UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172020
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 000-49728
JETBLUE AIRWAYS CORPORATION
(Exact name of registrant as specified in its charter) |
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Delaware | | 87-0617894 |
| (State or other jurisdiction of incorporation or organization) | 87-0617894
| (I.R.S. Employer Identification No.) |
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| 27-01 Queens Plaza North | Long Island City | New York | 11101 |
| (Address of principal executive offices) | (Zip Code) |
27-01 Queens Plaza North, Long Island City, New York 11101
(Address, including zip code, of registrant's principal executive offices)
(718) 286-7900
Registrant's telephone number, including area code:(718) 286-7900
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, $0.01 par value | JBLU | The NASDAQ Global SelectStock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý☒ No o☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o☐ No ý☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No o☐
Indicate by checkmarkcheck mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý☒ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ''large accelerated filer,” “accelerated filer'', “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☑ | Accelerated filer | ☐ | | | |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | | | |
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Large accelerated filer þ
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Non-accelerated filer o (Do not check if a smaller reporting company)
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Smaller reporting company o
| | Emerging growth companyo | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ý☒
The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of June 30, 20172020 was approximately $7.5$3.0 billion (based on the last reported sale price on the NASDAQ Global Select Market on that date). The number of shares outstanding of the registrant's common stock as of January 31, 20182021 was 321,859,269316,028,908 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Designated portions of the Registrant's Proxy Statement for its 20182021 Annual Meeting of Stockholders, which is to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Annual Report on Form 10-K, or the Report, to the extent described therein.
Table of Contents |
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| PART I. |
| Item 1. | | |
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| Item 1A. | | |
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| Item 1B. | | |
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| PART II. | | |
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| PART III. | | |
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| PART IV. | | |
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FORWARD-LOOKING INFORMATION
Statements in this Report (or otherwise made by JetBlue or on JetBlue’s behalf) contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which represent our management’s beliefs and assumptions concerning future events. These statements are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995.When used in this document and in documents incorporated herein by reference, the words “expects,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” “seeks,” “targets” and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions, and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, including, without limitation, the coronavirus (“COVID-19”) pandemic and the outbreak of any other disease or similar public health threat that affects travel demand or behavior; restrictions on our business related to the financing we accepted under the CARES Act; our significant fixed obligations and substantial indebtedness; risk associated with execution of our strategic operating plans in the near-term and long-term; the recording of a material impairment loss of tangible or intangible assets;our extremely competitive industry; volatility in financial and credit markets which could affect our ability to obtain debt and/or lease financing or to raise funds through debt or equity issuances; our significant fixed obligations and substantial indebtedness; volatility in fuel prices, maintenance costs and interest rates; our reliance on high daily aircraft utilization; our ability to implement our growth strategy; our ability to attract and retain qualified personnel and maintain our culture as we grow; our reliance on a limited number of suppliers, including for aircraft, aircraft engines and parts and vulnerability to delays by those suppliers; our dependence on the New York and Boston metropolitan markets and the effect of increased congestion in these markets; our reliance on automated systems and technology; our being subject to potential unionization, work stoppages, slowdowns or increased labor costs; our presence in some international emerging markets that may experience political or economic instability or may subject us to legal risk; reputational and business risk from information security breaches or cyber-attacks; changes in or additional domestic or foreign government regulation;regulation, including new or increased tariffs; changes in our industry due to other airlines' financial condition; acts of war or terrorism; global economic conditions or an economic downturn leading to a continuing or accelerated decrease in demand for air travel; the spread of infectious diseases; adverse weather conditions or natural disasters; and external geopolitical events and conditions. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change prior to the end of each quarter or year.
Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. You should understand that many important factors, in addition to those discussed or incorporated by reference in this Report, could cause our results to differ materially from those expressed in the forward-looking statements. Potential factors that could affect our results include, in addition to others not described in this Report, those described in Item 1A of this Report under “Risks Related to the COVID-19 Pandemic”, “Risks Related to JetBlue”, and “Risks Associated with the Airline Industry.” In light of these risks and uncertainties, the forward-looking events discussed in this Report might not occur. Our forward-looking statements speak only as of the date of this Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.
PART I
ITEM 1. BUSINESS
OVERVIEW
General
JetBlue Airways Corporation, or JetBlue, is New York's Hometown Airline™Hometown Airline®. In 2017,As of December 31, 2020, JetBlue carried over 40 million Customers with an average of 1,000 daily flights and served 10198 destinations in the United States, the Caribbean and Latin America.
JetBlue was incorporated in Delaware in August 1998 and commenced service on February 11, 2000. As of the end of 2017, we were the sixth largest passenger carrier in the U.S. based on available seat miles, or ASMs. We believe our differentiated product and culture combined with our competitive cost structure enables us to compete effectively in the high-value geographies we serve. Looking to the future, we plan to continue to grow in our high-value geographies, invest in industry leading products and provide award winningaward-winning service by our more than 21,00020,000 dedicated employees, whom we refer to as Crewmembers.crewmembers. Going forward, we believe we will continue to differentiate ourselves from other airlines, enabling us to continue to attract a greater mix of Customerscustomers, and to drive further profitable growth. We are focused on delivering solid results for our Shareholders,shareholders, our Customerscustomers, and our Crewmembers.crewmembers.
As used in this Report, the terms “JetBlue,” the “Company,” “we,” “us,” “our” and similar terms refer to JetBlue Airways Corporation and its subsidiaries, unless the context indicates otherwise. Our principal executive offices are located at 27-01 Queens Plaza North, Long Island City, New York 11101 and our telephone number is (718) 286-7900.
Our Industry and Competition
The U.S. airline industry is extremely competitive and challenging, and results are often volatile. It is uniquely susceptible to external factors such as fuel costs, downturns in domestic and international economic conditions, weather-related disruptions, the spread of infectious diseases, such as COVID-19, and associated stay at home orders and travel restrictions, the impact of airline restructurings or consolidations, and military actions or acts of terrorism. We operate in a capital and energy intensive industry that has high fixed costs, as well as heavy taxation and fees. Airline returns are sensitive to slight changes in fuel prices, average fare levels, and passenger demand. The industry's principal competitive factors include fares, brand and customer service, route networks, flight schedules, aircraft types, safety records, code-sharingcodeshare and interline relationships, in-flightinflight entertainment and connectivity systems, and frequent flyer programs.
Price competition is intenseThe Coronavirus (COVID-19) Pandemic
The unprecedented coronavirus ("COVID-19") pandemic and the related travel restrictions and physical distancing measures implemented throughout the world have significantly reduced demand for air travel. Beginning in March 2020, large public events were canceled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel, and popular leisure destinations temporarily closed to visitors. Certain countries have imposed bans on international travelers for specified periods or indefinitely.
Demand for air travel began to weaken at the end of February 2020. The pace of decline accelerated throughout March into April 2020 and demand remained depressed throughout the rest of 2020. This decline in demand has had a material adverse impact on our industry.operating revenues and financial position. Our abilitycapacity and operating revenues for the year ended December 31, 2020 declined by 48.8% and 63.5% year-over-year, respectively. Although demand began to operate successfully and grow in this environment depends on, among other things, our ability to operate at costs equal to orimprove as the year progressed, it remained significantly lower than in prior years. The exact timing and pace of the recovery is uncertain given the significant impact of the pandemic on the overall U.S. and global economy.
In response to the COVID-19 pandemic, since March 2020 we have implemented a number of measures to focus on the safety of our competitors.
Since 2001,customers, our crewmembers, and our business. We expect the demand environment to remain depressed until the majority of traditional network airlines have undergone significant financial restructuring including bankruptcies, mergers and consolidations. These types of restructurings typically result in a lower cost structure through a reduction of labor costs, restructuring of commitments including debt terms, leases and fleet, modification or termination of pension plans, increased workforce flexibility, and innovative offerings. These actions also have provided the restructured airline significant opportunities for realignment of route networks, alliances and frequent flyer programs. Each factor has had a significant influence on the industry's improved profitability.
2017 OPERATIONAL HIGHLIGHTS
We believe our differentiated product and culture, competitive costs and high-value geography relative to other airlines contributed to our continued success in 2017. Our 2017 operational highlights include:
•Product enhancements - Throughout 2017 we continued to invest in industry-leading products which we believe will continue to differentiate our offerings from the other airlines.
◦During 2017, we continued to expand MintTM service, our premium product which includes 16 fully lie-flat seats, four of which are in suites with a privacy door, a first in the U.S. domestic market, by adding flights from John F. Kennedy International Airport, or JFK,population is vaccinated against COVID-19. Our response to Las Vegasthe pandemic and San Diego, along with Bostonthe measures we take to San Diego. We continually enhance our onboard MintTM experience through new offerings to our MintTM Customers suchsecure additional liquidity may be modified as new products like locally curated artisanal ice creams based in some of our MintTM BlueCities and a new exclusive chocolate bar from Raaka. During 2018, we expect to further expand our MintTM service with flights from JFK and Boston to Seattle.
◦During 2017, we enhanced our free Fly-Fi™ in-flight internet service, availablehave more clarity on our entire fleet, to set our experience apart from other airlines by becoming the first in the U.S. to offer gate-to-gate internet connectivity on every aircraft. Gate-to-gate Fly-Fi™ eliminates the need to wait until reaching cruising altitude to get connected. Instead, Customers can email, surf, stream, tweet and shop from the moment they board until they reach the arrival gate.
•Fleet - In conjunction with our intention to expand our Mint™ experience, we amended our purchase agreement with Airbus in April 2017 which changed the timing of certain of our Airbus A321ceo and Airbus A321neo deliveries. Specifically, we deferred eight A321neo deliveries from 2019 to 2023 and five from 2020 to 2024. We also moved up the delivery of three A321ceo Aircraft from 2019 to 2018, while deferring three A321neo deliveries to 2019. We retain flexibility to make further changes in our order book. We have the option to take certain A321neo deliveries with the long range configuration, the A321-LR.demand recovery.
During 2017, we took delivery of 16 Airbus A321 aircraft, 15 of which were equipped with our Mint™ cabin layout.
During the second half of 2016, we introduced Airbus' new innovative galley and lavatory module on our single cabin layout Airbus A321 with 200 seats. We believe our cabin restyling program across our Airbus fleet will improve Customer experience while freeing up valuable onboard space. As part of our cabin restyling program we expect to increase the seat density on our Airbus A320 fleet. Our reconfigured Airbus A320 aircraft will have new seats, larger TV screens with up to 100 channels of free DIRECTV®, and free gate-to-gate Fly-Fi™. Our reconfiguring of our Airbus A320 aircraft will result in 162 seats. The industry has experienced design failures with the space efficient lavatory module that we have installed on certain of our A321 aircraft and were planning to install on A320 aircraft. During the fourth quarter of 2017, we made significant progress in addressing certain quality issues with our business partners. As a result, our first Airbus A320 entered modifications for prototyping during the first quarter of 2018, coinciding with a scheduled heavy maintenance check for operational efficiency. We believe this multi-year restyling program will allow us to increase capacity in a capital-efficient and customer-focused way.
We are continuing to evaluate our E190 fleet as part of our fleet-wide review, and are making progress exploring our future fleet options with aircraft and engine manufacturers. Our options range from maintaining our current fleet of E190s to replacing it with alternative aircraft types. The commercial aircraft landscape has recently changed, requiring us to spend more time assessing our options. We examine all fleet and capital decisions through the lens of aiming to achieve superior margins and drive Shareholder value.
•Network - We continued to expand and grow in our high-value geography. In 2017, we expanded our network with one new BlueCity, bringing our total as of the end of December 2017 to 101 BlueCities, and added several connect-the-dot routes.
We began service in March from Boston to Atlanta, our 101st BlueCity. Atlanta became the 63rd nonstop destination from Boston. The addition of nonstop Atlanta service, which was the most requested destination by our Boston Customers, is part of our plan to reach 200 daily flights in the coming years. Customers in both cities benefit from convenient, five times daily service between Boston and Atlanta. In December 2017, we moved our LaGuardia operation from the airport's Central Terminal B to our new home at the historic Marine Air Terminal. We’re New York’s Hometown Airline™ and we believe moving into the Marine Air Terminal further exemplifies JetBlue’s leadership in our largest focus city. The move to the Marine Air Terminal will also enhance the Customer experience at LaGuardia by allowing Customers to avoid the congestion and traffic associated with the Central Terminal – a particularly significant benefit for Customers traveling on our popular LaGuardia-Boston route.
In May 2018, we plan to begin three daily roundtrip services from Boston to Minneapolis, making Minneapolis our 102nd BlueCity, and the 65th nonstop destination from Boston.
•Customer Service - JetBlue and our Crewmembers were recognized in 2017 for industry leading customer service.
JetBlue received the top score on the American Customer Satisfaction Index (ACSI) among airlines. Our score of 82 was the highest for any domestic airline. Additionally, Airline Ratings awarded us 7 out of 7 stars for safety, and 5 out of 5 stars for our product offerings.
•Our Crewmembers -During 2017, our Crewmembers recognized JetBlue as one of America's "Best Employers" by Forbes. JetBlue ranked #12 through a survey that asked individuals how likely they would be to recommend their employer to someone else. We are proud that for a sixth year we have achieved a top score of 100 on the Corporate Equality Index, which rates major U.S. companies and their policies and practices related to the LGBT community, earning us the designation of one of the "Best Places to Work for LGBT Equality."
Effective January 1, 2017, profit sharing eligible Crewmembers received an 8% raise and a modified profit sharing plan. We believe this recognition and change to our compensation structure reflects industry trends and ensures that our
Crewmember compensation and rewards are fair and competitive. Under the modified profit sharing plan, non-management Crewmembers are eligible to receive profit sharing, calculated as 10% of adjusted pre-tax income before profit sharing and special items, up to a pre-tax margin of 18% with the result reduced by Retirement Plus contributions. If JetBlue's resulting pre-tax margin exceeds 18%, non-management Crewmembers will receive 20% profit sharing on amounts above an 18% pre-tax margin.
We believe the recent U.S. tax reform changes will be positive for our company, and provide JetBlue with the opportunity to pass on the benefit to our Crewmembers, Customers and Shareholders. With tax reform in mind, we announced a $1,000 bonus for every Crewmember employed as of December 31, 2017.
JETBLUE EXPERIENCE
We offer our Customerscustomers a distinctive flying experience which we refer to as the "JetBlue Experience."Experience''. We believe we deliver award winningaward-winning service that focuses on the entire Customercustomer experience, from booking an itinerary to arrival at the final destination. Typically, our Customerscustomers are neither high-traffic business travelers nor ultra-price sensitive travelers. Rather, we believe we are the carrier of choice for the majority of travelers who have been underserved by other airlines as we offer a differentiated product and award winning customer service.
Differentiated Product and Culture
Delivering the JetBlue Experience to our Customerscustomers through our differentiated product and culture is core to our mission to inspire humanity. We look to attract new Customerscustomers to our brand and provide current Customerscustomers with a reason to come back by continuing to innovate and evolve the JetBlue Experience. We believe we can adapt to the changing needs of our Customerscustomers and a key element of our success is the belief that competitive fares and quality air travel need not be mutually exclusive.
Our award winning service begins from the moment our Customerscustomers purchase a ticket through one of our distribution channels such as www.jetblue.com, our mobile applications, or our reservations centers. Customers can purchase tickets under our Fare Options pricing model, at one of threefour branded fares: Blue Basic, Blue, Blue Plus,Extra, and in select markets, Blue Flex.Plus. Each fare includes different offerings such as priority boarding, advance seat selections, free checked bags, reduced change fees, and additional TrueBlue® points, with all fares including our core offering of free in-flightinflight entertainment, free brand name snacks, and free non-alcoholic beverages. Customers can choose to “buy up” to an option with additional offerings. These different fares allow Customerscustomers to select the products or services they need or value when they travel, without having to pay for the things they do not need or value.
Upon arrival at the airport, our Customerscustomers are welcomed by our dedicated Crewmemberscrewmembers and can choose to purchase one or more of our ancillary options such as Even More™® Speed, allowing them to enjoy an expedited security experience in most domestic JetBlue locations. Customers who select our Blue FlexExtra option or purchase a Mint™® seat receive Even More™® Speed as part of their fare. We additionally have mobile applications for both Apple and Android devices which have robust features including real-time flight information updates and mobile check-in for certain routes. Our applications are designed to enhance our Customers'customers' travel experience and are in keeping with the JetBlue Experience.
Our self-service initiativelayout in select BlueCities redesigned the physical layout ofway our customers travel through the airport lobby and the way our Customers travel through it.lobby. Our new user-friendly kiosks are the first point of contact for each Customercustomer traveling through the airport lobby.lobby and allow for contact-less service. While all Customerscustomers are encouraged to use the kiosks, our new lobby layout allows them to choose the check-in experience they prefer. Customers who choose to use our kiosk receive a virtually queue-less experience. For Customerscustomers who prefer a more traditional experience, our Help Desk offers full-service check-in. The self-service model allows Crewmemberscrewmembers to get out from behind the ticket counter and move through the lobby to guide our Customerscustomers through the check-in process. The self-service lobby opens up the opportunity for our Crewmemberscrewmembers to make personal connections with our Customers,customers, to assist with bag tagging, to answer Customercustomer questions and to direct them to their next step in the travel ribbon.experience.
Once onboard our aircraft, Customerscustomers enjoy seats in a comfortable layout with the most legroom in the main cabin of all U.S. airlines, based on average fleet-wide seat pitch. Our Even More™® Space seats are available for purchase across our fleet, giving Customerscustomers the opportunity to enjoy additional legroom. Customers on certain transcontinental or Caribbean flights have the option to purchase our premium service, Mint™®, which has 16 fully lie-flat seats, including four suites with privacy doors.
In February 2021, we unveiled a reimagined version of our Mint® experience. The new service includes a completely refreshed cabin design featuring private suites with a sliding door for every Mint® customer. Each Mint® aircraft will also include two Mint® Studio suites which offers the most space in a premium experience from any U.S. airline based on personal square footage per passenger seat. We expect to debut this new premium service with a 16-seat individual suite layout on a limited number of flights between New York and Los Angeles in 2021. For our anticipated transatlantic flights to London, the new Mint® experience will include 24 individual suites.
Our in-flightinflight entertainment system onboard the majority of our Airbus A320 and Embraer E190 aircraft includes 36 channels of free DIRECTV®, 100100+ channels of free SiriusXM Radio® satellite radio and premium movie channel offerings from JetBlue Features®.Features. Customers on our Airbus A321 aircraft and certain restyled Airbus A320 aircraft have access to 100100+ channels of DIRECTV®, 100+ channels of SiriusXM Radio® radio and premium movie channel offerings from JetBlue Features®.Features. Our Mint™ Customers® customers enjoy 15-inch flat screen televisions to experience our in-flightinflight entertainment offerings. Our entire fleet is equipped with Fly-Fi™®, a broadband product with connectivity that we believe is significantly faster than airlines featuring KU-band satellites and older ground to air technology.allows gate-to-gate Wi-Fi at every seat. Customers also have access to the Fly-Fi™® Hub, a content portal where Customerscustomers can access a wide range of movies, television shows, and additional content from their own personal devices. In 2017, we became the first in the U.S. to offer gate-to-gate internet connectivity on every aircraft. Gate-to-gate Fly-Fi™ eliminates the need to wait until reaching cruising altitude to get connected. Instead, Customers can email, surf, stream, tweet and shop from the moment they board until they reach the arrival gate.
All Customerscustomers may enjoy an assortment of free and unlimited brand name snacks and non-alcoholic beverages and have the option to purchase additional products such as blankets, pillows, headphones, premium beverages and premium food selections. Our Mint™ Customers® customers have access to an assortment of complimentary food, beverages and products including a small-plates menu, artisanal snacks, alcoholic beverages, a blanket, pillows, and headphones.
Our Airbus A321 aircraft in a single cabin layout have 200 seats and those with our Mint™® offering have 159 seats. Our Airbus A320 aircraft in the classic configuration have 150 seats while our Embraer E190 aircraft have 100 seats. As part ofThose A320 aircraft which have gone through our cabin restyling program we expect to increase the seat density on our Airbus A320 fleet. Our reconfiguring of our Airbus A320 aircraft will result inhave 162 seats. Regarding our cabin restyling program, the industry has experienced design failures with the space efficient lavatories that we have installed on certain of our A321s, and are planning to install on the A320s. During the fourth quarter of 2017, we made significant progress in addressing certain quality issues with our business partners. As a result, our first Airbus A320 entered modifications for prototyping during the first quarter of 2018, coinciding with a scheduled heavy maintenance check for operational efficiency. We believe thisour multi-year restyling program will allow us to increase capacity in a capital-efficient and customer-focusedcustomer-focused way. Our first restyled Airbus A320 aircraft entered into revenue service in April 2018. As of December 31, 2020, we had 72 restyled Airbus A320 aircraft in service. In December 2020, we took delivery of our first airbus A220 aircraft with a cabin configuration of 140 seats.
Because of our network strength in leisure destinations, we also sell vacation packages through our wholly owned subsidiary, JBTP, LLC, or JetBlue® Vacations, Travel Products, a one-stop, value-priced vacation service for self-directed packaged travel planning. These packages offer competitive fares for air travel on JetBlue along with a selection of JetBlue-recommended hotels and resorts, car rentals, and local attractions. In 2018, we created a standalone wholly-owned subsidiary, JetBlue Travel Products, LLC that will absorb the JetBlue® Vacations business.
We work to provide a superior air travel experience, including communicating openly and honestly with Customerscustomers about delays and service disruptions. We are the only major U.S. airline to have a Customer Bill of Rights. This programRights which was introduced in 2007 to provide compensation to Customerscustomers who experience inconveniences. This Customer Bill of Rights commits us to high service standards and holds us accountable if we fall short.
In 2017, we completed 97.3% of our scheduled flights. Unlike most other airlines, we have a policy of not overbooking flights.
Our Customerscustomers have repeatedly indicated the distinctive JetBlue Experience is an important reason why they select us over other carriers. We measure and monitor customer feedback regularly which helps us to continuously improve customer satisfaction. One way we do so is by measuring our net promoter score, or NPS. This metric is used by companies in a broad range of industries to measure and monitor the customer experience. Many of the leading consumer brands that are recognized for great customer service receive high NPS scores. We believe a higher NPS score has positive effects on customer loyalty and ultimately leads to increased revenue.
Network/ High-Value GeographyNetwork
We are a predominately point-to-point system carrier, with the majority of our routes touching at least one of our six Focus Cities:focus cities: New York, Boston, Fort Lauderdale-Hollywood, Orlando, Long BeachLos Angeles, and San Juan, Puerto Rico. During 2017, over 92% of our Customers flew on nonstop itineraries.
Leisure traveler focused airlines are often faced with high seasonality. As a result, we continually work to manage our mix of Customerscustomers to include both business travelers and travelers visiting friends and relatives, or VFR. VFR travelers tend to be slightly less seasonal and less susceptible to economic downturns than traditional leisure destination travelers. Understanding the purpose of our Customers'customers' travel helps us optimize destinations, strengthen our network, and increase unit revenues. All six of our Focus Citiesfocus cities are in regions with a diverse mix of traffic and were profitable in 2017.traffic.
As of December 31, 2017,2020, our network served 101served 98 BlueCities in 30 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 2123 countries in the Caribbean and Latin America.
We also made changes across our network by announcing new routes between existing BlueCities. We group our capacity distribution based upon geographical regions rather than on a mileage or a length-of-haul basis. The historic distribution of ASMs, or capacity, by region for the years ending December 31 was:
| | | Capacity Distribution | | 2017 | | 2016 | | 2015 | Capacity Distribution | | 2020 | | 2019 | | 2018 |
| Florida | | 30.1 | % | | 29.1 | % | | 29.2 | % | |
| Transcontinental | | 28.6 |
| | 28.8 |
| | 28.5 |
| Transcontinental | | 31.7 | % | | 32.0 | % | | 31.3 | % |
Caribbean & Latin America (1) | | 28.3 |
| | 30.1 |
| | 30.2 |
| Caribbean & Latin America (1) | | 31.4 | | | 31.2 | | | 28.7 | |
| Florida | | Florida | | 27.4 | | | 25.2 | | | 27.3 | |
| East | | 6.4 |
| | 5.4 |
| | 5.7 |
| East | | 4.5 | | | 6.0 | | | 6.5 | |
| Central | | 3.8 |
| | 4.1 |
| | 3.8 |
| Central | | 4.0 | | | 4.0 | | | 4.0 | |
| West | | 2.8 |
| | 2.5 |
| | 2.6 |
| West | | 1.0 | | | 1.6 | | | 2.2 | |
| Total | | 100.0 | % | | 100.0 | % | | 100.0 | % | Total | | 100.0 | % | | 100.0 | % | | 100.0 | % |
(1) Domestic operations as defined by the U.S. Department of Transport, or DOT, include Puerto Rico and the U.S. Virgin Islands, but for the purposes of the capacity distribution table above, we have included these locations in the Caribbean and Latin America region.
During the past decade we invested inWe made numerous adjustments to our network which had been dominatedin response to the dynamic environment created by the New York metropolitan areaCOVID-19 pandemic. At the onset of the pandemic, we significantly reduced our capacity to a level that maintained essential services to align with over halfthe precipitous decline in demand. We temporarily consolidated our operations in certain cities that contain multiple airport locations and parked a portion of our ASMs. Our network growth overfleet.
As the past few years has been focused onpandemic progressed, we launched new routes to serve customers in markets where leisure and VFR travel showed signs of recovery. These new routes offered us the business traveler in Boston as well as travelersopportunity to the Caribbeangenerate revenue, bring aircraft back into service, and Latin America region. added more flying opportunities for our crewmembers and customers.
We expect to focus on increasingresume our plans to increase our presence in Fort Lauderdale-Hollywood whereour focus cities and diversify our network as we believe there is an opportunity to increase our operations to destinations throughout the Caribbean and Latin America. Our plan is supported by significant investmentrecover from the Broward County Aviation Department in the airport and surrounding facilities. pandemic. We believe our increased focus on Boston and Fort Lauderdale-Hollywood makes our ASMs more balanced and the overall network is stronger.
In 2018, we anticipate further expanding our network and have previously announced service to the following new destination:destinations:
|
| | | | | | | |
| Destination | | Service ScheduledExpected to Commence |
Minneapolis, MNKey West, Florida | | May 3, 2018February 11, 2021 |
| Miami, Florida | | February 11, 2021 |
Guatemala City, Guatemala(*) | | April 15, 2021 |
Los Cabos, Mexico(*) | | June 17, 2021 |
(*) Subject to receipt of government operating authority.
We also anticipate launching service from Boston and JFK to London in 2021. London will be our first BlueCity in Europe.
Airline Commercial Partnerships
Airlines frequently participate in commercial partnerships with other carriers in order to increase Customercustomer convenience by providing interline-connectivity, code-sharing, coordinatedcodeshare, complementary flight schedules, frequent flyer program reciprocity, and other joint marketing activities. As of December 31, 2017,2020, we hadhad 48 airlineairline commercial partnerships. Our commercial partnerships typically begin as an interline agreement allowing a Customercustomer to book onea single itinerary with tickets on multiple airlines. During 2017,On their day of travel, they enjoy a simplified airport experience with single check-in and bag drop.
In July 2020, we enteredannounced our intention to enter into onea strategic relationship with American Airlines Group Inc. ("American"). This arrangement, once fully implemented, will include an alliance agreement with reciprocal code sharing on domestic and international routes from or connecting through New York (John F. Kennedy International Airport ("JFK"), LaGuardia Airport, and Newark Liberty International Airport) and Boston, excluding JetBlue's future European transatlantic flying. We believe this partnership will create more capacity, seamless connectivity for travelers in the northeast, and offer more choices for customers across the networks of both airlines. In addition, we believe this relationship will also accelerate our recovery as the travel industry adapts to new code-sharing agreement. Code-sharing istrends as a practice byresult of the COVID-19 pandemic. Pursuant to federal law, American and JetBlue submitted this proposed alliance arrangement to the Department of Transportation ("DOT") for review. After American, JetBlue and the DOT agreed to a series of commitments, the DOT terminated its review of the proposed alliance. The commitments include growth commitments to ensure capacity expansion, slot divestitures at JFK and at Reagan National Airport near Washington, D.C. and antitrust compliance measures. Beyond this agreement with the DOT, American and JetBlue will also be limiting their coordination on certain city pair markets within the scope of the alliance. In addition to the DOT review, the Department of Justice and the New York Attorney General, the Massachusetts Attorney General, and the Attorneys General of certain other state and local jurisdictions are investigating this proposed alliance, which one airline places its nameare ongoing. American and flight number on flights operated by another airline. JetBlue intend to cooperate with those investigations, but are proceeding with plans to implement this alliance.
In 2018,2021, we expect to continue to seek additional strategic opportunities through new commercial partners as well as assess ways to deepen existing airline partnerships. We plan to do this by expanding code-sharecodeshare relationships and other areas of cooperation such as frequent flyer programs. We believe these commercial partnerships allow us to better leverage our strong network and drive incremental traffic and revenue while improving off-peak travel.
Marketing
JetBlue is a widely recognized and respected global brand. JetBlue created a new category in air travel and our brand stands for high service quality at a reasonable cost.We believe this brand has evolved into an important and valuable asset which identifies us as a safe, reliable, high value airline. Similarly, we believe customer awareness of our brand has contributed to the success of our marketing efforts. It enables us to promote ourselves as a preferred marketing partner with companies across many different industries.
We market our services through advertising and promotions in various media forms including popular social media outlets. We engage in large multi-market programs, local events and sponsorships across our route network as well as mobile marketing programs. Our targeted public and community relations efforts reflect our commitment to the communities we serve, as well as promotingpromote brand awareness, and complementingcomplement our strong reputation.
Distribution
Our primary and preferred distribution channel to Customerscustomers is through our website, www.jetblue.com, our lowest cost channel. Our website allows us to more closely control and deliver the JetBlue Experience while also offering the full suite of
JetBlue Fare Options, EvenMore™Even More® Space and Speed, and other ancillary services. In the first half of 2015, we introduced a new merchandising platform for www.jetblue.com with our business partner Datalex, in addition to merchandising capabilities on our kiosks and in our self-service channels with our business partner IBM.
Our participation in global distribution systems, or GDS, supports our profitable growth, particularly in the business market. We find business Customerscustomers are more likely to book through a travel agency or a booking product which relies on a GDS platform. Although the cost of sales through this channel is higher than through our website, the average fare purchased through a GDS is generally higher and often covers the increased distribution costs. We currently participate in several major
GDS and online travel agents, or OTA. Due to the majority of our Customerscustomers booking travel on our website, we maintain relatively low distribution costs despite our increased participation in GDS and OTA in recent years.
Customer Loyalty Program
TrueBlue® is our customer loyalty program designed to reward and recognize loyal Customers.customers. Members earn points based upon, among other methods, the amount paid for JetBlue flights and services from certain commercial partners. Our points do not expire, the program has no black-out dates, orpoints can be redeemed for any open seat, restrictions, and any JetBlue destination can be booked if the TrueBlue® member has enough points to exchange for the value of an open seat. Mosaic® is an additional level for our most loyal Customerscustomers who either (1) fly a minimum of 30 times with JetBlue and acquire at least 12,000 base flight points within a calendar year, or (2) accumulate 15,000 base flight points within a calendar year, or (3) in certain circumstances, qualify through a minimum credit card spend of $50,000 in a calendar year.
We made several updates to our TrueBlue® program in response to the COVID-19 pandemic. These include extending the status of all current Mosaic®customers through 2021 and also reducing the qualification requirements for customers trying to earn Mosaic® status by 50% in 2021. Under the updated program, customers can now enjoy Mosaic® benefits by either (1) flying a minimum of 15 times with JetBlue and acquiring at least 6,000 base flight points within a calendar year or (2) accumulating 7,500 base flight points within a calendar year. Over 2 million TrueBlue® one-way redemption awards were flown during 2017, representing approximately 5%These reduced qualification requirements are effective through the end of our total revenue passenger miles.2021.
We currently have co-branded loyalty credit cards available to eligible U.S. residents, as well as co-brand agreements in Puerto Rico and the Dominican Republic to allow cardholders to earn TrueBlue® points. Our current co-branded credit cardcards in the United States are issued in partnership with Barclaycard® on the MasterCard® network exceeded expectations for conversion rates and has exceeded our expectations for new member enrollments. network. We also have co-branded loyalty credit cards issued by Banco SantanderPopular de Puerto Rico and MasterCard® in Puerto Rico as well as Banco Popular Dominicano and MasterCard® in the Dominican Republic. These credit cards allow Customerscustomers in Puerto Rico and the Dominican Republic to take full advantage of our TrueBlue® loyalty program.
We have a separate agreement with American Express® that allows any American Express® cardholder to convert Membership Rewards® points into TrueBlue® points. In 2016, we added a partnership agreement with Citibank® to convert Citi ThankYou® Rewards points into TrueBlue® points. We have various agreements with other loyalty partners, including financial institutions, hotels, and car rental companies, that allow their Customerscustomers to earn TrueBlue® points through participation in our partners’ programs. Customers can link their TrueBlue account with Lyft, to take advantage of unique discounts, travel perks, and earn TrueBlue loyalty points on any Lyft ride to and from any airport nationwide. We intend to continue to develop the footprint of our co-branded credit cards and pursue other loyalty partnerships in the future.
OPERATIONS AND COST STRUCTURE
Historically, our cost structure has allowed us to price fares lower than many of our competitors and iswas a principal reason for our profitable growth.growth prior to the onset of the COVID-19 pandemic in 2020. Our current cost advantage relative to some of our competitors iswas due to, among other factors, high aircraft utilization, new and efficient aircraft, relatively low distribution costs, and a productive workforce. Because our network initiatives and growth plans require a low cost platform, we strive to stay focused on our competitive costs, operational excellence, efficiency improvements, and enhancing critical elements of the JetBlue Experience.
During 2016 we introduced an initiative to reduce our structural cost with the goal of saving $250 to $300 million by 2020. The program aims to cover all cost categories including our technical operations, corporate services, airports We will remain nimble and our distribution network. Through a combination of strategic sourcing, planning, automation and a review of our distribution channel strategy we anticipate delivering structural cost savings which will continue to allow us to deliver the JetBlue Experience toexecute on our Customers while maintaining a competitive cost structure. In 2017, we made significant progressplan in the initial stagesface of achieving this target and have already secured approximately $90 million ofchanging customer behaviors as we navigate through the goal. In order to minimize distribution costs, we have been proactively reducing the number of online travel agencies that sell our tickets. This is the first phase of a broader strategy to drive our most price-sensitive Customers towards direct distribution, our lowest cost and best merchandise channel.COVID-19 pandemic.
Route Structure
OurJetBlue's point-to-point system is the foundation of our operational structure, with the majority of our routes touching at least one of our six focus cities. This structure allows us to optimize costs as well as accommodate Customers'customers' preference for nonstop itineraries. A vast majority of our operations are centered in and around the heavily populated northeast corridor of the U.S., which includes the New York and Boston metropolitan areas. This airspace is some of the world's most congested and drives certain operational constraints.
Our peak levels of traffic over the course of the typical year vary by route; the East Coast to Florida/Caribbean routes peak from October through April and the West Coast routes peak in the summer months. ManyGenerally speaking, many of our areas of operations in the Northeast experience poor winter weather conditions, resulting in increased costs associated with de-icing aircraft, canceled flights, and accommodating displaced Customers.customers. Many of our Florida and Caribbean routes experience bad weather conditions in the summer and fall due to thunderstorms and hurricanes. As we enter new markets we could be subject to additional seasonal variations along with competitive responses by other airlines.
Our flying in 2020 did not follow the typical historical patterns and was instead shaped by our responses to the significant declines in demand for air travel and changes in travel behavior triggered by the COVID-19 pandemic and associated government travel restrictions in the U.S. and international destinations we serve.
•New York metropolitan area - We are New York's Hometown AirlineTM®. The majorityApproximately one-half of our flights originate infrom or are destined for the New York metropolitan area, the nation's largest travel market.area. JFK is New York's largest airport, and we are the second largest airline at JFK as measured by domestic seats. Our 20172020 operations accounted for more than 37%39% of seats offered on domestic routes from JFK. As JFK is a slot controlled airport we have been able to continue to grow our operations by adding more seats per departure with the delivery of the Airbus A321 aircraft, as well as continuing to optimize routes based upon load factor and costs. We operate from Terminal 5, or T5, which includes an international arrivals facility within our current T5 footprint. We believe T5 enables us to increase operational efficiencies, provide savings, streamline our operations and improve the overall travel experience for our Customers arriving from international destinations. We also serve New Jersey's Newark Liberty International Airport, or Newark, New York
City's LaGuardia Airport, or LaGuardia, Newburgh, New York's Stewart International Airport, or Newburgh, and White Plains, New York's Westchester County Airport. We are the leading carrier in the average number of flights flown per day between the New York metropolitan area and Florida. In December, we moved our operation at LaGuardia from the Central Terminal to the historic Marine Air Terminal, also known as Terminal A bringing our Customers greater convenience and an improved ground experience while the Central Terminal undergoes reconstruction. We also added year-round Mint™ service from New York to Las Vegas and San Diego this year.Airport, or White Plains.
•Boston - We are the largest carrier in terms of flights and capacity at Boston's Logan International Airport. ByAirport, or Boston. At the end of 20172020, we flew to 6370 nonstop destinations from Boston and our operations accounted for more than 27%31% of all seats offered in Boston. We continue to capitalize on opportunities in the changing competitive landscape by adding routes, frequencies and increasing our relevance to local travelers. Our plan is to grow Boston with a general target of 200 flights per day. In August 2017, we announced nonstop service will be offered to Syracuse, NY, in January 2018. In October 2017, we announced nonstop service to be offered to Minneapolis in the second quarter of 2018.
With the success of our existing Mint™ routes, we announced additional Boston Mint™ service to San Francisco, which began in the third quarter of 2017, to San Diego, which began in the fourth quarter of 2017, and seasonal Mint™ service to St. Maarten, which began in the fourth quarter of 2017.
In November 2015, we unveiled Phase I of our $50 million Logan Terminal C upgrade which included new kiosks and ticket counters. Twenty-five kiosks and thirty check-in counters are in use in the North Pod of the terminal. Phase II of the upgrade, funded by the Massachusetts Port Authority, or Massport, was completed on the South Pod in 2016 which mirrors the check-in experience of the North Pod. Updated digital flight information displays and a connector between Terminal C and international flights at Terminal E were also completed during 2016. We lease 23 gates, and completed installation of self-service kiosks in Boston in early 2017.
•Caribbean and Latin America - At the end of 20172020, we had 3835 BlueCities in the Caribbean and Latin America and we expect our presence to continue to grow.America. San Juan, Puerto Rico is our only focus city outside of the Continental U.S. We are the largest airlinea leading carrier in Puerto Rico serving more nonstop destinations than any other carrier.three airports. We are also the largest airline in the Dominican Republic, serving fivefour airports. While the Caribbean and Latin American region is a growing part of our network, operating in this region can present challenges, including working with less developed airport infrastructure, political instability and vulnerability to corruption. The second half of 2017 brought extraordinary weather conditions due to several strong hurricanes. We believe full recovery in Puerto Rico in the wake of Hurricane Maria will take many months. As the largest airline in the Commonwealth, we are working closely with the authorities and the community to support short-term needs and help in the long-term recovery. In September 2017, we launched a companywide initiative, 100x35JetBlue, including daily relief flights, transportation of essential items and fund raising initiatives. We plan to continue our efforts and commitment to providing support during 2018.
•Fort Lauderdale-Hollywood - We are the largesta leading carrier at Fort Lauderdale-Hollywood International Airport, or Fort Lauderdale-Hollywood, with approximately 25%19% of all seats offered in 2017. We expect Fort Lauderdale-Hollywood to continue to be our fastest growing focus city. Flying out of Fort Lauderdale-Hollywood instead of nearby Miami International Airport helps preserve our competitive cost advantage through lower enplanement costs. In 2012, Broward County authorities commenced a multi-year, $2.3 billion refurbishment effort at the airport and surrounding facilities including the construction of a new south runway. We operate primarily out of Terminal 3 which is scheduled to be refurbished and connected to the upgraded and expanded international terminal by 2018. We will have additional facilities in the new international terminal to support our international arrivals. Terminal 3 allows for easy access to the expanded and enhanced airfield. We expect the connection of these terminals to streamline operations for both Crewmembers and Customers. Due to these factors, we believe Fort Lauderdale-Hollywood an ideal location between the U.S. and Latin America as well as South Florida's high-value geography. We intend to focus on Fort Lauderdale-Hollywood growth going forward. During 2017, we launched our Mint™ service from Fort Lauderdale to Los Angeles and San Francisco, and we launched nonstop service to Salt Lake City. The new route continues to grow our presence in Fort Lauderdale where we're the largest airline. Salt Lake City will become the 56th nonstop destination from Fort Lauderdale. We expect to add new service to Atlanta in March of 2018.2020.
