Sun Country Airlines warns of possible shutdown

(AP) - Struggling Sun Country Airlines has warned its employees that they should be prepared for potential major layoffs or even a shutdown as early as Dec. 1, though the carrier sought Thursday to downplay that message.

The warning came in a letter to employees on Wednesday night by John Fredericksen, general counsel for the Mendota Heights-based carrier, which employs 850 people.

Sun Country said in a statement Thursday, however, that it issued that letter to comply with legal requirements, and that it has no plans to shut down or slash its work force. It noted that federal law requires airlines to give employees 60 days notice if they intend large-scale job cuts or ceasing operations.

"In response to questions regarding Sun Country Airlines communication to the employees regarding the WARN Act, this communication was sent out in compliance with federal law and was released on a contingency basis," the airline said in a statement Thursday. "Federal law requires 60 days notice in the event of a shutdown or a major layoff. While Sun Country has no plans to shut down or institute a major layoff, we wanted to be sure we are in compliance with federal law in light of the recent developments at our parent company."

That's a reference to events at Petters Group Worldwide, whose founder, Tom Petters, resigned as chairman and chief executive officer Monday amid a federal investigation that alleges he and others defrauded investors of $100 million or more through a web of phony transactions since the mid-1990s.

The target of the probe is Petters Co. Inc., a financing division of Petters Group.

Petters hasn't been charged, and the investigation hasn't involved Sun Country, but the carrier's CEO, Stan Gadek, told employees in a letter Monday the airline needs to become financially independent of its parent company.

This is the slow season for the airline and it normally would have taken a short-term loan from its parent company, but that's not an option now, he wrote. On Friday, Gadek met with pilot and flight attendant unions and outlined a plan to defer pay by 50 percent for everyone through the end of the year.

In its statement Thursday, Sun Country officials said "customers have nothing to worry about if they have purchased a ticket on the airline. We are meeting our financial obligations and have every confidence we will continue to fly."

They said the airline's credit card bank retains funds paid by passengers until they fly and would make refunds if any flights were canceled.

"We have been very open about the financial challenges we face since the situation with our parent company developed last week," the statement said. "However, over the past week we have made progress in negotiating with vendors and identifying additional sources of revenue."

Sun Country lost $47 million on $251 million in operating revenue for the 12 months ended in June. Petters had provided about $25 million to subsidize operating losses at Sun Country over the past year.

"Sun Country is doing, and will continue to do, everything within our power to solve our current financial crisis," Fredericksen wrote in his notice to employees.

(Copyright 2008 by The Associated Press. All Rights Reserved.)