon signing the ATSA, Amazon received 632,183 fully vested warrants to purchase the Company’s common stock, with a fair value of $4,667. This fair value was assigned to a portion of the $10,300 cash received from Amazon and the remaining $5,633 was recorded in Other Liabilities on the Company’s Consolidated Balance Sheet. This deferred up-front payment is being amortized into revenue on a pro-rata basis over the initial six years of the ATSA.  For the years ended December 31, 2021 and 2020, $1,040 and $393 was amortized into Cargo revenue, respectively, on the Company’s Consolidated Statements of Operations.

Loyalty Program

The Sun Country Rewards program provides loyalty awards to program members based on accumulated loyalty points. Loyalty points are earned as a result of travel and purchases using the Company’s co-branded credit card. The balance of the Loyalty Program Liabilities fluctuates based on seasonal patterns, which impact the volume of loyalty points awarded through travel or issued to co-branded credit card and other partners (deferral of revenue) and loyalty points redeemed (recognition of revenue).

Changes in the Loyalty Program Liabilities are as follows:

	2021		2020
Balance - January 1	$	22,069	$	22,892
Loyalty Points Earned		4,562		4,015
Loyalty Points Redeemed (1)		(6,913)		(4,838)
Balance - December 31	$	19,718	$	22,069

(1) Principally relates to revenue recognized from the redemption of loyalty points for both air and non-air travel awards. Loyalty points are combined in one homogenous pool and are not separately identifiable. As such, the revenue recognized is comprised of points that were part of the Loyalty Program Liabilities balance at the beginning of the period, as well as points that were earned during the period.

The timing of loyalty point redemptions can vary significantly; however most new points, that are not left to expire, are later redeemed. Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and will adjust estimates in the future, which could be material.