•Orlando - We are the third largestleading carrier in terms of capacitymeasured by seats at Orlando International Airport, or Orlando. At the end of 2020, we served 33 nonstop destinations from Orlando with 13%and our operations accounted for 10% of all seats offered in 2017. Orlando is JetBlue's fourth largest focus city with 30 nonstop destinations and a growing mix of traffic including leisure, VFR and business travelers. Our centralized training center, known as JetBlue University, is based in Orlando. In 2015, we opened the Lodge at OSC which is adjacent to our training center and is used for lodging our Crewmembers when they attend training.2020.
•Los Angeles area - We are the sixth largest carrier in the Los Angeles area measured by seats, operating from Long Beach Airport, or Long Beach, Los Angeles International Airport, or LAX, and Burbank's Bob Hope Airport. We areAirport, or Burbank, and Ontario International Airport, or Ontario. In July 2020, we announced our plans to make LAX a focus city and our primary base of operations on the largest carrier inwest coast. To enable this shift, we relocated our operations from Long Beach Airport along with almost 80% of all seats offeredour crew and maintenance bases in 2017 operated by JetBlue.October 2020. We worked with the city of Long Beach and the community to request the U.S. Customs and Border Protection to add a Federal Inspection Site, or FIS, at the airport, which would have enabledbelieve this move will enable us to serve international destinations from Long Beach. However, in January 2017,embark on a strategic expansion over the Long Beach City Council voted against moving forwardnext five years with the plans for the FIS facility. Long Beach remains an important BlueCity for JetBlue and is part of our broader strategy.
In June 2014, we started operating our premium service, Mint™, from LAX, which continued to grow during 2017. We currently offer up to eleven daily round trips between JFK and LAX and up to four daily round trips between Boston and LAX. While international service is not possible at Long Beach due to Federal regulations, we remain committed to Long Beach and to growing across California. We are now operating morereach approximately 70 flights than we ever have in our 15-year history at Long Beach and we continue to grow our LAX operation with the expansion of Mint™. Elsewhere in the region, we serve Burbank and are now on the waiting list for slots at John Wayne Airport in Orange County.per day by 2025.
Fleet Structure
We currently operate Airbus A321, Airbus A320, and Embraer E190 aircraft types. In 2017,As of December 31, 2020, our fleet had an average age of 9.2 years and operated an average11.3 years. We took delivery of 11.7 hours per day. By scheduling and operating our first Airbus A220 aircraft more efficiently we are ablein December 2020. We expect this aircraft to spread related fixed costs over a greater number of ASMs.enter into service in early 2021.
The reliability of our fleet is essential to ensuring our operations run efficiently and we are continually working with our aircraft and engine manufacturers to enhance our performance.
Our comprehensive fleet review continues as we explore all options. Regarding our cabin restyling program, the industry experienced design failures with the space efficient lavatories that we have installed on our A321s, and are planningWe continue to install on the A320s. During the fourth quarter of 2017, we made significant progress in addressing certain quality issues with our business partners. As a result, our first Airbus A320 entered modifications for prototyping during the first quarter of 2018, coinciding with a scheduled heavy maintenance check for operational efficiency. We believe this multi-year restyling program will allow us to increase capacity in a capital-efficient and customer-focused way.
We are workingwork with the Federal Aviation Administration, or FAA, in efforts towards implementing the Next Generation Air Transportation System, or NextGen, by 2020.NextGen. NextGen technology is expected to improve operational efficiency in the congested airspaces in which we operate. In 2012, we equipped 35NextGen is a multi-year modernization project with a target of our Airbus A320 aircraft to test ADS-B Out, a satellite based technology aimed to facilitate the communication between pilots and air traffic controllers. Even though it is stillhaving all major components in the testing phase we have already seen benefits from the ADS-B Out equipment including being able to reroute flights over the Gulf of Mexico to avoid bad weather, an area where the current FAA radar coverage is not complete. In 2012, we also became the first FAA certified Airbus A320 carrier in the U.S. to use satellite-based Special Required Navigation Performance Authorization Required, or RNP AR, approaches at two of JFK's prime and most used runways, 13L and 13R.place by 2025. As part of NextGen, our aircraft will also be outfitted with the following:
•Automatic Dependent Surveillance-Broadcast Out ("ADSB-Out"): ADSB-Out is a global positioning system ("GPS") surveillance technology that give air traffic controllers the precise location of aircraft every second. The goal of this technology is to safely boost the capacity of our airspace.
•Satellite-based Communications: We are putting satellite-based voice and data communications (SATCOM)("SATCOM") on our Airbus fleet. EveryAs planned, every aircraft will be assigned a unique phone number, similar to a cell network. This will givenetwork, aimed at giving us positive contact with our aircraft anywhere in the world.
•Data Comm: Data Comm makes departures more efficient by dramatically speeding up the process of aircraft pilots obtaining clearance from air traffic controllers. With Data Comm, controllers can simply push clearance details to the aircraft and dispatcher, which the pilot can confirm and automatically input into the flight computer with the push of a button. We recently received approval to equip our entire Airbus fleet with Data Comm. Data Comm is currently installed on 35 of our Airbus A321 aircraft and will be equipped on all future deliveries.
In addition, we also plan to upgrade our entire fleet to the latest version of the Traffic Collision & Avoidance System (TCAS), a critical safety system that reduces the chance of a mid-air collision.
Fleet Maintenance
Consistent with our core value of safety, our FAA-approved maintenance programs are administered by our technical operations department. We use qualified maintenance personnel and ensure they have comprehensive training. We maintain our aircraft and associated maintenance records in accordance with, if not exceeding, FAA regulations. As a result of the significant reduction in demand expectations and lower capacity driven by the COVID-19 pandemic, we have temporarily parked a portion of our fleet throughout 2020 and continuing into 2021.Fleet maintenance work is divided into three categories: line maintenance, heavy maintenance, and component maintenance.
The bulk of our line maintenance is handled by JetBlue technicians and inspectors. It consists of daily checks, overnight and weekly checks, or "A" checks, diagnostics, and routine repairs.
Heavy maintenance checks, or "C" checks, consist of a series of more complex tasks taking from one to four weeks to complete and are typically performed once every 15 months. All of our aircraft heavy maintenance work is performed by third party FAA-approved facilities such as Embraer, Haeco, Aeromantenimiento S.A.Aeroman (an MRO Holdings company), Flightstar (an MRO Holdings company), and Lufthansa Technik AG,PEMCO World Air Services (an Airborne Maintenance and Engineering Services, Inc. company), and are subject to direct
oversight by JetBlue personnel. We outsource heavy maintenance as the costs are lower than if we performed the tasks internally.
Component maintenance on equipment such as engines, auxiliary power units, landing gears, pumps, and avionic computers are all performed by a number of different FAA-approved third party repair stations. We have an agreementtime and materials agreements with MTU Aero Engines, Lufthansa Technik AG, and International Aero Engines AG ("IAE") for the repair, overhaul, modification, and logistics of our Airbus aircraft engines and certain Airbus components.engines. We also have a maintenance agreement with GE Engine Services, LLC for our Embraer E190 aircraft engines and IAE for our Airbus A321neo aircraft engines. Many of our maintenance service agreements are based on a fixed cost per flight hour. These fixed costs vary based upon the age of the aircraft and other operating factors impacting the related component. Required maintenance not otherwise covered by these agreements is performed on a time and materials basis. All other maintenance activities are sub-contracted to qualified maintenance, repair and overhaul facilities.
Aircraft Fuel
Aircraft fuel continues to be one of our largest expenses. Its price and availability has been extremely volatile due to global economic and geopolitical factors which we can neither control nor accurately predict. Our 2020 fuel consumption decreased by 53.4% compared to 2019 due to capacity reductions in response to lower demand as a result of the COVID-19 pandemic. We use a third party to assist with fuel management service and to procure most of our fuel. Our historical fuel consumption and costs for the years ended December 31 were:
| | | | | 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 |
| Gallons consumed (millions) | | 792 |
| | 760 |
| | 700 |
| Gallons consumed (millions) | | 412 | | | 885 | | | 849 | |
Total cost (millions)(1) | | $ | 1,363 |
| | $ | 1,074 |
| | $ | 1,348 |
| Total cost (millions)(1) | | $ | 631 | | | $ | 1,847 | | | $ | 1,899 | |
Average price per gallon(1) | | $ | 1.72 |
| | $ | 1.41 |
| | $ | 1.93 |
| Average price per gallon(1) | | $ | 1.53 | | | $ | 2.09 | | | $ | 2.24 | |
| Percent of operating expenses | | 22.7 | % | | 20.2 | % | | 25.9 | % | Percent of operating expenses | | 13.5 | % | | 25.3 | % | | 25.7 | % |
(1) Total cost and average price per gallon each include related fuel taxes as well as effective fuel hedging gains and losses.
We attempt to protect ourselves against the volatility of fuel prices by entering into a variety of derivative instruments. These include call spread options, call options, swaps, caps, collars, and basis swaps with underlyings of jet fuel, crude and heating oil.
Financial Health
We strive to maintain financial strength and a cost structure that enables us to grow profitably and sustainably. In the first years of our history, we relied on financing activities to fund much of our growth. Starting in 2007, our growth has largely been funded through internally generated cash from operations. Since 2014, while
In response to the travel restrictions, decreased demand, and other effects the COVID-19 pandemic has had and is expected to continue to have on the Company's business, we have invested approximately $4.1secured over $4 billion in capital assets, we have also generated approximately $5.6 billionnet proceeds through various debt and equity financing activities in cash from operations, resulting2020. We believe the additional liquidity will allow us to navigate through the pandemic in approximately $1.5 billion in free cash flow. Our improvedthe short-term. We will continue to evaluate future financing opportunities to build additional levels of liquidity as needed. Due to the impact that the demand environment has had on our financial results have resulted in bettercondition, our credit ratings which in turn allows for more attractive financing terms. Since 2014, we have also reduced our total debt balance by nearly $1 billion.were downgraded during 2020. Our current ratings from the three major credit rating agencies are summarized below:
| | | | | | | | | | | | | | |
| Rating Agency | | Current Rating | | Outlook |
| Fitch | | BB- | | Negative |
| Moody's | | Ba2 | | Negative |
| Standard & poor's | | B+ | | Negative |
JetBlue Technology Ventures
JetBlue has a new wholly-owned subsidiary, JetBlue Technology Ventures, L.L.C.,LLC, or JTV, that incubates,is a wholly owned subsidiary of JetBlue. JTV invests in and partners with early stage startups atwith goals of improving the intersectiontravel, hospitality, and transportation industries. The investment focus of technology,JTV is as follows:
•Seamless Customer Journey: Solutions that brighten the journey and enable a seamless travel experience throughout every part of the customer's trip.
•Reimagining the Accommodation Experience: Evolutions in hospitality, including alternative accommodations, and hospitality.the underlying products and services that power the industry.
•Next-Generation Aviation Operations and Enterprise Tech: Innovations that enhance safety, improve operations, and drive enterprise-wide efficiencies.
•Innovation in Loyalty, Distribution, and Revenue: Technologies that personalize and diversify commerce, simplify payments, and improve revenue opportunities.
•Sustainable Travel: Advanced methods of measuring and reducing emissions, improved environmental protections, and game-changing transportation powered by alternative propulsion systems.
JetBlue Travel Products
In 2018, we launched JBTP, LLC, or JetBlue Travel Products, which includes our JetBlue Vacations® Vacations brand and other non-air travel products such as travel insurance, cruises, and car rental. With its Inspiration Center headquartered in Fort Lauderdale, we planbelieve JetBlue Travel Products will play an important role in delivering our vision of inspiring humanity, extending our reach further across the travel ribbon to introduce a new booking flow on our website to better merchandise our existingoffer customers an even more seamless travel products.experience.
TWA Flight Center Hotel Development
In 2015, the Board of Commissioners of the Port Authority of New York & New Jersey, or the PANYNJ approved a construction plan to redevelop the TWA Flight Center at JFK on its nearly six-acre site into a hotel with over 500 rooms, meeting spaces, restaurants, a spa and an observation deck. The complex is planned to feature two six-story hotel towers. As part of the plan, a 75-year lease agreement involveswas entered into between the PANYNJ and the Flight Center Hotel, LLC, a partnership of MCR Development, LLC and JetBlue. We estimate our ultimate ownership in the hotel to be approximately 5% to 10% of the final total investment. During December 2016, theThe TWA Flight Center Hotel officially broke ground. The hotel is scheduled to openopened for business in early 2019. It will beAs of December 31, 2020, we have an approximate 10% ownership interest in the first hotel on airport property at JFK since 2009. The only other hotels near the airport are budget accommodations a short drive away by shuttle bus or taxi.hotel.
CULTURE
HUMAN CAPITAL MANAGEMENT
Our People and Culture
OurWe believe our success depends on our Crewmemberscrewmembers delivering a terrific Customer experiencethe JetBlue Experience in the sky and on the ground. One of our competitive strengths is a service orientatedoriented culture grounded in our five key values: safety, caring, integrity, passion, and fun. We believe a highly productive and engaged workforce enhances customer loyalty. Our goal is to hire, train, and retain a diverse workforce of caring, passionate, fun, and friendly people who share our mission to inspire humanity.
OurWe first introduce our culture is first introduced to new Crewmemberscrewmembers during the screening process and then at an extensive new hire orientation program at JetBlue University, our training center in Orlando. Orientation focuses on the JetBlue strategy and emphasizes the importance of customer service, productivity, and cost control. We provide continuous training for our Crewmemberscrewmembers including technical training, a specialized captainvarious leadership training program unique in the industry, a leadership program for current company managers, an emerging managers program,programs, and regular training focused on the safety value and front line training for our customer service teams.
Our historical and, post-pandemic, future growth plans necessitate and facilitate opportunities for talent development. In 2008, we launched the University Gateway Program, one of our many pilot recruitment initiatives, which made us the first airline to provide a training program for undergraduate students interested in becoming JetBlue First Officers. In 2016, we launched Gateway Select, a program for prospective pilots to join us for a rigorous, approximately four-year training program in partnership with CAE Inc. that incorporates classroom learning, extensive real-world flying experience and instruction in full flight simulators.
We believe a direct relationship between Crewmemberscrewmembers and our leadership is in the best interests of our Crewmembers,crewmembers, our Customerscustomers, and our Shareholders.shareholders. Except for our pilots and inflight crewmembers, our Crewmemberscrewmembers do not have third-party representation. In April 2014, JetBlueJetBlue’s pilots elected to be solely represented byvoted for, and the National Mediation Board, or NMB, certified the Air Line Pilots Association, or ALPA. The National Mediation Board, or NMB, certified ALPA, as the representative body for JetBlue pilots and we are working with ALPA to reachafter winning a representation election. We reached a final agreement for our first collective bargaining agreement which was ratified by the pilots in 2018. The agreement is a four-year renewable contract effective August 1, 2018. In April 2018, JetBlue inflight crewmembers elected to be solely represented by the Transport Workers Union of America, or TWU. The NMB certified the TWU as the representative body for JetBlue inflight crewmembers. In November 2020, our inflight crewmembers voted to decline the ratification of a tentative collective bargaining agreement between JetBlue and TWU. We are currently working with TWU to determine next steps. As of December 31, 2020, approximately 51 percent of our full-time equivalent crewmembers were represented by unions. The following table sets forth our crewmember groups and the status of their respective collective bargaining agreements. | | | | | | | | | | | | | | | | | | | | |
| Crewmember Group | | Representative | | Crewmembers(1) | | Amendable Date(2) |
| Pilots | | Air Line Pilots Association (ALPA) | | 3,715 | | August 1, 2022 |
| Inflight | | Transport Workers Union (TWU) | | 3,572 | | In negotiations |
(1) Approximate number of active full-time equivalent crewmembers as of December 31, 2020.
(2) Our relations with our labor organizations are governed by Title II of the Railway Labor Act of 1926, pursuant to which the collective bargaining agreements between us and these organizations do not expire but instead become amendable as of a certain date if either party wishes to modify the terms of the agreement.
We have individual employment agreements with each of our non-unionized FAA licensed Crewmemberscrewmembers which consist of dispatchers, technicians, inspectors, and air traffic controllers. Each employment agreement is for a term of five years and renews for an additional five-year term, unless the Crewmembercrewmember is terminated for cause or the Crewmembercrewmember elects not to renew. Pursuant to these employment agreements, Crewmemberscrewmembers can only be terminated for cause. In the event of a downturn in our business, resulting in a reduction of flying and related work hours, we are obligated to pay these Crewmemberscrewmembers a guaranteed level of income and to continue their benefits. We believe that through these agreements we provide what we believe to be industry-leading job protection.protection through these agreements. We believe these agreements provide JetBlue and Crewmemberscrewmembers flexibility and allow us to react to Crewmembercrewmember needs more efficiently than collective bargaining agreements.
In December 2017, The Transport Workers Union of America (TWU) filed for an election, the next step in its long-running effort to unionize our Inflight Crewmembers. We continue to monitor this process as it affects our Crewmembers. Our Inflight Crewmembers have an important choice to make and our focus remains on keeping our culture and values intact.
A key feature of the direct relationship with our Crewmemberscrewmembers is our Values Committees which are made up of peer-elected frontline Crewmemberscrewmembers from each of our major work groups, other than pilots.pilots and inflight crewmembers. They represent the interests of our workgroups and help us run our business in a productive and efficient manner. We believe this direct relationship with Crewmemberscrewmembers drives higher levels of engagement and alignment with JetBlue’s strategy, culture, and overall goals.
We believe the efficiency and engagement of our Crewmemberscrewmembers is a result of our flexible and productive work rules. We are cognizant of the competition for productive labor in key industry positions and new government rules requiring higher qualifications as well as more restricted hours that may result in potential labor shortages in the upcoming years.
Our leadership team communicates on a regular basis with all Crewmemberscrewmembers in order to maintain a direct relationship and to keep them informed about news, strategy updates, and challenges affecting the airline and the industry. Effective and frequent communication throughout the organization is fostered through various means including email messages from our CEO and other senior leaders at least weekly, weekday news updates to all Crewmembers, employeecrewmembers, crewmember engagement surveys, a quarterly Crewmember magazine and active leadership participation in new hire orientations. Leadership is also heavily involved in periodic open forum meetings across our network, called “pocket sessions” which are often videotaped and posted on our intranet. By soliciting feedback for ways to improve our service, teamwork and work environment, our leadership team works to keep Crewmemberscrewmembers engaged and makes our business decisions transparent. Additionally, we believe cost and revenue improvements are best recognized by Crewmemberscrewmembers on the job.
Our average number of full-time equivalent Crewmemberscrewmembers for the year ended December 31, 20172020 consisted of 3,2113,714 pilots, 4,2514,308 inflight (whom other airlines may refer to as flight attendants), 4,5122,745 airport operations personnel, 585653 technicians (whom other airlines may refer to as mechanics), 1,430849 reservation agents, and 3,1293,181 management and other personnel. For the year ended December 31, 2017,2020, we employed an average of 14,87016,228 full-time and 5,1084,514 part-time Crewmembers.crewmembers.
Our average number of full-time equivalent crewmembers decreased by 16.6% compared to 2019 as a result of various voluntary separation and time off programs implemented in response to the drastic decline in demand for air travel brought on by the COVID-19 pandemic.
Diversity and Inclusion
Every day we aim to live our mission of inspiring humanity, driving inclusion both inside and outside the Company. While we recognize that there is a lack of diversity in certain areas of the commercial aviation industry, we are taking steps to address that challenge.
Our efforts to promote diversity and inclusion are centered around three key pillars: (1) representative leadership; (2) an open culture; and (3) commercial impact. This focus starts at the top.
As leadership opportunities emerge, we will continue to seek qualified diverse candidates to propel our Company forward. To this end, we have expanded our recruitment streams for diverse talent through partnerships with the National Gay Pilots Association, Boston Pride, and the Organization of Black Aerospace Professionals, among others. In 2018, we appointed our first female President and Chief Operating Officer, Joanna Geraghty. Today, women account for more than one-third of our Board of Directors and approximately one-fifth of our senior leadership team.
All JetBlue crewmembers have the right to an open and respectful workplace. Our Code of Conduct prohibits all forms of discrimination, and we promote open communication to resolve any discrimination concerns. Every JetBlue director-level crewmember and above is required to participate in unconscious bias training.
Crewmember Programs
We are committed to supporting our Crewmemberscrewmembers through a number of programs including:
•Crewmember Resource Groups (CRGs) - These are groups formed byWe encourage crewmembers to celebrate their individuality and consisting of Crewmembers to act as a resource for both the group members as well as JetBlue. The groups serve as an avenuebuild camaraderie through our various CRGs. CRGs spearhead programs to embrace and encourage the sharing of different perspectives, thoughts, and ideas. At the end of 2017,2020, we had foursix CRGs which include:
◦Blue Aviasian: Celebrates the history of Asians, Asian Americans and Pacific Islanders. The group offers immersive cultural experiences, networking, and career development events.
◦Blue Conexión: Shares the Latino culture and language in place: JetPride, Womenthe workplace and community.
◦JADE (JetBlue African Diaspora Experience): Explores the rich cultures of the African diaspora. JADE leads cultural events during Black History Month and hosts TravelCon, a day-long event for crewmembers to learn about the diverse experience of Black travelers, among other events.
◦JetPride: Offers professional development opportunities for LGBTQ+ crewmembers and their allies. During Pride Month, crewmembers march across the network to celebrate diversity, equality and acceptance.
◦Vets in Flight,Blue: Provides a forum for crewmembers who honorably serve or have served in the Armed Forces. Vets in Blue strengthens JetBlue’s efforts to employ and BlueConexion. In 2018, we welcomeretain members of the military through outreach, networking events, career fairs, and mentoring opportunities. Many former service members enjoy second careers with JetBlue African Diaspora Experience (JADE),in airport operations, corporate security, inflight, flight operations and more.
◦Women in Flight: Provides members with educational networking opportunities that inspire career and personal growth. Typically, the group hosts our fifth CRG.annual Fly Like a Girl event, teaching young girls about different career paths in aviation.
•JetBlue Crewmember Crisis Fund (JCCF) -This organization, originally formed in 2002, is a non-profit corporation independent from JetBlue and recognized by the IRS as of that date as a tax-exempt entity. JCCF was created to assist JetBlue Crewmemberscrewmembers and their immediate family members (IRS Dependents) with short-term financial support in times of crisis.crisis and unexpected emergencies when other resources are not available. Funds for JCCF grants come directly from Crewmembercrewmember donations via a tax-deductible payroll deduction. During 2017 we witnessed several unprecedented weather challenges including various hurricanes. JCCF helped provide over $2 million in relief to Crewmembers impacted by Hurricanes Harvey, Irma and Maria. The assistance process is confidential with only the fund administrator and coordinator knowing the identity of the Crewmemberscrewmembers in need.
•JetBlue Scholars - Developed in 2015, this program offers a new and innovative model to our Crewmemberscrewmembers wishing to further their education. Crewmembers enrolled in the program can earn a bachelor'san undergraduate degree through self-directed online college courses facilitated by JetBlue. In November 2017 we celebrated the graduation of 60 of our Crewmembers who took the initiative and successfully completed their undergraduate college degrees. This reemphasizes our continuous effort to help provide assistance to our most valued asset, our people. To build on the program, we introduced the Master's Pathway program in 2019 which is designed to help crewmembers who would like to advance their education even further by pursuing a master's degree. The Master's Pathway program partners with reputable institutions to provide a variety of benefits to crewmembers including tuition discounts, scholarships, and access to specialized support services.
• Lift Recognition Program - FormedCreated in 2012, this Crewmembercrewmember recognition program encourages Crewmemberscrewmembers to celebrate their peers for living JetBlue's values by sending e-thanks through an on-line platform. Our senior leadership team periodically hosts an event for the Crewmemberscrewmembers who receive the highest number of Lift award recognitions in each quarter of the year. In 2017,2020, we saw more than 100,000 Lift awards.
Response to the COVID-19 Pandemic
In response to the COVID-19 pandemic, we continued to prioritize the safety of our crewmembers while continuing to support the needs of our operations during this period. Some of the steps we have taken include:
•Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses enhanced safety and cleaning measures on our flights, at our airports, and in our offices;
•Instituted temperature checks for all of our customer-facing and support-center crewmembers;
•Updated our sick leave policy to provide up to 14 days of paid sick leave for crewmembers who were diagnosed with COVID-19 or were required to quarantine;
•Partnered with Northwell Direct to provide a comprehensive set of COVID-19 services and programs to support our crewmembers;
•Implemented a framework for internal contact tracing, crewmember notification, and a return to work clearance process for all crewmembers, wherever they may be located;
•Administered more frequent disinfecting of common surfaces and areas with high touchpoints in our facilities; and
•Conducted regular virtual "pocket sessions" to provide company-wide updates to our crewmembers as we navigate through the pandemic.
Community Programs
JetBlue is strongly committed to supporting the communities and BlueCities we serve through a variety of community programs including:
•100x35JetBlue - As the airline with more service than any other carrier in Puerto Rico and nearly 500 local Crewmembers, we take our commitment to the community very seriously. 100x35JetBlue, an initiative JetBlue launched following Hurricane Maria making landfall in the Caribbean, we supported our Crewmembers, Customers, and communities to meet urgent needs and ongoing rebuilding efforts after the devastating impact of Hurricane Maria. JetBlue's support included helping replenish vegetation and the ecosystem, hosting free meal events, donating school supplies, partnering with community leaders and influencers to raise awareness and funds, and offering advertising space to promote Puerto Rican tourism.
•Corporate Social Responsibility (CSR) - The CSR team supports not-for-profit organizations focusingstrategy, JetBlue For Good, focuses on three areas that our customers and crewmembers are passionate about: (1) youth and education, environment,(2) community, and (3) environment.
◦Youth and Education: As a pillar of JetBlue For Good, our youth and education efforts focus on providing children from underserved areas the resources needed to obtain a quality education and sustainable careers. We do this through various initiatives including donating age-appropriate books to areas where books are scarce outside of school walls. We also host regular career days that help expose young adults to the careers available to them upon graduation and beyond.
◦Community: We have a longstanding tradition of supporting the dedicated community organizations that make our BlueCities better. We show our support through partnerships, donations and more than the 1 million-plus volunteer hours logged by our crewmembers since 2011.
◦Environment: JetBlue’s primary environmental sustainability priority is reducing and managing carbon emissions from jet fuel. We are committed to investing in the BlueCities we serve. The team organizesmore fuel-efficient technologies, renewable fuels, electric ground service equipment, logistics and supports community service projects, charitable giving and non-profit partnerships such as KaBOOM!, which builds, opens and improves playgroundsother measures to benefit millions of young children, and Soar with Reading, which works to get books into the hands of children who need them most including free book vending machines.reduce our carbon footprint.
•JetBlue Foundation - OrganizedCreated in 2013 as a 501(c)(3) non-profit corporation, this foundationthe JetBlue Foundation is a JetBlue-sponsored organization to advance aviation-related education and to continue our efforts to promote aviation as a career choicefocused on raising awareness for students. The foundation intends to do this by igniting interestcareers in science, technology, engineering and mathematics.math (STEM) and aviation. The foundation is legally independentJetBlue Foundation focuses on four main areas:
◦Partnering with organizations and communities to provide access to STEM programs for students from JetBluetraditionally underserved communities;
◦Investing in programs geared toward students from diverse backgrounds to create a lifelong interest in STEM as early as possible in a student's academic career;
◦Creating equal opportunities and hasincreasing access for all students to spark a Board of Directors as well as an Advisory Committee, both of which are made up of Crewmembers. The foundation is recognized by the IRS aspassion for STEM; and
◦Building a tax-exempt entity.
•USO Center T5/JFK - Continuing our tradition of proudly supporting the men, women and families of the U.S. military, in September 2014 we opened a USO Center in T5 at JFK. The USO Center is open seven days a week, 365 days per year for military members and their families traveling on any airline at JFK, not just JetBlue. This USO Center is fully stocked with computers, televisions, gaming devices/stations, furniture, iPads, food, beverages and much more. In conjunction with leading airport design firm Gensler, Turner Construction Company, the PANYNJ and more than 28 contractors and individual donors, 100% of the space, services, labor and materials were donated to ensure the USO Center would be free of any financial burden. Crewmembers donate time to help run the USO Center.
•T5 Farm - Creating a healthier airport environment is a core pillar of JetBlue's sustainability philosophy. Through a partnership with TERRA brand and support from GrowNYC and the PANYNJ, we created the T5 Farm, a blue potato farm and produce garden on the roof of T5. The T5 Farm aims to serve as an agricultural and educational resourcediverse talent pipeline for the community, as well as a mechanism to absorb rainwater and runoff, reducing the possibility of flooding in the adjacent areas. Produce from the T5 Farm is donated to local food pantries.aviation industry.
REGULATION
Airlines are heavily regulated, with rules and regulations set by various federal, state and local agencies. We also operate under specific regulations due to our operations within the high density airspace of the northeast U.S. Most of our airline operations are regulated by U.S. governmental agencies including:
DOT - The DOT primarily regulates economic issues affecting air service including, but not limited to, certification and fitness, insurance, consumer protection and competitive practices. They set the requirement that carriers cannot permit domestic flights to remain on the tarmac for more than three hours. The DOT also requires that the advertised price for an airfare or a tour package including airfare (such as a hotel/air vacation package) has to be the total price to be paid by the Customer,customer, including all government taxes and fees. It has the authority to investigate and institute proceedings to enforce its economic regulations and may assess civil penalties, revoke operating authority and seek criminal sanctions.
FAA - The FAA primarily regulates flight operations, in particular, matters affecting air safety. This includes but is not limited to airworthiness requirements for aircraft, the licensing of pilots, mechanics and dispatchers, and the certification of flight attendants. It requires each airline to obtain an operating certificate authorizing the airline to operate at specific airports using specified equipment. Like all U.S. certified carriers, JetBlue cannot fly to new destinations without the prior authorization of the FAA. After providing notice and a hearing, itthe FAA has the authority to modify, suspend temporarily or revoke permanently our authority to provide air transportation or that of our licensed personnel for failure to comply with FAA regulations. It can additionally assess civil penalties for such failures as well as institute proceedings for the imposition and collection of monetary fines for the violation of certain FAA regulations. When significant safety issues are involved, it can revoke a U.S. carrier's authority to provide air transportation on an emergency basis, without providing notice and a hearing. It monitors our compliance with maintenance as well as flight operations and safety regulations. It maintains on-site representatives and performs frequent spot inspections of our aircraft, Crewmemberscrewmembers and records. ItThe FAA also has the authority to issue airworthiness directives and other mandatory orders. This includes the inspection of aircraft and engines, fire retardant and smoke detection devices, collision and windshearwind shear avoidance systems, noise abatement, and the mandatory removal and replacement of aircraft parts that have failed or may fail in the future. We have and maintain FAA certificates of airworthiness for all of our aircraft and have the necessary FAA authority to fly to all of the destinations we currently serve.
Transportation Security Administration and U.S. Customs and Border Protection- The Transportation Security Administration, or TSA, and the U.S. Customs and Boarder Protection, or CBP, operate under the Department of Homeland Security and are responsible for all civil aviation security. This includes passenger and baggage screening; cargo security measures; airport security; assessment and distribution of intelligence; security research and development; international passenger screening; customs; and agriculture. It also has law enforcement powers and the authority to issue regulations, including in cases of national emergency, without a notice or comment period. It can also assess civil penalties for such failures as well as institute proceedings for the imposition and collection of monetary fines for the violation of certain regulations.
Taxes & Fees - The airline industry is one of the most heavily taxed in the U.S., with taxes and fees accounting for approximately 17% ofapproximately 15% of the total fare charged to a Customer.customer. Airlines are obligated to fund all of these taxes and fees regardless of their ability to pass these charges on to the Customer.customer. The September 11 Security Fee which is set by the TSA and is passed through to the Customer,customer, is currently $5.60 per enplanement, regardless of the number of connecting flights and a round trip fee is limited to a maximum of $11.20. Effective December 28, 2015, the Animal and Plant Health Inspection Service Aircraft Inspection fee increased from $70.75 to $225 per international aircraft arriving in the U.S.
State and Local - We are subject to state and local laws and regulations in a number of states in which we operate and the regulations of various local authorities operating the airports we serve.
Airport Access - JFK, LaGuardia, and Ronald Reagan Washington National Airport, or Reagan National, are slot-controlled airports subject to the "High Density Rule" and successor rules issued by the FAA, or Slots. These rules were implemented due to the high volume of traffic at these popular airports located in the northeast corridor airspace. The rules limit the air traffic in and out of these airports during specific times; however, even with the rules in place, delays remain among the highest in the nation due to continuing airspace congestion. We additionallyAdditionally, we have Slots at other Slot-controlled airports governed by unique local ordinances not subject to the High Density Rule, includingsuch as Westchester County Airport in White Plains, NY and Long Beach (California) Municipal Airport. We started flying to Atlanta in the first half of 2017 and were not granted the agreed upon number of gates as originally promised,NY. Gate access is another common issue at certain airports.
Airport Infrastructure - The northeast corridor of the U.S. contains some of the most congested airspaces in the world. The airports in this region are some of the busiest in the country, the majority of which are more than 60 years old. Due to high usage and aging infrastructure, issues arise at these airports that are not necessarily seen in other parts of the country. At JFK, the completion of high-speed taxiways, in addition to the runway renovations finished in 2015, enables landing aircraft the ability to exit the runway faster. We renovated our lobby layout as part of our self-service initiative with our new user friendly kiosks. At LaGuardia, in late 2017 we moved from Central Terminal B to the historic Marine Air Terminal A. The Marine Air Terminal has a beautiful historic design which we plan to honor while adding our own modern touches to create an airport experience in line with the award-winning service our Customers receive onboard. We expect out makeover of the Terminal to continue into 2018 and to include updated and additional concessions post-security, more seating, and technology upgrades. The Terminal is scheduled to feature an expanded check-in area with self-bag-tagging kiosks and a dedicated TSA Pre-Check lane with JetBlue as the main tenant, occupying four gates.
Foreign Operations - International air transportation is subject to extensive government regulation. The availability of international routes to U.S. airlines is regulated by treaties and related agreements between the U.S. and foreign governments. We currently operate international service to Antigua and Barbuda, Aruba, the Bahamas, Barbados, Bermuda, the Cayman Islands, Colombia, Costa Rica, Cuba, Curaçao, the Dominican Republic, Ecuador, Grenada, Guadeloupe, Guyana, Haiti, Jamaica, Mexico, Peru, Saint Lucia, St. Maarten, Trinidad and Tobago, and the Turks and Caicos Islands. We anticipate further expanding our network to Guatemala in 2021 and intend to begin service to London, our first destination in Europe. To the extent we seek to provide air transportation to additional international markets in the future, we would be required to obtain necessary authority from the DOT and the FAA as well as the applicable foreign government.
During 2020, our flight operations to many of these countries were disrupted by travel restrictions that were implemented in response to the COVID-19 pandemic.
We believe we are operating in material compliance with DOT, FAA, TSA, CBP and applicable international regulations as well as hold all necessary operating and airworthiness authorizations and certificates. Should any of these authorizations or certificates be modified, suspended, or revoked, our business could be materially adversely affected.
Other
Environmental - We are subject to various federal, state and local laws relating to the protection of the environment. This includes the regulation of greenhouse gas ("GHG") emissions, the discharge or disposal of materials and chemicals, as well as the regulation of aircraft noise administered by numerous state and federal agencies.
The Airport Noise and Capacity Act of 1990 recognizes the right of airport operators with special noise problems to implement local noise abatement procedures as long as those procedures do not interfere unreasonably with the interstate and foreign commerce of the national air transportation system. Certain airports, including San Diego and Long Beach airportsairport in California, have established restrictions to limit noise which can include limits on the number of hourly or daily operations and the time of such operations. These limitations are intended to protect the local noise-sensitive communities surrounding the airport. Our scheduled flights at Long Beach and San Diego airport are in compliance with the noise curfew limits, but on occasion when we experience irregular operations, we may violate these curfews. In 2017, we entered into an agreement with the Long Beach City Prosecutor which requires us to pay a $6,000 fine per violation. The payments resulting from curfew violations go to support the Long Beach Public Library Foundation. This local ordinance has not had, and we believe it will not have, a negative effect on our operations.
We report annually on environmental, social, governance (ESG) issues and our response to them uses the Sustainable Accounting Standards Board (SASB) framework. The report can be found on our Investor Relations website at http://blueir.investproductions.comIn 2017, JetBlue focused our sustainability efforts on three areas: Climate Leadership, Sustainable Operations, and Sustainable Tourism. Climate Leadership encompasses climate change related risk and greenhouse gases associated with the burning of jet fuel, our biggest environmental impact and regulatory exposure. Sustainable Operations encompasses implementation of operational change and new technologies to reduce our cost of natural resources associated with the operations. Sustainable Tourism encompasses commercial and environmental research to forecast future demand for tourism. more can be found on www.jetblue.com/green/
During 2016, we entered into a partnership to buy renewable jet fuel produced from plant derived oils. This marked the largest, long-term, commitment globally by any airline for a jet fuel based on fatty acids. Early engagement with a renewable jet fuel supply positions JetBlue to reduce costs associated with CO2 emissions.
Concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit GHG emissions, including our aircraft and diesel engineground operations emissions. In October 2016, the International Civil Aviation Organization (“ICAO”) passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”), which is a global, market-based emissions offset program intended to encouragepromote carbon-neutral growth beyond 2020. CORSIA is scheduled to take effect bybe implemented through multiple phases beginning in 2021. ICAO continues to develop details regarding implementation, but we believe compliance with CORSIA will increase our operating costs.
As part of our sustainability and environmental strategy, we are embracing new technologies and making changes that will ultimately benefit our crewmembers, customers, and shareholders. Some of our sustainability initiatives include:
Reducing and Managing Carbon Dioxide ("CO2") Emissions- We are committed to reducing our contribution to global warming and climate change. We have been purchasing CO2 offsets since 2008. In 2020, we began offsetting our CO2 emissions from jet fuel for all domestic flights and became the first major U.S airline to achieve carbon neutrality on all domestic flying. Our target is to achieve net zero carbon emissions by 2040, ten years ahead of the Paris Climate Agreement. To reach net zero carbon emissions, we plan to continuously increase the fuel-efficiency of our operations, expand usage of sustainable aviation fuels, explore alternative power aircraft technology such as electric aircraft for short-hauls, and offset any remaining emissions.
Sustainable Aviation Fuel - As announced in January 2020, we have agreed to purchase sustainable aviation fuel produced from waste and residue raw materials. We began flying regularly with sustainable aviation fuel on flights from San Francisco International Airport in July 2020. We believe making the switch will help us significantly reduce CO2 emissions and our environmental footprint, with no impact on performance or safety.
Operating a More Sustainable Fleet - We are working closely with the FAA towards implementing NextGen. NextGen will allow us to fly more efficient routes thereby reducing fuel burn and resulting emissions. Our Airbus A321neo aircraft will help reduce CO2 emissions with improved fuel economy through newly designed engine technology and cabin changes. In addition, our incoming Airbus A220 aircraft will reduce emissions by approximately 40% per seat compared to the older aircraft they will replace.
Electric Ground Service Equipment - In 2019, we began replacing our gas-powered Ground Service Equipment ("GSE") at JFK with electric-powered versions, known as eGSE, to reduce fuel consumption, noise, and GHG emissions. We anticipate similar conversions to eGSE to be implemented at our other focus cities in the future. Our goal is to significantly expand our eGSE fleet by converting 40% of our three most commonly owned GSE vehicles (baggage tractors, belt loaders, and push back tugs) to electric by 2025 and 50% by 2030.
Reporting - We report annually on environmental, social, governance ("ESG") issues using the Sustainable Accounting Standards Board and Task Force on Climate-related Financial Disclosures frameworks. The report can be found on our Investor Relations website at http://investor.jetblue.com.
Foreign Ownership - Under federal law and DOT regulations, weJetBlue must be controlled by U.S. citizens. In this regard, our presidentchief executive officer and at least two-thirds of our board of directors must be U.S. citizens. Further, no more than 24.99% of our outstanding common stock may be voted by non-U.S. citizens. We believe we are currently in compliance with these ownership provisions.
Other Regulations - All airlines are subject to certain provisions of the Communications Act of 1934 due to their extensive use of radio and other communication facilities. They are also required to obtain an aeronautical radio license from the Federal Communications Commission, or FCC. To the extent we are subject to FCC requirements, we take all necessary steps to comply with those requirements.
Our labor relations are covered under Title II of the Railway Labor Act of 1926 and are subject to the jurisdiction of the NMB.
In addition, during periods of fuel scarcity, access to aircraft fuel may be subject to federal allocation regulations.
Civil Reserve Air Fleet - We are a participant in the Civil Reserve Air Fleet Program, which permits the U.S. Department of Defense to utilize our aircraft during national emergencies when the need for military airlift exceeds the capability of military aircraft. By participating in this program, we are eligible to bid on and be awarded peacetime airlift contracts with the U.S. military.
