What happened

Sun Country Airlines Holdings (SNCY -5.36%) took flight as a public company on Wednesday, and the initial response has been positive. The stock is up more than 40% on its debut, reflecting Wall Street's growing optimism about the airline industry.

So what

Sun Country is new to public markets, but the airline has been around in various forms since the early 1980s. The airline for much of its early history flew vacation charters to sunny destinations and along the way flew into bankruptcy multiple times.

Since 2017, it has been majority-owned by Apollo Management Group (APO) and focused on no-frills scheduled service. In 2019 it signed an agreement with Amazon to operate cargo flights. The agreement included issuing stock warrants to Amazon.

An airport ground worker directs a plane to its gate.

Image source: Getty Images.

Sun Country went public on Wednesday, raising $218 million by selling 9.1 million shares at $24 apiece. The IPO priced slightly above the $21 to $23 per share estimate announced last week and soared into the $30s in afternoon trading.

The airline said it intends to use a portion of the net proceeds from the offering to repay the government loans it took out last year during the COVID-19 crisis, with the rest going to general corporate purposes.

Now what

The airline industry was among the hardest hit by the pandemic, but Wall Street is growing increasingly convinced the worst is now over. Sun Country should be well positioned to take advantage of the early stages of a recovery, with its low costs and focus on leisure travelers. Airlines that rely on business and international customers are at least temporarily at a disadvantage to discounters like Sun Country.

Combine that with its small but intriguing business working with Amazon, and it is understandable that investors are excited. But a few words of caution are necessary.

For one, Sun Country remains what is known as a "controlled company" post-IPO, meaning that Apollo will remain its majority shareholder. Over time, expect Apollo to look to sell down its stake, meaning there could be a steady stream of new shares coming on the market in the quarters to come. Additions to the share count typically cause downward pressure on share price -- at least temporarily..

The pandemic is still not over, and this helped to account for the twenty pages of risk factors contained in Sun Country's IPO prospectus. Sun Country lost about $4 million in 2020 on revenue of $401.5 million, down from a $46 million gain in 2019 on $701 million in sales.

In a word, Sun Country has a compelling story to tell, but investors should be warned the airline is likely to fly through some turbulence in the months to come.