Insurance
We carry insurancevarious types of typesinsurance customary in the airline industry and at amounts deemed adequate to protect us and our property as well as comply with both federal regulations and certain credit and lease agreements. As a result of the terrorist attacks of September 11, 2001, aviation insurers significantly reduced the amount of insurance coverage available to commercial airlines for liability to persons other than Crewmembers or passengers for claims resulting from acts of terrorism, war or similar events. This is known as war risk coverage. At the same time, these insurers significantly increased the premiums for aviation insurance in general. The U.S. government agreed to provide commercial war-risk insurance for U.S. based airlines, covering losses to Crewmembers, passengers, third parties and aircraft. Prior to the end of U.S. government war-risk insurance coverage, JetBlue obtained comparable coverage in the commercial market starting in 2014 as part of our overall hull and liability insurance coverage.
WHERE YOU CAN FIND OTHER INFORMATION
Our website is www.jetblue.com. Information contained on our website is not part of this Report. Information we furnish or file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. Our SEC filings, including exhibits filed therewith, are also available at the SEC’s website at www.sec.gov. You may obtain and copy any document we furnish or file with the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation
ITEM 1A. RISK FACTORS
We are subject to various risks that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, liquidity, financial condition, and results of operations. In addition, these risks could cause results to differ materially from those we express in forward-looking statements contained in this Annual Report or in other Company communications. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. Risks Related to the COVID-19 Pandemic
The global COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on the travel industry generally and, as a result, on our business and results of operations, and these impacts may persist for an extended period of time or become more pronounced over time.
The global spread and impact of the COVID-19 pandemic is complex, unpredictable, and continuously evolving and has resulted in significant disruption and additional risks to our business; the travel and hospitality industries; and the global economy. The COVID-19 pandemic has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on large gatherings of people, travel bans, border closings and restrictions, business closures, quarantines, shelter-in-place orders, and social distancing measures. As a result, the COVID-19 pandemic and its consequences have significantly reduced global passenger air travel and have had a material detrimental impact on global commercial activity across the travel and hospitality industries, all of which has had, and is expected to continue to have, a material adverse impact on our business, operations, and financial results.
The extent, duration, and magnitude of the COVID-19 pandemic's effects will depend on various factors, all of which are highly uncertain and difficult to predict, including, but not limited to, the impact of the pandemic on global and regional economies, travel, and economic activity, as well as actions taken by governments, businesses, and individuals in response to the pandemic, any additional resurgence, or COVID-19 variants. These factors include the impact of the COVID-19 pandemic on unemployment rates and consumer discretionary spending; governmental or regulatory orders that impact our business and our industry; the demand for air travel; levels of consumer confidence; the ability to effectively and widely manufacture and distribute vaccines and broad acceptance of the vaccine by the general population; and the pace of recovery when the pandemic subsides. Moreover, even after shelter-in-place orders and travel bans and advisories are lifted and vaccines are more widely distributed and available, demand for air travel may remain depressed for a significant length of time, and we cannot predict if and when demand will return to pre-COVID-19 levels.In addition, we cannot predict whether business travel for in-person meetings will decrease over the long-term due to technological advancements in, and consumer acceptance and adaptation to, virtual meetings and/or changes in customer preferences.
The COVID-19 pandemic has subjected our business, operations, and financial condition to a number of significant risks:
Demand, Capacity, Revenues and Expenses: With the global spread of COVID-19 beginning in March 2020, the Company began experiencing a significant decline in international and domestic demand related to COVID-19 during the first quarter of 2020, and this reduction in demand has continued through the date of this report and is expected to continue for the foreseeable future. The decline in demand caused a material deterioration in our revenues, resulting in a net loss of $1.4 billion for the year ended December 31, 2020. The Company expects its results of operations for full-year 2021 to be materially impacted. The continued decline in demand, which is expected to continue for the foreseeable future, is expected to have a material adverse impact on our business, operating results, financial condition, and liquidity.
The COVID-19 pandemic has caused us, and could continue to cause us, to incur additional expenses. While governments have and may continue to implement various stimulus and relief programs, it is uncertain whether and to what extent we will be eligible to participate in, or successfully access, such programs, whether conditions or restrictions imposed under such programs will be acceptable, and whether such programs will be effective in avoiding or significantly mitigating the financial impacts of the COVID-19 pandemic. Further, we have incurred additional costs related to severance payments and may incur additional expenses related to restructuring activities in future periods. Even after the COVID-19 pandemic subsides, we could experience other short or longer-term impacts on our costs, including, for example, the need for enhanced health and hygiene standards or certifications, social distancing requirements or other precautionary measures in response to the health and safety challenges presented by the COVID-19 pandemic. These effects could impact our ability to generate profits even after revenues improve. The Company have and expect to continue to focus on reducing expenses and managing liquidity. While we lowered our cash burn from an average of approximately $18 million per day at the end of March 2020 to approximately $ 6.7 million per day in in the fourth quarter ended December 31, 2020, we may not be able to continue to reduce cash burn at the same rate in the future. Refer to our "Regulation G Reconciliation of Non-GAAP Financial Measures" provided in "Part II - Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations" within this Report for our definition of "cash burn".
Operations: In response to the significant decline in demand for air travel across our system, we have taken actions and continue to evaluate spending to manage operating expenses and optimize our financial resources. These actions include a permanent reduction in our workforce across our BlueCities and our support centers, eliminating non-essential spending and corporate initiatives, and reducing costs. We have received, and may continue to receive, demands or requests from labor unions that represent our colleagues, whether in the course of our periodic renegotiation of our collective bargaining agreements or otherwise, for additional compensation, healthcare benefits, or other terms that could increase costs, and we could experience labor disputes or disruptions as we continue to implement our mitigation plans. Further, once the effects of the pandemic subside, the recovery period could be extended and we expect that certain operational changes, particularly with respect to enhanced health and safety measures and global care and cleanliness certifications, will be necessary over the long-term.
Further, certain employees of the Company, its suppliers and its business partners, such as airport, air traffic personnel, and those working on certain production lines, have tested positive for or been suspected of having COVID-19, which has resulted in facility closures, reduction in available staffing, and disruptions to the Company’s overall operations as well as that of our suppliers. The Company’s operations may be further impacted in the event of additional instances of actual or perceived risk of infection among employees of the Company, its suppliers or its business partners, and this impact may have a material and adverse effect if the Company is unable to maintain a suitably skilled and sized workforce and address related employee matters.
Financial Condition and Indebtedness: As we manage through the effects of the pandemic, our level of indebtedness has increased and may continue to increase. To enhance our liquidity profile and cash position in response to the COVID-19 pandemic, the Company suspended share repurchases under its share repurchase program, executed two new term loan agreements and immediately drew down on these facilities for the full amount available, borrowed on its existing $550 million revolving credit facility, completed the public placements of equipment notes in an aggregate principal of $923 million, completed a public offering of 42 million shares of our common stock for net proceeds of $583 million, executed a number of aircraft sale-leaseback transactions, and temporarily grounded a portion of its fleet. There is no guarantee that debt financings will be available in the future to fund our obligations or will be available on terms consistent with our expectations. We also expect the impact of the COVID-19 pandemic on the financial markets could adversely affect our ability to raise equity financing. Changes in the credit ratings of our debt, including our revolving credit facility and outstanding senior notes, could have an adverse impact on our interest expense. As a result of the general economic uncertainty and the impact of the COVID-19 pandemic, our credit ratings have been downgraded. If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our credit rating levels, our industry, or our Company, our access to capital and the cost of debt financing would be negatively impacted.
The Company may also take additional actions to improve its financial position, including measures to improve liquidity, such as the issuance of additional unsecured and secured debt securities, equity securities and equity-linked securities, the sale of assets and/or the entry into additional bilateral and syndicated secured and/or unsecured credit facilities. There can be no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all. Any such actions may be material in nature and could result in significant additional borrowing. The Company's reduction in expenditures, measures to improve liquidity or other strategic actions that the Company may take in the future in response to COVID-19 may not be effective in offsetting decreased demand, and the Company will not be permitted to take certain strategic actions as a result of the CARES Act, which could result in a material adverse effect on the Company's business, operating results, liquidity and financial condition.
Growth: The COVID-19 pandemic has negatively impacted, and could continue to impact, the pace and timing of our growth. As a result of the COVID-19 pandemic, the Company reduced its planned capital expenditures and operating expenditures in 2020 (including by postponing projects deemed non-critical to the Company's operations), suspended share repurchases under its share repurchase program, and grounded or redeployed aircraft.
Capital Markets Impact: The global stock markets have experienced, and may continue to experience, significant volatility as a result of the COVID-19 pandemic, and the price of our common stock has been volatile since the onset of the pandemic. The COVID-19 pandemic and the significant uncertainties it has caused for the global economy, business activity, and business confidence have had, and are likely to continue to have, a significant effect on the market price of securities generally, including our securities. In addition, certain debt covenants restrict our ability to engage in share repurchase activity.
The impact of the COVID-19 pandemic is continuously evolving, and the continuation of the pandemic, any additional resurgence, or COVID-19 variants could precipitate or aggravate the other risk factors included in this annual report, which in turn could further materially adversely affect our business, financial condition, liquidity, results of operations, and profitability, including in ways that are not currently known to us or that we do not currently consider to present significant risks.
COVID-19 has materially disrupted our strategic operating plans in the near-term, and there are risks to our business, operating results, liquidity and financial condition associated with executing our strategic operating plans in the long-term.
COVID-19 has materially disrupted our strategic operating plans, and there are risks to our business, operating results and financial condition associated with executing our long-term strategic operating plans. In recent years, we have announced several strategic operating plans, including several revenue-generating initiatives and plans to optimize revenue, such as our plans to add capacity, including international expansion and new or increased service to mid-size airports, initiatives and plans to optimize and control our costs and opportunities to enhance our segmentation and improve the customer experience at all points in air travel. Most recently, in July 2020, we announced a strategic partnership with American Airlines Group Inc. (“AAL”), designed to optimize the Company and AAL’s network through certain flights operated by us and AAL to and from John F. Kennedy International Airport, LaGuardia Airport, Newark Liberty International Airport and Boston Logan International Airport. In developing our strategic operating plans, we make certain assumptions, including, but not limited to, those related to customer demand, competition, market consolidation, the availability of aircraft and the global economy. Actual economic, market and other conditions have been and may continue to be different from our assumptions.
The COVID-19 pandemic has materially disrupted the execution of our strategic operating plans, including plans to add capacity in 2020. If we do not successfully execute or adjust our strategic operating plans in the long-term, or if actual results continue to vary significantly from our prior assumptions or vary significantly from our future assumptions, our business, operating results and financial condition could be materially and adversely impacted.
Risks related to JetBlue
We operate in an extremely competitive industry.
The domestic airline industry is characterized by low profit margins, high fixed costs and significant price competition in an increasingly concentrated competitive field. We currently compete with other airlines on all of our routes. Most of our competitors are larger and have greater financial resources and name recognition than we do. Following our entry into new markets or expansion of existing markets, some of our competitors have chosen to add service or engage in extensive price competition. Unanticipated shortfalls in expected revenues as a result of price competition or in the number of passengers carried would negatively impact our financial results and harm our business. The extremely competitive nature of the airline industry could prevent us from attaining the level of passenger traffic or maintaining the level of fares required to maintain profitable operations in new and existing markets and could impede our profitable growth strategy, which would harm our business.
Furthermore, there have been numerous mergers and acquisitions within the airline industry in recentover the years. The industry may continue to change. Any business combination could significantly alter industry conditions and competition within the airline industry and could cause fares of our competitors to be reduced. Additionally, if a traditional network airline were to fully develop a low cost structure, or if we were to experience increased competition from low cost carriers or new entrants, our business could be materially adversely affected.
We may be subject to competitive risks due to the long-term nature of our fleet order book.
At present, we have existing aircraft commitments through 2027. As technological evolution occurs in our industry, through the use of composites and other innovations, we may be competitively disadvantaged because we have existing extensive fleet commitments that would prohibit us from adopting new technologies on an expedited basis.
Operational Risks
Our business is highly dependent on the availability of fuel and fuel is subject to price volatility.
Our results of operations are heavily impacted by the price and availability of fuel. Fuel costs comprise a substantial portion of our total operating expenses. Historically, fuel costs have been subject to wide price fluctuations based on geopolitical factors as well as supply and demand. The availability of fuel is not only dependent on crude oil but also on refining capacity. When even a small amount of the domestic or global oil refining capacity becomes unavailable, supply shortages can result for extended periods of time. The availability of fuel is also affected by demand for home heating oil, gasoline and other petroleum products, as well as crude oil reserves, dependence on foreign imports of crude oil and potential hostilities in oil producing areas of the world. Because of the effects of these factors on the price and availability of fuel, the cost and future availability of fuel cannot be predicted with any degree of certainty.
Our aircraft fuel purchase agreements do not protect us against price increases or guarantee the availability of fuel. Additionally, some of our competitors may have more leverage than we do in obtaining fuel. We have and may continue to enter into a variety of option contracts and swap agreements for crude oil, heating oil, and jet fuel to partially protect against significant increases in fuel prices. However, such contracts and agreements do not completely protect us against price volatility, are limited in volume and duration in the respective contract, and can be less effective during volatile market
conditions and may carry counterparty risk. Under the fuel hedge contracts we may enter from time to time, counterparties to those contracts may require us to fund the margin associated with any loss position on the contracts if the price of crude oil falls below specified benchmarks.contracts. Meeting our obligations to fund these margin calls could adversely affect our liquidity.
Due to the competitive nature of the domestic airline industry, at times we have not been able to adequately increase our fares to offset the increases in fuel prices nor may we be able to do so in the future. Future fuel price increases, continued high fuel price volatility or fuel supply shortages may result in a curtailment of scheduled services and could have a material adverse effect on our financial condition and results of operations.
We have a significant amount of fixed obligations and we will incur significantly more fixed obligations which could harm our ability to service our current obligations or satisfy future fixed obligations.
As of December 31, 2017, our debt of $1.2 billion accounted for 21% of our total capitalization. In addition to long-term debt, we have a significant amount of other fixed obligations under operating leases related to our aircraft, airport terminal space, airport hangers, other facilities and office space. As of December 31, 2017, future minimum payments under noncancelable leases and other financing obligations were approximately $3.3 billion for 2018 through 2022 and an aggregate of $1.6 billion for the years thereafter. T5 at JFK is under a lease with the PANYNJ that ends on the 28th anniversary of the date of beneficial occupancy of T5i. The minimum payments under this lease are being accounted for as a financing obligation and have been included in the future minimum payment totals above.
As of December 31, 2017, we had commitments of approximately $7.3 billion to purchase 119 additional aircraft, ten spare engines and various aircraft modifications through 2024, including estimated amounts for contractual price escalations. We may incur additional debt and other fixed obligations as we take delivery of new aircraft or finance unencumbered aircraft in our fleet and other equipment and continue to expand into new or existing markets. In an effort to limit the incurrence of significant additional debt, we may seek to defer some of our scheduled deliveries, sell or lease aircraft to others, or pay cash for new aircraft, to the extent necessary or possible. The amount of our existing debt, and other fixed obligations, and potential increases in the amount of our debt and other fixed obligations could have important consequences to investors and could require a substantial portion of cash flows from operations for debt service payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes.
Our level of debt and other fixed obligations could:
•impact our ability to obtain additional financing to support capital expansion plans and for working capital and other purposes on acceptable terms or at all;
•divert substantial cash flow from our operations, execution of our commercial initiatives and expansion plans in order to service our fixed obligations;
•require us to incur significantly more interest expense than we currently do if rates were to increase, since approximately 15% of our debt has floating interest rates; and
•place us at a possible competitive disadvantage compared to less leveraged competitors and competitors with better access to capital resources or more favorable financing terms.
Our ability to make scheduled payments on our debt and other fixed obligations will depend on our future operating performance and cash flows, which in turn will depend on prevailing economic and political conditions and financial, competitive, regulatory, business and other factors, many of which are beyond our control. We are principally dependent upon our operating cash flows and access to the capital markets to fund our operations and to make scheduled payments on debt and other fixed obligations. We cannot assure you we will be able to generate sufficient cash flows from our operations or from capital market activities to pay our debt and other fixed obligations as they become due. If we fail to do so our business could be harmed. If we are unable to make payments on our debt and other fixed obligations, we could be forced to renegotiate those obligations or seek to obtain additional equity or other forms of additional financing.
Our level of indebtedness may limit our ability to incur additional debt to obtain future financing needs.
We typically finance our aircraft through either secured debt, lease financing or through cash from operations. The impact on financial institutions from global economic conditions may adversely affect the availability and cost of credit to JetBlue as well as to prospective purchasers of our aircraft should we undertake to sell in the future, including financing commitments we have already obtained for purchases of new aircraft or financing or refinancing of existing aircraft. To the extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our strategy or otherwise constrain our operations.
Our maintenance costs will increase as our fleet ages.
Our maintenance costs will increase as our fleet ages. In the past, we have incurred lower maintenance expenses because most of the parts on our aircraft were under multi-year warranties, but many of these warranties on JetBlue's existing fleet types have expired. If any maintenance provider with whom we have a flight hour agreement fails to perform or honor such agreements, we could incur higher interim maintenance costs until we negotiate new agreements.
Furthermore we expect to continue to implement various fleet modifications over the next several years to ensure our aircraft's continued efficiency, modernization, brand consistency and safety. Our plans to continue to restyle our Airbus A320 aircraft with new cabins, for example, may require significant modification time. These fleet modifications may require significant investment over several years, including taking aircraft out of service for several weeks at a time.
Our salaries, wages and benefits costs will increase as our workforce ages.
As our Crewmembers'crewmembers' tenure with JetBlue matures, our salaries, wages and benefits costs increase. As our overall workforce ages, we expect our medical and related benefits to increase as well, despite an increased corporate focus on Crewmembercrewmember wellness.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs and the unionization of the Company’s pilots could result in increased labor costs.
Our business is labor intensive and the unionization of anyBecause we derive a portion of our Crewmembersrevenues from operations outside the United States, the risks of doing business internationally, or in a particular country or region, could result in demands that maylower our revenues, increase our operating expenses and adversely affectcosts, reduce our financial condition and results of operations. Any of the different craftsprofits, or classes of our Crewmembers could unionize at any time, which would require us to negotiate in good faith with the Crewmember group’s certified representative concerning a collective bargaining agreement. In addition, we may be subject to disruptions by unions protesting the non-union status of our other Crewmembers. Any of these events would be disruptive to our operations and could harmdisrupt our business.
In general, unionization has increased costsWe currently operate in 98 airports in 24 countries around the airline industry. On April 22, 2014,world. Our available seat miles that take off or land outside the United States represented approximately 74%36% of our pilots voted to be represented byrevenues for the Airlines Pilot Association, or ALPA. During 2015,year ended December 31, 2020. Over the long term, we began negotiations with the union regarding a collective bargaining agreement which remain ongoing. If we are unable to reach agreement on the terms of a collective bargaining agreement, or we experience wide-spread Crewmember dissatisfaction, we could be subject to adverse actions. In December 2017, the Transport Workers Union of America (TWU) filedexpect our international operations may account for an election, the next step in its long-running effort to unionize our Inflight workgroup. Any of these events could result in increased labor costs or reduced efficiency, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
There are risks associated with our presence in someincreasing portion of our international emerging markets, including political or economic instabilitytotal revenues and failure to adequately comply with existing legal and regulatory requirements.available seat miles.
Expansion into new international emerging markets may have risks due to factors specific to those markets. Emerging markets are countries which have less developed economies and may be vulnerable to economic and political instability, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets served by us and the resulting instability may adversely affect our business.
We have expanded and expect to continue to expand our service to countries in the Caribbean and Latin America, some of which have less developed legal systems, financial markets, and business and political environments than the United States, and therefore present greater political, legal, regulatory, economic and operational risks. We emphasize legal compliance and have implemented and continue to implement and refresh policies, procedures and certain ongoing training of Crewmemberscrewmembers with regard to business ethics and compliance, anti-corruption policies and many key legal requirements; however, there can be no assurance our Crewmemberscrewmembers or third party service providers in such locations will adhere to our code of business conduct, anti-corruption policies, other Company policies, or other legal requirements. If we fail to enforce our policies and procedures properly or maintain adequate record-keeping and internal accounting practices to accurately record our transactions, we may be subject to sanctions. In the event we believe or have reason to believe our Crewmemberscrewmembers have or may have violated applicable laws or regulations, we may be subject to investigation costs, potential penalties and other related costs which in turn could negatively affect our reputation, and our results of operations and cash flow.
In addition, to the extent we continue to grow our business both domestically and internationally, opening new markets requires us to commit a substantial amount of resources even before the new services commence. Expansion is also dependent upon our ability to maintain a safe and secure operation and requires additional personnel, equipment, and facilities.
As a result, we are subject to the risks of doing business outside the United States, including:
•the costs of complying with laws, regulations, and policies (including taxation policies) of foreign governments relating to investments and operations, the costs or desirability of complying with local practices and customs, and the impact of various anti-corruption and other laws affecting the activities of U.S. companies abroad;
•evolving local data residency requirements that require data to be stored only in and, in some cases, also to be accessed only from within, a certain jurisdiction;
•U.S. taxation of income earned abroad;
•import and export licensing requirements and regulations, as well as unforeseen changes in regulatory requirements, including imposition of tariffs or embargoes, export regulations, controls, and other trade restrictions;
•political and economic instability;
•fluctuations in GDP, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments;
•health and safety protocols, including global care and cleanliness certifications, at the airports in which we operate;
•the complexity of managing an organization doing business in many jurisdictions;
•uncertainties as to local laws and enforcement of contract and intellectual property rights and occasional requirements for onerous contract clauses; and
•rapid changes in government, economic, and political policies; political or civil unrest; acts of terrorism; or the threat of international boycotts or U.S. anti-boycott legislation.
While these factors and the impact of these factors are difficult to predict, any one or more of them could lower our revenues, affect our operations, increase our costs, reduce our profits, or disrupt our business. For example, in 2020, our financial results were materially adversely affected by the global COVID-19 pandemic. The occurrence of any of these events in markets served by us and the resulting instability may adversely affect our business.
Our comparatively high aircraft utilization rate helps us keep our costs low, but also makes us vulnerable to delays and cancellations; such delays and cancellations could reduce our profitability.
We maintain a comparatively high daily aircraft utilization rate which is the amount of time our aircraft spend in the air carrying passengers. High daily aircraft utilization is achieved in part by reducing turnaround times at airports so we can fly more hours on average in a day. Aircraft utilization is reduced by delays and cancellations from various factors, many of which are beyond our control, including adverse weather conditions, security requirements, air traffic congestion, and unscheduled maintenance events. The majority of our operations are concentrated in the Northeast and Florida, which are particularly vulnerable to weather and congestion delays. Reduced aircraft utilization may limit our ability to achieve and maintain profitability as well as lead to Customercustomer dissatisfaction.
Our business is highly dependent on the New York metropolitan market and increases in competition or congestion or a reduction in demand for air travel in this market, or governmental reduction of our operating capacity at JFK, would harm our business.
We are highly dependent on the New York metropolitan market where we maintain a large presence with approximately one-half of our daily flights having JFK, LaGuardia, Newark, Westchester County Airport, or Newburgh’s Stewart International Airport as either their origin or destination. We have historically experienced an increase in flight delays and cancellations at these airports due to airport congestion which has adversely affected our operating performance and results of operations. Our business could be further harmed by an increase in the amount of direct competition we face in the New York metropolitan market or by continued or increased congestion, delays or cancellations. Our business would also be harmed by any circumstances causing a reduction in demand for air transportation in the New York metropolitan area, such as adverse changes in local economic conditions, health concerns, including COVID-19, negative public perception of New York City, acts of terrorism, or significant price or tax increases linked to increases in airport access costs and fees imposed on passengers.
Extended interruptions or disruptions in service at one or more of our focus cities could have a material adverse impact on our operations.
Our business is heavily dependent on our operations in the New York Metropolitan area, particularly at JFK, and at our other focus cities in Boston, Orlando, Fort Lauderdale, the Los Angeles basin, and San Juan, Puerto Rico. Each of these operations includes flights that gather and distribute traffic to other major cities. A significant interruption or disruption in service at one or more of our focus cities could have a serious impact on our business, financial condition and results of operations.
We may be impacted by increases in airport expenses relating to infrastructure and facilities.
In order to operate within our current markets as well as continue to grow in new markets, we must be able to obtain adequate infrastructure and facilities within the airports we serve. This includes gates, check-in facilities, operations facilities, and landing slots, where applicable. The second halfcosts associated with these airports are often negotiated on a short-term basis with the airport authority and we could be subject to increases in costs on a regular basis with or without our approval. There is a possibility that airport authorities, suffering from revenue shortfalls due to the pandemic, may attempt to recover those shortfalls by passing along the costs or increasing rents or fees to airline tenants. In addition, our operations concentrated in
older airports may be harmed if the infrastructure at those older airports fails to operate as expected due to age, overuse, or significant unexpected weather events, particularlyevents.
Our results of operations fluctuate due to seasonality, weather, and other factors.
We expect our quarterly operating results to fluctuate due to seasonality including high vacation and leisure demand generally occurring on our Florida routes between October and April and on our western routes during the summer. Actions of our competitors and the impact of COVID-19 and travel restrictions may also contribute to fluctuations in our results. We are more susceptible to adverse weather conditions, including snow storms and hurricanes, as a result of our operations being concentrated on the East Coast, than some of our competitors. Our Florida and Caribbean operations are subject to hurricanes. As we enter new markets we could be subject to additional seasonal variations along with any competitive responses to our entry by other airlines. Price changes in aircraft fuel as well as the Caribbean. Hurricanes Irmatiming and Maria resulted in over 2,500 canceled flights or 3%amount of departures. Following large weather events,maintenance and advertising expenditures also impact our operations. As a result of these factors, quarter-to-quarter comparisons of our operating results may not be a good indicator of our future performance. In addition, it is possible in any future period our operating results could be below the expectations of investors and any published reports or analysis regarding JetBlue. In such an event, the price of our common stock could decline, perhaps substantially. In addition, the effects of the COVID-19 pandemic has and may continue to see lingering demand impact similardisrupt traditional seasonality in our industry and geographies due to whatquarantines, rising case counts and changes in governmental travel related regulation.
We are subject to the risks of having a limited number of suppliers for our aircraft, engines, and our Fly-Fi® product.
Our current dependence on five types of aircraft and engines for all of our flights makes us vulnerable to significant problems associated with the Pratt & Whitney Geared Turbofan Engines, or PW1133G-JM engine on our A321neo fleet, International Aero Engines, or IAE V2533-A5 engine on our Airbus A321 fleet, the International Aero Engines, or IAE V2527-A5 engine on our Airbus A320 fleet, the Pratt & Whitney Geared Turbofan Engines, or PW1524G-3 engine on our A220 fleet, and the General Electric Engines CF34-10 engine on our Embraer E190 fleet. This could include design defects, mechanical problems, contractual performance by the manufacturers, or adverse perception by the public which would result in customer avoidance or in actions by the FAA resulting in an inability to operate our aircraft. Carriers operating a more diversified fleet are better positioned than we experiencedare to manage such events.
Our Fly-Fi® service uses technology and satellite access through our agreement with Thales Avionics, Inc., or Thales. An integral component of the Fly-Fi® system is the antenna, which is supplied to us by Thales. If Thales were to stop supplying us with its antennas for any reason, we would have to incur significant costs to procure an alternate supplier. Additionally, if the satellites Fly-Fi® uses were to become inoperable for any reason, we would have to incur significant costs to replace the service.
Tariffs imposed on commercial aircraft and related parts imported from outside the United States, or tariffs that may be escalated over time, may have a material adverse effect on our fleet, business, financial condition and results of operations.
Certain of the products and services that we purchase, including aircraft and related parts, are sourced from suppliers located outside the United States, and the imposition of new tariffs, or any increase in New York, following superstorm Sandyexisting tariffs, by the U.S. government on the importation of such products or services could materially increase the amounts we pay for them. On October 2, 2019, the World Trade Organization ruled that the United States could impose up to $7.5 billion in 2012. retaliatory tariffs in response to European Union subsidies to Airbus. On October 18, 2019, the United States imposed these tariffs on certain imports from the European Union, including an ad valorem duty of 10% on commercial aircraft and related parts. On February 14, 2020, the United States announced it would increase the tariff to 15% with an effective date of March 18, 2020. As of January 12, 2021, the tariff also applies to certain aircraft parts imported from specific countries into the United States for consumption. These tariffs apply to aircraft and other parts that we are already contractually obligated to purchase. The imposition of these tariffs could substantially increase the cost of, among other things, new Airbus aircraft and parts, which in turn could have a material adverse effect on our fleet, business, financial condition and results of operations. We may also seek to postpone or cancel delivery of certain aircraft currently scheduled for delivery, and we may choose not to purchase in the future as many aircraft as we intended. In addition, should additional or different retaliatory tariffs be imposed, our business could be harmed. Any such action could have a material adverse effect on the size of our fleet, business, financial condition and results of operations.
Data and Information Security Related Risks
Our reputation and business may be harmed and we may be subject to legal claims if there is loss, unlawful disclosure or misappropriation of, or unsanctioned access to, our customers’, crewmembers’, business partners’ or our own information or other breaches of our information security.
In the Caribbean,current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance, and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as
ours. Computer hackers routinely attempt to breach our networks. When the Company learns of security incidents, we believeinvestigate the full recoveryincident, which includes making reports to law enforcement, as appropriate.
We also are aware that hackers may attempt to fraudulently induce crewmembers, customers, or others to disclose information or unwittingly provide access to systems or data. We make extensive use of online services and centralized data processing, including through third party service providers or business providers. The secure maintenance and transmission of customer and crewmember information is a critical element of our operations. Our information technology and other systems and those of service providers or business partners, that maintain and transmit customer information, may be compromised by a malicious third party penetration of our network security, or of a business partner, or impacted by deliberate or inadvertent actions or inactions by our crewmembers, or those of a business partner. The risk of cyberattacks to our Company also includes attempted breaches of contractors, business partners, vendors, and other third parties. As a result, personal information may be lost, disclosed, accessed, or taken without consent. We transmit confidential credit card information by way of secure private retail networks and rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission and storage of confidential information.
While the Company makes significant efforts to ensure the security of its computer network, we cannot provide any assurances that our efforts will defend against all cyberattacks. Any compromises to our security or computer network could have a material adverse effect on the reputation, business, operating results, and financial condition of the Company, and could result in Puerto Rico,a loss of customers. Additionally, any material failure by the Company to achieve or maintain compliance with the Payment Card Industry, or PCI, security requirements or rectify a security issue may result in fines and the imposition of restrictions on the Company's ability to accept credit cards as a form of payment. Any such loss, disclosure or misappropriation of, or access to, customers’, crewmembers’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, may lead to regulatory enforcement actions against us, and may materially adversely affect our business, operating results, and financial condition. Furthermore, the loss, disclosure or misappropriation of our business information may materially adversely affect our business, operating results, and financial condition. The regulations in this area continue to develop and evolve. International regulation adds complexity as we expand our service and include more passengers from other countries.
Data security compliance requirements could increase our costs, and any significant data breach could disrupt our operations and harm our reputation, business, results of operations and financial condition.
The Company is subject to increasing legislative, regulator, and customer focus on privacy issues and data security. Our business requires the appropriate and secure utilization of customer, crewmember, business partner, and other sensitive information. We cannot be certain that advances in criminal capabilities (including cyberattacks or cyber intrusions over the Internet, malware, computer viruses, and the like), discovery of new vulnerabilities or attempts to exploit existing vulnerabilities in our systems, other data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology protecting the networks that access and store sensitive information. The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
Furthermore, there has been heightened legislative and regulatory focus on data security in the wakeU.S. and abroad, including requirements for varying levels of Hurricane Maria,customer notification in the event of a data breach. Many of our commercial business partners, including credit card companies, have imposed data security standards that we must meet. In particular, we are required by the Payment Card Industry Security Standards Council, founded by the credit card companies, to comply with their highest level of data security standards. The Company will take severalcontinue its efforts to meet its privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase the Company's costs.
A significant data security breach or our failure to comply with applicable U.S. or foreign data security regulations or other data security standards may expose us to litigation, claims for contract breach, fines, sanctions or other penalties, which could disrupt our operations, harm our reputation, and materially and adversely affect our business, results of operations, and financial condition. The costs to remediate breaches and similar system compromises that do occur could be material. In addition, as cyber criminals become more months.frequent, intense, and sophisticated, the costs of proactive defensive measures may increase. Failure to address these issues appropriately could also give rise to additional legal risks, which, in turn, could increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties, and cause us to incur further related costs and expenses.
We rely heavily on automated systems to operate our business; any failure of these systems could harm our business.
We are dependent on automated systems and technology to operate our business, enhance the JetBlue Experience, and achieve low operating costs. The performance and reliability of our automated systems and data centers is critical to our ability to operate our business and compete effectively. These systems include our computerized airline reservation system, flight
operations system, telecommunications systems, website, maintenance systems, check-in kiosks, and our primary and redundant data centers. Our website and reservation system must be able to securely accommodate a high volume of traffic and deliver important flight information. These systems require upgrades or replacement periodically, which involve implementation and other operational risks. Our business may be harmed if we fail to operate, replace or upgrade our systems or data center infrastructure successfully.
We rely on third party providers of our current automated systems and data center infrastructure for technical support. If our current providers were to fail to adequately provide technical support for any one of our key existing systems or if new or updated components were not integrated smoothly, we could experience service disruptions, which could result in the loss of important data, increase our expenses, decrease our revenues and generally harm our business, reputation and brand. Furthermore, our automated systems cannot be completely protected against events beyond our control, including natural disasters, computer viruses, cyber-attacks,cyberattacks, other security breaches, or telecommunications failures. Substantial or sustained system failures could impact customer service and result in our Customerscustomers purchasing tickets from other airlines. We have implemented security measures and change control procedures and have disaster recovery plans. We also require our third party providers to have disaster recovery plans; however, we cannot assure you these measures are adequate to prevent disruptions, which, if they were to occur, could result in the loss of important data, increase our expenses, decrease our revenues, and generally harm our business, reputation, and brand.
We may be impacted by increases in airport expenses relating to infrastructure and facilities.
In order to operate within our current markets as well as continue to grow in new markets, we must be able to obtain adequate infrastructure and facilities within the airports we serve. This includes gates, check-in facilities, operations facilities and landing slots, where applicable. The costs associated with these airports are often negotiated on a short-term basis with the airport authority and we could be subject to increases in costs on a regular basis with or without our approval.
In addition, our operations concentrated in older airports may be harmed if the infrastructure at those older airports fails to operate as expected due to age, overuse or significant unexpected weather events.
Our reputation and business may be harmed and we may be subject to legal claims if there is loss, unlawful disclosure or misappropriation of, or unsanctioned access to, our Customers’, Crewmembers’, business partners’ or our own information or other breaches of our information security.
In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hactivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclosure information or unwittingly provide access to systems or data. We make extensive use of online services and centralized data processing, including through third party service providers or business providers. The secure maintenance and transmission of Customer and Crewmember information is a critical element of our operations. Our information technology and other systems and those of service providers or business partners, that maintain and transmit customer information, may be compromised by a malicious third party penetration of our network security, or of a business partner, or impacted by deliberate or inadvertent actions or inactions by our Crewmembers, or those of a business partner. The risk of cyberattacks to our Company also includes attempted breaches of contractors, business partners, vendors and other third parties. As a result, personal information may be lost, disclosed, accessed or taken without consent.
We transmit confidential credit card information by way of secure private retail networks and rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission and storage of confidential information. The Company has made significant efforts to secure its computer network. If any compromise of our security or computer network were to occur, it could have a material adverse effect on the reputation, business, operating results and financial condition of the Company, and could result in a loss of Customers. Additionally, any material failure by the Company to achieve or maintain compliance with the Payment Card Industry, or PCI, security requirements or rectify a security issue may result in fines and the imposition of restrictions on the Company's ability to accept credit cards as a form of payment.
Any such loss, disclosure or misappropriation of, or access to, Customers’, Crewmembers’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, may lead to regulatory enforcement actions against us, and may materially adversely affect our business, operating results and financial condition. Furthermore, the loss, disclosure or misappropriation of our business information may materially adversely affect our business, operating results and financial condition. The regulations in this area continue to develop and evolve. International regulation adds complexity as we expand our service and include more passengers from other countries.
Data security compliance requirements could increase our costs, and any significant data breach could disrupt our operations and harm our reputation, business, results of operations and financial condition.
The Company is subject to increasing legislative, regulator and customer focus on privacy issues and data security. Our business requires the appropriate and secure utilization of Customer, Crewmember, business partner and other sensitive information. We cannot be certain that advances in criminal capabilities (including cyber-attacks or cyber intrusions over the Internet, malware, computer viruses and the like), discovery of new vulnerabilities or attempts to exploit existing vulnerabilities in our systems, other data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology protecting the networks that access and store sensitive information. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Furthermore, there has been heightened legislative and regulatory focus on data security in the U.S. and abroad, including requirements for varying levels of customer notification in the event of a data breach.Many of our commercial partners, including credit card companies, have imposed data security standards that we must meet. In particular, we are required by the Payment Card Industry Security Standards Council, founded by the credit card companies, to comply with their highest level of data security standards. The Company will continue its efforts to meet its privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase the Company's costs.
A significant data security breach or our failure to comply with applicable U.S. or foreign data security regulations or other data security standards may expose us to litigation, claims for contract breach, fines, sanctions or other penalties, which could disrupt our operations, harm our reputation and materially and adversely affect our business, results of operations and financial condition. Failure to address these issues appropriately could also give rise to additional legal risks, which, in turn, could increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur further related costs and expenses.
Our liquidity could be adversely impacted in the event one or more of our credit card processors were to impose material reserve requirements for payments due to us from credit card transactions.
We currently have agreements with organizations that process credit card transactions arising from purchases of air travel tickets by our Customers. Credit card processors have financial risk associated with tickets purchased for travel which can occur several weeks after the purchase. Our credit card processing agreements provide for reserves to be deposited with the processor in certain circumstances. We do not currently have reserves posted for our credit card processors. If circumstances were to occur requiring us to deposit reserves, the negative impact on our liquidity could be significant which could materially adversely affect our business.Human Capital Related Risks
If we are unable to attract and retain qualified personnel or fail to maintain our company culture, our business could be harmed.
We compete against other major U.S. airlines for pilots, mechanics, and other skilled labor; some of them offer wage and benefit packages exceeding ours. As more pilots in the industry approach mandatory retirement age, the U.S. airline industry may be affected by a pilot shortage. We may be required to increase wages and/or benefits in order to attract and retain qualified personnel or risk considerable Crewmembercrewmember turnover. In addition, we have had crewmembers take opt out packages to reduce our costs and we may continue to lose crewmembers due to the impact of COVID-19 on aviation and we may lose crewleaders as a result of restrictions imposed under the CARES Act. If we are unable to hire, train, and retain qualified Crewmembers,crewmembers representing diverse backgrounds, experiences, and skill sets, our business could be harmed and we may be unable to implement our growth plans.
In addition, as we hire more people and grow, we believe itour business may be increasingly challenging to continue to hire people who will maintain our company culture. harmed if we lose too many individuals with institutional knowledge.
We believe one of our competitive strengths is our service-oriented company culture which emphasizes friendly, helpful, team-oriented, and customer-focused Crewmembers.crewmembers. Our company culture is important to providing high quality customer service and having a productive workforce in order to help keep our costs low. As we continue to grow,experience turnover, we may be unable to identify, hire, or retain enough people who meet the above criteria, including those in management or other key positions. Our company culture could otherwise be adversely affected by our growing operations and broader geographic diversity. If we fail to maintain the strength of our company culture, our competitive ability and our business may be harmed.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs and the unionization of the Company’s pilots and inflight crewmembers could result in increased labor costs.
Our business is labor intensive and the unionization of any of our crewmembers could result in demands that may increase our operating expenses and adversely affect our financial condition and results of operations fluctuate due to seasonality, weather and other factors.
We expect our quarterly operating results to fluctuate due to seasonality including high vacation and leisure demand occurring on our Florida routes between October and April and on our western routes duringoperations. Any of the summer. Actionsdifferent crafts or classes of our competitorscrewmembers could unionize at any time, which would require us to negotiate in good faith with the crewmember group’s certified representative concerning a collective bargaining agreement. In addition, we may also contributebe subject to fluctuationsdisruptions by unions protesting the non-union status of our other crewmembers. Any of these events would be disruptive to our operations and could harm our business.
In general, unionization has increased costs in the airline industry. In 2014, our results.pilots voted to be represented by the Airlines Pilot Association, or ALPA and our first collective bargaining agreement was ratified by the pilots and became effective on August 1, 2018. In April 2018, JetBlue inflight crewmembers elected to be solely represented by the Transport Workers Union of America, or TWU. The NMB certified the TWU as the representative body for JetBlue inflight crewmembers. In November 2020, our inflight crewmembers voted to decline the ratification of a tentative collective bargaining agreement between JetBlue and TWU. We are more susceptiblecurrently working with TWU to adverse weather conditions, including snow storms and hurricanes, as a result of our operations being concentrateddetermine next steps. If we are unable to reach agreement on the East Coast, than someterms of our competitors. Our Florida and Caribbean operations are subjecta collective bargaining agreement, or if we were to hurricanes. As we enter new marketsexperience widespread crewmember dissatisfaction, we could be subject to additional seasonal variations along with any competitive responses to our entry by other airlines. Price changes in aircraft fuel as well as the timing and amountadverse actions.
We are subject to the risks of having a limited number of suppliers for our aircraft, engines and our Fly-Fi™ product.
Our current dependence on three types of aircraft and engines for all of our flights makes us vulnerable to significant problems associated with the International Aero Engines, or IAE V2533-A5 engine on our Airbus A321 fleet, the International Aero Engines, or IAE V2527-A5 engine on our Airbus A320 fleet and the General Electric Engines CF34-10 engine on our Embraer E190 fleet. This could include design defects, mechanical problems, contractual performance by the manufacturers, or adverse perception by the public which would result in Customer avoidance or in actions by the FAA resulting in an inability to operate our aircraft. Carriers operating a more diversified fleet are better positioned than we are to manage such events.
Our Fly-Fi™ service uses technology and satellite access through our agreement with LiveTV. An integral component of the Fly-Fi™ system is the antenna, which is supplied to us by LiveTV. If LiveTV were to stop supplying us with its antennas for any reason, we would have to incur significant costs to procure an alternate supplier. Additionally, if the satellites Fly-Fi™ uses were to become inoperable for any reason, we would have to incur significant costs to replace the service.Reputational Risks
Our reputation and financial results could be harmed in the event of an accident or incident involving our aircraft.
An accident or incident involving one of our aircraft could involve significant potential claims of injured passengers or others in addition to repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service. We are required by the DOT to carry liability insurance. Although we believe we currently maintain liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate and we may be forced to bear substantial losses from an accident or incident. Substantial claims resulting from an accident or incident in excess of our related insurance coverage would harm our business and financial results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception we are less safe or reliable than other airlines which would harm our business.
Our business depends on our strong reputation and the value of the JetBlue brand.
The JetBlue brand name symbolizes high-quality friendly customer service, innovation, fun, and a pleasant travel experience. JetBlue is a widely recognized and respected global brand; the JetBlue brand is one of our most important and valuable assets. The JetBlue brand name and our corporate reputation are powerful sales and marketing tools and we devote significant resources to promoting and protecting them. Adverse publicity, whether or not justified, relating to activities by our Crewmembers,crewmembers, contractors, or agents could tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity could reduce demand for our services and thus have an adverse effect on our financial condition, liquidity, and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand.
Financing and Financial Risks
We have a significant amount of fixed obligations and we will incur significantly more fixed obligations which could harm our ability to service our current obligations or satisfy future fixed obligations.
As of December 31, 2020, our debt of $4.9 billion accounted for 55% of our total capitalization. In addition to long-term debt, we have a significant amount of other fixed obligations under operating leases related to our aircraft, airport terminal space, airport hangars, other facilities and office space. As of December 31, 2020, future minimum payments under non-cancelable leases and other financing obligations were approximately $3.2 billion for 2021 through 2025 and an aggregate of $1.4 billion for the years thereafter. T5 at JFK is under a lease with the PANYNJ that ends on the 28th anniversary of the date of beneficial occupancy of T5i. The minimum payments under this lease have been included in the future minimum payment totals above.
As of December 31, 2020, we had commitments of approximately $8.2 billion to purchase 141 additional aircraft and related flight equipment through 2027, including estimated amounts for contractual price escalations and pre-delivery deposits. We may incur additional debt and other fixed obligations as we take delivery of new aircraft or finance unencumbered aircraft in our fleet and other equipment and continue to expand into new or existing markets. In an effort to limit the incurrence of significant additional debt, we may seek to defer some of our scheduled deliveries, sell or lease aircraft to others, or pay cash for new aircraft, to the extent necessary or possible. The amount of our existing debt, and other fixed obligations, and potential increases in the amount of our debt and other fixed obligations could have important consequences to investors and could require a substantial portion of cash flows from operations for debt service payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes.
Our level of debt and other fixed obligations could:
•impact our ability to obtain additional financing to support capital expansion plans and for working capital and other purposes on acceptable terms or at all;
•divert substantial cash flow from our operations, execution of our commercial initiatives and expansion plans in order to service our fixed obligations;
•require us to incur significantly more interest expense than we currently do if rates were to increase, since approximately 34% of our debt has floating interest rates; and
•place us at a possible competitive disadvantage compared to less leveraged competitors and competitors with better access to capital resources or more favorable financing terms.
Our ability to make scheduled payments on our debt and other fixed obligations will depend on our future operating performance and cash flows, which in turn will depend on prevailing economic and political conditions and financial, competitive, regulatory, business and other factors, many of which are beyond our control. We are principally dependent upon our operating cash flows and access to the capital markets to fund our operations and to make scheduled payments on debt and other fixed obligations. We cannot assure that we will be able to generate sufficient cash flows from our operations or from capital market activities to pay our debt and other fixed obligations as they become due. If we fail to do so our business could be harmed. If we are unable to make payments on our debt and other fixed obligations, we could be forced to renegotiate those obligations or seek to obtain additional equity or other forms of additional financing.
Our level of indebtedness may limit our ability to incur additional debt to meet future financing needs.
We typically finance our aircraft through either secured debt, lease financing, or through cash from operations. The impact on financial institutions from global economic conditions, including COVID-19, may adversely affect the availability and cost of credit to JetBlue as well as to prospective purchasers of our aircraft should we undertake to sell in the future, including financing commitments we have already obtained for purchases of new aircraft or financing or refinancing of existing aircraft. To the extent we finance our activities with additional debt, we may become subject to competitive risksfinancial and other covenants that may restrict our ability to pursue our strategy or otherwise constrain our operations.
Our liquidity could be adversely impacted in the event one or more of our credit card processors were to impose material reserve requirements for payments due to us from credit card transactions.
We currently have agreements with organizations that process credit card transactions arising from purchases of air travel tickets by our customers. Credit card processors have financial risk associated with tickets purchased for travel which can occur several weeks after the long term naturepurchase. Our credit card processing agreements provide for reserves to be deposited with the processor in certain circumstances. We do not currently have reserves posted for our credit card processors. If circumstances were to occur requiring us to deposit reserves, the negative impact on our liquidity could be significant which could materially adversely affect our business.
We are subject to certain restrictions on our business as a result of our fleet order book.participation in governmental programs under the CARES Act.
At present,In April 2020, we entered into the PSP Agreement under the CARES Act with the Treasury governing our participation in the Payroll Support Program. Under the Payroll Support Program, Treasury provided us a $936 million Payroll Support Payment, consisting of $685 million in grants and $251 million in an unsecured term loan. On September 30, 2020, Treasury provided a $27 million Additional Payroll Support Payment, consisting of $19 million in grants and $8 million in unsecured term loan under the PSP Agreement. In consideration for the Payroll Support Payment and the Additional Payroll Support Payment, we issued warrants to purchase approximately 2.6 million and 85,540 shares of common stock, respectively, to the Treasury at an exercise price of $9.50 per share.
Additionally, on September 29, 2020, we entered into a loan and guarantee agreement (the "Loan Agreement") with Treasury under the Loan Program of the CARES Act, pursuant to which Treasury agreed to extend loans to us in an aggregate principal amount of up to $1.1 billion until March 26, 2021, subject to specified terms. On September 29, 2020, JetBlue borrowed an initial $115 million under the Loan Agreement and on November 3, 2020, JetBlue and Treasury agreed to increase JetBlue’s allocation from $1.1 billion to $1.9 billion. On January 15, 2021, JetBlue and Treasury agreed to extend JetBlue’s option to borrow the full amount under the Loan Agreement until May 28, 2021. In connection with the Loan Agreement, on September 29, 2020, we entered into a warrant agreement with Treasury, pursuant to which we issued to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share.
In accordance with any grants and/or loans received under the CARES Act, we are required to comply with the relevant provisions of the CARES Act which, among other things, includes the following: the requirement to use the Payroll Support Payment and the Additional Payroll Support Payment exclusively for the continuation of payment of crewmember wages, salaries and benefits; the requirement that certain levels of commercial air service be maintained until March 1, 2022; the prohibitions on share repurchases and the payment of common stock dividends; and restrictions on the payment of certain executive compensation vary depending on the type of CARES Act support received. Further, the Loan Agreement includes affirmative and negative covenants that restrict our ability to, among other things, dispose of certain assets, merge, consolidate or sell assets, incur certain additional indebtedness or pay certain dividends. In addition, we are required to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities aggregating not less than $550 million and to maintain a minimum ratio of the borrowing base of the collateral. If we do not meet the minimum collateral coverage ratio, we must either provide additional collateral to secure our obligations under the Loan Agreement or repay the loans by an amount necessary to maintain compliance with the collateral coverage ratio.
The substance and duration of restrictions to which we are subject under the grants and/or loans under the CARES Act, including, but not limited to, those outlined above, will materially affect the Company's operations, and the Company may not
be successful in managing these impacts. Further, these restrictions could limit our ability to take actions that we otherwise might have existingdetermined to be in the best interest of our Company and our shareholders. In particular, limitations on executive compensation, which, depending on the form of aid, could extend up to six years, may impact the Company's ability to attract and retain senior management or attract other key employees during this critical time. We cannot predict whether the assistance under any of these programs will be adequate to support our business for the duration of the COVID-19 pandemic or whether additional assistance will be required or available in the future.
The Company has a significant amount of indebtedness from fixed obligations and may seek material amounts of additional financial liquidity in the short-term, and insufficient liquidity may have a material adverse effect on the Company's financial condition and business.
The Company has a significant amount of indebtedness from fixed obligations, including aircraft commitments through 2024. As technological evolution occurs in our industry, through the uselease and debt financings, leases of compositesairport property, secured loan facilities and other innovations, wefacilities, and other material cash obligations. In addition, the Company has substantial non-cancelable commitments for capital expenditures, including for the acquisition of new aircraft and related spare engines.
In addition, in response to the travel restrictions, decreased demand and other effects the COVID-19 pandemic has had and is expected to have on the Company's business, the Company may continue to seek material amounts of additional financial liquidity in the short-term, which may include the issuance of additional unsecured or secured debt securities, equity securities and equity-linked securities, the sale of assets, the entry into sale-leaseback transactions, as well as additional bilateral and syndicated secured and/or unsecured credit facilities, among other items. If the Company's credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to the Company's rating levels, the airline industry, or the Company, the Company's access to capital and the cost of any debt financing would be negatively affected. There can be no assurance as to the timing of any such issuance, which may be competitively disadvantaged becausein the near term, or that any such additional financing will be completed on favorable terms, or at all. In addition, as of December 31, 2020, the Company has received a total of $963 million in funding under the Payroll Support Program of the CARES Act and $115 million under the Loan Program of the CARES Act, which financial assistance subjects the Company and its business to certain restrictions . See “We are subject to certain restrictions on our business as a result of our participation in governmental programs under the CARES Act.”
Although the Company's cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to meet its obligations and commitments to date, the Company's liquidity has been, and may in the future be, negatively affected by the risk factors described herein. If the Company's liquidity is materially diminished, the Company might not be able to timely pay its leases and debts or comply with certain operating and financial covenants under its financing and credit card processing agreements or with other material provisions of its contractual obligations. Moreover, as a result of the Company's recent financing activities in response to the COVID-19 pandemic, the number of financings and the aggregate amount of indebtedness with respect to which such covenants and provisions apply has increased, thereby subjecting the Company to more substantial risk of cross-default and cross-acceleration in the event of breach, and additional operating and financial covenants could become binding on the Company as it continues to seek additional liquidity. In addition, the Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that have been processed by that financial institution, but for which the Company has not yet provided the air transportation. Such financial institutions may require cash or other collateral reserves to be established or withholding of payments related to receivables to be collected, including if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short-term investments. In light of the affect COVID-19 is having on demand and, in turn, capacity, the Company has seen an increase in demand from consumers for refunds on their tickets, and we have existing extensive fleet commitmentsanticipate this will continue to be the case for the foreseeable future. Refunds lower our liquidity and put us at risk of triggering liquidity covenants in these processing agreements and, in doing so, could force us to post cash collateral with the credit card companies for advance ticket sales. The Company also maintains certain insurance- and surety-related agreements under which counterparties may require collateral.
The Company's substantial level of indebtedness, particularly following the additional liquidity transactions completed and contemplated in response to the impacts of COVID-19, and non-investment grade credit rating, as well as market conditions and the availability of assets as collateral for loans or other indebtedness, which has been reduced as a result of the $2.3 billion in secured term loan facilities entered into since the beginning of fiscal year 2020 and may be further reduced as the Company continues to seek material amounts of additional financial liquidity, together with the effect the COVID-19 pandemic has had on the global economy generally and the air transportation industry specifically, may make it difficult for the Company to raise additional capital if needed to meet its liquidity needs on acceptable terms, or at all.
See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report for additional information regarding the Company's liquidity as of December 31, 2020.
The Company may never realize the full value of its intangible assets or its long-lived assets causing it to record impairments that would prohibit us from adopting new technologiesmay negatively affect its financial condition and operating results.
In accordance with applicable accounting standards, the Company is required to test its indefinite-lived intangible assets for impairment on an expedited basis.annual basis, or more frequently where there is an indication of impairment. In addition, the Company is required to test certain of its other assets for impairment where there is any indication that an asset may be impaired.
The Company may be required to recognize losses in the future due to, among other factors, extreme fuel price volatility, tight credit markets, government regulatory changes, decline in the fair values of certain tangible or intangible assets, such as aircraft, route authorities, airport slots and frequent flyer database, unfavorable trends in historical or forecasted results of operations and cash flows and an uncertain economic environment, as well as other uncertainties. For example, during the year ended December 31, 2020, the Company recorded impairment charges of $273 million associated with its E190 fleet due to COVID-19. The Company can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period, and the risk of future material impairments has been significantly heightened as result of the effects of the COVID-19 pandemic on our flight schedules and business. The value of the Company's aircraft could also be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from the grounding of aircraft. A further impairment loss could have a material adverse effect on the Company's financial condition and operating results.
Risks Associated with the Airline Industry
The airline industry is particularly sensitiveWe could be adversely affected by an outbreak of a disease or an environmental disaster that significantly affects travel behavior.
Any outbreak of another disease or variants of COVID-19, which affect travel behavior, travel demand, or travel restrictions, or a similar public health threat, or fear of such an event could have a material adverse impact on airlines. In addition, outbreaks of disease could result in quarantines of our personnel, business partners and their suppliers, or an inability to changesaccess facilities or our aircraft, which could adversely affect our operations. Similarly, if an environmental disaster were to occur and adversely impact any of our destination cities, travel behavior could be affected and in economicturn, could materially adversely impact our business, operating results, liquidity and financial condition.
FundamentalCompliance with future environmental regulations may harm our business.
Many aspects of airlines’ operations are subject to increasingly stringent environmental regulations, and permanent changesgrowing concerns about climate change may result in the imposition of additional regulation. Since the domestic airline industry have been ongoing overis increasingly price sensitive, we may not be able to recover the past several years as a resultcost of several years of repeated losses, among other reasons. These losses resulted in airlines renegotiatingcompliance with new or attempting to renegotiate labor contracts, reconfiguring flight schedules, furloughing or terminating Crewmembers, as well as considering other efficiencymore stringent environmental laws and cost-cutting measures. Despite these actions, several airlines have reorganized under Chapter 11 of the U.S. Bankruptcy Code to permit them to reduce labor rates, restructure debt, terminate pension plans and generally reduce their cost structure. Since 2005, the U.S. airline industry has experienced significant consolidation and liquidations. A global economic recession and related unfavorable general economic conditions, such as higher unemployment rates, a constrained credit market, housing-related pressures, and increased business operating costs can reduce spending for both leisure and business travel. Unfavorable economic conditions could also impact an airline’s ability to raise fares to counteract increased fuel, labor, and other costs. It is possible that further airline reorganizations, consolidation, bankruptcies or liquidations may occur in the current global economic environment, the effects ofregulations from our customers, which we are unable to predict. We cannot assure you the occurrence of these events, or potential changes resulting from these events, will not harm our business or the industry.
A future act of terrorism, the threat of such acts or escalation of U.S. military involvement overseas could adversely affect our industry.
Actsbusiness. Although we don't expect the costs of terrorism, the threat of such acts or escalation of U.S. military involvement overseas couldcomplying with current environmental regulations will have ana material adverse effect on our financial position, results of operations, or cash flows, no assurance can be made that the airline industry. Incosts of complying with environmental regulations in the event of an act of terrorism, whether or not successful, the airline industry would likely experience increased security requirements and significantly reduced demand. We cannot assure you these actions, or consequences resulting from these actions,future will not harmhave such an effect.
Federal budget constraints or federally imposed furloughs due to budget negotiation deadlocks may adversely affect our industry, business, results of operations and financial position.
Many of our airline operations are regulated by governmental agencies, including, but not limited to, the DOT, FAA, CBP, and the TSA. If the federal government were to continue experiencing issues in reaching budgetary consensus in the future resulting in mandatory furloughs and/or other budget constraints, or if a government shutdown were to continue for an extended period of time, our operations and results of operations could be materially negatively impacted. The travel behaviors of the industry.flying public could also be affected, which may materially adversely impact our industry and our business.
We may be affected by global climate change or by legal, regulatory or market responses to such change.
Concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit GHG emissions, including our aircraft and ground operations emissions. In October 2016, the ICAO passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"), which is a global, market-based emissions offset program to encourage carbon-neutral growth beyond 2020. CORISA is scheduled to be implemented through multiple phases beginning in 2021. ICAO continues to develop details regarding implementation, but we believe compliance with CORSIA will increase our operating costs.
Changes in government regulations imposing additional requirements and restrictions on our operations could increase our operating costs and result in service delays and disruptions.
Airlines are subject to extensive regulatory and legal requirements, both domestically and internationally, involving significant compliance costs. In the last several years, Congress has passed laws, and the agencies of the federal government, including, but not limited to, the DOT, FAA, CBP, and the TSA have issued regulations relating to the operation of airlines that have required significant expenditures. We expect to continue to incur expenses in connection with complying with government regulations. Additional laws including executive orders, regulations, taxes, and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted or materially amended, these measures could have the effect of raising ticket prices affecting the perception of the airline industry, reducing air travel demand and/or revenue, and increasing costs. We cannot assure you these and other laws including executive orders, regulations, or taxes enacted in the future will not harm our business.
In addition, the U.S. Environmental Protection Agency, or EPA, has proposed changes to underground storage tank regulations that could affect certain airport fuel hydrant systems. In addition to the proposed EPA and state regulations, several U.S. airport authorities are actively engaged in efforts to limit discharges of de-icing fluid to local groundwater, often by requiring airlines to participate in the building or reconfiguring of airport de-icing facilities.
Federal budget constraintsA future act of terrorism, the threat of such acts or federally imposed furloughs due to budget negotiation deadlocks mayescalation of U.S. military involvement overseas could adversely affect our industry.
Acts of terrorism, the threat of such acts or escalation of U.S. military involvement overseas could have an adverse effect on the airline industry. In the event of an act of terrorism, whether or not successful, the airline industry business, results of operationswould likely experience increased security requirements and financial position.
Many of our airline operations are regulated by governmental agencies, including the FAA, the DOT, the CBP, the TSA and others. If the federal government were to experience issues in reaching budgetary consensus in the futuresignificantly reduced demand. We cannot assure you these actions, or consequences resulting in mandatory furloughs and/or other budget constraints, our operations and results of operations could be materially negatively impacted. The travel behaviors of the flying public could also be affected, which may materially adversely impact our industry and our business.
Compliance with future environmental regulations mayfrom these actions, will not harm our business.business or the industry.
Many aspects of airlines’ operations are subjectThe airline industry is particularly sensitive to increasingly stringent environmental regulations,changes in economic condition.
Fundamental and growing concerns about climate change may resultpermanent changes in the imposition of additional regulation. Since the domestic airline industry have occurred over time as a result of several years of repeated losses, among other reasons. These losses resulted in airlines renegotiating or attempting to renegotiate labor contracts, reconfiguring flight schedules, furloughing, or terminating crewmembers, as well as considering other efficiency and cost-cutting measures. Despite these actions, several airlines have reorganized under Chapter 11 of the U.S. Bankruptcy Code to permit them to reduce labor rates, restructure debt, terminate pension plans, and generally reduce their cost structure. Since 2005, the U.S. airline industry has experienced significant consolidation and liquidations. A global economic recession and related unfavorable general economic conditions, such as higher unemployment rates, a constrained credit market, housing-related pressures, and increased business operating costs can reduce spending for both leisure and business travel. Unfavorable economic conditions could also impact an airline’s ability to raise fares to counteract increased fuel, labor, and other costs. It is increasingly price sensitive, wepossible that further airline reorganizations, consolidation, bankruptcies, or liquidations may not be able to recover the cost of compliance with new or more stringent environmental laws and regulations from our Customers, which could adversely affect our business. Although it is not expected the costs of complying with current environmental regulations will have a material adverse effect on our financial position, results of operations or cash flows, no assurance can be made the costs of complying with environmental regulationsoccur in the futurecurrent global economic environment, the effects of which we are unable to predict. We cannot assure you the occurrence of these events, or potential changes resulting from these events, will not have such an effect.harm our business or the industry.
We may be affected by global climate change or by legal, regulatory or market responses to such change.
Concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit greenhouse gas ("GHG") emissions, including our aircraft emissions. In October 2016, the ICOA passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"), which is a global, market-based emissions offset program to encourage carbon-neutral grown beyond 2020. CORISA is scheduled to take effect by 2021. ICAO continues to develop details regarding implementation, but we believe compliance with CORSIA will increase our operating costs.
We could be adversely affected by an outbreak of a disease or an environmental disaster that significantly affects travel behavior.
Any outbreak of a disease affecting travel behavior could have a material adverse impact on airlines. In addition, outbreaks of disease could result in quarantines of our personnel or an inability to access facilities or our aircraft, which could adversely affect our operations. Similarly, if an environmental disaster were to occur and adversely impact any of our destination cities, travel behavior could be affected and in turn, could materially adversely impact our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Aircraft
As of December 31, 2017,2020, we operated a fleet consisting of 53one Airbus A220 aircraft, 63 Airbus A321 aircraft, 13 Airbus A321neo aircraft, 130 Airbus A320 aircraft, and 60 Embraer E190 aircraft as summarized below:
| | | Aircraft | | Seating Capacity | | Owned | | Capital Leased | | Operating Leased | | Total | | Average Age in Years | Aircraft | | Seating Capacity | | Owned(4) | | Finance Leased | | Operating Leased | | Total | | Average Age in Years |
| Airbus A220 | | Airbus A220 | | 140 | | | 1 | | | — | | | — | | | 1 | | | — | |
| Airbus A320 | | 150 |
| (1) | | 114 |
| | 4 |
| | 12 |
| | 130 |
| | 12.3 |
| Airbus A320 | | 162/ 150 | (1) | | 96 | | | 2 | | | 32 | | | 130 | | | 15.3 | |
| Airbus A321 | | 200 / 159 |
| (2) | | 49 |
| | 2 |
| | 2 |
| | 53 |
| | 1.9 |
| Airbus A321 | | 200 / 159 | (2) (3) | | 61 | | | 2 | | | — | | | 63 | | | 4.5 | |
| Airbus A321neo | | Airbus A321neo | | 200 | | | 13 | | | — | | | — | | | 13 | | | 0.8 | |
| Embraer E190 | | 100 |
| | 30 |
| | — |
| | 30 |
| | 60 |
| | 9.2 |
| Embraer E190 | | 100 | | | 30 | | | — | | | 30 | | | 60 | | | 12.2 | |
| | | | | 193 |
| | 6 |
| | 44 |
| | 243 |
| | 9.2 |
| | 201 | | | 4 | | | 62 | | | 267 | | | 11.3 | |
(1) During 2017, we completed the buyoutOur Airbus A320 with a restyled cabin configuration (72 aircraft) has a seating capacity of three162 seats. Our Airbus A320 with a classic cabin configuration has a seating capacity of our aircraft leases.150 seats.
(2) Our Airbus A321 with a single cabin layout has a seating capacity of 200 seats. Our Airbus A321 with our Mint™® premium service has a seating capacity of 159 seats.
(3) During 2020, we completed the buyout of one of our A321 aircraft leases.
(4) Total owned aircraft include aircraft associated with sale-leaseback transactions that did not qualify as sales for accounting purposes.
As of December 31, 2017,2020, our aircraft leases had an average remaining term of approximately 63 years, with expiration dates between 20182022 and 2028.2026. We have the option to extend most of these leases for additional periods or to purchase the aircraft at the end of the related lease term. We have 74 owned aircraft subject to secured debt financing; 119 of our owned aircraft and 37 owned spare engines are unencumbered.
In July 2016, we amended our purchase agreement with Airbus by adding 30 incremental Airbus A321 aircraft deliveries between 2017 and 2023; 15 of these aircraft are scheduled to be A321ceo to be delivered between 2017 and 2019 and the remaining 15 are scheduled to be A321neos to be delivered between 2020 and 2023.
We amended our purchase agreement with Airbus in April 2017. The amendment changed the timing of several of our Airbus A321ceo and Airbus A321neo deliveries. We deferred eight A321neo deliveries from 2019 to 2023 and five from 2020 to 2024. We also moved up the delivery of three A321ceo aircraft from 2019 to 2018, while deferring three A321neo deliveries to 2019. We retain flexibility to make further changes in our order book. We have the option to take certainA321neo deliveries with the long range configuration, the A321-LR.
As of December 31, 2017,2020, options for 50 additional A220-300 aircraft deliveries remain available to us and we retain the flexibility to convert certain aircraft to the A220-100 model. Both members of the A220 family share commonality in more than 99 percent of their replaceable parts and utilize the same family of engines.
As of December 31, 2020, we had 119141 aircraft on order and scheduled for delivery through 2024.2027. Our future aircraft delivery schedule is as follows:
| | | | | | | | | | | | | Contractual Order Book |
| Year | | Airbus A320neo | | Airbus A321ceo | | Airbus A321neo | | Embraer 190 | | Total | Year | | Airbus A321neo | | Airbus A220 | | Total |
| 2018 | | — | | 10 | | — | | — | | 10 | |
| 2019 | | — | | — | | 13 | | — | | 13 | |
| 2020 | | 6 | | — | | 7 | | 10 | | 23 | |
| 2021 | | 16 | | — | | 4 | | 7 | | 27 | 2021 | | 8 | | 7 | | 15 |
| 2022 | | 3 | | — | | 17 | | 7 | | 27 | 2022 | | 3 | | 8 | | 11 |
| 2023 | | — | | — | | 14 | | — | | 14 | 2023 | | 11 | | 19 | | 30 |
| 2024 | | — | | — | | 5 | | — | | 5 | 2024 | | 13 | | 22 | | 35 |
| 2025 | | 2025 | | 11 | | 12 | | 23 |
| 2026 | | 2026 | | 12 | | 1 | | 13 |
| 2027 | | 2027 | | 14 | | — | | 14 |
| Total | | 25 | | 10 | | 60 | | 24 | | 119 | Total | | 72 | | 69 | | 141 |
Ground Facilities
Airports
All of our facilities at the airports we serve are under leases or other occupancy agreements. This space is leased directly or indirectly from the local airport authority on varying terms dependent on prevailing practices at each airport. Our passenger terminal service facilities consisting of ticket counters, gate space, operations support area, and baggage service offices generally have agreement terms ranging from less than one year to five years. They can contain provisions for periodic adjustments of rental rates, landing fees, and other charges applicable under the type of lease. Under some of these agreements, we are responsible for the maintenance, insurance, utilities, and certain other facility-related expenses and services.
A summary of our most significant lease agreements are:
•JFK - We have a lease agreement with the PANYNJ for T5 and T5i. We have the option to terminate the agreement in 2033, five years prior to the end of the original scheduled lease term of October 2038. In December 2010, weWe also executed a supplement to this lease agreement for the T6 property, our original base of operations at JFK for a term of five years, which afforded us the exclusive right to develop on the T6 property. T5i, our expansion of T5 that we use as an international arrivals facility opened to Customerscustomers in November 2014. Another supplement of the original T5 lease was executed in 2013. The lease, as amended, now incorporates a total of approximately 19 acres of space for our T5 facilities.
•Boston - We had an initial five year lease agreement with Massport for five gates in Terminal C that started on May 1, 2005 and allowed JetBlue to grow to 11 gates by 2008. We negotiated anThe agreement included extension as of May 1, 2010 whereby the lease hadlanguage which provided for 20 successive one-year automatic renewals each from May 1 through to April 30.after the initial five year term. With the continued growth of our operations in Boston, we increased the number of leased gates from Massport to 16 and signed an amendment in May 2014 to lease an additional eight gates and related support spaces in Terminal C that were previously occupied by United Airlines. We furtherhave periodically amended our lease to add additional gates and support spaces, most recently in December 2017 which allows us to gradually lease uphave the rights to six additional gates. and related support spaces. As of December 31, 2017,2020, we leased 25 27 gates in Boston. Our lease with Massport is scheduled to expire in April 2030.
We have entered into use arrangements at each of the airports we serve providing for the non-exclusive use of runways, taxiways, and other airport facilities. Landing fees under these agreements are typically based on the number of aircraft landings and the weight of the aircraft.
Other
We lease the following hangars and airport support facilities at our focus cities:
•New York - At JFK we have a ground lease agreement which expires in 2030 for an aircraft maintenance hangar, an adjacent office, and warehouse facility, including a storage facility for aircraft parts. These facilities accommodate our technical support and catering operations. We also lease a building from the PANYNJ which is mainly used for ground equipment maintenance work.
•Boston - We have a ground lease agreement which expires in 2022 for a building which includes an aircraft maintenance hangar and support space. We also have a leaseleases for a facilityfacilities to accommodate our ground support equipment maintenance.maintenance and catering operations.
•Orlando - We have a ground lease agreement for a hangerhangar which expires in 2035. We also occupy a training center, JetBlue University, with a lease agreement expiring in 2035 which we use for the initial and recurrent training of our pilots and in-flight Crewmembers,inflight crewmembers, as well as support training for our technical operations and airport Crewmembers.crewmembers. This facility is equipped with sevennine full flight simulators, tennine flight training devices, three cabin trainers,trainers, a training pool, classrooms, and support areas. We began the planned expansion of JetBlue University in April 2019 which has continued into 2020. As we continue to grow, developing our crewmembers' technical, service, and hospitality skills that provide our JetBlue Experience is crucial to our continued success. The new learning space will include additional flight and cabin simulators, an auditorium that can accommodate six new classrooms, and a larger ditching pool.
In 2015, we opened the Lodge at OSC which is adjacent to JetBlue University and is used for lodging our Crewmemberscrewmembers when they attend training.
Our primary corporate offices are located in Long Island City, New York with our lease expiring in 2023. Our offices in Salt Lake City, Utah contain a core team of Crewmemberscrewmembers who are responsible for group sales, customer service, at-home reservation agent supervision, disbursements and certain other finance functions. The lease for our Salt Lake City facility expires in 2022. We also maintain other facilities that are necessary to support our operations in the cities we serve.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of our business, we are party to various legal proceedings and claims which we believe are incidental to the operation of our business. Other than as described under Note 1112 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe the ultimate outcome of these proceedings to which we are currently a party will not have a material adverse effect on our business, financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Stockholder Matters
Our common stock is traded on the NASDAQ Global Select Market under the symbol JBLU. The table below shows the high and low closing prices for our common stock. |
| | | | | | | | |
| | | High | | Low |
| 2017 Quarter Ended | | | | |
| March 31 | | $ | 22.78 |
| | $ | 18.86 |
|
| June 30 | | 23.36 |
| | 20.51 |
|
| September 30 | | 23.75 |
| | 18.25 |
|
| December 31 | | 22.58 |
| | 18.51 |
|
| 2016 Quarter Ended | | | | |
| March 31 | | $ | 23.37 |
| | $ | 19.34 |
|
| June 30 | | 21.33 |
| | 15.15 |
|
| September 30 | | 18.71 |
| | 15.76 |
|
| December 31 | | 22.79 |
| | 16.93 |
|
As of January 31, 2018,2021, there were approximately 433 holdersapproximately 408 holders of record of our common stock.
We have not paid cash dividends on our common stock and have no current intention to do so. Any future determination to pay cash dividends would be at the discretion of our Board of Directors, subject to applicable limitations under Delaware law. This decision would be dependent upon our results of operations, financial condition, and other factors deemed relevant by our Board of Directors.
Purchases of Equity Securities by the Issuer and Affiliated Purchases
In September 2015, the Board of Directors authorized a three year share repurchase program starting in 2016, of up to $250 million worth of JetBlue common stock. This authorization replaced our prior 2012 authorization. On December 7, 2016, the Board approved changes to our share repurchase program to increase the aggregate authorization to $500 million worth of JetBlue common stock, and extended the term of the program through December 31, 2019. The 2015 authorization was completed during the three months ended September 30, 2017 and no shares were repurchased during the three months ended December 2017.
On December 8, 2017, the Board of Directors approved a two year share repurchase authorization starting on January 1, 2018,program, or the 2017 Authorization, of up to $750 million worth of JetBlue common stock.stock beginning on January 1, 2018. The 2017 Authorization was completed in 2019.
On September 19, 2019, the Board of Directors approved a share repurchase program, or the 2019 Authorization, of up to $800 million worth of common stock beginning on October 1, 2019 and ending no later than December 31, 2021. Our share repurchase programs include authorization can be executed throughfor repurchases in open market transactions pursuant to Rules 10b-18 and/or 10b5-1 of the Securities and Exchange Act, of 1934, as amended, and/or one or more privately-negotiated accelerated stock repurchase transactions. We may adjust or change our share repurchase practicesThe timing, price, and volume of any repurchases will be based on market conditions and other alternatives.relevant factors.
During 2020, the following shares were repurchased under the above programs (in millions, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
| February 2020 | | 8.1 | | | (1) (2) | | 8.1 | | | $ | 480 | |
| March 2020 | | 4.9 | | | (1) (2) | | 4.9 | | | 480 | |
| Total | | 13.0 | | | | | 13.0 | | | |
(1) On November 21, 2019, JetBlue entered into an accelerated share repurchase agreement, or ASR, paying $160 million for an initial delivery of 6.9 million shares. The term of the ASR concluded on February 21, 2020 with delivery of 1.5 million additional shares to JetBlue on February 25, 2020. A total of 8.4 million shares, at an average price of $19.03 per share, were repurchased under the agreement.
(2) On February 24, 2020, JetBlue entered into an ASR paying $160 million for an initial delivery of 6.6 million shares. The term of the ASR concluded on March 16, 2020 with delivery of 4.9 million additional shares to JetBlue on March 18, 2020. A total of 11.5 million shares, at an average price of $13.91 per share, were repurchased under the agreement.
In accordance with the Payroll Support Program Agreement and the Loan and Guarantee Agreement with the United States Department of the Treasury under the CARES Act, JetBlue is temporarily restricted from making any share repurchases. We have suspended our share repurchase program as of March 31, 2020.
Stock Performance Graph
This performance graph shall not be deemed “filed” with the SEC or subject to Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act, of 1933, as amended.
The following line graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the Standard & Poor’sS&P 500 Stock Index and the NYSE Arca Airline Index from December 31, 20132016 to December 31, 2017.2020. The comparison assumes the investment of $100 in our common stock and in each of the foregoing indices and reinvestment of all dividends. The stock performance shown represents historical performance and is not representative of future stock performance.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 12/31/2016 | | 12/31/2017 | | 12/31/2018 | | 12/31/2019 | | 12/31/2020 |
| JetBlue Airways Corporation | | $ | 100 | | | $ | 100 | | | $ | 72 | | | $ | 83 | | | $ | 65 | |
| S&P 500 Stock Index | | 100 | | | 119 | | | 112 | | | 144 | | | 168 | |
| NYSE Arca Airline Index | | 100 | | | 105 | | | 82 | | | 99 | | | 75 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | | 12/31/2013 | | 12/31/2014 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 |
| JetBlue Airways Corporation | | $ | 100 |
| | $ | 186 |
| | $ | 265 |
| | $ | 263 |
| | $ | 262 |
|
| S&P 500 Stock Index | | 100 |
| | 111 |
| | 111 |
| | 121 |
| | 145 |
|
| NYSE Arca Airline Index | | 100 |
| | 149 |
| | 125 |
| | 159 |
| | 167 |
|
ITEM 6. SELECTED FINANCIAL DATA
The following financial information for each of the prior five years ending on December 31 has been derived from our consolidated financial statements. This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Report. | | | (in millions except per share data) | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | (in millions except per share data) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016(1) |
| Statements of Operations Data | | | | | | | | | | | Statements of Operations Data | | | | | | | | | | |
| Operating revenues | | $ | 7,015 |
| | $ | 6,632 |
| | $ | 6,416 |
| | $ | 5,817 |
| | $ | 5,441 |
| Operating revenues | | $ | 2,957 | | | $ | 8,094 | | | $ | 7,658 | | | $ | 7,012 | | | $ | 6,584 | |
| Operating expenses: | | | | | | | | | | | Operating expenses: | |
| Aircraft fuel and related taxes | | 1,363 |
| | 1,074 |
| | 1,348 |
| | 1,912 |
| | 1,899 |
| Aircraft fuel and related taxes | | 631 | | | 1,847 | | | 1,899 | | | 1,363 | | | 1,074 | |
| Salaries, wages and benefits | | 1,887 |
| | 1,698 |
| | 1,540 |
| | 1,294 |
| | 1,135 |
| Salaries, wages and benefits | | 2,032 | | | 2,320 | | | 2,044 | | | 1,887 | | | 1,698 | |
| Landing fees and other rents | | 397 |
| | 357 |
| | 342 |
| | 321 |
| | 305 |
| Landing fees and other rents | | 358 | | | 474 | | | 462 | | | 438 | | | 357 | |
| Depreciation and amortization | | 446 |
| | 393 |
| | 345 |
| | 320 |
| | 290 |
| Depreciation and amortization | | 535 | | | 525 | | | 469 | | | 424 | | | 393 | |
| Aircraft rent | | 100 |
| | 110 |
| | 122 |
| | 124 |
| | 128 |
| Aircraft rent | | 85 | | | 99 | | | 104 | | | 102 | | | 110 | |
| Sales and marketing | | 267 |
| | 259 |
| | 264 |
| | 231 |
| | 223 |
| Sales and marketing | | 110 | | | 290 | | | 294 | | | 271 | | | 263 | |
| Maintenance, materials and repairs | | 622 |
| | 563 |
| | 490 |
| | 418 |
| | 432 |
| Maintenance, materials and repairs | | 441 | | | 619 | | | 625 | | | 622 | | | 563 | |
| Other operating expenses | | 933 |
| | 866 |
| | 749 |
| | 682 |
| | 601 |
| Other operating expenses | | 762 | | | 1,106 | | | 1,060 | | | 932 | | | 866 | |
Special items(2) | | Special items(2) | | (283) | | | 14 | | | 435 | | | — | | | — | |
| Total operating expenses | | 6,015 |
| | 5,320 |
| | 5,200 |
| | 5,302 |
| | 5,013 |
| Total operating expenses | | 4,671 | | | 7,294 | | | 7,392 | | | 6,039 | | | 5,324 | |
| Operating income | | 1,000 |
| | 1,312 |
| | 1,216 |
| | 515 |
| | 428 |
| |
| Operating (loss) income | | Operating (loss) income | | (1,714) | | | 800 | | | 266 | | | 973 | | | 1,260 | |
Other income (expense)(1)(3) | | (79 | ) | | (96 | ) | | (119 | ) | | 108 |
| | (149 | ) | | (179) | | | (32) | | | (47) | | | (55) | | | (96) | |
| Income before income taxes | | 921 |
| | 1,216 |
| | 1,097 |
| | 623 |
| | 279 |
| |
| (Loss) income before income taxes | | (Loss) income before income taxes | | (1,893) | | | 768 | | | 219 | | | 918 | | | 1,164 | |
Income tax expense (benefit)(2)(5) | | (226 | ) | | 457 |
| | 420 |
| | 222 |
| | 111 |
| | (539) | | | 199 | | | 30 | | | (222) | | | 437 | |
| Net income | | $ | 1,147 |
| | $ | 759 |
| | $ | 677 |
| | $ | 401 |
| | $ | 168 |
| |
| Earnings per common share: | | | | | | | | | | | |
| Net (loss) income | | Net (loss) income | | $ | (1,354) | | | $ | 569 | | | $ | 189 | | | $ | 1,140 | | | $ | 727 | |
| (Loss) earnings per common share: | | (Loss) earnings per common share: | | | | | | | | | | |
| Basic | | $ | 3.49 |
| | $ | 2.32 |
| | $ | 2.15 |
| | $ | 1.36 |
| | $ | 0.59 |
| Basic | | $ | (4.88) | | | $ | 1.92 | | | $ | 0.60 | | | $ | 3.47 | | | $ | 2.23 | |
Diluted(2)(5) | | $ | 3.47 |
| | $ | 2.22 |
| | $ | 1.98 |
| | $ | 1.19 |
| | $ | 0.52 |
| | $ | (4.88) | | | $ | 1.91 | | | $ | 0.60 | | | $ | 3.45 | | | $ | 2.13 | |
| Other Financial Data: | | | | | | | | | | | Other Financial Data: | |
| Operating margin | | 14.3 | % | | 19.8 | % | | 19.0 | % | | 8.9 | % | | 7.9 | % | Operating margin | | (58.0) | % | | 9.9 | % | | 3.5 | % | | 13.9 | % | | 19.1 | % |
Pre-tax margin(1)(6) | | 13.1 | % | | 18.3 | % | | 17.1 | % | | 10.7 | % | | 5.1 | % | | (64.0) | % | | 9.5 | % | | 2.9 | % | | 13.1 | % | | 17.7 | % |
| Ratio of earnings to fixed charges | | 6.23x |
| | 7.03x |
| | 5.71x |
| | 3.59x |
| | 2.05x |
| |
| Net cash provided by operating activities | | $ | 1,398 |
| | $ | 1,632 |
| | $ | 1,598 |
| | $ | 912 |
| | $ | 758 |
| |
| Net cash used in investing activities | | (975 | ) | | (1,045 | ) | | (1,134 | ) | | (379 | ) | | (476 | ) | |
| Net cash used in financing activities | | (553 | ) | | (472 | ) | | (487 | ) | | (417 | ) | | (239 | ) | |
| | Net cash (used in) provided by operating activities | | Net cash (used in) provided by operating activities | | $ | (683) | | | $ | 1,449 | | | $ | 1,200 | | | $ | 1,379 | | | $ | 1,632 | |
| Net cash (used in) investing activities | | Net cash (used in) investing activities | | (1,349) | | | (1,129) | | | (1,157) | | | (979) | | | (1,046) | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | | 2,983 | | | 165 | | | 131 | | | (536) | | | (472) | |
(1) Amounts prior to 2017 do not reflect the impact of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) of the Codification, adopted as of January 1, 2019.
(2) We had special items of $(283) million, $14 million, and $435 million in 2020, 2019, and 2018 respectively. Special items reduced our loss per share by $0.77 in 2020. Special items in 2019 and 2018 reduced our diluted earnings per share by $0.03, and $1.04, respectively. Refer to Note 18 to our consolidated financial statements for details.
(3) In 2014,2019, we hadrecognized a gain on equity method investments of $241 million from the sale$15 million. The impact of LiveTV. Pre-tax margin excluding thethis gain on the sale of LiveTV is 6.6%.to our diluted earnings per share was $0.04.
(2)(4) Our 2017 results includeincluded a $570$564 million tax benefit, or $1.72$1.71 of diluted earnings per share, from the remeasurement of our deferred taxes to reflect the impact of the enactment of the Tax Cuts and Jobs Act of 2017.
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| Balance Sheet Data: | | | | | | | | | | |
| Cash and cash equivalents | | $ | 303 |
| | $ | 433 |
| | $ | 318 |
| | $ | 341 |
| | $ | 225 |
|
| Investment securities | | 392 |
| | 628 |
| | 607 |
| | 427 |
| | 516 |
|
Total assets(1) | | 9,781 |
| | 9,323 |
| | 8,499 |
| | 7,643 |
| | 7,203 |
|
| Total long-term debt and capital leases | | 1,199 |
| | 1,384 |
| | 1,827 |
| | 2,211 |
| | 2,558 |
|
| Common stockholders’ equity | | 4,834 |
| | 4,013 |
| | 3,210 |
| | 2,529 |
| | 2,134 |
|
| | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| Operating Statistics: | | | | | | | | | | |
| Revenue passengers (thousands) | | 40,038 |
| | 38,263 |
| | 35,101 |
| | 32,078 |
| | 30,463 |
|
| Revenue passenger miles (millions) | | 47,240 |
| | 45,619 |
| | 41,711 |
| | 37,813 |
| | 35,836 |
|
| Available seat miles (ASMs) (millions) | | 56,007 |
| | 53,620 |
| | 49,258 |
| | 44,994 |
| | 42,824 |
|
| Load factor | | 84.3 | % | | 85.1 | % | | 84.7 | % | | 84.0 | % | | 83.7 | % |
| Aircraft utilization (hours per day) | | 11.7 |
| | 12.0 |
| | 11.9 |
| | 11.8 |
| | 11.9 |
|
| Average fare | | $ | 157.07 |
| | $ | 157.14 |
| | $ | 167.89 |
| | $ | 166.57 |
| | $ | 163.19 |
|
| Yield per passenger mile (cents) | | 13.31 |
| | 13.18 |
| | 14.13 |
| | 14.13 |
| | 13.87 |
|
| Passenger revenue per ASM (cents) | | 11.23 |
| | 11.21 |
| | 11.96 |
| | 11.88 |
| | 11.61 |
|
| Operating revenue per ASM (cents) | | 12.53 |
| | 12.37 |
| | 13.03 |
| | 12.93 |
| | 12.71 |
|
| Operating expense per ASM (cents) | | 10.74 |
| | 9.92 |
| | 10.56 |
| | 11.78 |
| | 11.71 |
|
Operating expense per ASM, excluding fuel(2) | | 8.30 |
| | 7.92 |
| | 7.82 |
| | 7.53 |
| | 7.28 |
|
| Departures | | 353,681 |
| | 337,302 |
| | 316,505 |
| | 294,800 |
| | 282,133 |
|
| Average stage length (miles) | | 1,072 |
| | 1,093 |
| | 1,092 |
| | 1,088 |
| | 1,090 |
|
| Average number of operating aircraft during period | | 233.5 |
| | 218.9 |
| | 207.9 |
| | 196.2 |
| | 185.2 |
|
| Average fuel cost per gallon, including fuel taxes | | $ | 1.72 |
| | $ | 1.41 |
| | $ | 1.93 |
| | $ | 2.99 |
| | $ | 3.14 |
|
| Fuel gallons consumed (millions) | | 792 |
| | 760 |
| | 700 |
| | 639 |
| | 604 |
|
Average number of full-time equivalent Crewmembers(3) | | 17,118 |
| | 15,696 |
| | 14,537 |
| | 13,280 |
| | 12,447 |
|
(1)Retrospective application to all prior periods as required under ASU 2015-17 Income Taxes, Balance Sheet Classification The Tax Cuts and Jobs Act of Deferred Taxes. See Note 12017 made significant changes to the Consolidated Financial Statements for additional information.federal tax code, including a reduction in the federal corporate statutory tax rate from 35% to 21%.
(5) Our 2018 results included a $28 million tax benefit, or $0.09 of diluted earnings per share, resulting from measurement period adjustments related to the enactment of the Tax Cuts and Jobs Act of 2017.
(6) Pre-tax margin excluding special items and gain on equity method investments was (73.6)%, 9.5%, and 8.5% in 2020, 2019 and 2018, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016(1) |
| Balance Sheet Data: | | | | | | | | | | |
| Cash and cash equivalents | | $ | 1,918 | | | $ | 959 | | | $ | 474 | | | $ | 303 | | | $ | 433 | |
| Investment securities | | 1,137 | | | 372 | | | 416 | | | 392 | | | 628 | |
| Total assets | | 13,406 | | | 11,918 | | | 10,959 | | | 10,402 | | | 9,323 | |
| Total debt and finance leases | | 4,863 | | | 2,334 | | | 1,670 | | | 1,199 | | | 1,384 | |
| Common stockholders’ equity | | 3,951 | | | 4,799 | | | 4,685 | | | 4,805 | | | 3,933 | |
| | | | | | | | | | |
| | 2020 | | 2019 | | 2018 | | 2017 | | 2016(1) |
| Operating Statistics: | | | | | | | | | | |
| Revenue passengers (thousands) | | 14,274 | | | 42,728 | | | 42,150 | | | 40,038 | | | 38,263 | |
| Revenue passenger miles (millions) | | 18,598 | | | 53,617 | | | 50,790 | | | 47,240 | | | 45,619 | |
| Available seat miles (ASMs) (millions) | | 32,689 | | | 63,841 | | | 59,881 | | | 56,007 | | | 53,620 | |
| Load factor | | 56.9 | % | | 84.0 | % | | 84.8 | % | | 84.3 | % | | 85.1 | % |
| Aircraft utilization (hours per day) | | 5.4 | | | 11.9 | | | 11.8 | | | 11.7 | | | 12.0 | |
| Average fare | | $ | 191.42 | | | $ | 182.23 | | | $ | 175.11 | | | $ | 168.88 | | | $ | 166.74 | |
| Yield per passenger mile (cents) | | 14.69 | | | 14.52 | | | 14.53 | | | 14.31 | | | 13.99 | |
| Passenger revenue per ASM (cents) | | 8.36 | | | 12.20 | | | 12.33 | | | 12.07 | | | 11.90 | |
| Operating revenue per ASM (cents) | | 9.04 | | | 12.68 | | | 12.79 | | | 12.52 | | | 12.28 | |
| Operating expense per ASM (cents) | | 14.29 | | | 11.43 | | | 12.34 | | | 10.78 | | | 9.93 | |
Operating expense per ASM, excluding fuel(2) | | 13.12 | | | 8.44 | | | 8.37 | | | 8.29 | | | 7.88 | |
| Departures | | 168,636 | | | 368,355 | | | 366,619 | | | 353,681 | | | 337,302 | |
| Average stage length (miles) | | 1,222 | | | 1,140 | | | 1,096 | | | 1,072 | | | 1,093 | |
| Average number of operating aircraft during period | | 262.2 | | | 253.6 | | | 246.8 | | | 233.5 | | | 218.9 | |
| Average fuel cost per gallon, including fuel taxes | | $ | 1.53 | | | $ | 2.09 | | | $ | 2.24 | | | $ | 1.72 | | | $ | 1.41 | |
| Fuel gallons consumed (millions) | | 412 | | | 885 | | | 849 | | | 792 | | | 760 | |
| Average number of full-time equivalent crewmembers | | 15,450 | | | 18,535 | | | 17,766 | | | 17,118 | | | 15,696 | |
(1) Amounts prior to 2017 do not reflect the impact of ASU 2016-02, Leases (Topic 842) of the Codification, adopted as of January 1, 2019.
(2)Refer to our “Regulation"Regulation G Reconciliation”Reconciliation of Non-GAAP Financial Measures" section for more information on this non-GAAP measure.
(3)Excludes results
Glossary of Airline terminology
Airline terminology used in this section and elsewhere in this Report:
•Aircraft utilization - The average number of block hours operated per day per aircraft for the total fleet of aircraft.
•Available seat miles - The number of seats available for passengers multiplied by the number of miles the seats are flown.
•Average fare - The average one-way fare paid per flight segment by a revenue passenger.
•Average fuel cost per gallon - Total aircraft fuel costs, including fuel taxes and effective portion of fuel hedging, divided by the total number of fuel gallons consumed.
•Average stage length - The average number of miles flown per flight.
•Load factor - The percentage of aircraft seating capacity actually utilized, calculated by dividing revenue passenger miles by available seat miles.
•Operating expense per available seat mile - Operating expenses divided by available seat miles.
•Operating expense per available seat mile, excluding fuel - Operating expenses, less aircraft fuel, and other non-airline expenses, and special items, divided by available seat miles.
•Operating revenue per available seat mile - Operating revenues divided by available seat miles.
•Passenger revenue per available seat mile - Passenger revenue divided by available seat miles.
•Revenue passengers - The total number of paying passengers flown on all flight segments.
•Revenue passenger miles - The number of miles flown by revenue passengers.
•Yield per passenger mile - The average amount one passenger pays to fly one mile.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In 2017, we experiencedThe Coronavirus (COVID-19) Pandemic
The unprecedented coronavirus ("COVID-19") pandemic and the persistent competitivenessrelated travel restrictions and physical distancing measures implemented throughout the world have significantly reduced demand for air travel. Beginning in March 2020, large public events were canceled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel, and popular leisure destinations temporarily closed to visitors. Certain countries have imposed bans on international travelers for specified periods or indefinitely.
Demand for air travel began to weaken at the end of February 2020. The pace of decline accelerated throughout March into April 2020 and demand remained depressed throughout the rest of 2020. This decline in demand has had a material adverse impact on our operating revenues and financial position. Our operating revenues for the year ended December 31, 2020 declined by 63.5% year-over-year. Although demand began to improve as the year progressed, it remained significantly lower than in prior years. The exact timing and pace of the airline industry. Even with these external factors, 2017 was onerecovery is uncertain given the significant impact of the most profitable yearspandemic on the overall U.S. and global economy. Some states have experienced a resurgence of COVID-19 cases after reopening and as a result, certain other states have implemented travel restrictions or advisories for travelers from such states. We have also seen a similar resurgence of COVID-19 cases in other countries and we expect to continue to see fluctuations in the numbers of cases, which we believe will result in actions by governmental authorities restricting activities. We expect the demand environment to remain depressed until the majority of the U.S. population is vaccinated against COVID-19 and the medical community lifts the current physical distancing guidelines. Our response to the pandemic and the measures we take to secure additional liquidity may be modified as we have more clarity on the timing of demand recovery.
In response to the COVID-19 pandemic, since March 2020 we have implemented the following measures to focus on the safety of our customers, our crewmembers, and our business.
Customers and Crewmembers
The safety of our customers and crewmembers continues to be a priority. As the COVID-19 pandemic has developed, we have taken steps to promote physical distancing and implemented new procedures that reflect the recommendations of health experts, including the following:
•Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses enhanced safety and cleaning measures on our flights, at our airports, and in our history. offices;
•Instituted temperature checks for our customer-facing and support-center crewmembers;
•Updated our sick leave policy to provide up to 14 days of paid sick leave for crewmembers who were diagnosed with COVID-19 or were required to quarantine;
•Partnered with Northwell Direct to provide a comprehensive set of COVID-19 services and programs to support our crewmembers;
•Implemented a framework for internal contact tracing, crewmember notification, and a return to work clearance process for all crewmembers, wherever they may be located;
•Required face coverings for all crewmembers while boarding, in flight, and when physical distancing cannot be maintained;
•Administered more frequent disinfecting of common surfaces and areas with high touchpoints in our facilities;
•Enhanced daily and overnight cleaning of our aircraft and all facilities, using electrostatic spraying of disinfectant in the cabins of aircraft parked overnight at selected focus cities;
•Required customers to wear face coverings during check-in, boarding, and inflight;
•Limited the number of seats sold on most flights through January 7, 2021;
•Suspended group boarding and implemented a back-to-front boarding process to minimize passing in the aisle;
•Eliminated layovers for crewmembers in New York City and worked with crew transportation companies to ensure physical distancing;
•Implemented jump seat buffers on our flights to further promote physical distancing measures;
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
36
•Provided enhanced flexibility to our customers by waiving change and cancel fees for customers with existing bookings made through March 31, 2021, while also extending the expiration date of travel credits issued between February 27, 2020 and June 30, 2020 for flight purchases to 24 months; and
•Announced our partnership with Vault Health to provide discounted at-home COVID-19 testing to customers with pending travel plans.
Our Business
The COVID-19 pandemic drove a significant decline in demand beginning in the second half of March 2020. We have significantly reduced our capacity to a level that maintains essential services to align with demand. Our capacity for the year ended December 31, 2020 declined by 48.8% year-over-year. For the first quarter of 2021, we expect capacity to be down by at least 40%, as compared to the first quarter of 2019. As a result of the significant reduction in demand expectations and lower capacity, we have temporarily parked a portion of our fleet.
The reductions in demand and in our capacity have resulted in a significant reduction to our revenue. As a result, we have, and will continue to implement cost saving initiatives to reduce our overall level of cash spend. Some of the initiatives we have undertaken include:
•Adjustments in flying capacity to align with the expected demand.
•Temporary consolidations of our operations in certain cities that contain multiple airport locations.
•Renegotiated service rates with business partners and extended payment terms.
•Instituted a company-wide hiring freeze.
•Implemented salary reductions for a portion of our crewmembers, including our officers throughout 2020 and into 2021.
•Offered crewmembers voluntary time off and separation programs, with most departures for the separation program occurring during the third quarter of 2020.
We believe the unprecedented impact of COVID-19 on the demand for air travel and the corresponding decline in revenue will continue to have an adverse impact on our results of operations, operating cash flow, and financial condition. Given this situation, we have taken actions to increase liquidity, strengthen our financial position, and conserve cash. Some of the actions we have taken since the onset of the pandemic through December 31, 2020 include:
•Executed a $1.0 billion 364-day delayed draw term loan agreement in March 2020 and immediately drew down on the facility for the full amount available. This term loan facility was repaid during the third quarter.
•Borrowed on our existing $550 million revolving credit facility in April 2020.
•Executed a $150 million pre-purchase arrangement of TrueBlue® points with our co-brand credit card partner in April 2020.
•Suspended non-critical capital expenditure projects.
•Amended our purchase agreement with Airbus which changed the timing of our Airbus A321 and A220 deliveries in May and October 2020 resulting in approximately $2.0 billion of reduction in aircraft capital expenditures through 2022.
•Suspended share repurchases.
•Obtained $963 million of government funding under the Payroll Support Program of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is discussed further below.
•Executed a $750 million term loan credit facility and immediately drew down on the facility for the full amount available in June 2020.
•Entered into $563 million of sale-leaseback transactions; which is discussed further below.
•Completed public placements of equipment notes in an aggregate principal amount of $923 million secured by 49 Airbus A321 aircraft in August 2020, which is discussed further in Note 4 to our consolidated financial statements. The net proceeds were primarily used to repay the outstanding borrowings under our 364-day delayed draw term loan facility that was due to be repaid in March 2021.
•Entered into a Loan and Guarantee agreement, as amended, with the United States Department of the Treasury ("Treasury") under the Loan Program of the CARES Act which gives us access to loans in an aggregate principal
| | |
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure. |
| 37 |
amount of up to $1.9 billion until May 28, 2021, which is discussed further below. We drew down $115 million under the Loan Program on September 29, 2020.
•Completed the public offering of 42 million shares of our common stock for net proceeds of $583 million in December 2020.
As a result of these activities, we had cash, cash equivalents, and short-term investments of approximately $3.1 billion at December 31, 2020.
We continue to evaluate future financing opportunities in an effort to build additional levels of liquidity.
We lowered our cash burn from approximately $18 million per day at the end of March 2020 to an average of approximately $6.7 million per day during the fourth quarter of 2020.
Preparing for Recovery
As the COVID-19 pandemic progresses, we have taken a number of steps to position the Company for recovery when demand for air travel eventually returns.
In June 2020, we announced the addition of 30 new domestic routes to serve customers in markets where leisure and visiting friends and relatives travel were showing signs of strength. These new routes include daily nonstop Mint® service from Newark Liberty International Airport to both Los Angeles International Airport and San Francisco International Airport. While the timeline for recovery remains uncertain, these new routes offer us the opportunity to generate revenue, bring aircraft back into service that would otherwise sit idle, and add more flying opportunities of our crewmembers and customers. We believe adding more destinations in these key markets will make us more relevant to travelers and increase customer loyalty.
In July 2020, we announced plans for a multi-year west coast expansion from southern California which includes moving our primary base of operations from Long Beach Airport to Los Angeles International Airport. We plan to grow our operations at Los Angeles International Airport from the average current level of 20 flights per day to approximately 70 flights per day by 2025.
Also in July 2020, we announced our intention to enter into a strategic relationship with American Airlines Group Inc. ("American"). This arrangement, once fully implemented, will include an alliance agreement with reciprocal code sharing on domestic and international routes from or connecting through New York (John F. Kennedy International Airport ("JFK"), LaGuardia Airport, and Newark Liberty International Airport) and Boston, excluding JetBlue's future European transatlantic flying. We believe this partnership will create more capacity, seamless connectivity for travelers in the northeast, and offer more choices for customers across the networks of both airlines. In addition, we believe this relationship will also accelerate our recovery as the travel industry adapts to new trends as a result of the COVID-19 pandemic. Pursuant to federal law, American and JetBlue submitted this proposed alliance arrangement to the Department of Transportation ("DOT") for review. After American, JetBlue and the DOT agreed to a series of commitments, the DOT terminated its review of the proposed alliance. The commitments include growth commitments to ensure capacity expansion, slot divestitures at JFK and at Reagan National Airport near Washington, D.C. and antitrust compliance measures. Beyond this agreement with the DOT, American and JetBlue will also be limiting their coordination on certain city pair markets within the scope of the alliance. In addition to the DOT review, the Department of Justice and the New York Attorney General, the Massachusetts Attorney General, and the Attorneys General of certain other state and local jurisdictions are investigating this proposed alliance, which are ongoing. American and JetBlue intend to cooperate with those investigations, but are proceeding with plans to implement this alliance.
In September 2020, we announced plans to launch 24 new routes aimed at immediately capturing traffic on a variety of new, nonstop routes as demand increases. These routes will introduce new non-stop destinations from our focus cities and expand our Mint® service in Newark and Los Angeles.
In December 2020, we announced plans to introduce service in four new destinations as part of a broader plan to add 24 new nonstop routes in the first half of 2021. These new destinations include Miami and Key West in Florida; Guatemala City, Guatemala; and Los Cabos, Mexico. The new services are aimed at capturing traffic where we anticipate customer demand.
2020 Results
For the year end December 31, 2020:
•System capacity decreased by 48.8% year over year.
•We generated operating revenue growth of almost 5.8% year-over-year. We remain committed to striving to deliver a safe and reliable JetBlue Experience for our Customers and increasing returns for our Shareholders. We believe our continued focus on cost discipline, product innovation and network enhancements, combined with our commitment to service excellence, will drive our future success.
2017 Highlights
•We generated over $7.0$3.0 billion in operating revenue, an increasea decrease of $383 million$5.1 billion compared to 20162019, primarily due primarily to a 4.6% increase66.6% decrease in revenue passengers.
•Our earnings per diluted share were $3.47, including a benefit from tax reform of $570 million or $1.72.
•We generated $1.4 billion in cash from operations. The significant amount of cash we generated provided the opportunity to pay cash for all 2017 aircraft deliveries, buy out three aircraft leases, reduce existing debt balances and execute share repurchases.
•Operating expensesrevenue per available seat mile (RASM) decreased by 28.7% to 9.04 cents.
•Operating expense decreased by 36.0% to $4.7 billion.
| | |
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure. |
| 38 |
•Operating expense per available seat mile (CASM) increased 8.2%by 25.1% to 10.74 cents, primarily driven by an increase in aircraft fuel expenses.14.29 cents.
•Our 2020 and 2019 results included the effects of special items. Excluding fuel and related taxes, special items, as well as operating expenses related to our non-airline operations,businesses, our operating expense(1) decreased by 20.4% to $4.3 billion.
•Excluding fuel and related taxes, special items, as well as operating expenses related to our non-airline businesses, our cost per available seat mile (CASM ex-fuel)(1)increased 4.8%by 55.4% to 13.12 cents.
•Our operating margin was (58.0)% in 2017. Effective January 1, 2017, non-management profit sharing eligible Crewmembers received an 8% raise2020 compared to 9.9% in 2019. Excluding special items, our adjusted operating margin(1) were (67.5)% and 10.1% for full year 2020 and 2019, respectively.
•Reported a modified profit sharing plan. We believe this recognition and changenet loss of $(1.4) billion in 2020 compared to net income of $569 million in 2019.
•Our reported (loss) per share for full year 2020 was $(4.88) compared to reported earnings per diluted share of $1.91 in 2019. Excluding special items, our compensation structure reflects industry trends and ensures that our Crewmember compensation and rewards are fair and competitive.adjusted (loss) per share(1) was $(5.65) for full year 2020. Our adjusted earnings per diluted share(1) for full year 2019 was $1.90.
Company Initiatives
Balance Sheet
We ended the year with unrestricted cash, cash equivalents and short-term investments of $693 million and undrawn lines of credit of approximately $625 million. In June 2017, Moody's Investor Service upgraded our debt rating to Ba1 from Ba3 with a stable outlook reflecting the strength of our financial position. In November 2017, Standard & Poor's Rating Services upgraded our debt rating to BB from BB- with a stable outlook. At December 31, 2017, unrestricted cash, cash equivalents and short-term investments was approximately 10% of trailing twelve months revenue. We reduced our overall debt and capital lease obligations by $185 million. As a result, three aircraft became unencumbered. We increased the number of unencumbered aircraft in 2017 bringing total unencumbered aircraft to 119 and spare engines to 37 as of December 31, 2017. •During 2017, we acquired approximately 18.7 million shares of our common stock for approximately $380 million under our share repurchase program.
Aircraft and Airport Infrastructure Investments
During 2017,2020, we took delivery of 16seven Airbus A321A321neo aircraft alland our first Airbus A220 aircraft. We expect our first Airbus A220 aircraft to enter into service in early 2021.
Outlook for 2021
The length and severity of which were purchased with cash.
In November 2015,the reduction in demand due to the COVID-19 pandemic is uncertain; accordingly, we unveiled Phase I of our $50 million Terminal C upgrade at Boston Logan International Airport. This upgrade included new kiosks and ticket counters. At December 31, 2017 twenty-five kiosks and thirty check-in counters were in useexpect the adverse impact to continue in the North Podfirst quarter of 2021 and beyond. The exact timing and pace of the terminal. Phase IIrecovery is uncertain given the significant impact of the upgrade, funded by the Massachusetts Port Authority, or Massport, was completedpandemic on the South Pod in 2016, mirroringoverall U.S. and global economy. We expect the check-in experiencedemand environment to remain depressed until the majority of the North Pod. Updated digital flight information displaysU.S. population is vaccinated against COVID-19 and a connector between Terminal Cthe medical community lifts the current physical distancing guidelines. Our response to the pandemic and international flights at Terminal E were also completed during 2016.the measures we take to secure additional liquidity may be modified as we have more clarity in the timing of demand recovery.
We introduced self-tagging kioskswill continue to nine BlueCities in 2017: Boston, Newark, Atlanta, Long Beach, Los Angeles, Buffalo, Jacksonville, Orlando and La Guardia. These kiosks helped streamline the airport experience for our Customers and we plan to continue the improvements to other BlueCities in 2018.
Network
As part of our ongoing network initiatives and route optimization efforts, we continued to make schedule and frequency adjustments throughout 2017. During 2017, we added Atlanta to our growing network. Due to the unprecedented weather in Puerto Rico andmonitor customer behaviors as they evolve throughout the Caribbean, we temporarily redeployed inbound leisure flying to other destinations. We expect to return to a full operation by the end of 2018. We will also continue to watch booking trends closely and expect to adjust our plans as needed. We also added new routes between existing BlueCities.
Outlook for 2018
We believe we will improve our long term return for Shareholders as we implement our structural cost initiatives.pandemic. We plan to add new destinations and route pairings based upon market demand. We are continuously looking to expand our other ancillary revenue opportunities, improve our TrueBlue® loyalty program and deepen our portfolio of commercial partnerships. As in the past, we intend to invest in infrastructure and product enhancements, which we believe will enable us to reap future benefits. We also plan to continue to strengthening the balance sheet.
We will adopt the requirements of ASU 2014-09, Revenue from Contracts with Customers topic of the Codification, as of January 1, 2018 utilizing the full retrospective method of transition. Please see Note 1 on the specific changes related to revenue recognition.
The Tax Cuts and Jobs Act of 2017, or The Act, was enacted on December 22, 2017. The Act made significant changes to the Federal tax code, including a reduction in the Federal corporate statutory rate from 35% to 21%. The Act also made changes to the Federal taxation of foreign earnings, to the timing of recognition of certain revenue and expenses, and the deductibility of certain business expenses. During 2018, the Company will continue to gain a more thorough understanding of The Act and additional regulatory guidance that may be issued. As a result of The Act, we expect the reduction in the corporate tax rate will result in an effective annual tax rate for JetBlue between 24% to 26%. However, the actual tax rate could differ due to a number of factors.
For the full year 2018, we estimate our operating capacity will increase by approximately 6.5% to 8.5% over 2017 with the addition of 10 Airbus A321 aircraftmake strategic adjustments to our operating fleet. We are expecting our cost per available seat mile, excluding fuelnetwork, as necessary, to maximize revenue potential and related taxes, and operating expenses related to other non-airline expenses, for 2018 to increase by between approximately (1.0)% to 1.0% over the level in 2017.
accelerate recovery.
| | |
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure. |
| 39 |
RESULTS OF OPERATIONS
Year 2017 compared2020 Compared to Year 20162019
Overview
We reported a net income(loss) of $1.1$(1.4) billion, an operating income(loss) of $1.0$(1.7) billion and operating margin of 14.3%(58.0)% for the year ended December 31, 2017.2020. This compares to net income of $759$569 million, operating income of $1,312$800 million, and operating margin of 19.8%9.9% for the year ended December 31, 2016. Diluted2019. Our (loss) per share was $(4.88) for 2020 compared to earnings of $1.91 per diluted share for 2019.
Our 2020 and 2019 reported results included the effects of special items. Adjusting for these one-time items(1), our adjusted net (loss) was $(1.6) billion, operating (loss) was $(2.0) billion, and our adjusted operating margin was (67.5)% for 2020. This compares to adjusted net income of $568 million, operating income of $814 million, and an operating margin of 10.1% for 2019. Excluding one-time items(1), our adjusted (loss) per share was $(5.65) for 2020 compared to adjusted earnings per diluted share were $3.47of $1.90 for 2017 compared to $2.22 for the same period in 2016. This included a benefit from tax reform of $570 million or $1.72 per share.
Approximately 75% of our operations are centered in and around the heavily populated northeast corridor of the U.S., which includes the New York and Boston metropolitan areas. During the third quarter of 2017, we saw unprecedented weather challenges for JetBlue and the entire airline industry, with two large hurricanes impacting our network. We estimate that, due to the severe hurricane season, revenue was negatively impacted by approximately $110 million for the full year 2017. Revenue per available seat mile (RASM) was negatively impacted by approximately 0.3 points for the full year by the hurricanes. Operating income was negatively impacted by approximately $82 million.
2019.
Operating Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (revenues in millions; percent changes based on unrounded numbers) | | | | | | Year-over-Year Change | |
| 2020 | | 2019 | | $ | | % | |
| Passenger revenue | | $ | 2,733 | | | $ | 7,786 | | | (5,053) | | | (64.9) | | |
| Other revenue | | 224 | | | 308 | | | (84) | | | (27.3) | | |
| Operating revenues | | $ | 2,957 | | | $ | 8,094 | | | (5,137) | | | (63.5) | | |
| | | | | | | | | |
| Average fare | | $ | 191.42 | | | $ | 182.23 | | | 9.19 | | | 5.0 | | |
| Yield per passenger mile (cents) | | 14.69 | | | 14.52 | | | 0.17 | | | 1.2 | | |
| Passenger revenue per ASM (cents) | | 8.36 | | | 12.20 | | | (3.84) | | | (31.5) | | |
| Operating revenue per ASM (cents) | | 9.04 | | | 12.68 | | | (3.64) | | | (28.7) | | |
| Average stage length (miles) | | 1,222 | | | 1,140 | | | 82 | | | 7.2 | | |
| Revenue passengers (thousands) | | 14,274 | | | 42,728 | | | (28,454) | | | (66.6) | | |
| Revenue passenger miles (millions) | | 18,598 | | | 53,617 | | | (35,019) | | | (65.3) | | |
| Available seat miles (ASMs) (millions) | | 32,689 | | | 63,841 | | | (31,152) | | | (48.8) | | |
| Load factor | | 56.9 | % | | 84.0 | % | | | | (27.1) | | pts |
|
| | | | | | | | | | | | | | | |
| (revenues in millions; percent changes based on unrounded numbers) | | | | | | Year-over-Year Change | |
| | 2017 | | 2016 | | $ | | % | |
| Passenger revenue | | $ | 6,288 |
| | $ | 6,013 |
| | 275 |
| | 4.6 |
| |
| Other revenue | | 727 |
| | 619 |
| | 108 |
| | 17.3 |
| |
| Operating revenues | | 7,015 |
| | 6,632 |
| | 383 |
| | 5.8 |
| |
| | | | | | | | | | |
| Average fare | | $ | 157.07 |
| | $ | 157.14 |
| | (0.08 | ) | | — |
| |
| Yield per passenger mile (cents) | | 13.31 |
| | 13.18 |
| | 0.13 |
| | 1.0 |
| |
| Passenger revenue per ASM (cents) | | 11.23 |
| | 11.21 |
| | 0.02 |
| | 0.1 |
| |
| Operating revenue per ASM (cents) | | 12.53 |
| | 12.37 |
| | 0.16 |
| | 1.3 |
| |
| Average stage length (miles) | | 1,072 |
| | 1,093 |
| | (21 | ) | | (1.9 | ) | |
| Revenue passengers (thousands) | | 40,038 |
| | 38,263 |
| | 1,775 |
| | 4.6 |
| |
| Revenue passenger miles (millions) | | 47,240 |
| | 45,619 |
| | 1,621 |
| | 3.6 |
| |
| Available seat miles (ASMs) (millions) | | 56,007 |
| | 53,620 |
| | 2,387 |
| | 4.5 |
| |
| Load factor | | 84.3 | % | | 85.1 | % | | | | (0.8 | ) | pts |
Passenger revenue accounted for 89.6%92.4% of our total operating revenue for the year ended December 31, 2017.2020. In addition to seat revenue, passenger revenue includes revenue from our ancillary product offerings such as EvenMore™Even More® Space. Revenue generated from international routes, including Puerto Rico, accounted for 28.7%36.1% of our passengertotal operating revenues in 2017. Revenue2020. Passenger revenue, including certain ancillary fees directly related to passenger tickets, is recognized either when the transportation is providedprovided. Passenger revenue from unused tickets and passenger credits are recognized in proportion to flown revenue based on estimates of expected expiration or afterwhen the ticketlikelihood of the customer exercising his or customer credit expires.her remaining rights becomes remote. We measure capacity in terms of available seat miles, which represents the number of seats available for passengers multiplied by the number of miles the seats are flown. Yield, or the average amount one passenger pays to fly one mile, is calculated by dividing Passenger revenue by Revenue passenger miles. We attempt to increase Passenger revenue primarily by increasing our yield per flight which produces higher revenue per available seat mile. Our objective is to optimize our fare mix to increase our overall average fare while continuing to provide our Customerscustomers with competitive fares.
In 2017,2020, the increasedecrease in Passenger revenue was mainly attributableprimarily driven by the unprecedented decline in demand for travel tied to COVID-19 and its effects. We saw a 4.6% increase66.6% decline in revenue passengers. Ourpassengers compared to 2019. Fee revenue decreased by $324 million as a result of the lack of flying, representing a 55.4% decline from prior year. Revenue from our Even More® Space seats, which was our largest ancillary product remains the EvenMore™ Space seats, generating approximately $246in 2019, decreased by $197 million, in revenue, an increase of over 3% compared to 2016.or 65.6% year-over-year.
The primary component of Other revenue is fees from reservation changes and excess baggage charged to Customers in accordance with our published policies. We also includeprimarily comprised of the marketing component of TrueBlue® pointthe sales onboard product sales,of our TrueBlue® points. It also includes revenue from the sale of vacation packages, ground handling fees ofreceived from other airlines, and rental income.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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Operating Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percentages based on unrounded numbers) | | | | | | Year-over-Year Change | | per ASM |
| 2020 | | 2019 | | $ | | % | | 2020 | | 2019 | | % Change |
| Aircraft fuel and related taxes | | $ | 631 | | | $ | 1,847 | | | (1,216) | | | (65.9) | | | 1.93 | | | 2.89 | | | (33.3) | |
| Salaries, wages and benefits | | 2,032 | | | 2,320 | | | (288) | | | (12.4) | | | 6.21 | | | 3.64 | | | 71.0 | |
| Landing fees and other rents | | 358 | | | 474 | | | (116) | | | (24.4) | | | 1.10 | | | 0.74 | | | 47.6 | |
| Depreciation and amortization | | 535 | | | 525 | | | 10 | | | 1.8 | | | 1.64 | | | 0.82 | | | 98.9 | |
| Aircraft rent | | 85 | | | 99 | | | (14) | | | (14.4) | | | 0.26 | | | 0.16 | | | 67.2 | |
| Sales and marketing | | 110 | | | 290 | | | (180) | | | (62.0) | | | 0.34 | | | 0.46 | | | (25.7) | |
| Maintenance, materials and repairs | | 441 | | | 619 | | | (178) | | | (28.8) | | | 1.34 | | | 0.97 | | | 39.0 | |
| Other operating expenses | | 762 | | | 1,106 | | | (344) | | | (31.0) | | | 2.33 | | | 1.73 | | | 34.7 | |
| Special items | | (283) | | | 14 | | | (297) | | | (2,073.5) | | | (0.86) | | | 0.02 | | | (3,954.2) | |
| Total operating expenses | | $ | 4,671 | | | $ | 7,294 | | | (2,623) | | | (36.0) | | | 14.29 | | | 11.43 | | | 25.1 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percentages based on unrounded numbers) | | | | | | Year-over-Year Change | | per ASM |
| | 2017 | | 2016 | | $ | | % | | 2017 | | 2016 | | % Change |
| Aircraft fuel and related taxes | | $ | 1,363 |
| | $ | 1,074 |
| | $ | 289 |
| | 26.9 |
| | 2.43 |
| | 2.00 |
| | 21.5 |
|
| Salaries, wages and benefits | | 1,887 |
| | 1,698 |
| | 189 |
| | 11.1 |
| | 3.37 |
| | 3.17 |
| | 6.4 |
|
| Landing fees and other rents | | 397 |
| | 357 |
| | 40 |
| | 11.1 |
| | 0.71 |
| | 0.67 |
| | 6.3 |
|
| Depreciation and amortization | | 446 |
| | 393 |
| | 53 |
| | 13.7 |
| | 0.80 |
| | 0.73 |
| | 8.9 |
|
| Aircraft rent | | 100 |
| | 110 |
| | (10 | ) | | (9.0 | ) | | 0.18 |
| | 0.21 |
| | (12.9 | ) |
| Sales and marketing | | 267 |
| | 259 |
| | 8 |
| | 2.9 |
| | 0.48 |
| | 0.48 |
| | (1.5 | ) |
| Maintenance, materials and repairs | | 622 |
| | 563 |
| | 59 |
| | 10.5 |
| | 1.11 |
| | 1.04 |
| | 5.8 |
|
| Other operating expenses | | 933 |
| | 866 |
| | 67 |
| | 7.6 |
| | 1.66 |
| | 1.62 |
| | 3.0 |
|
| Total operating expenses | | $ | 6,015 |
| | $ | 5,320 |
| | $ | 695 |
| | 13.1 |
| | 10.74 |
| | 9.92 |
| | 8.2 |
|
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes represented 23%13.5% of our total operating expenses in 20172020 compared to 20%25.3% in 2016.2019. The average fuel price increased 21.8%decreased 26.8% in 20172020 to $1.72$1.53 per gallon. This was coupled with an increase in ourOur fuel consumption of approximately 32decreased by 53.4%, or 473 million gallons. Additional fuel consumption was mainlygallons, due to our increasecapacity reductions in capacity. Based on our expected fuel volume for 2018,response to lower demand as a 10% per gallon increase inresult of the cost of aircraft fuel would increase our annual fuel expense by approximately $170 million.COVID-19 pandemic.
In 2017, we recordedWe recognized fuel hedge gainslosses of $15$7 million compared to $9and $5 million, in fuel hedge gains in 2016 which2020 and 2019, respectively. These losses were recorded in Aircraft fuel and related taxes. We did notare unable to predict the potential loss from hedge accounting, which is determined on a derivative-by-derivative basis, due to the volatility in the forward markets for these commodities. We have anyno outstanding fuel hedging contracts outstandinghedges as of December 31, 2017.2020.
Salaries, Wages and Benefits
Salaries, wages and benefits represent approximately 31%decreased $288 million, or 12.4% in 2020. This decrease was driven primarily by the actions taken as a result of decreased demand for air travel due to the COVID-19 pandemic. Beginning in March 2020, we instituted a company-wide hiring freeze, implemented salary reductions for a portion of our total operating expensescrewmembers, including officers, offered voluntary time off programs to our crewmembers, and reduced work hours for all other management workgroups. In June 2020, we announced voluntary separation programs to our crewmembers, with most departures occurring in 2017the third quarter. We had approximately 20,000 crewmembers as of December 31, 2020 as compared to 32% in 2016. The increase in salaries, wages and benefits was primarily driven by an increase in our Crewmember headcount and an 8% raise for profit sharing eligible Crewmembers effective January 1, 2017 and a modified profit sharing plan.
Our profit sharing is calculated as 10% of adjusted pre-tax income, reduced by Retirement Plus contributions and special items. Profit sharing decreased by $133 million in 2017 compared to 2016, primarily driven by our change in policy.approximately 22,500 crewmembers at December 31, 2019. During 2017,2020, the average number of full-time equivalent Crewmembers increasedcrewmembers decreased by 9%16.6% and the average tenure of our Crewmemberscrewmembers was 6.68 years.
Retirement Plus contributions, which equate to 5% of all of our eligible Crewmembers wages, increased by $13 million and our 3% retirement contribution for a certain portion of our FAA-licensed Crewmembers, which we refer to as Retirement Advantage, increased by approximately $3 million. The increasing tenure of our Crewmembers, rising healthcare costs and efforts to maintain competitiveness in our overall compensation packages will continue to pressure our costs in 2018.
Landing Fees and Other Rents
Landing fees and other rents include landing fees, which are at a premium rates in the heavily trafficked northeast corridor of the U.S. where approximately 75%through which a large number of our operations center.flights operate. Other rents primarily consist of rent for airports in our 101 BlueCities. Landing fees and other rents increased $40decreased $116 million, or 11.1%24.4%, in 20172020 primarily due to our increased departures.capacity reductions in response to the significant decline in demand beginning in the second half of March 2020 amid the COVID-19 pandemic.
Depreciation and Amortization
Depreciation and amortization primarily include depreciation for our owned and capitalfinance leased aircraft, engines, and in-flightinflight entertainment systems. Depreciation and amortization increased $53$10 million, or 13.7%1.8%, primarily driven by a 6.7%3.4% increase in the average number of aircraft operating in 20172020 compared to the same period in 2016.2019. We placed nine Airbus A321neo aircraft into service and bought out the lease of one Airbus A321 aircraft in 2020. In addition, we also completed the cabin restyle on 21 Airbus A320 aircraft.
Maintenance, Materials and Repairs
Maintenance, materials and repairs are generally expensed when incurred unless covered by a long-term flight hour services contract. The average age of our aircraft in 20172020 was 9.211.3 years which is relatively young compared to our competitors. However, as our fleet ages our maintenance costs will increase significantly, both on an absolute basis and as a percentage of our unit costs, as older aircraft require additional, more expensive repairs over time. We had an average of 14.68.6 additional total operating aircraft in 20172020 compared to 2016.2019.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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In 2017,2020, Maintenance, materials and repairs increaseddecreased by $59$178 million, or 10.5%28.8% compared to 2016,2019. The decrease is primarily driven by increased flight hours on our engine flight-hour based maintenance repair agreementsthe COVID-19 related reduction in flying and by the numbertiming of airframe heavy maintenance repairs.visits and engine maintenance.
Other Operating Expenses
Other operating expenses consist of the following categories: outside services (including expenses related to fueling, ground handling, skycap, security, and janitorial services), insurance, personnel expenses, professional fees, onboard supplies, shop and office supplies, bad debts, communication costs, and taxes other than payroll and fuel taxes.
In 2017, Other2020, other operating expenses increaseddecreased by $67$344 million, or 7.6%31.0%, compared to 2016, primarily2019, due to an increasecapacity reductions in airport servicesresponse to the significant decline in demand beginning in the second half of March 2020 coupled with the benefits from cost saving initiatives implemented amid the COVID-19 pandemic.
Special Items
In 2020, special items included the following:
•Contra-expense of $685 million, which represents the amount of CARES Act payroll support grants utilized during the period.
•Contra-expense of $36 million related to the recognition of Employee Retention Credits provided by the CARES Act.
•Impairment charges of $273 million on our Embraer E190 fleet.
•Losses of $106 million related to sale-leaseback transactions.
•One-time costs of $59 million, consisting of severance and passenger onboard supplies resulting from an increased numberhealth benefits, in connection with our voluntary separation programs.
Special items in 2019 consisted of passengers flown.$6 million of one-time costs related to the Embraer E190 fleet transition and $8 million of one-time costs related to the implementation of our pilots' collective bargaining agreement.
Income Taxes
Our effective tax rate was a benefit of 24.5%28.5% in 2017,2020, compared to our25.9% in 2019. The CARES Act permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid incomes taxes. As a result, the Company’s effective tax rate of 37.6% in 2016. Our effectiveincludes an income tax benefit related to the anticipated refunds from tax losses generated during 2020 that are permitted to be carried back to certain years when the U.S. federal income tax rate decreased primarily duewas 35%.
2019 Compared to a one-time benefit of $570 million from the remeasurement of our deferred taxes to reflect the enactment of the Tax Cuts and Jobs Act of 2017.
Year 2016 compared to Year 20152018
Overview
We reported net income of $759$569 million, operating income of $1,312$800 million and operating margin of 19.8%9.9% for the year ended December 31, 2016.2019. This compares to net income of $677$189 million, operating income of $1,216$266 million and operating margin of 19.0%3.5% for the year ended December 31, 2015.2018. Diluted earnings per share were $2.22$1.91 for 20162019 compared to $1.98$0.60 for 2018.
Our 2019 and 2018 reported results included the same period in 2015.
Approximately 77%effects of special items. Adjusting for these one-time items(1), our operations are centered in and around the heavily populated northeast corridor of the U.S., which includes the New York and Boston metropolitan areas. During the first quarter of 2015, a series of winter storms impacted the New York and Boston metropolitan areas, with Boston’s Logan Airport experiencing record breaking snowfall totals. Despite the adverse weather conditions, our operational performance improved over prior years with fewer flight cancellations. We estimate that winter storms reduced ouradjusted net income was $568 million, operating income by approximately $10was $814 million, inand our adjusted operating margin was 10.1% for 2019. This compares to adjusted net income of $488 million, operating income of $701 million, and operating margin of 9.2% for 2018. Excluding one-time items(1), diluted earnings per share were $1.90 and $1.55 for 2019 and 2018, respectively.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the first quarterend of 2015.this section for more information on this non-GAAP measure.
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Operating Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (revenues in millions; percent changes based on unrounded numbers) | | | | | | Year-over-Year Change | |
| 2019 | | 2018 | | $ | | % | |
| Passenger revenue | | $ | 7,786 | | | $ | 7,381 | | | 405 | | | 5.5 | | |
| Other revenue | | 308 | | | 277 | | | 31 | | | 11.0 | | |
| Operating revenues | | $ | 8,094 | | | $ | 7,658 | | | 436 | | | 5.7 | | |
| | | | | | | | | |
| Average fare | | $ | 182.23 | | | $ | 175.11 | | | $ | 7.12 | | | 4.1 | | |
| Yield per passenger mile (cents) | | 14.52 | | | 14.53 | | | (0.01) | | | (0.1) | | |
| Passenger revenue per ASM (cents) | | 12.20 | | | 12.33 | | | (0.13) | | | (1.1) | | |
| Operating revenue per ASM (cents) | | 12.68 | | | 12.79 | | | (0.11) | | | (0.9) | | |
| Average stage length (miles) | | 1,140 | | | 1,096 | | | 44 | | | 4.0 | | |
| Revenue passengers (thousands) | | 42,728 | | | 42,150 | | | 578 | | | 1.4 | | |
| Revenue passenger miles (millions) | | 53,617 | | | 50,790 | | | 2,827 | | | 5.6 | | |
| Available seat miles (ASMs) (millions) | | 63,841 | | | 59,881 | | | 3,960 | | | 6.6 | | |
| Load factor | | 84.0 | % | | 84.8 | % | | | | (0.8) | | pts |
|
| | | | | | | | | | | | | | | | |
| (revenues in millions; percent changes based on unrounded numbers) | | | | | | Year-over-Year Change | |
| | 2016 | | 2015 | | $ | | % | |
| Passenger revenue | | $ | 6,013 |
| | $ | 5,893 |
| | $ | 120 |
| | 2.0 |
| |
| Other revenue | | 619 |
| | 523 |
| | 96 |
| | 18.5 |
| |
| Operating revenues | | 6,632 |
| | 6,416 |
| | 216 |
| | 3.4 |
| |
| | | | | | | | | | |
| Average fare | | $ | 157.14 |
| | $ | 167.89 |
| | $ | (10.75 | ) | | (6.4 | ) | |
| Yield per passenger mile (cents) | | 13.18 |
| | 14.13 |
| | (0.95 | ) | | (6.7 | ) | |
| Passenger revenue per ASM (cents) | | 11.21 |
| | 11.96 |
| | (0.75 | ) | | (6.3 | ) | |
| Operating revenue per ASM (cents) | | 12.37 |
| | 13.03 |
| | (0.66 | ) | | (5.0 | ) | |
| Average stage length (miles) | | 1,093 |
| | 1,092 |
| | 1 |
| | 0.1 |
| |
| Revenue passengers (thousands) | | 38,263 |
| | 35,101 |
| | 3,162 |
| | 9.0 |
| |
| Revenue passenger miles (millions) | | 45,619 |
| | 41,711 |
| | 3,908 |
| | 9.4 |
| |
| Available seat miles (ASMs) (millions) | | 53,620 |
| | 49,258 |
| | 4,362 |
| | 8.9 |
| |
| Load factor | | 85.1 | % | | 84.7 | % | | | | 0.4 |
| pts |
Passenger revenue accounted for over 90.7%96.2% of our total operating revenues for the year ended December 31, 2016.2019. In addition to seat revenue, passenger revenue includes revenue from our ancillary product offerings such as EvenMore™Even More® Space. Revenue generated from international routes, including Puerto Rico, accounted for 28.4%30.4% of our passengertotal operating revenues in 2016. Revenue2019. Passenger revenue, including certain ancillary fees directly related to passenger tickets, is recognized either when the transportation is providedprovided. Passenger revenue from unused tickets and passenger credits are recognized in proportion to flown revenue based on estimates of expected expiration or afterwhen the ticketlikelihood of the customer exercising his or passenger credit expires.her remaining rights becomes remote. We measure capacity in terms of available seat miles, which represents the number of seats available for passengers multiplied by the number of miles the seats are flown. Yield, or the average amount one passenger pays to fly one mile, is calculated by dividing Passenger revenue by Revenue passenger miles. We attempt to increase Passenger revenue primarily by increasing our yield per flight which produces higher Revenuerevenue per available seat mile. Our objective is to optimize our fare mix to increase our overall average fare while continuing to provide our Customerscustomers with competitive fares.
In 2016,2019, the increase in Passengerpassenger revenue was mainly attributable to a 9.0%1.4% increase in revenue passengers and a 6.4% decrease4.1% increase in average fare. Fee revenue increased by $76 million as a result of changes in our baggage and change fee policies. Our largest ancillary product was EvenMore™Even More® Space, generating approximately $238$301 million in revenue, an increase of over 4%10% compared to 2015.2018.
The primary component of Other revenue is the fees from reservation changes and excess baggage charged to Customers in accordance with our published policies. We also includeprimarily comprised of the marketing component of TrueBlue® pointthe sales onboard product sales, charters,of our TrueBlue® points. It also includes revenue from the sale of vacation packages, ground handling fees ofreceived from other airlines, and rental income.
In 2016, Other revenue increased by $96 million compared(1) Refer to 2015. The increase in Other revenue was primarily due to an increase in bag fees partly attributable to a full yearour ''Regulation G Reconciliation of our Fare Options pricing structure compared to half a year during 2015.Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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Operating Expenses
| | | (in millions; per ASM data in cents; percentages based on unrounded numbers) | | | | | | Year-over-Year Change | | per ASM | (in millions; per ASM data in cents; percentages based on unrounded numbers) | | Year-over-Year Change | | per ASM |
| | 2016 | | 2015 | | $ | | % | | 2016 | | 2015 | | % Change | | 2019 | | 2018 | | $ | | % | | 2019 | | 2018 | | % Change |
| Aircraft fuel and related taxes | | $ | 1,074 |
| | $ | 1,348 |
| | (274 | ) | | (20.3 | ) | | 2.00 |
| | 2.74 |
| | (26.8 | ) | Aircraft fuel and related taxes | | $ | 1,847 | | | $ | 1,899 | | | (52) | | | (2.7) | | | 2.89 | | | 3.17 | | | (8.8) | |
| Salaries, wages and benefits | | 1,698 |
| | 1,540 |
| | 158 |
| | 10.2 |
| | 3.17 |
| | 3.13 |
| | 1.2 |
| Salaries, wages and benefits | | 2,320 | | | 2,044 | | | 276 | | | 13.5 | | | 3.64 | | | 3.41 | | | 6.5 | |
| Landing fees and other rents | | 357 |
| | 342 |
| | 15 |
| | 4.3 |
| | 0.67 |
| | 0.70 |
| | (4.2 | ) | Landing fees and other rents | | 474 | | | 462 | | | 12 | | | 2.6 | | | 0.74 | | | 0.77 | | | (3.7) | |
| Depreciation and amortization | | 393 |
| | 345 |
| | 48 |
| | 13.9 |
| | 0.73 |
| | 0.70 |
| | 4.7 |
| Depreciation and amortization | | 525 | | | 469 | | | 56 | | | 12.1 | | | 0.82 | | | 0.78 | | | 5.2 | |
| Aircraft rent | | 110 |
| | 122 |
| | (12 | ) | | (9.6 | ) | | 0.21 |
| | 0.25 |
| | (17.0 | ) | Aircraft rent | | 99 | | | 104 | | | (5) | | | (5.1) | | | 0.16 | | | 0.17 | | | (11.0) | |
| Sales and marketing | | 259 |
| | 264 |
| | (5 | ) | | (1.7 | ) | | 0.48 |
| | 0.54 |
| | (9.7 | ) | Sales and marketing | | 290 | | | 294 | | | (4) | | | (1.1) | | | 0.46 | | | 0.49 | | | (7.3) | |
| Maintenance, materials and repairs | | 563 |
| | 490 |
| | 73 |
| | 14.9 |
| | 1.04 |
| | 0.99 |
| | 5.6 |
| Maintenance, materials and repairs | | 619 | | | 625 | | | (6) | | | (1.0) | | | 0.97 | | | 1.04 | | | (7.2) | |
| Other operating expenses | | 866 |
| | 749 |
| | 117 |
| | 15.7 |
| | 1.62 |
| | 1.51 |
| | 6.3 |
| Other operating expenses | | 1,106 | | | 1,060 | | | 46 | | | 4.2 | | | 1.73 | | | 1.78 | | | (2.2) | |
| Special items | | Special items | | 14 | | | 435 | | | (421) | | | (96.7) | | | 0.02 | | | 0.73 | | | (96.9) | |
| Total operating expenses | | $ | 5,320 |
| | $ | 5,200 |
| | $ | 120 |
| | 2.3 |
| | 9.92 |
| | 10.56 |
| | (6.0 | ) | Total operating expenses | | $ | 7,294 | | | $ | 7,392 | | | (98) | | | (1.3) | | | 11.43 | | | 12.34 | | | (7.4) | |
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes represented 20%25% of our total operating expenses in 20162019 compared to 26% in 2015.2018. The average fuel price decreased 26.9%6.7% in 20162019 to $1.41$2.09 per gallon. This was partially offset by ana 4.3% increase in our fuel consumption of approximately 6036 million gallons. Additional fuel consumption was mainly due to our increase in capacity.the average number of operating aircraft.
In 2016, we recorded fuel hedge gains of $9 million compared to $126 million inWe recognized fuel hedge losses of $5 million and $2 million, in 2015 which was2019 and 2018, respectively. These losses were recorded in Aircraft fuel and related taxes. We are unable to predict what the amount of ineffectiveness will be related to these instruments, or the potential loss of hedge accounting which is determined on a derivative-by-derivative basis, due to the volatility in the forward markets for these commodities.
Salaries, Wages and Benefits
Salaries, wages and benefits represented approximately 32% of our total operating expenses in 20162019 compared to 30%28% in 2015.2018. The increase in salaries, wages and benefits was primarily driven by profit sharing and an increase in our Crewmember headcount.
the incremental costs of the new pilots' collective bargaining agreement which became effective on August 1, 2018. Our profit sharing was calculated as 15% of adjusted pre-tax income, reduced by Retirement Plus contributions and special items. Profit sharingcrewmember headcount also increased by $25 million in 2016 compared to 2015, primarily driven by lower aircraft fuel and related taxes and increased revenues.year-over-year. During 2016,2019, the average number of full-time equivalent Crewmemberscrewmembers increased by 8%4% and the average tenure of our Crewmemberscrewmembers was 6.37 years.
Retirement Plus contributions, which equate to 5% of all of our eligible Crewmembers wages, increased by $4 million and our 3% retirement contribution for a certain portion of our FAA-licensed Crewmembers, which we refer to as Retirement Advantage, increased by approximately $1 million.
Landing Fees and Other Rents
Landing fees and other rents include landing fees, which are at a premium rates in the heavily trafficked northeast corridor of the U.S. where approximately 77%76% of our operations centeredresided in 2016.2019. Other rents primarily consisted of rent for airports in our 100 BlueCities. Landing fees and other rents increased $15$12 million, or 4.3%2.6%, in 20162019 primarily due to our increased number of departures.
Depreciation and Amortization
Depreciation and amortization primarily include depreciation for our owned and capitalfinance leased aircraft, engines, and in-flightinflight entertainment systems. Depreciation and amortization increased $48$56 million, or 13.9%12.1%, primarily duedriven by a 2.8% increase in the average number of aircraft operating in 2019 compared to our ten ownedthe same period in 2018. We placed five Airbus A321 deliveries during 2016 resulting in an averageaircraft into service and bought out the lease of 160 owned and capital leasedone Airbus A320 aircraft in 2016 compared to 149 in 2015.2019. In addition, we also completed the cabin restyle on 42 Airbus A320 aircraft.
Maintenance, Materials and Repairs
Maintenance, materials and repairs are generally expensed when incurred unless covered by a long-term flight hour services contract. The average age of our aircraft in 20162019 was 8.910.6 years which was relatively young compared to our competitors. However, as our fleet ages our maintenance costs will increase significantly, both on an absolute basis and as a percentage of our unit costs, as older aircraft require additional, more expensive repairs over time. We had an average of 116.8 additional total operating aircraft in 20162019 compared to 2015. 2018.
In 2016,2019, Maintenance, materials and repairs increaseddecreased by $73$6 million, or 14.9%1.0% compared to 2015, primarily driven by increased flight hours on our engine flight-hour based maintenance repair agreements2018. The decrease is attributable to lower cost structures achieved through the Structural Cost Program and by the numbertiming of airframe heavy maintenance repairs.visits.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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Other Operating Expenses
Other operating expenses consist of the following categories: outside services (including expenses related to fueling, ground handling, skycap, security, and janitorial services), insurance, personnel expenses, professional fees, onboard supplies, shop and office supplies, bad debts, communication costs, and taxes other than payroll and fuel taxes.
In 2016, Other2019, other operating expenses increased by $117$46 million, or 15.7%4.2%, compared to 2015,2018, primarily due to an increase in airport services and the non-recurrencepassenger onboard supplies resulting from an increased number of the $9departures and customers flown.
Special Items
Special items in 2019 consisted of $6 million gain in 2015of one-time costs related to an insurance recovery for a damaged engine, a $6the Embraer E190 fleet transition and $8 million legal settlementof one-time costs related to the implementation of our pilots' collective bargaining agreement. Special items in 2018 consisted of $362 million of impairment and a $6one-time costs related to the Embraer E190 fleet transition, and $73 million gain on sale of an engine.one-time costs related to the ratification of our pilots' collective bargaining agreement.
Income Taxes
Our effective tax rate was 37.6%25.9% in 2016 and 38.3%2019, compared to 13.9% in 2015.2018. Our 2018 effective tax rate decreased primarily dueincluded a benefit of $28 million related to implementation of various provisions of the adoptionTax Cuts and Jobs Act of Accounting Standards Update, or ASU, 2016-09, Improvements to Employee Share-Based Payment Accounting.2017.
LIQUIDITY AND CAPITAL RESOURCES
The airline business is capital intensive. Our ability to successfully execute our profitable growth plans is largely dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business depends on maintaining sufficient liquidity. We believe we have adequate resources from a combination of cash and cash equivalents and investment securities on-hand and two available lineson-hand. During 2020, we have executed a significant number of credit. Additionally, asfinancing transactions to ensure that we have adequate levels of liquidity to navigate through the COVID-19 pandemic. As of December 31, 2017,2020, we had 119 unencumbered aircraftunrestricted cash and 37 unencumbered spare engines which wecash equivalents of $1.9 billion and short-term investments of $1.1 billion. We took numerous important steps throughout 2020 to strengthen our balance sheet. We believe could be an additional source of liquidity, if necessary.our actions will position us to successfully navigate through the challenges posed by the COVID-19 pandemic. Our adjusted debt to capitalization ratio(1) at December 31, 2020 was 57%.
We believe a healthy liquidity position is a crucial element of our ability to weather any part of the economic cycle while continuing to execute on our plans for profitable growth and increased returns. Our goal is to continue to be diligent with our liquidity, maintainingmaintain financial flexibility, and allowing forbe prudent with capital spending.
AsAnalysis of December 31, 2017, weCash Flows
We had unrestricted cash and cash equivalents of $303 million and short-term investments of $390 million. We believe our current level of unrestricted cash, cash equivalents and short-term investments of approximately 10% of trailing twelve months revenue, combined with our approximately $625 million in available lines of credit and portfolio of unencumbered assets, provides a strong liquidity position and the potential for higher returns on cash deployment. We believe we have taken several important steps during 2017 in solidifying our strong balance sheet and overall liquidity position.
Our highlights for 2017 included:
•Increased the number of unencumbered aircraft from 97$1.9 billion as of December 31, 2016,2020. This compares to 119 as of December 31, 2017. This was principally accomplished by paying cash for the purchase of 16 Airbus A321 aircraft, buying out the leases on three of our aircraft. Three of our Airbus A320 aircraft became unencumbered in 2017 as a result of regularly scheduled debt payments.
•Our adjusted debt to capitalization ratio improved from 35% in 2016 to 28% in 2017.
Analysis of Cash Flows
We had cash$959 million and cash equivalents of $303$474 million as of December 31, 2017. This compares to $433 million2019 and $318 million as of December 31, 2016 and 2015,2018, respectively. We held both short and long termlong-term investments in 2017, 20162020, 2019 and 2015.2018. Our short-term investments totaled $390$1.1 billion as of December 31, 2020 compared to $369 million and $413 million as of December 31, 2017 compared to $538 million2019 and $558 million as of December 31, 2016 and 2015, respectively. Our long-term investments totaled $2 million as of December 31, 2017 compared to $90 million and $49 million as of December 31, 2016 and 2015,2018, respectively.
Operating Activities
Cash flowsused in operating activities totaled approximately $(683) million in 2020, compared to cash provided by operating activities totaled approximately $1.4of $1.5 billion and $1.2 billion in 20172019 and $1.62018, respectively. The $2.1 billion in each of 2016 and 2015. There was a $234 million decrease in cash flows from operating activities in 20172020 compared to 2016 which2019 was primarilyprincipally driven by a 21.8% increasethe unprecedented decline in the price of fuel, partially offsetdemand for travel caused by a 4.5% increase in capacity during 2017.COVID-19. The $34$249 million increase in cash flows from operations in 20162019 compared to 20152018 was primarily a result of a 8.9%principally driven by an increase in capacity and a decrease of 26.9% in the price of fuel which both helped to improve operating cash flows. As of December 31, 2017, our unrestricted cash, cash equivalents and short-term investments as a percentage of trailing twelve months revenue was approximately 10%. We rely primarily on cash flows from operations to provide working capital for current and future operations.margin.
Investing Activities
During 2017,2020, capital expenditures related to our purchase of flight equipment included $128$426 million for the purchase of seven new Airbus A321neo aircraft, our first Airbus A220 aircraft, and the buyout of one Airbus A321 aircraft lease, $76 million for flight equipment deposits, $759$151 million for the purchase of 16 new Airbus A321 aircraftflight equipment work-in-progress, and the buyout of three aircraft leases, $61$15 million for spare part purchases, and $156 million for flight equipment work-in-progress.purchases. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $98$123 million. Investing activities also included the net purchase of $236$767 million in investment securities.
We executed $563 million of sale-leaseback transactions in 2020. Of these transactions, $209 million qualified as sales for accounting purposes and the related proceeds are classified within investing activities.
During 2016,2019, capital expenditures related to our purchase of flight equipment included $161$478 million for the purchase of six new Airbus A321neo aircraft and the buyout of one Airbus A320 aircraft lease, $224 million for flight equipment deposits, $588$249 million for flight equipment work-in-progress, and $48 million for spare part purchases. Other property and equipment
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
45
capital expenditures included ground equipment purchases and facilities improvements for $158 million. Investing activities also included the net purchase of $40 million in investment securities.
During 2018, capital expenditures related to our purchase of flight equipment included $519 million for the purchase of 10 new Airbus A321 aircraft and the buyout of ninetwo aircraft leases, $18$206 million for flight equipment deposits, $163 million for flight equipment work-in-progress, and $130 million for spare part purchases, and $96 million for flight equipment work-in-progress.purchases. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $148$97 million. Investing activities also included the net purchase of $23$28 million in investment securities.
During 2015, capital expenditures related to our purchase of flight equipment included $104 million for flight equipment deposits, $450 million for the purchase of 12 new Airbus A321 aircraft, $110 for the buyout of six aircraft leases, $120 million for spare part purchases, and $29 million for flight equipment work-in-progress. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $128 million. Investing activities also included the net purchase of $187 million in investment securities.
We currently anticipate 20182021 capital expenditures to be between $900 million and $1.1 billion, including approximately $750 million and $900 million for aircraft and predelivery deposits. The remaining$1.0 billion. We plan to restrict non-aircraft capital expenditures of approximately $150 million to $200 million relate to non-aircraft projects such as our initiative to reduce our structural costthose with the goal of saving $250 to $300 million by 2020.highest returns.
Financing Activities
Financing activities during 20172020 primarily consisted of net proceeds of $2.2 billion from drawdowns of our credit facilities and the execution of a number of financing transactions which include the following:
•$981 million from our 364-day delayed draw term loan facility with Morgan Stanley Senior Funding Inc. as administrative agent;
•$717 million from our term loan facility with Barclays Bank PLC as administrative agent, and
•$550 million from our revolving credit facility with Citibank N.A. as administrative agent.
Also included in financing activities are:
•Net proceeds of $913 million from the public placements of equipment notes;
•Net proceeds of $583 million from the public offering of 42 million shares of our common stock;
•$354 million of sale-leaseback transactions which did not qualify as sales for accounting purposes;
•Net proceeds of $259 million and $19 million from the issuance of unsecured term loan and warrants, respectively, in connection with the Payroll Support Program under the CARES Act;
•Net proceeds of $105 million and $9 million from the issuance of secured term loan and warrants, respectively, in connection with the Loan Program under the CARES Act; and
•$36 million in proceeds from the issuance of common stock related to our crewmember stock purchase plan.
These proceeds are partially offset by the payoff of our 364-day delayed draw term loan facility for $1.0 billion, scheduled repaymentmaturities of $194$372 million relating to debt and capitalfinance lease obligations,obligations, $12 million of which were associated with scheduled rent payments on sale-leaseback aircraft that did not qualify as a result, three aircraft became unencumbered. In addition, we acquired $390 million insales for accounting purposes, and the acquisitions of treasury shares of $167 million, of which $380$160 million related to our accelerated share repurchases, or ASRs. Our share repurchase program has been suspended since March 31, 2020.
Financing activities during 2017.2019 consisted of the net issuance of $981 million of debt, $764 million of which relates to the offering of our Enhanced Equipment Trust Certificates, Series 2019-1 ("2019-1 EETC") in November, partially offset by the scheduled repayment of $323 million in debt and finance lease obligations. In addition, we acquired $542 million in treasury shares of which $535 million related to ASRs during 2019. During this period, we realized $47received $51 million in proceeds from the issuance of stock related to employee share-based compensation.
Financing activities during 20162018 consisted of the net issuance of $687 million of debt partially offset by the scheduled repayment of $368$222 million relating to debt and capitalfinance lease obligations, as a result, 17 aircraft became unencumbered.obligations. In addition, we acquired $134$382 million in treasury shares of which $120$375 million related to our accelerated share repurchase in the fourth quarter of 2016.ASRs during 2018. During this period, we realized $45received $48 million in proceeds from the issuance of stock related to employee share-based compensation. During 2016, $86 million of Series B 6.75% convertible debentures were converted by holders, as a result, we issued approximately 17.6 million shares of our common stock.
Financing activities during 2015 consisted of the scheduled repayment of $196 million relating to debt and capital lease obligations. We prepaid $100 million of outstanding principal relating to 10 Airbus A320 aircraft. As a result, four aircraft became unencumbered and six have lower principal balances. We also prepaid the outstanding balance of $32 million on a special facility revenue bond for JFK that was issued by the New York City Industrial Development Agency in December 2006. In addition, we acquired $241 million in treasury shares of which $150 million related to our accelerated share repurchase in June 2015. During this period, we realized $84 million in proceeds from the issuance of stock related to employee share-based compensation. During 2015, $68 million of our Series B 5.5% convertible debentures were converted by holders, as a result, we issued approximately 15 million shares of our common stock.
In November 2015,March 2019, we filed an automatic shelf registration statement with the SEC. Under this shelf registration statement, we or one or more selling security holders, have the capacity tomay offer and sell from time to time common stock, preferred stock, debt securities, depositary shares, warrants, stock purchase contracts, stock purchase units, subscription rights, and pass-through certificates. The net proceeds of any securities we sell under this registration statement may be used for general corporate purposes, including among other possible uses, the acquisition of aircraft and construction of facilities on or near airports, the repayment or repurchase of short-term or long-term debt or lease obligations and other capital expenditures. We may also use the proceeds for temporary investments until we need them for general corporate purposes. We will not receive any of the proceeds from the sale of securities by any selling security holders who may be named in a prospectus supplement. Through to December 31, 2017, we had not issued any securities under this registration statement. We may utilize this universal shelf registration statement, or a replacement filed with the SEC, in the future to raise capital to fund the continued development of our products and services, the commercialization of our products and services, to repay indebtedness, or for other general corporate purposes. The warrants issued in connection with the Payroll Support Program and Loan Program of the CARES Act were made, and any issuances of our underlying common stock are expected to be made, in reliance on the exemption from the registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for transactions not involving a public offering.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
46
None of our lenders or lessors are affiliated with us.
Capital Resources
We have been able to generate sufficient funds from operations to meet our working capital requirements and we have historically paid cash or financed our aircraft through either secured debt or lease financing. As of December 31, 2017, we operated a fleet of 243 aircraft which included 43 Airbus A321 aircraft and 76 Airbus A320 aircraft that were unencumbered. Of our remaining aircraft, 44 were under operating leases, six were financed under capital leases and 80 were financed by private and public secured debt. Additionally we have 37 unencumbered spare engines. Approximately 29% of our property and equipment is pledged as security under various loan arrangements.
Dependent on market conditions, we anticipate using a mix of cash and debt financing for the 10 Airbus A321our expected aircraft scheduled for deliverydeliveries in 2018.2021. To the extent we cannot secure financing on terms we deem attractive, we may be required to pay in cash, further modify our aircraft acquisition plans, or incur higher than anticipated financing costs. Although we believe debt and/or lease financing should be available to us if needed, we cannot give assuranceassurances we will be able to secure financing on terms attractive to us, if at all.
Working Capital
We had a working capital deficit of $1.2 billion$671 million as of December 31, 20172020 compared to a deficit of $656$877 million as of December 31, 20162019. Our working capital improved by $1.5 billion due to several factors, including cash proceeds from long-term debt and a deficitequity financing activities, coupled with lower level of $902 million as of December 31, 2015. operational payables resulting from various cost saving initiatives amid the COVID-19 pandemic.
Working capital deficits can be customary in the airline industry since air traffic liability is classified as a current liability. Our working capital deficit increased $379 million in 2017 primarily due to using cash and short-term investments on hand to cover the difference of our cash from operations and our capital expenditures and share repurchases.
In 2012, we entered into a revolving line of credit with Morgan Stanley for up to $100 million which was subsequently increased toapproximately $200 million in December 2012.million. This line of credit is secured by a portion of our investment securities held by Morgan Stanley and the borrowing amount may vary accordingly. This line of credit bears interest at a floating rate based upon the London Interbank Offered Rate, or LIBOR, plus a margin. We did not borrow onunder this facility in 20172019 or 20162018 and the line was undrawn as of December 31, 2017.2020.
In April 2017,August 2019, we increasedamended and restated our revolving Credit and Guaranty Agreement with Citibank N.A. as the administrative agentagent. The amendment increased our borrowing capacity by $125 million to $425 million. The$550 million and extended the term of the Amended and Restated Facility runsfacility through April 6, 2021. BorrowingAugust 2023. Borrowings under the AmendedCredit and Restated Facility bearsGuaranty Agreement bear interest at a variable rate equal to LIBOR, plus a margin. The Amended and Restated Facility is secured by Slots at JFK, LaGuardia, Reagan Nationalspare parts, aircraft, and certain other assets. The AmendedCredit and Restated FacilityGuaranty Agreement includes customary covenants that require us to maintain certain minimum balances in unrestricted cash, cash equivalents, and unused commitments available under all revolving credit facilities. In addition, the covenants restrict our ability to, incur additional indebtedness, issue preferred stockamong other things, dispose of certain collateral, or pay dividends. During 2017merge, consolidate, or sell assets. In response to the unprecedented decline in demand caused by the COVID-19 pandemic, we borrowed the full amount under the Credit and 2016, we did not borrow on this facility and the line was undrawnGuarantee Agreement in April 2020, all of which remained outstanding as of December 31, 2017.2020.
CARES Act Loan Program
Under the CARES Act Loan Program as signed in April 2020 and subsequently amended in November 2020, JetBlue has the ability to borrow up to approximately $1.9 billion from the Treasury. If we accept the full amount of the loan, we will issue warrants to purchase approximately 20.5 million shares of our common stock to the Treasury. We borrowed $115 million of the $1.9 billion available to us under the Loan Program on September 29, 2020.
As of December 31, 2020, approximately $1.8 billion of the borrowing capacity under the Loan Program remained available to us. On January 15, 2021, we entered into a letter agreement with Treasury which provided an extension of the Loan Program allowing us the option to access the remaining borrowing capacity through May 28, 2021.
Payroll Support Program 2
Also on January 15, 2021, we entered into a Payroll Support Program Extension Agreement (the “PSP Extension Agreement”) with Treasury governing our participation in the federal Payroll Support Program for passenger air carriers under the United States Consolidated Appropriations Act, 2021 (the “Payroll Support Program 2”).
Pursuant to the Payroll Support Program 2, on January 15, 2021, Treasury provided to JetBlue a payment of approximately $252 million (the “2021 Payroll Support Payment”) under the PSP Extension Agreement. The 2021 Payroll Support Payment includes a grant of approximately $206 million and an unsecured loan of $46 million. In consideration for the 2021 Payroll Support Payment, we issued to Treasury warrants to purchase 316,583 shares of our common stock at an exercise price of $14.43 per share.
We expect to meet our obligations as they become due through available cash, investment securities, and internally generated funds, supplemented, as necessary, by financing activities as theyand federal government assistance programs, which may be available to us. We expect to generate positive working capital through our operations. However, we cannot predict what the effect on our business might be from future developments related to the COVID-19 pandemic and its impact on the economy and consumer behavior, the extremely competitive environment in which we are operating inoperate, or from events beyond our control, such as volatile fuel prices, economic conditions, weather-related disruptions, airport infrastructure challenges, the spread of
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
47
infectious diseases, the impact of other airline bankruptcies, restructurings or consolidations, U.S. military actions, or acts of terrorism. We believe there is sufficient liquidity available to us to meet our cash requirements for at least the next 12 months.
Debt and CapitalFinance Leases
As part of our efforts to effectively manage our balance sheet, and improve ROIC, we expect to continue to actively manage our debt balances. Our approach to debt management includes managing the mix of fixed vs.and floating rate debt, annual maturities of debt, and the weighted average cost of debt. We intend to continue to opportunistically pre-purchase outstanding debt when market conditions and terms are favorable as well as when excess liquidity is available. Additionally, our unencumbered assets including 119 aircraft and 37 engines, allow some flexibility in managing our cost of debt and capital requirements.
CONTRACTUAL OBLIGATIONS
Our noncancelable contractual obligations at December 31, 2017 include:2020 include the following (in billions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments due in |
| (in billions) | | Total | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter |
Long-term debt and
capital lease obligations(1) | | $ | 1.4 |
| | $ | 0.2 |
| | $ | 0.3 |
| | $ | 0.2 |
| | $ | 0.2 |
| | $ | 0.2 |
| | $ | 0.3 |
|
| Lease commitments | | 1.2 |
| | 0.2 |
| | 0.2 |
| | 0.1 |
| | 0.1 |
| | 0.1 |
| | 0.5 |
|
| Flight equipment obligations | | 7.3 |
| | 0.8 |
| | 1.0 |
| | 1.4 |
| | 1.5 |
| | 1.5 |
| | 1.1 |
|
Other obligations(2) | | 2.3 |
| | 0.5 |
| | 0.3 |
| | 0.3 |
| | 0.2 |
| | 0.2 |
| | 0.8 |
|
| Total | | $ | 12.2 |
| | $ | 1.7 |
| | $ | 1.8 |
| | $ | 2.0 |
| | $ | 2.0 |
| | $ | 2.0 |
| | $ | 2.7 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments due in |
| | Total | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter |
Debt and finance lease obligations(1) | | $ | 5.8 | | | $ | 0.6 | | | $ | 0.6 | | | $ | 1.3 | | | $ | 1.1 | | | $ | 0.4 | | | $ | 1.8 | |
| Operating lease obligations | | 1.2 | | | 0.2 | | | 0.2 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.5 | |
| Flight equipment purchase obligations | | 7.8 | | | 1.0 | | | 0.7 | | | 1.5 | | | 1.8 | | | 1.2 | | | 1.6 | |
Other obligations(2) | | 2.6 | | | 0.3 | | | 0.4 | | | 0.4 | | | 0.4 | | | 0.4 | | | 0.7 | |
| Total | | $ | 17.4 | | | $ | 2.1 | | | $ | 1.9 | | | $ | 3.3 | | | $ | 3.4 | | | $ | 2.1 | | | $ | 4.6 | |
| |
(1) | Includes actual interest and estimated interest for floating-rate debt based on December 31, 2017 rates.
|
| |
(2) | Amounts include noncancelable commitments for the purchase of goods and services. |
(1)Includes actual interest and estimated interest for floating-rate debt based on December 31, 2020 rates.
(2)Amounts include non-cancelable commitments for the purchase of goods and services.
The interest rates are fixed for $1.1$3.0 billion of our debt and capitalfinance lease obligations, with the remaining $0.2$1.6 billion having floating interest rates. The floating interest rates adjust either quarterly or semi-annually based on LIBOR. The weighted average maturity of all of our debt was sixeight years as of December 31, 2017.2020.
As of December 31, 2017,2020, we were in compliance with allthe covenants of our covenants in relation to our debt and lease agreements and 29%approximately 81% of our owned property and equipment were pledged as security under various loan agreements.
As of December 31, 2017,2020, we had operating lease obligations for 4462 aircraft with lease terms that expire between 20182022 and 2028. None of these leases have2026. Our a variable-rate rent payments which adjust semi-annually based on LIBOR. Our aircraftircraft lease agreements contain termination provisions which include standard maintenance and return conditions. Our policy is to record these lease return conditions when they are probable and the costs can be estimated. We also lease airport terminal space and other airport facilities in each of our markets, as well as office space and other equipment. We have approximately $30 $27 million of restricted assets pledged under standby letters of credit related to certain of our leases which will expire at the end of the related leases. As of December 31, 2017,2020, the average age of our operating fleetfleet was 9.2 years.11.3 years.
Our firm aircraft order book as of December 31, 2017 is2020 was as follows:
| | | Year | | Airbus A320neo | | Airbus A321ceo | | Airbus A321neo | | Embraer 190 | | Total | Year | | Airbus A321neo | | Airbus A220 | | Total |
| 2018 | | — | | 10 | | — | | — | | 10 | |
| 2019 | | — | | — | | 13 | | — | | 13 | |
| 2020 | | 6 | | — | | 7 | | 10 | | 23 | |
| 2021 | | 16 | | — | | 4 | | 7 | | 27 | 2021 | | 8 | | 7 | | 15 |
| 2022 | | 3 | | — | | 17 | | 7 | | 27 | 2022 | | 3 | | 8 | | 11 |
| 2023 | | — | | — | | 14 | | — | | 14 | 2023 | | 11 | | 19 | | 30 |
| 2024 | | — | | — | | 5 | | — | | 5 | 2024 | | 13 | | 22 | | 35 |
| 2025 | | 2025 | | 11 | | 12 | | 23 |
| 2026 | | 2026 | | 12 | | 1 | | 13 |
| 2027 | | 2027 | | 14 | | — | | 14 |
| Total | | 25 | | 10 | | 60 | | 24 | | 119 | Total | | 72 | | 69 | | 141 |
Committed expenditures for our firm aircraft and spare engines include estimated amounts for contractual price escalations and predeliverypre-delivery deposits. We expect to meet our predeliverypre-delivery deposit requirements for our aircraft by paying cash or by using short-term borrowing facilities for deposits generally required six to 24 months prior to delivery. Any predeliverypre-delivery deposits paid by the issuance of notes are fully repaid at the time of delivery of the related aircraft.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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Our Terminal at JFK, T5, is governed by a lease agreement we entered into with the PANYNJ in 2005. We are responsible for making various payments under the lease. This includes ground rents for the terminal site which began at the time of the lease execution in 2005 and facility rents commenced in October 2008 upon our occupancy of T5. The facility rents are based on the number of passengers enplaned out of the terminal, subject to annual minimums. The PANYNJ reimbursed us for construction costs of this project in accordance with the terms of the lease, except for approximately $76 million in leasehold improvements provided by us. In 2013, we amended this lease to include additional ground space for our international arrivals facility, T5i, which we opened in November 2014. For financial reporting purposes, the T5 project is being accounted for as a financing obligation, with the constructed asset and related liability being reflected on our consolidated balance sheets. The T5i project was accounted for at cost. Minimum ground and facility rents at JFK totaling $299$536 million are included in the commitments table above as operating lease commitments and financing obligations.
We enter into individual employment agreements with each of our non-unionized FAA-licensed Crewmembers,crewmembers, inspectors, and air traffic controllers. Each employment agreement is for a term of five years and automatically renews for an additional five-year term unless the Crewmembercrewmember is terminated for cause or the Crewmembercrewmember elects not to renew it. Pursuant to these agreements, these Crewmemberscrewmembers can only be terminated for cause. In the event of a downturn in our business requiring a reduction in flying and related work hours, we are obligated to pay these Crewmemberscrewmembers a guaranteed level of income and to continue their benefits.benefits. As we are not currently obligated to pay this guaranteed income and benefits, no amounts related to these guarantees are included in the contractual obligations table above. Our pilots voted to be represented by ALPA during 2014.
OFF-BALANCE SHEET ARRANGEMENTS
None of our operating lease obligations are reflected on our consolidated balance sheets. Although some of our aircraft lease arrangements are with variable interest entities, as defined by the Consolidations topic of the Codification, none of them require consolidation in our financial statements. The decision to finance these aircraft through operating leases rather than through debt was based on an analysis of the cash flows and tax consequences of each financing alternative and a consideration of liquidity implications. We are responsible for all maintenance, insurance and other costs associated with operating these aircraft. However, we are not obligated to provide any residual value or other guarantees to our lessors.
We have determined that we hold a variable interest in, but are not the primary beneficiary of, certain pass-through trusts. The beneficiaries of these pass-through trusts are the purchasers of equipment notes issued by us to finance the acquisition of aircraft. Each trust maintains a liquidity facility whereby a third party agrees to make payments sufficient to pay up to 18 months of interest on the applicable certificates if a payment default occurs.
We have also made certain guarantees and indemnities to other unrelated parties that are not reflected on our consolidated balance sheets, which we believe will not have a significant impact on our results of operations, financial condition or cash flows. We have no other off-balance sheet arrangements. See Notes 2, 34, 5, and 1112 to our consolidated financial statements for a more detailed discussion of our variable interests and other contingencies, including guarantees and indemnities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements in conformity with U.S.generally accepted accounting principles in the United States, or GAAP, requires management to adopt accounting policies as well as make estimates and judgments to develop amounts reported in our financial statements and accompanying notes. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the estimates that are required to prepare our financial statements. We believe our estimates and judgments are reasonable; however, actual results and the timing of recognition of such amounts could differ from those estimates. In addition, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.
Critical accounting policies and estimates are defined as those that are reflective of significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. The policies and estimates discussed below have been reviewed with our independent registered public accounting firm and with the Audit Committee of our Board of Directors. For a discussion of these and other significant accounting policies, see Note 1 to our consolidated financial statements.
Passenger revenueRevenue
Passenger ticketTicket sales and the fees collected for related ancillary services are initially deferred in air traffic liability. RevenueAir traffic liability represents tickets sold but not yet flown, credits which can be used for future travel, and a portion of the liability related to our TrueBlue® loyalty program. We allocate the transaction price to each performance obligation identified in a passenger ticket on a relative standalone basis. Passenger revenue, including certain ancillary fees directly related to passenger tickets, is recognized when the transportation is provided or whenprovided. Taxes that we are required to collect from our customers, including foreign and U.S. federal transportation taxes, security taxes, and airport facility charges, are excluded from passenger revenue. Those taxes and fees are recorded as a liability upon collection and are relieved from the liability upon remittance to the applicable governmental agency.
The majority of the tickets we sell are non-refundable. Non-refundable fares may be canceled prior to the scheduled departure date for a credit for future travel. Refundable fares may be canceled at any time prior to the scheduled departure date. Failure to cancel a refundable fare prior to departure will result in the cancellation of the original ticket or customerand an issuance of a credit expires. Airfor future travel. Passenger credits can generally be used for future travel up to a year from the date of issuance. In response to the impact of COVID-19 on air travel, we extended the expiration dates for travel credits issued from February 27,
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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2020 through June 30, 2020 to a 24-month period. The air traffic liability also includes customerclassified as non-current as of December 31, 2020 represents our current estimate of tickets and credits issuedto be used or refunded beyond one year, while the balance classified as current represents our current estimate of tickets and unused tickets whosecredits to be used or refunded within one year. We will continue to monitor our customers' travel date has passed. Credit forbehavior and may adjust our estimates in the future.
Passenger breakage revenue from unused tickets and customerpassenger credits can eachwill be applied towards another ticket within 12 monthsrecognized in proportion to flown revenue based on estimates of expected expiration when the original scheduled service or 12 months from the issuancelikelihood of the customer credit. We also defer inexercising his or her remaining rights becomes remote. Breakage revenue consists of non-refundable tickets that remain unused past the air traffic liability account an estimate for customerdeparture date, have continued validity, and are expected to ultimately expire unused, as well as passenger credits issued in conjunction with the JetBlue Airways Customer Bill of Rights that we expectare not expected to be ultimately redeemed. Theseredeemed prior to expiration. JetBlue uses estimates are based on historical experience of expired tickets and credits and considers other factors that could impact future expiration patterns of tickets and credits. Tickets which do not have continued validity past the departure date are recognized as revenue after the scheduled departure date has lapsed.
Passenger ticket costs primarily include credit card fees, commissions paid, and global distribution systems booking fees. Costs are allocated entirely to the purchased travel services and are periodically evaluated, and adjusted if necessary, based on actual credit usage.capitalized until recognized when travel services are provided to the customer.
Loyalty Program
Frequent flyer accounting
We utilize a number of estimates in accounting forCustomers may earn points under our TrueBlue® customer loyalty program, or TrueBlue®. We record, based on the fare paid and fare product purchased for a liability forflight. Customers can also earn points through business partners such as credit card companies, hotels, car rental companies, and our participating airline partners.
Points Earned From a Ticket Purchase. When a TrueBlue® member travels, we recognize a portion of the estimated incremental cost of outstanding points earned from JetBlue purchases that we expect to be redeemed. This liability was $37 millionfare as revenue and $30 million as of December 31, 2017 and 2016, respectively. The estimated cost includes incremental fuel, insurance, passenger food and supplies, in-flight entertainment and reservation costs. We adjust this liability, which is includeddefer in air traffic liability, based on points earned and redeemed, pointsliabilities the portion that will ultimately go unused, or breakage, changes inrepresents the estimated incremental costs associated with providing travel and changes in the TrueBlue® program. Customers earn points based on the value paid for a trip rather than the length of the trip and never expire. In addition, there is no longer an automatic generation of a travel award once minimum award levels are reached, but instead the points are maintained in the account until used by the member. Customers can pool points between small groups of people, branded as Family PoolingTM. Periodically we evaluate our assumptions for appropriateness, including comparison of the cost estimates to actual costs incurred as well as the expiration and redemption assumptions to actual experience. Changes in the minimum award levels or in the lives of the awards would also require us to reevaluate the liability, potentially resulting in a significant impact in the year of change as well as in future years.
TrueBlue® points can also be sold to participating companies, including credit card and car rental companies. These sales are accounted for as multiple-element arrangements.
Upon the re-launch of the TrueBlue® program in November 2009, we extended our co-branded credit card and membership rewards participation agreements with American Express®. Under this arrangement, which ended in 2015, we identified two elements, with one element representing the fair value of the travel that will ultimately be providedpoints net of spoilage, or breakage. We allocate the transaction price to each performance obligation on a relative standalone basis. We determine the standalone selling price of TrueBlue® points issued using the redemption value approach. To maximize the use of observable inputs, we utilize the actual ticket value of the tickets purchased with TrueBlue® points. The liability is relieved and passenger revenue is recognized when the points are redeemed and the other consisting of marketing related activities we conductfree travel is provided.
Points Sold to TrueBlue® Partners. Our most significant contract to sell TrueBlue® points is with the participating company. The fair value of the transportation portion of these point sales is deferred and recognized as passenger revenue when transportation is provided. The marketing portion, which is the excess of the total sales proceeds over the estimated fair value of the transportation to be provided, is recognized in other revenue when the points are sold.
In 2015, we announced aour co-branded credit card partnership with Barclaycard®, which commenced in March 2016. The agreement is a multiple-element arrangement subject to ASU, 2009-13, Multiple Deliverable Revenue Arrangements. ASU 2009-13 requires the allocation of the overall consideration received to each deliverable using the estimated selling price. We identifiedpartner. Co-branded credit card partnerships have the following deliverables:identified performance obligations: air transportation; use of the JetBlue brand name, and access to our frequent flyer customer lists; advertising; and other airline benefits. In determining the estimated selling price, JetBlue consideredconsiders multiple inputs, methods, and assumptions, including: discounted cash flows; estimated equivalent ticketredemption value, net of fulfillment discount; points expected to be awarded and redeemed; estimated annual spending by cardholder;cardholders; estimated annual royalty for use of JetBlue's frequent flyer customer lists; and estimated utilization of other airline benefits. Payments are typically due monthly based on the volume of points sold during the period, and the terms of our marketing contracts are generally from one to seven years. The overall consideration received is allocated to each deliverableperformance obligation based on their standalone relative selling prices. The air transportation element will beis deferred and recognized as passenger revenue when the points are utilized. The other elements will generally beare recognized as other revenue when earned.the performance obligation related to those services are satisfied, which is generally the same period as when consideration is received from the participating company.
TrueBlue® points soldAmounts allocated to participating companiesthe air transportation element which are initially deferred include a portion that are expected to be redeemed during the following twelve months (classified as a component of Air traffic liability), and a portion that are not expected to be redeemed during the following twelve months (classified as Air traffic liability - non-current). We periodically update this analysis and adjust the split between current and non-current liabilities as appropriate.
Points earned by TrueBlue® members never expire. TrueBlue® members can pool points between small groups of people, branded as Points Pooling™. Breakage is estimated using historical redemption patterns to determine a breakage rate. Breakage rates used to estimate breakage revenue are recognized asevaluated annually. Changes to breakage estimates impact revenue when management determines the probability of redemption is remote. Deferred revenue was $263 million and $211 million at December 31, 2016 and 2015, respectively.recognition prospectively.
Accounting for long-lived assetsLong-Lived Assets
In accounting for long-lived assets, we make estimates about the expected useful lives, projected residual values, and the potential for impairment. In estimating useful lives and residual values of our aircraft, we have relied upon actual industry experience with the same or similar aircraft types and our anticipated utilization of the aircraft. Changing market prices of new and used aircraft, government regulations, and changes in our maintenance program or operations could result in changes to these estimates.
Our long-lived assets are evaluated for impairment when events and circumstances indicate the assets may be impaired. Indicators include operating or cash flow losses, significant decreases in market value, or changes in technology. As
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(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure. |
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To determine if impairment exists for our assetsaircraft used in operations, we group our aircraft by fleet-type (the lowest level for which there are all relatively newidentifiable cash flows) and we continue to have positive operatingthen estimate their future cash flows based on projections of capacity, aircraft age, maintenance requirements, and other relevant conditions. An impairment occurs when the sum of the estimated undiscounted future cash flows are less than the aggregate carrying value of the fleet. The impairment loss recognized is the amount by which the fleet's carrying value exceeds its estimated fair value. We estimate aircraft fair value using third party valuations which consider the effects of the current market environment, age of the assets, and marketability.
Given the substantial reduction in our active aircraft and diminished projections of future cash flows in the near term as a result of the COVID-19 pandemic, we have not identified any significantevaluated our fleet during 2020 and recorded impairment charges of flight equipment and other property and equipment related to our long-lived assets at this time.
Intangible assets
Our intangible assets consistEmbraer E190 fleet. As we obtain greater clarity about the duration and extent of acquired take-offreduced demand and landing Slots at certain domestic airports. Slots are rights to take-off or land at a specific airport during a specific time period during the day and are a means by which airportpotentially execute further capacity and congestion can be managed. The Federal government controls Slots at three domestic airports under the High Density rule, including Reagan National Airport in Washington D.C. and LaGuardia and JFK Airports in New York City. In accounting for our Slot-related intangible assetsadjustments, we make estimates about their expected useful lives. Slots at High Density Airports are indefinite lived intangible assets. Slots at other airports will continue to be amortized on a straight-line basis over their expected useful lives of up to 15 years. Changes in our operations, government regulations or demand for air travel at these airports could result in changes to these estimates.
We evaluate our intangible assetsfleet compared to network requirements and may decide to adjust our fleet strategy accordingly. Future decisions regarding the temporarily parked aircraft and the timing of any return to service will be dependent on the evolution of the demand environment.
In 2018, we recorded an impairment charge related to our decision to exit the Embraer E190 fleet.
Refer to Note 18 to our consolidated financial statements for further details of our impairment at least annually or when events and circumstances indicate they may be impaired. Indicators include operating or cash flow losses as well as significant decreases in market value.charges.
Lease accounting Accounting
We operate airport facilities, office buildings, and aircraft under operating leases with minimum lease payments. We recognize the costs associated with these agreements as rent expense on a straight-line basis over the expected lease term. Within the provisions of certain leases, there are minimum escalations in payments over the base lease term. There are also periodic adjustments of lease rates, landing fees, and other charges applicable under such agreements, as well as renewal periods. The effects of the escalations and other adjustments have been reflected in rent expense on a straight-line basis over the lease term. This includes renewal periods when it is deemed to be reasonably assured at the inception of the lease that we would incur an economic penalty for not renewing.lease. The amortization period for leasehold improvements is the term used in calculating straight-line rent expense or their estimated economic life, whichever is shorter.
Derivative instrumentsInstruments used for aircraft fuel Aircraft Fuel
We utilize financial derivative instruments to manage the risk of changing aircraft fuel prices. We do not purchase or hold any derivative instrument for trading purposes. Fair values are determined using commodity prices provided to us by independent third parties. When possible, we designate these instruments as cash flow hedges for accounting purposes, as defined by the Derivatives and Hedging topic of the Codification which permits the deferral of the effective portions of gains or losses until contract settlement.
The Derivatives and Hedging topic is a complex accounting standard. It requires us to develop and maintain a significant amount of documentation related to:
(1) our fuel hedging program and fuel management approach,
(2) statistical analysis supporting a highly correlated relationship between the underlying commodity in the derivative financial instrument and the risk being hedged, i.e. aircraft fuel, on both a historical and prospective basis, and
(3) cash flow designation for each hedging transaction executed, to be developed concurrently with the hedging transaction.
This documentation requires us to estimate forward aircraft fuel prices since there is no reliable forward market for aircraft fuel. These prices are developed through the observation of similar commodity futures prices, such as crude oil and/or heating oil, and adjusted based on variations to those like commodities. Historically, our hedges have settled within 24 months; therefore, the deferred gains and losses have been recognized into earnings over a relatively short period of time.
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(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure. |
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REGULATION G RECONCILIATIONSRECONCILIATION OF NON-GAAP FINANCIAL MEASURES
We sometimes use non-GAAP financial measures in this report. Non-GAAP financial measures are financial measures that are derived from the consolidated financial statements, but that are not presented in accordance with generally accepted accounting principles in the U.S.,United States, or U.S. GAAP. We believe these non-GAAP financial measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with U.S. GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. The information below provides an explanation of each non-GAAP financial measure and shows a reconciliation of non-GAAP financial measures used in this filing to the most directly comparable GAAP financial measures.
Operating ExpensesExpense per Available Seat Mile, excluding fuel and related taxes, other non-airline operating expenses, and special items ("CASM Ex-Fuel")
Operating expenses per available seat mile, or CASM, is a common metric used in the airline industry. Our CASM for 2017 through 2013 are summarized in the table below. We exclude aircraft fuel and related taxes, and operating expenses related to other non-airline expenses,businesses, such as our subsidiaries, JetBlue Technology Ventures and JetBlue Travel Products, and special items from operating expenses to determine CASM ex-fuel. ex-fuel, which is a non-GAAP financial measure.
In 2020, special items include contra-expenses recognized on the utilization of payroll support grants received under the CARES Act, contra-expenses recognized on the Employee Retention Credits provided by the CARES Act, impairment charges of our Embraer E190 fleet, losses generated from certain sale-leaseback transactions, and one-time costs associated with our voluntary crewmember separation programs.
Special items for 2019 and 2018 include an impairment charge and one-time costs related to the Embraer E190 fleet transition as well as one-time costs related to the ratification and implementation of our pilots' collective bargaining agreement.
We believe that CASM ex-fuel is useful for investors because it provides investors with the ability to measure financial performance excluding items beyond our control, such as fuel costs, which are subject to many economic and political factors, beyond our control, or not related to the generation of an available seat mile, such as operating expense related to other non-airline expenses.businesses. We believe this non-GAAP measure is more indicative of our ability to manage airline costs and is more comparable to measures reported by other major airlines.
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NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL |
| (in millions; per ASM data in cents) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016(1) |
| $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM |
| Total operating expenses | | $ | 4,671 | | | 14.29 | | | $ | 7,294 | | | 11.43 | | | $ | 7,392 | | | 12.34 | | | $ | 6,039 | | | 10.78 | | | $ | 5,324 | | | 9.93 | |
| Less: | | | | | | | | | | | | | | | | | | | | |
| Aircraft fuel and related taxes | | 631 | | | 1.93 | | | 1,847 | | | 2.89 | | | 1,899 | | | 3.17 | | | 1,363 | | | 2.43 | | | 1,074 | | | 2.00 | |
Other non-airline expenses(2) | | 35 | | | 0.10 | | | 46 | | | 0.08 | | | 44 | | | 0.07 | | | 35 | | | 0.06 | | | 26 | | | 0.05 | |
| Special items | | (283) | | | (0.86) | | | 14 | | | 0.02 | | | 435 | | | 0.73 | | | — | | | — | | | — | | | — | |
| Operating expenses, excluding fuel | | $ | 4,288 | | | 13.12 | | | $ | 5,387 | | | 8.44 | | | $ | 5,014 | | | 8.37 | | | $ | 4,641 | | | 8.29 | | | $ | 4,224 | | | 7.88 | |
(1) Amounts prior to 2017 do not reflect the impact of the adoption of ASU 2016-02, Leases (Topic 842) of the Codification, adopted as of January 1, 2019.
(2) Other non-airline expenses for 2016 includes operating expenses related to JetBlue Technology Ventures only.
Reconciliation of Operating Expense, Income before Taxes, Net Income and Earnings per Share, excluding special items, gain on equity method investments, and impact of tax reform
Our GAAP results in the applicable periods were impacted by charges that are deemed special items and a one-time gain on an equity method investment.
In 2020, special items include contra-expenses recognized on the utilization of payroll support grants received under the CARES Act, impairment charges of our Embraer E190 fleet, losses generated from certain sale-leaseback transactions, and one-time costs associated with our voluntary crewmember separation programs.
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| Reconciliation of Operating expense per ASM, excluding fuel |
| (in millions; per ASM data in cents) | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM |
| Total operating expenses | | $ | 6,015 |
| | 10.74 |
| | $ | 5,320 |
| | 9.92 |
| | $ | 5,200 |
| | 10.56 |
| | $ | 5,302 |
| | 11.78 |
| | $ | 5,013 |
| | 11.71 |
|
| Less: | | | | | | | | | | | | | | | | | | | | |
| Aircraft fuel and related taxes | | 1,363 |
| | 2.43 |
| | 1,074 |
| | 2.00 |
| | 1,348 |
| | 2.74 |
| | 1,912 |
| | 4.25 |
| | 1,899 |
| | 4.43 |
|
| Other non-airline expenses | | 4 |
| | 0.01 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Operating expenses, excluding fuel | | $ | 4,648 |
| | 8.30 |
| | $ | 4,245 |
| | 7.92 |
| | $ | 3,852 |
| | 7.82 |
| | $ | 3,390 |
| | 7.53 |
| | $ | 3,114 |
| | 7.28 |
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We believe the impact of these items distort our overall trends and that our metrics are more comparable with the presentation of our results excluding the impact of these items. The table below provides a reconciliation of our GAAP reported amounts to the non-GAAP amounts excluding the impacts of these items.
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NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE, INCOME BEFORE TAXES, NET INCOME AND EARNINGS PER SHARE
EXCLUDING SPECIAL ITEMS, GAIN ON EQUITY METHOD INVESTMENT, AND IMPACT OF TAX REFORM |
| | Year Ended December 31, |
| (in millions except per share amounts) | | 2020 | | 2019 | | 2018 |
| Total operating revenues | | $ | 2,957 | | | $ | 8,094 | | | $ | 7,658 | |
| | | | | | |
| Total operating expenses | | $ | 4,671 | | | $ | 7,294 | | | $ | 7,392 | |
| Less: Special items | | (283) | | | 14 | | | 435 | |
| Total operating expenses excluding special items | | $ | 4,954 | | | $ | 7,280 | | | $ | 6,957 | |
| | | | | | |
| Operating (loss) income | | $ | (1,714) | | | $ | 800 | | | $ | 266 | |
| Add back: Special items | | (283) | | | 14 | | | 435 | |
| Operating (loss) income excluding special items | | $ | (1,997) | | | $ | 814 | | | $ | 701 | |
| | | | | | |
| Operating margin excluding special items | | (67.5) | % | | 10.1 | % | | 9.2 | % |
| | | | | | |
| (Loss) income before income taxes | | $ | (1,893) | | | $ | 768 | | | $ | 219 | |
| Add back: Special items | | (283) | | | 14 | | | 435 | |
| Less: Gain on equity method investment | | — | | | 15 | | | — | |
| (Loss) income before income taxes excluding special items and gain on equity method investment | | $ | (2,176) | | | $ | 767 | | | $ | 654 | |
| | | | | | |
| Pre-tax margin excluding special items and gain on equity method investment | | (73.6) | % | | 9.5 | % | | 8.5 | % |
| | | | | | |
| Net (loss) income | | $ | (1,354) | | | $ | 569 | | | $ | 189 | |
| Add back: Special items | | (283) | | | 14 | | | 435 | |
| Less: Income tax (expense) benefit related to special items | | (69) | | | 4 | | | 108 | |
| Less: Gain on equity method investments | | — | | | 15 | | | — | |
| Less: Income tax (expense) related to gain on equity method investments | | | | (4) | | | — | |
| Less: Income tax benefit related to tax reform | | — | | | — | | | 28 | |
| Net (loss) income excluding special items, gain on equity method investment, and tax reform impact | | $ | (1,568) | | | $ | 568 | | | $ | 488 | |
| | | | | | |
| (Loss) earnings per common share: | | | | | | |
| Basic | | $ | (4.88) | | | $ | 1.92 | | | $ | 0.60 | |
| Add back: Special items, net of tax | | (0.77) | | | 0.04 | | | 1.05 | |
| Less: Gain on equity method investment, net of tax | | — | | | 0.04 | | | — | |
| Less: Tax reform impact | | — | | | — | | | 0.09 | |
| Basic excluding special items, gain on equity method investment, and tax reform impact | | $ | (5.65) | | | $ | 1.92 | | | $ | 1.56 | |
| | | | | | |
| Diluted | | $ | (4.88) | | | $ | 1.91 | | | $ | 0.60 | |
| Add back: Special items, net of tax | | (0.77) | | | 0.03 | | | 1.04 | |
| Less: Gain on equity method investments, net of tax | | — | | | 0.04 | | | — | |
| Less: Tax reform impact | | — | | | — | | | 0.09 | |
| Diluted excluding special items, gain on equity method investments, and tax reform impact | | $ | (5.65) | | | $ | 1.90 | | | $ | 1.55 | |
Return on Invested Capital
Return on invested capital, or ROIC,Daily Cash Burn
We present cash burn because we believe this metric is an importanthelpful to investors to evaluate our ability to maintain liquidity and evaluate cash flows from our core operating performance. Our cash burn is calculated as net cash used in operating activities, net cash used in investing activities, and net cash provided by financing activities adjusted for: cash payments associated with our voluntary separation programs, net purchases of investment securities, and net proceeds from our common stock offering completed in December 2020.
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NON-GAAP FINANCIAL MEASURE
DAILY CASH BURN |
| (in millions, except for days in period) | | Three Months Ended |
| | December 31, 2020 |
| Net cash (used in) operating activities | | $ | (459) | |
| Net cash (used in) investing activities | | (765) | |
| Net cash provided by financing activities | | 614 | |
| (Decrease) in cash, cash equivalents, and restricted cash | | (610) | |
| Adjustments | | |
| Voluntary separation programs | | 5 | |
| Net purchases of investment securities | | 570 | |
| Proceeds from issuance of common stock | | (583) | |
| Total adjustments | | (8) | |
| | |
| Adjusted (decrease) in cash | | (618) | |
| Days in period | | 92 | |
| Daily cash burn | | $ | (6.7) | |
Adjusted Debt to Capitalization Ratio
Adjusted debt to capitalization ratio is a non-GAAP financial metricmeasure which we believe provides meaningful information asis relevant in assessing the Company's overall debt profile. Adjusted debt includes aircraft operating lease liabilities, in addition to how well we generate returns relative to the capital invested in our business. During 2017, our ROIC was 10.3% from 14.3% in 2016, primarily due to fuel prices. We are committed to taking appropriate actions which will allow us to produce returns greater than our cost of capital while adding capacitytotal debt and continuing to grow.
We believe this non-GAAP measure provides a meaningful comparison of our results to the airline industry and our prior year results.finance lease obligations. Adjusted capitalization represents total equity plus adjusted debt. Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP.
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NON-GAAP FINANCIAL MEASURE
ADJUSTED DEBT TO CAPITALIZATION RATIO |
| (in millions) | | December 31, |
| | 2020 | | 2019 |
| Long-term debt and finance lease obligations | | $ | 4,413 | | | $ | 1,990 | |
| Current maturities of long-term debt and finance lease obligations | | 450 | | | 344 | |
| Operating lease liabilities — aircraft | | 273 | | | 183 | |
| Adjusted debt | | $ | 5,136 | | | $ | 2,517 | |
| | | | |
| Long-term debt and finance lease obligations | | $ | 4,413 | | | $ | 1,990 | |
| Current maturities of long-term debt and finance lease obligations | | 450 | | | 344 | |
| Operating lease liabilities — aircraft | | 273 | | | 183 | |
| Stockholders' equity | | 3,951 | | | 4,799 | |
| Adjusted capitalization | | $ | 9,087 | | | $ | 7,316 | |
| | | | |
| Adjusted debt to capitalization ratio | | 57 | % | | 34 | % |
|
| | | | | | | | |
| Reconciliation of Return on Invested Capital (Non-GAAP) |
| (in millions, except as otherwise noted) | | Twelve Months Ended December 31, |
| | | 2017 | | 2016 |
| Numerator | | | | |
| Operating Income | | $ | 1,000 |
| | $ | 1,312 |
|
| Add: Interest income (expense) and other | | 6 |
| | 7 |
|
Add: Interest component of capitalized aircraft rent (1) | | 53 |
| | 58 |
|
| Subtotal | | 1,059 |
| | 1,377 |
|
| Less: Income tax expense impact | | 395 |
| | 520 |
|
| Operating Income After Tax, Adjusted | | $ | 664 |
| | $ | 857 |
|
| | | | | |
| Denominator | | | | |
| Average Stockholders' equity | | $ | 4,424 |
| | $ | 3,611 |
|
| Average total debt | | 1,291 |
| | 1,606 |
|
Capitalized aircraft rent (1) | | 702 |
| | 771 |
|
| Invested Capital | | $ | 6,417 |
| | $ | 5,988 |
|
| | | | | |
| Return on Invested Capital | | 10.3 | % | | 14.3 | % |
| | | | | |
| (1) Capitalized Aircraft Rent | | | | |
| Aircraft rent, as reported | | $ | 100 |
| | $ | 110 |
|
Capitalized aircraft rent (7 * aircraft rent) (2) | | 702 |
| | 771 |
|
| Interest component of capitalized aircraft rent (Imputed interest at 7.5%) | | 53 |
| | 58 |
|
Free Cash Flow (Non-GAAP)
The table below reconciles cash provided by operations determined in accordance with U.S. GAAP to Free Cash Flow, a non-GAAP financial measure. Management believesWe believe that Free Cash Flow is a relevant metric in measuring our financial strength and is useful in assessing our ability to fund future capital commitments and other obligations. Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, our financial measures prepared in accordance with U.S. GAAP.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF FREE CASH FLOW |
| (in millions) | | Year Ended December 31, |
| | 2020 | | 2019 | | 2018 | | 2017 | | 2016(1) |
| Net cash (used in) provided by operating activities | | $ | (683) | | | $ | 1,449 | | | $ | 1,200 | | | $ | 1,379 | | | $ | 1,632 | |
| Less: Capital expenditures | | (715) | | | (932) | | | (908) | | | (1,074) | | | (850) | |
| Less: Pre-delivery deposits for flight equipment | | (76) | | | (224) | | | (206) | | | (128) | | | (161) | |
| Free Cash Flow | | $ | (1,474) | | | $ | 293 | | | $ | 86 | | | $ | 177 | | | $ | 621 | |
(1) Amounts prior to 2017 do not reflect the impact of the adoption of ASU 2016-02, Leases (Topic 842) of the Codification, adopted as of January 1, 2019.
|
| | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Free Cash Flow (Non-GAAP) |
| (in millions) | | Year Ended December 31, |
| | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| Net cash provided by operating activities | | $ | 1,398 |
| | $ | 1,632 |
| | $ | 1,598 |
| | $ | 912 |
| | $ | 758 |
|
Less: Capital expenditures(1) | | (1,074 | ) | | (850 | ) | | (837 | ) | | (806 | ) | | (615 | ) |
| Less: Predelivery deposits for flight equipment | | (128 | ) | | (161 | ) | | (104 | ) | | (127 | ) | | (22 | ) |
| Free Cash Flow | | $ | 196 |
| | $ | 621 |
| | $ | 657 |
| | $ | (21 | ) | | $ | 121 |
|
(1) The capital expenditures in 2014 included two capital leases for approximately $76 million which were classified as a non-cash financing activity in the consolidated statements of cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes to the price of fuel and interest rates as discussed below. The sensitivity analyses presented do not consider the effects such adverse changes may have on the overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to such changes. Variable-rate leases are not considered market sensitive financial instruments and, therefore, are not included in the interest rate sensitivity analysis below. Actual results may differ.differ from the sensitivity analyses. See Notes 1, 24 and 13 to our consolidated financial statements for accounting policies and additional information.
Aircraft fuel
Our results of operations are affected by changes in the price and availability of aircraft fuel. Market risk is estimated as a hypothetical 10% increase in the December 31, 20172020 cost per gallon of fuel. Based on projected 20182021 fuel consumption, such an increase would result in an increase to aircraft fuel expense of approximately $170approximately $89 million in 2018. This is compared to an estimated $133 million for 2017 measured as of December 31, 2016.2021. We did not have any hedge contractsfuel hedges outstanding as of December 31, 2017.2020.
The financial derivative instrument agreements we have with our counterparties may require us to fund all, or a portion of, outstanding loss positions related to these contracts prior to their scheduled maturities. The amount of collateral posted, if any, is periodically adjusted based on the fair value of the hedge contracts.
Interest
Our earnings are affected by changes in interest rates due to the impact those changes have on interest expense from variable-rate debt instruments and on interest income generated from our cash and investment balances. The interest rate is fixed for $1.1$3.0 billion of our debt and capitalfinance lease obligations, with the remaining $153 million having$1.6 billion having floating interest rates. If interest rates were on average 100 basis points higher in 20182021 than they were during 2017,2020, our interest expense would increase by approximately $2approximately $16 million. This amount is determined by considering the impact of the hypothetical change in interest rates on our variable rate debt.
If interest rates were an average 10%100 basis points lower in 20182021 than they were during 2017,2020, our interest income from cash and investment balances would decrease by approximately $1$2 million. These amounts areThis amount is determined by considering the impact of the hypothetical interest rates on the balances of our cashmoney market funds and cash equivalents and short term investment securities balances asshort-term, interest-bearing investments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of JetBlue Airways CorporationCorporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of JetBlue Airways Corporation (the Company) as of December 31, 20172020 and 2016,2019 and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2017,2020, and the related notes and financial statement schedule listed in Item 15(2) (collectively referred to as the "financial"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the CompanyJetBlue Airways Corporation at December 31, 20172020 and 2016,2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 16, 2018March 2, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | | | | |
| | Accounting for Loyalty Program - Breakage |
| | |
| Description of the Matter | | As discussed in Note 3 to the consolidated financial statements, under the customer loyalty program, the Company issues points to customers based upon the fare paid for a ticket purchase or through sales to business partners, including JetBlue’s co-branded credit card partners. The Company defers a portion of the transaction price allocable to points issued and recognizes revenue when the points are utilized for travel. The Company estimates breakage for issued points using historical redemption patterns and records revenue for points that are not expected to be redeemed. Estimates of breakage are evaluated annually, and changes to breakage estimates prospectively impact Passenger revenue and Air traffic liability. The balance of the Company’s Air traffic liability associated with the loyalty program was $733 million at December 31, 2020.
Auditing management’s estimates and calculations used in its accounting for the loyalty program is significant to our audit as the related impact to Passenger revenue and Air traffic liability is material and sensitive to changes in the breakage rate. The estimate of breakage by management requires the Company to forecast redemption patterns, which involves the application of judgment and estimation. As a result, auditing the Company’s accounting for the loyalty program required complex auditor judgement. |
| | |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for the loyalty program, including controls over management's estimation of breakage rates and review of the significant assumptions underlying the determination of estimated redemption patterns.
Our audit procedures included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management's calculation including the total number of points issued to and redeemed by customers. We involved our valuation professionals to assist us in our evaluation of the methodology used by the Company to estimate expected redemption patterns. We performed a sensitivity analysis of management’s estimate of points expected to be redeemed to evaluate the impact on Passenger revenue and Air traffic liability. We also tested the calculation used to determine the amount recognized as revenue for the period. |
| | |
| | E190 Fleet Impairment |
| | |
| Description of the Matter | | As discussed in Note 2 and Note 18 to the consolidated financial statements, the Company recorded impairment charges of $273 million for the year ended December 31, 2020 related to its Embraer E190 aircraft, as well as the related engines, operating lease assets, aircraft parts and other related flight equipment in that asset group. Management records impairment charges for long-lived assets when events and circumstances indicate that the assets in an asset group may be impaired, the future undiscounted cash flows forecasted to be generated by those assets are less than their associated carrying value, and the net book value of the asset group exceeds its estimated fair value.
Auditing the Company’s impairment assessments was highly subjective due to the significant estimation required in determining the fair values of long-lived assets. As a result of the COVID-19 pandemic, there is currently a very limited market for aircraft and limited data on how the COVID-19 pandemic has affected the fair value of aircraft.In estimating the fair value of the owned assets in the E190 fleet asset group, management considered the current market environment, aircraft age, and maintenance condition. Management determined the fair value of operating lease right-of-use assets based on the present value of current market lease rates utilizing a market discount rate for the remaining term of each lease. |
| | | | | | | | |
| | |
How We Addressed the Matter in Our Audit
| | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls relating to the Company’s process to measure impairments of long-lived assets, including controls over the review of the significant assumptions underlying the fair value estimates.
Our audit procedures included, among others, evaluating the significant assumptions used by the Company in its estimate of the fair value of the E190 fleet asset group described above and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We involved our valuation specialists to assist in our assessment of the valuation approach and certain significant inputs and assumptions, including the consideration of market transactions, current market lease rates, and the reasonableness of adjustments made to reflect maintenance conditions. |
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2001.
New York, New York
February 16, 2018March 2, 2021
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of JetBlue Airways Corporation
Opinion on Internal Control over Financial Reporting
We have audited JetBlue Airways Corporation’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, JetBlue Airways Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2017 consolidated financialbalance sheets of the Company as of December 31, 2020 and 2019 and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity and cash flows for each of the Companythree years in the period ended December 31, 2020, and the related notes and financial statement schedule and our report dated February 16, 2018March 2, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company'sCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management'sManagement’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
February 16, 2018
March 2, 2021
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
| | | | | | | | | | | | | | |
| | | December 31, |
| | | 2020 | | 2019 |
| ASSETS | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | $ | 1,918 | | | $ | 959 | |
| Investment securities | | 1,135 | | | 369 | |
| Receivables, less allowance (2020 - $2; 2019-$1) | | 98 | | | 231 | |
| Inventories, less allowance (2020 - $27; 2019-$22) | | 71 | | | 81 | |
| Prepaid expenses and other | | 123 | | | 146 | |
| Total current assets | | 3,345 | | | 1,786 | |
| PROPERTY AND EQUIPMENT | | | | |
| Flight equipment | | 10,256 | | | 10,332 | |
| Pre-delivery deposits for flight equipment | | 420 | | | 433 | |
| Total flight equipment and pre-delivery deposits, gross | | 10,676 | | | 10,765 | |
| Less accumulated depreciation | | 2,888 | | | 2,768 | |
| Total flight equipment and pre-delivery deposits, net | | 7,788 | | | 7,997 | |
| Other property and equipment | | 1,202 | | | 1,145 | |
| Less accumulated depreciation | | 591 | | | 528 | |
| Total other property and equipment, net | | 611 | | | 617 | |
| Total property and equipment, net | | 8,399 | | | 8,614 | |
| OPERATING LEASE ASSETS | | 804 | | | 912 | |
| OTHER ASSETS | | | | |
| Investment securities | | 2 | | | 3 | |
| Restricted cash | | 51 | | | 59 | |
| Intangible assets, net of accumulated amortization of $360 and $319, at 2020 and 2019, respectively. | | 261 | | | 241 |
| Other | | 544 | | | 303 | |
| Total other assets | | 858 | | | 606 | |
| TOTAL ASSETS | | $ | 13,406 | | | $ | 11,918 | |
|
| | | | | | | | |
| | | December 31, |
| | | 2017 | | 2016 |
| ASSETS | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | $ | 303 |
| | $ | 433 |
|
| Investment securities | | 390 |
| | 538 |
|
| Receivables, less allowance (2017-$1; 2016-$5) | | 245 |
| | 172 |
|
| Inventories, less allowance (2017-$14; 2016-$12) | | 55 |
| | 47 |
|
| Prepaid expenses and other | | 213 |
| | 213 |
|
| Total current assets | | 1,206 |
| | 1,403 |
|
| PROPERTY AND EQUIPMENT | | | | |
| Flight equipment | | 8,980 |
| | 7,868 |
|
| Predelivery deposits for flight equipment | | 204 |
| | 223 |
|
| Total flight equipment and predelivery deposits, gross | | 9,184 |
| | 8,091 |
|
| Less accumulated depreciation | | 2,125 |
| | 1,823 |
|
| Total flight equipment and predelivery deposits, net | | 7,059 |
| | 6,268 |
|
| Other property and equipment | | 1,041 |
| | 972 |
|
| Less accumulated depreciation | | 405 |
| | 345 |
|
| Total other property and equipment, net | | 636 |
| | 627 |
|
| Assets constructed for others | | 561 |
| | 561 |
|
| Less accumulated depreciation | | 207 |
| | 185 |
|
| Total assets constructed for others, net | | 354 |
| | 376 |
|
| Total property and equipment, net | | 8,049 |
| | 7,271 |
|
| OTHER ASSETS | | |
| | |
|
| Investment securities | | 2 |
| | 90 |
|
| Restricted cash | | 56 |
| | 62 |
|
| Other | | 468 |
| | 497 |
|
| Total other assets | | 526 |
| | 649 |
|
| TOTAL ASSETS | | $ | 9,781 |
| | $ | 9,323 |
|
See accompanying notes to consolidated financial statements.
5263
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
| | | | | | | | | | | | | | |
| | | December 31, |
| | | 2020 | | 2019 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| CURRENT LIABILITIES | | | | |
| Accounts payable | | $ | 365 | | | $ | 401 | |
| Air traffic liability | | 1,122 | | | 1,119 | |
| Accrued salaries, wages and benefits | | 409 | | | 376 | |
| Other accrued liabilities | | 215 | | | 295 | |
| Current operating lease liabilities | | 113 | | | 128 | |
| Current maturities of long-term debt and finance lease obligations | | 450 | | | 344 | |
| Total current liabilities | | 2,674 | | | 2,663 | |
| LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | | 4,413 | | | 1,990 | |
| LONG-TERM OPERATING LEASE LIABILITIES | | 752 | | | 690 | |
| DEFERRED TAXES AND OTHER LIABILITIES | | | | |
| Deferred income taxes | | 922 | | | 1,251 | |
| Air traffic liability - non-current | | 616 | | | 481 | |
| Other | | 78 | | | 44 | |
| Total deferred taxes and other liabilities | | 1,616 | | | 1,776 | |
| COMMITMENTS AND CONTINGENCIES (Notes 11 & 12) | | 0 | | 0 |
| STOCKHOLDERS’ EQUITY | | | | |
| Preferred stock, $0.01 par value; 25 shares authorized, none issued | | 0 | | | 0 | |
| Common stock, $0.01 par value; 900 shares authorized, 474 and 427 shares issued and 316 and 282 shares outstanding at 2020 and 2019, respectively | | 5 | | | 4 | |
| Treasury stock, at cost; 158 and 145 shares at 2020 and 2019, respectively | | (1,981) | | | (1,782) | |
| Additional paid-in capital | | 2,959 | | | 2,253 | |
| Retained earnings | | 2,968 | | | 4,322 | |
| Accumulated other comprehensive income | | 0 | | | 2 | |
| Total stockholders’ equity | | 3,951 | | | 4,799 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 13,406 | | | $ | 11,918 | |
|
| | | | | | | | |
| | | December 31, |
| | | 2017 | | 2016 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| CURRENT LIABILITIES | | | | |
| Accounts payable | | $ | 378 |
| | $ | 242 |
|
| Air traffic liability | | 1,215 |
| | 1,120 |
|
| Accrued salaries, wages and benefits | | 313 |
| | 342 |
|
| Other accrued liabilities | | 293 |
| | 321 |
|
| Current maturities of long-term debt and capital leases | | 196 |
| | 189 |
|
| Total current liabilities | | 2,395 |
| | 2,214 |
|
| LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS | | 1,003 |
| | 1,195 |
|
| CONSTRUCTION OBLIGATION | | 441 |
| | 457 |
|
| DEFERRED TAXES AND OTHER LIABILITIES | | | | |
| Deferred income taxes | | 1,033 |
| | 1,354 |
|
| Other | | 75 |
| | 90 |
|
| Total deferred taxes and other liabilities | | 1,108 |
| | 1,444 |
|
| COMMITMENTS AND CONTINGENCIES (Notes 10 & 11) | |
|
| |
|
| STOCKHOLDERS’ EQUITY | | | | |
| Preferred stock, $0.01 par value; 25 shares authorized, none issued | | — |
| | — |
|
| Common stock, $0.01 par value; 900 shares authorized, 418 and 414 shares issued and 321 and 337 shares outstanding at 2017 and 2016, respectively | | 4 |
| | 4 |
|
| Treasury stock, at cost; 97 and 77 shares at 2017 and 2016, respectively | | (890 | ) | | (500 | ) |
| Additional paid-in capital | | 2,127 |
| | 2,050 |
|
| Retained earnings | | 3,593 |
| | 2,446 |
|
| Accumulated other comprehensive income | | — |
| | 13 |
|
| Total stockholders’ equity | | 4,834 |
| | 4,013 |
|
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 9,781 |
| | $ | 9,323 |
|
See accompanying notes to consolidated financial statements.
5364
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)data)
| | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 |
| OPERATING REVENUES | | | | | | |
| Passenger | | $ | 2,733 | | | $ | 7,786 | | | $ | 7,381 | |
| Other | | 224 | | | 308 | | | 277 | |
| Total operating revenues | | 2,957 | | | 8,094 | | | 7,658 | |
| OPERATING EXPENSES | | | | | | |
| Aircraft fuel and related taxes | | 631 | | | 1,847 | | | 1,899 | |
| Salaries, wages and benefits | | 2,032 | | | 2,320 | | | 2,044 | |
| Landing fees and other rents | | 358 | | | 474 | | | 462 | |
| Depreciation and amortization | | 535 | | | 525 | | | 469 | |
| Aircraft rent | | 85 | | | 99 | | | 104 | |
| Sales and marketing | | 110 | | | 290 | | | 294 | |
| Maintenance, materials and repairs | | 441 | | | 619 | | | 625 | |
| Other operating expenses | | 762 | | | 1,106 | | | 1,060 | |
| Special items | | (283) | | | 14 | | | 435 | |
| Total operating expenses | | 4,671 | | | 7,294 | | | 7,392 | |
| OPERATING (LOSS) INCOME | | (1,714) | | | 800 | | | 266 | |
| OTHER INCOME (EXPENSE) | | | | | | |
| Interest expense | | (179) | | | (79) | | | (70) | |
| Capitalized interest | | 13 | | | 14 | | | 10 | |
| Gain on equity method investments | | 0 | | | 15 | | | 0 | |
| Interest income and other | | (13) | | | 18 | | | 13 | |
| Total other income (expense) | | (179) | | | (32) | | | (47) | |
| (LOSS) INCOME BEFORE INCOME TAXES | | (1,893) | | | 768 | | | 219 | |
| Income tax (benefit) expense | | (539) | | | 199 | | | 30 | |
| NET (LOSS) INCOME | | $ | (1,354) | | | $ | 569 | | | $ | 189 | |
| | | | | | |
| (LOSS) EARNINGS PER COMMON SHARE | | | | | | |
| Basic | | $ | (4.88) | | | $ | 1.92 | | | $ | 0.60 | |
| Diluted | | $ | (4.88) | | | $ | 1.91 | | | $ | 0.60 | |
|
| | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2017 | | 2016 | | 2015 |
| OPERATING REVENUES | | | | | | |
| Passenger | | $ | 6,288 |
| | $ | 6,013 |
| | $ | 5,893 |
|
| Other | | 727 |
| | 619 |
| | 523 |
|
| Total operating revenues | | 7,015 |
| | 6,632 |
| | 6,416 |
|
| OPERATING EXPENSES | | | | | | |
| Aircraft fuel and related taxes | | 1,363 |
| | 1,074 |
| | 1,348 |
|
| Salaries, wages and benefits | | 1,887 |
| | 1,698 |
| | 1,540 |
|
| Landing fees and other rents | | 397 |
| | 357 |
| | 342 |
|
| Depreciation and amortization | | 446 |
| | 393 |
| | 345 |
|
| Aircraft rent | | 100 |
| | 110 |
| | 122 |
|
| Sales and marketing | | 267 |
| | 259 |
| | 264 |
|
| Maintenance, materials and repairs | | 622 |
| | 563 |
| | 490 |
|
| Other operating expenses | | 933 |
| | 866 |
| | 749 |
|
| Total operating expenses | | 6,015 |
| | 5,320 |
| | 5,200 |
|
| OPERATING INCOME | | 1,000 |
| | 1,312 |
| | 1,216 |
|
| OTHER INCOME (EXPENSE) | | | | | | |
| Interest expense | | (95 | ) | | (111 | ) | | (128 | ) |
| Capitalized interest | | 10 |
| | 8 |
| | 8 |
|
| Interest income and other | | 6 |
| | 7 |
| | 1 |
|
| Total other income (expense) | | (79 | ) | | (96 | ) | | (119 | ) |
| INCOME BEFORE INCOME TAXES | | 921 |
| | 1,216 |
| | 1,097 |
|
| Income tax expense (benefit) | | (226 | ) | | 457 |
| | 420 |
|
| NET INCOME | | $ | 1,147 |
| | $ | 759 |
| | $ | 677 |
|
| | | | | | | |
| EARNINGS PER COMMON SHARE | | | | | | |
| Basic | | $ | 3.49 |
| | $ | 2.32 |
| | $ | 2.15 |
|
| Diluted | | $ | 3.47 |
| | $ | 2.22 |
| | $ | 1.98 |
|
See accompanying notes to consolidated financial statements.
5465
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 |
| NET (LOSS) INCOME | | $ | (1,354) | | | $ | 569 | | | $ | 189 | |
| Changes in fair value of derivative instruments, net of reclassifications into earnings, net of deferred taxes of $0, $(1), and $2 in 2020, 2019, and 2018, respectively | | (2) | | | 5 | | | (3) | |
| Total other comprehensive (loss) income | | (2) | | | 5 | | | (3) | |
| COMPREHENSIVE (LOSS) INCOME | | $ | (1,356) | | | $ | 574 | | | $ | 186 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| NET INCOME | $ | 1,147 |
| | $ | 759 |
| | $ | 677 |
|
| Changes in fair value of derivative instruments, net of reclassifications into earnings (net of $(8), $8, and $38 of taxes in 2017, 2016 and 2015, respectively) | (13 | ) | | 16 |
| | 60 |
|
| Total other comprehensive income (loss) | (13 | ) | | 16 |
| | 60 |
|
| COMPREHENSIVE INCOME | $ | 1,134 |
| | $ | 775 |
| | $ | 737 |
|
See accompanying notes to consolidated financial statements.
5566
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net (loss) income | | $ | (1,354) | | | $ | 569 | | | $ | 189 | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | |
| Deferred income taxes | | (329) | | | 139 | | | 90 | |
| Impairment of long-lived assets | | 273 | | | 0 | | | 319 | |
| Depreciation and amortization | | 535 | | | 525 | | | 469 | |
| Stock-based compensation | | 28 | | | 31 | | | 28 | |
| | | | | | |
| Losses on sale-leaseback transactions | | 106 | | | 0 | | | 0 | |
| Changes in certain operating assets and liabilities: | | | | | | |
| Decrease (increase) in receivables | | 144 | | | (3) | | | 46 | |
| Decrease (increase) in inventories, prepaid and other | | 52 | | | 188 | | | (178) | |
| Increase in air traffic liability | | 66 | | | 118 | | | 131 | |
| (Decrease) increase in accounts payable and other accrued liabilities | | (255) | | | (91) | | | 103 | |
| Other, net | | 51 | | | (27) | | | 3 | |
| Net cash (used in) provided by operating activities | | (683) | | | 1,449 | | | 1,200 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | | (715) | | | (932) | | | (908) | |
| Pre-delivery deposits for flight equipment | | (76) | | | (224) | | | (206) | |
| Purchase of held-to-maturity investments | | 0 | | | (374) | | | (429) | |
| Proceeds from the maturities of held-to-maturity investments | | 21 | | | 534 | | | 505 | |
| Purchase of available-for-sale securities | | (1,962) | | | (1,000) | | | (979) | |
| Proceeds from the sale of available-for-sale securities | | 1,174 | | | 880 | | | 875 | |
| Proceeds from sale-leaseback transactions | | 209 | | | 0 | | | 0 | |
| Other, net | | 0 | | | (13) | | | (15) | |
| Net cash (used in) investing activities | | (1,349) | | | (1,129) | | | (1,157) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from issuance of long-term debt | | 2,541 | | | 981 | | | 687 | |
| Proceeds from short-term borrowings | | 981 | | | 0 | | | 0 | |
| Proceeds from sale-leaseback transactions | | 354 | | | 0 | | | 0 | |
| Proceeds from issuance of common stock | | 620 | | | 51 | | | 48 | |
| Proceeds from issuance of stock warrants | | 28 | | | 0 | | | 0 | |
| Repayment of long-term debt and finance lease obligations | | (372) | | | (323) | | | (222) | |
| Repayment of short-term borrowings | | (1,000) | | | 0 | | | 0 | |
| Acquisition of treasury stock | | (167) | | | (542) | | | (382) | |
| Other, net | | (2) | | | (2) | | | 0 | |
| Net cash provided by financing activities | | 2,983 | | | 165 | | | 131 | |
| INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | 951 | | | 485 | | | 174 | |
| Cash, cash equivalents and restricted cash at beginning of period | | 1,018 | | | 533 | | | 359 | |
Cash, cash equivalents and restricted cash at end of period (1) | | $ | 1,969 | | | $ | 1,018 | | | $ | 533 | |
| SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | |
| Cash payments for interest (net of amount capitalized) | | $ | 139 | | | $ | 62 | | | $ | 59 | |
| Cash payments for income taxes (net of refunds) | | 5 | | | (52) | | | 11 | |
| NON-CASH TRANSACTIONS | | | | | | |
| Operating lease assets obtained in exchange for operating lease liabilities | | $ | 144 | | | $ | 7 | | | $ | 20 | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2017 | | 2016 | | 2015 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | | $ | 1,147 |
| | $ | 759 |
| | $ | 677 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Deferred income taxes | | (313 | ) | | 270 |
| | 377 |
|
| Depreciation | | 383 |
| | 337 |
| | 288 |
|
| Amortization | | 63 |
| | 56 |
| | 57 |
|
| Stock-based compensation | | 29 |
| | 23 |
| | 20 |
|
| Collateral returned for derivative instruments | | — |
| | — |
| | 52 |
|
| Changes in certain operating assets and liabilities: | | | | | | |
| (Increase) decrease in receivables | | (50 | ) | | (21 | ) | | 11 |
|
| Decrease (increase) in inventories, prepaid and other | | 15 |
| | 1 |
| | (5 | ) |
| Increase in air traffic liability | | 95 |
| | 67 |
| | 80 |
|
| Increase in accounts payable and other accrued liabilities | | 53 |
| | 157 |
| | 64 |
|
| Other, net | | (24 | ) | | (17 | ) | | (23 | ) |
| Net cash provided by operating activities | | 1,398 |
| | 1,632 |
| | 1,598 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
| | | | |
| Capital expenditures | | (1,074 | ) | | (850 | ) | | (837 | ) |
| Predelivery deposits for flight equipment | | (128 | ) | | (161 | ) | | (104 | ) |
| Purchase of held-to-maturity investments | | (207 | ) | | (276 | ) | | (370 | ) |
| Proceeds from the maturities of held-to-maturity investments | | 244 |
| | 333 |
| | 313 |
|
| Purchase of available-for-sale securities | | (245 | ) | | (597 | ) | | (372 | ) |
| Proceeds from the sale of available-for-sale securities | | 444 |
| | 517 |
| | 242 |
|
| Other, net | | (9 | ) | | (11 | ) | | (6 | ) |
| Net cash used in investing activities | | (975 | ) | | (1,045 | ) | | (1,134 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | |
| | | | |
| Proceeds from: | | |
| | | | |
| Issuance of common stock | | 47 |
| | 45 |
| | 84 |
|
| Repayment of: | | | | | | |
| Long-term debt and capital lease obligations | | (194 | ) | | (368 | ) | | (328 | ) |
| Acquisition of treasury stock | | (390 | ) | | (134 | ) | | (241 | ) |
| Other, net | | (16 | ) | | (15 | ) | | (2 | ) |
| Net cash used in financing activities | | (553 | ) | | (472 | ) | | (487 | ) |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | (130 | ) | | 115 |
| | (23 | ) |
| Cash and cash equivalents at beginning of period | | 433 |
| | 318 |
| | 341 |
|
| Cash and cash equivalents at end of period | | $ | 303 |
| | $ | 433 |
| | $ | 318 |
|
See accompanying notes to consolidated financial statements.
5667
| | | | | | | | | | | | | | | | | | | | |
| (1) Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets: |
| | December 31, |
| | 2020 | | 2019 | | 2018 |
| Cash and cash equivalents | | $ | 1,918 | | | $ | 959 | | | $ | 474 | |
| Restricted cash | | 51 | | | 59 | | | 59 | |
| Total cash, cash equivalents and restricted cash | | $ | 1,969 | | | $ | 1,018 | | | $ | 533 | |
See accompanying notes to consolidated financial statements.
68
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Common
Shares | | Common
Stock | | Treasury
Shares | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Total |
| Balance at December 31, 2014 | | 369 |
| | $ | 4 |
| | 59 |
| | $ | (125 | ) | | $ | 1,711 |
| | $ | 1,002 |
| | $ | (63 | ) | | $ | 2,529 |
|
| Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | 677 |
| | — |
| | 677 |
|
| Other comprehensive income | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 60 |
| | 60 |
|
| Vesting of restricted stock units | | 2 |
| | — |
| | 1 |
| | (14 | ) | | — |
| | — |
| | — |
| | (14 | ) |
| Exercise of stock options | | 5 |
| | — |
| | — |
| | — |
| | 59 |
| | — |
| | — |
| | 59 |
|
| Stock compensation expense | | — |
| | — |
| | — |
| | — |
| | 20 |
| | — |
| | — |
| | 20 |
|
| Stock issued under Crewmember stock purchase plan | | 1 |
| | — |
| | — |
| | — |
| | 25 |
| | — |
| | — |
| | 25 |
|
| Shares repurchased under 2012 share repurchase plan | | — |
| | — |
| | 10 |
| | (227 | ) | | — |
| | — |
| | — |
| | (227 | ) |
| Convertible debt redemption | | 15 |
| | — |
| | — |
| | — |
| | 67 |
| | — |
| | — |
| | 67 |
|
| Other | | — |
| | — |
| | — |
| | — |
| | 14 |
| | — |
| | — |
| | 14 |
|
| Balance at December 31, 2015 | | 392 |
| | $ | 4 |
| | 70 |
| | $ | (366 | ) | | $ | 1,896 |
| | $ | 1,679 |
| | $ | (3 | ) | | $ | 3,210 |
|
| Cumulative Effect for the adoption of ASU 2016-09 | | — |
| — |
| — |
| | — |
| | — |
| | — |
| | 8 |
| | — |
| | 8 |
|
| Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | 759 |
| | — |
| | 759 |
|
| Other comprehensive income | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 16 |
| | 16 |
|
| Vesting of restricted stock units | | 1 |
| | — |
| | 1 |
| | (14 | ) | | — |
| | — |
| | — |
| | (14 | ) |
| Exercise of stock options | | 1 |
| | — |
| | — |
| | — |
| | 10 |
| | — |
| | — |
| | 10 |
|
| Stock compensation expense | | — |
| | — |
| | — |
| | — |
| | 23 |
| | — |
| | — |
| | 23 |
|
| Stock issued under Crewmember stock purchase plan | | 2 |
| | — |
| | — |
| | — |
| | 35 |
| | — |
| | — |
| | 35 |
|
| Shares repurchased under 2016 share repurchase plan | | — |
| | — |
| | 6 |
| | (120 | ) | | — |
| | — |
| | — |
| | (120 | ) |
| Convertible debt redemption | | 18 |
| | — |
| | — |
| | — |
| | 86 |
| | — |
| | — |
| | 86 |
|
| Balance at December 31, 2016 | | 414 |
| | $ | 4 |
| | 77 |
| | $ | (500 | ) | | $ | 2,050 |
| | $ | 2,446 |
| | $ | 13 |
| | $ | 4,013 |
|
| Net income | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,147 |
| | — |
| | 1,147 |
|
| Other comprehensive loss | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (13 | ) | | (13 | ) |
| Vesting of restricted stock units | | 1 |
| | — |
| | 1 |
| | (10 | ) | | — |
| | — |
| | — |
| | (10 | ) |
| Exercise of stock options | | — |
| | — |
| | — |
| | — |
| | 4 |
| | — |
| | — |
| | 4 |
|
| Stock compensation expense | | — |
| | — |
| | — |
| | — |
| | 29 |
| | — |
| | — |
| | 29 |
|
| Stock issued under Crewmember stock purchase plan | | 3 |
| | — |
| | — |
| | — |
| | 44 |
| | — |
| | — |
| | 44 |
|
| Shares repurchased under 2016 share repurchase plan | | — |
| | — |
| | 19 |
| | (380 | ) | | — |
| | — |
| | — |
| | (380 | ) |
| Balance at December 31, 2017 | | 418 |
|
| $ | 4 |
|
| 97 |
|
| $ | (890 | ) |
| $ | 2,127 |
|
| $ | 3,593 |
|
| $ | — |
|
| $ | 4,834 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common
Shares | | Common
Stock | | Treasury
Shares | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Total |
| Balance at December 31, 2017 | | 418 | | | $ | 4 | | | 97 | | | $ | (890) | | | $ | 2,127 | | | $ | 3,564 | | | $ | 0 | | | $ | 4,805 | |
| Net income | | — | | | — | | | — | | | — | | | — | | | 189 | | | — | | | 189 | |
| Other comprehensive (loss) | | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | (3) | |
| Vesting of restricted stock units | | 1 | | | — | | | — | | | (7) | | | — | | | — | | | — | | | (7) | |
| Stock compensation expense | | — | | | — | | | — | | | — | | | 28 | | | — | | | — | | | 28 | |
| Shares issued under Crewmember Stock Purchase Plan | | 3 | | | — | | | — | | | — | | | 48 | | | — | | | — | | | 48 | |
| Shares repurchased | | — | | | — | | | 19 | | | (375) | | | 0 | | | — | | | — | | | (375) | |
| Balance at December 31, 2018 | | 422 | | | $ | 4 | | | 116 | | | $ | (1,272) | | | $ | 2,203 | | | $ | 3,753 | | | $ | (3) | | | $ | 4,685 | |
| Net income | | — | | | — | | | — | | | — | | | — | | | 569 | | | — | | | 569 | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 5 | |
| Vesting of restricted stock units | | 2 | | | — | | | — | | | (6) | | | — | | | — | | | — | | | (6) | |
| Stock compensation expense | | — | | | — | | | — | | | — | | | 31 | | | — | | | — | | | 31 | |
| Shares issued under Crewmember Stock Purchase Plan | | 3 | | | — | | | — | | | — | | | 51 | | | — | | | — | | | 51 | |
| Shares repurchased | | — | | | — | | | 29 | | | (504) | | | (32) | | | — | | | — | | | (536) | |
| Balance at December 31, 2019 | | 427 | | | $ | 4 | | | 145 | | | $ | (1,782) | | | $ | 2,253 | | | $ | 4,322 | | | $ | 2 | | | $ | 4,799 | |
| Net (loss) | | — | | | — | | | — | | | — | | | — | | | (1,354) | | | — | | | (1,354) | |
| Other comprehensive (loss) | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | (2) | |
| Vesting of restricted stock units | | 1 | | | — | | | — | | | (7) | | | — | | | — | | | — | | | (7) | |
| Stock compensation expense | | — | | | — | | | — | | | — | | | 28 | | | — | | | — | | | 28 | |
| Shares issued under Crewmember Stock Purchase Plan | | 4 | | | — | | | — | | | — | | | 35 | | | — | | | — | | | 35 | |
| Shares repurchased | | — | | | — | | | 13 | | | (192) | | | 32 | | | — | | | — | | | (160) | |
| CARES Act warrant issuance | | — | | | — | | | — | | | — | | | 28 | | | — | | | — | | | 28 | |
| Shares issued under common stock offering | | 42 | | | 1 | | | — | | | — | | | 583 | | | — | | | — | | | 584 | |
| Balance at December 31, 2020 | | 474 | | | $ | 5 | | | 158 | | | $ | (1,981) | | | $ | 2,959 | | | $ | 2,968 | | | $ | 0 | | | $ | 3,951 | |
See accompanying notes to consolidated financial statements.
5769
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JetBlue Airways Corporation, or JetBlue, is New York's Hometown Airline™®. We believe our differentiated product and service offerings combined with our competitive cost advantage enables us to effectively compete in the high-value geography we serve. As of December 31, 2017,2020, we served 101 98 destinations in 30 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 2123 countries in the Caribbean and Latin America. In December 2015, JetBlue created a new wholly-owned subsidiary, JetBlue Technology Ventures, LLC, or JTV. JTV will invest in or partner with emerging companies in the development of innovative products and services within the travel, hospitality and lifestyle industries.
Note 1—Summary of Significant Accounting Policies
Basis of Presentation
JetBlue provides air transportation services across the United States, the Caribbean, and Latin America. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S.,United States, or U.S. GAAP, and include the accounts of JetBlue and our subsidiaries. All majority-owned subsidiaries are consolidated with all intercompany transactions and balances being eliminated.
Use of Estimates
The preparation of our consolidated financial statements and accompanying notes in conformity with U.S. GAAP requirerequires us to make certain estimates and assumptions. Actual results could differ from those estimates.
Fair Value
The Fair Value Measurements and Disclosures topic of the Financial Accounting Standards Board’s,Board, or FASB, Accounting Standards Codification™®, or Codification,establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. This topic clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The topic also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs.inputs. Refer to Note 1314 to our consolidated financial statements for more information.
Cash and Cash Equivalents
Our cash and cash equivalents include short-term, highly liquid investments which are readily convertible into cash. These investments include money market securities, commercial paper, and commercial paperstime deposits with maturities of three months or less when purchased.
Restricted Cash
Restricted cash primarilyprimarily consists of securitysecurity deposits, funds held in escrow for estimated workers’ compensation obligations, and performance bonds for aircraft and facility leases.
Accounts and Other Receivables
Accounts and other receivables are carried at cost. They primarily consist of amounts due from credit card companies associated with sales of tickets for future travel. We estimate an allowance for doubtful accounts based on known troubled accounts, if any, and historical experience of losses incurred.incurred, as well as current and expected conditions.
Investment Securities
Investment securities consist of available-for-sale investment securities and held-to-maturity investment securities. When sold, we use a specific identification method to determine the cost of the securities.
Available-for-sale investment securities
Our available-for-sale investment securities include highly liquid investments such as certificates oftime deposits, U.S. Treasury bills with maturities between three and twelve months, commercial paper, and convertible debt securities which are stated at fair value.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Held-to-maturity investment securities
Our held-to-maturity investments consist of investment-grade interest bearing instruments, primarily treasurysuch as corporate bonds and U.S. Treasury notes, and bills, which are stated at amortized cost. We do not intend to sell these investment securities and the contractual maturities are not greater than 24 months. Those with maturities less than twelve months are included in short-term investments on our consolidated balance sheets. Those with remaining maturities in excess of twelve months are included in long-term investments on our consolidated balance sheets. We did not0t record any material gains or losses on these securities during the years ended December 31, 2017, 20162020, 2019 or 2015.2018. The estimated fair value of these investments approximated their carrying value
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as of December 31, 20172020 and 2016.2019.
The carrying values of investment securities consisted of the following at December 31, 20172020 and 20162019 (in millions):
| | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| Available-for-sale securities | | | | |
| Time deposits | | $ | 1,130 | | | $ | 325 | |
| | | | |
| Commercial paper | | 0 | | | 20 | |
| Debt securities | | 7 | | | 6 | |
| Total available-for-sale securities | | 1,137 | | | 351 | |
| Held-to-maturity securities | | | | |
| | | | |
| Corporate bonds | | 0 | | | 21 | |
| Total held-to-maturity securities | | 0 | | | 21 | |
| Total investment securities | | $ | 1,137 | | | $ | 372 | |
|
| | | | | | | | |
| | | 2017 | | 2016 |
| Available-for-sale securities | | | | |
| Time deposits | | $ | 130 |
| | $ | 160 |
|
| Debt Securities | | 6 |
| | — |
|
| Treasury bills | | — |
| | 115 |
|
| Commercial paper | | — |
| | 60 |
|
| Total available-for-sale securities | | 136 |
| | 335 |
|
| Held-to-maturity securities | | | | |
| Treasury notes | | 220 |
| | 283 |
|
| Corporate bonds | | 36 |
| | 10 |
|
| Total held-to-maturity securities | | 256 |
| | 293 |
|
| TOTAL INVESTMENT SECURITIES | | $ | 392 |
| | $ | 628 |
|
Derivative InstrumentsInvestments in which we can exercise significant influence are accounted for using the equity method in accordance with Topic 323, Investments - Equity Method and Joint Ventures of the Codification. The carrying amount of our equity method investments, which is recorded within other assets on our consolidated balance sheets, was $34 million and $38 million as of December 31, 2020 and 2019, respectively. In September 2019, we recognized a gain of $15 million on one of our equity method investments related to its fair value measurement upon the closing of a subsequent financing round.
Other Investments
Our wholly-owned subsidiary, JetBlue Technology Ventures, LLC, or JTV, has equity investments in emerging companies which do not have readily determinable fair values. In accordance with Accounting Standards Update ("ASU") 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, we account for these investments using a measurement alternative which allows entities to measure these investments at cost, less any impairment, adjusted for changes from observable price changes in orderly transactions for identifiable or similar investments of the same issuer. The carrying amount of these investments was $40 million and $41 million as of December 31, 2020 and December 31, 2019, respectively.
We have an approximate 10% ownership interest in the TWA Flight Center Hotel at John F. Kennedy International Airport and it is also accounted for under the measurement alternative. The carrying amount of this investment was $14 million and $13 million as of December 31, 2020 and 2019, respectively.
Derivative Instruments
Our derivative instruments includinginclude fuel hedge contracts, such as jet fuel basis swap agreementscall options and interest rate swap agreementscall option spreads, which are stated at fair value, net of any collateral postings.postings. Derivative instruments are included in other current assets and other current liabilities inon our consolidated balance sheets. Refer to Note 1213 to our consolidated financial statements for more information.
Inventories
Inventories consist of expendable aircraft spare parts and supplies that are stated at average cost, as well as aircraft fuel that is accounted for on a first-in, first-out basis. These items are expensed when used or consumed. An allowance for obsolescence on aircraft spare parts and supplies is provided over the remaining useful life of the related aircraft fleet.
Property and Equipment
We record our property and equipment at cost and depreciate these assets on a straight-line basis over their estimated useful lives to their estimated residual values. We capitalize additions, modifications enhancing the operating performance of our assets, andas well as the interest related to predeliverypre-delivery deposits used to acquire new aircraft and the construction of our facilities.
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Estimated useful lives and residual values for our property and equipment are as follows:
|
| | | | | | | | | | | | | |
| Property and Equipment Type | | Estimated Useful Life | | Residual Value |
| Aircraft | | 25 years | | 20 | % |
In-flightInflight entertainment systems | | 5-10 years | | 0 | % |
| Aircraft parts | | Fleet life | | 10 | % |
| Flight equipment leasehold improvements | | Lower of lease term or economic life | | 0 | % |
| Ground property and equipment | | 2-10 years | | 0 | % |
| Leasehold improvements—other | | Lower of lease term or economic life | | 0 | % |
| Buildings on leased land | | Lease term | | 0 | % |
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Property under capitalfinance leases is initially recorded at an amount equal to the present value of future minimum lease payments which is computed on the basis of our incremental borrowing rate or, when known, the interest rate implicit in the lease. Amortization of property under capitalfinance leases is on a straight-line basis over the expected useful life to their estimated residual values and is included in depreciation and amortization expense.
We record impairment losses on long-lived assets used in operations when events and circumstances indicate the assets may be impaired and the undiscounted future cash flows estimated to be generated by the assets are less than the assets’ net book value. If impairment occurs, the loss is measured by comparing the fair value of the asset to its carrying amount. Impairment losses are recorded in depreciation and amortization expense.
Software
We capitalize certain costs related to the acquisition and development of computer software. We amortize these costs using the straight-line method over the estimated useful life of the software, which is generally between five and ten years. The net book value of computer software, which is included in otherintangible assets on our consolidated balance sheets, was $92$121 million and $97$102 million as of December 31, 20172020 and 2016,2019, respectively. Amortization expense related to computer software was $41$44 million, $32$52 million and $34$46 million for the years ended December 31, 2017, 20162020, 2019, and 2015,2018, respectively. As of December 31, 2017,2020, amortization expense related to computer software is expected to be approximately $37 million in 2018, $28 million in 2019, $11 million in 2020, $7$38 million in 2021, and $4$34 million in 2022.2022, $27 million in 2023, $16 million in 2024, and $6 million in 2025.
Indefinite-Lived Intangible Assets
Our indefinite-lived intangible assets consist primarily of acquired take-off and landing slots, or Slots at certain domestic airports.High Density Airports which result in no amortization expense. Slots are the rights to take-off or land at a specific airport during a specific time period of the day and are a means by which airport capacity and congestion can be managed. We account for Slots at High Density Airports, including Reagan National Airport in Washington, D.C., LaGuardia Airport, and JFK Airport, both in New York City as indefinite life intangible assets which results in no amortization expense. Slots at other airports are amortized on a straight-line basis over their expected useful lives of up to 15 years. We evaluate our indefinite-lived intangible assets for impairment at least annually or when events and circumstances indicate they may be impaired. Indicators include operating or cash flow losses as well as significant decreases invarious market factors to determine if events and circumstances could reasonably have affected the fair value. As of December 31, 20172020 and 2016,2019, our indefinite-lived intangible assets, for Slots at High Density Airports with indefinite lives was $139 million.which are included in intangible assets on our consolidated balance sheets, were $139 million. We performed an impairment assessment as of December 31, 2020 and determined our indefinite-lived intangible assets were not impaired.
Passenger Revenue
Ticket sales and the fees collected for related ancillary services are initially deferred in air traffic liability. Air traffic liability represents tickets sold but not yet flown, credits which can be used for future travel, and a portion of the liability related to our TrueBlue® loyalty program. We allocate the transaction price to each performance obligation identified in a passenger ticket on a relative standalone basis. Passenger revenue, including certain ancillary fees directly related to passenger tickets, is recognized when the transportation is provided or after the ticket or passenger credit issued upon payment of a change fee expires. It is recognized net of the taxesprovided. Taxes that we are required to collect from our Customers,customers, including foreign and U.S. federal transportation taxes, security taxes, and airport facility charges. Tickets sold but not yet recognizedcharges, are excluded from passenger revenue. Those taxes and fees are recorded as revenue and unexpired credits are included in air traffic liability on the consolidated balance sheets.
Loyalty Program
We account for our customer loyalty program, TrueBlue®, by recording a liability upon collection and are relieved from the liability upon remittance to the applicable governmental agency.
The majority of the tickets sold are non-refundable. Non-refundable fares may be canceled prior to the scheduled departure date for a credit for future travel. Refundable fares may be canceled at any time prior to the estimated incremental costscheduled departure date. Failure to cancel a refundable fare prior to departure will result in the cancellation of outstanding points earnedthe original ticket and an issuance of a credit for future travel. Passenger credits can be used for future travel up to a year from JetBlue purchases that we expectthe date of issuance. Passenger breakage revenue from unused tickets and passenger credits will be recognized in proportion to be redeemed. The estimated cost includes incremental fuel, insurance, passenger food and supplies, in-flight entertainment and reservation costs. We adjust this liability, which is included in air traffic liability,flown revenue based on points earned and redeemed, points that will ultimately go unused, or breakage, changes inestimates of expected expiration when the estimated incremental costs associated with providing travel and changes in the TrueBlue® program. This liability was $37 million and $30 million as of December 31, 2017 and 2016, respectively. We estimate breakage based on historical point redemptions. In June 2013, we amended the program so points earned by members never expire. Customers earn points based on the value paid for a trip rather than the lengthlikelihood of the trip,customer exercising his or her remaining rights becomes remote. Breakage revenue consists of non-refundable tickets that remain unused past the departure date, have continued validity, and Customers can pool points between small groups of people, branded as Family Pooling™. We believe Family Pooling™ has not had a material impact on the breakage calculation.
TrueBlue® points can also be sold to participating companies, including credit card and car rental companies. These sales are accounted for as multiple-element arrangements.
Upon the re-launch of the TrueBlue® program in November 2009, we extended our co-branded credit card and membership rewards participation agreements with American Express®. Under this agreement, which ended in 2015, we identified two elements, with one element representing the fair value of the travel that will ultimately be provided when the points are redeemed and the other consisting of marketing related activities that we conduct with the participating company. The fair value of the transportation portion of these point sales is deferred and recognized as passenger revenue when transportation is provided. The marketing portion, which is the excess of the total sales proceeds over the estimated fair value of the transportation to be provided, is recognized in other revenue when the points are sold.
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expected to ultimately expire unused, as well as passenger credits that are not expected to be redeemed prior to expiration. JetBlue uses estimates based on historical experience of expired tickets and credits and considers other factors that could impact future expiration patterns of tickets and credits. Tickets which do not have continued validity past the departure date are recognized as revenue after the scheduled departure date has lapsed.
Passenger ticket costs primarily include credit card fees, commissions paid, and global distribution systems booking fees. Costs are allocated entirely to the purchased travel services and are capitalized until recognized when travel services are provided to the customer.
In 2015,response to the impact of COVID-19 on air travel, we announcedextended the expiration dates for travel credits issued from February 27, 2020 through June 30, 2020 to a 24-month period. The air traffic liability classified as non-current as of December 31, 2020 represents our current estimate of tickets and credits to be used or refunded beyond one year, while the balance classified as current represents our current estimate of tickets and credits to be used or refunded within one year. We will continue to monitor our customers' travel behavior and may adjust our estimates in the future.
Loyalty Program
Customers may earn points under our customer loyalty program, TrueBlue®, based on the fare paid and fare product purchased for a flight. Customers can also earn points through business partners such as credit card companies, hotels, car rental companies, and our participating airline partners.
Points Earned From a Ticket Purchase. When a TrueBlue® member travels, we recognize a portion of the fare as revenue and defer in air traffic liabilities the portion that represents the value of the points net of spoilage, or breakage. We allocate the transaction price to each performance obligation on a relative standalone basis. We determine the standalone selling price of TrueBlue® points issued using the redemption value approach. To maximize the use of observable inputs, we utilize the actual ticket value of the tickets purchased with TrueBlue® points. The liability is relieved and passenger revenue is recognized when the points are redeemed and the free travel is provided.
Points Sold to TrueBlue® Partners. Our most significant contract to sell TrueBlue® points is with our co-branded credit card partnership with Barclaycard®, which commenced in March 2016. The agreement is a multiple-element arrangement subject to Accounting Standards Update, or ASU, 2009-13, Multiple Deliverable Revenue Arrangements. ASU 2009-13 requires the allocation of the overall consideration received to each deliverable using the estimated selling price. We identifiedpartner. Co-branded credit card partnerships have the following deliverables:identified performance obligations: air transportation; use of the JetBlue brand name and access to our frequent flyer customer lists; advertising; and other airline benefits. In determining the estimated selling price, JetBlue considered multiple inputs, methods and assumptions, including: discounted cash flows; estimated equivalent ticketredemption value, net of fulfillment discount; points expected to be awarded and redeemed; estimated annual spending by cardholder;cardholders; estimated annual royalty for use of JetBlue's frequent flyer customer lists; and estimated utilization of other airline benefits. Payments are typically due monthly based on the volume of points sold during the period, and the terms of our contracts are generally from one to seven years. The overall consideration received is allocated to each deliverableperformance obligation based on their standalone relative selling prices. The air transportation element is deferred and recognized as passenger revenue when the points are utilized. The other elements are recognized as other revenue when earned.the performance obligation related to those services are satisfied, which is generally the same period as when consideration is received from the participating company.
TrueBlue® points soldAmounts allocated to participating companiesthe air transportation element which are initially deferred include a portion that are expected to be redeemed during the following twelve months (classified as a component of Air traffic liability), and a portion that are not expected to be redeemed during the following twelve months (classified as Air traffic liability - non-current). We periodically update this analysis and adjust the split between current and non-current liabilities as appropriate.
Points earned by TrueBlue® members never expire. TrueBlue® members can pool points between small groups of people, branded as Points Pooling™. Breakage is estimated using historical redemption patterns to determine a breakage rate. Breakage rates used to estimate breakage revenue are recognized asevaluated annually. Changes to breakage estimates impact revenue when management determines the probability of redemption is remote. Deferred revenue was $263 million and $211 million at December 31, 2017 and 2016, respectively.recognition prospectively.
Airframe and Engine Maintenance and Repair
Regular airframe maintenance for owned and leased flight equipment is charged to expense as incurred unless covered by a third-party long-term flight hour service agreement. We have separate service agreements in place covering scheduled and unscheduled repairs of certain airframe line replacement unit components as well as the engines in our fleet. TheseCertain of these agreements whose original terms generally range from 10 to 15 years, require monthly payments at rates based either on the number of cycles each aircraft was operated during each month or the number of flight hours each engine was operated during each month, subject to annual escalations. These power by the hour agreements transfer certain risks, including cost risks, to the third-party service providers. They generally fix the amount we pay per flight hour or number of cycles in exchange for maintenance and repairs under a predefined maintenance
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program, which are representative of the time and materials that would be consumed. These costs are expensed as the related flight hours or cycles are incurred.
Advertising Costs
Advertising costs, which are included in sales and marketing, are expensed as incurred. Advertising expense was $45 million in 2020, $66 million in 2017, $652019 and $72 million in 2016 and $69 million in 2015.2018.
Share-Based Compensation
We record compensation expense for share-based awards based on the grant date fair value of those awards. Share-based compensation expense includes an estimate for pre-vesting forfeitures and is recognized over the requisite service periods of the awards on a straight-line basis.
Income Taxes
We account for income taxes utilizing the liability method. Deferred income taxes are recognized for the tax consequences of temporary differences between the tax and financial statement reporting bases of assets and liabilities. A valuation allowance for deferred tax assets is provided unless realizabilityrealization of the asset is judged by us to be more likely than not. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
NewRecently Issued Accounting Standards
New accounting rules and disclosure requirements can impact our financial results and the comparability of our financial statements. The authoritative literature which has recently been issued and that we believe will impact our consolidated financial statements is described below. There are also several new proposals under development. If and when enacted, these proposals may have a significant impact on our financial statements.
DuringIn December 2019, the first quarter of 2017, we adopted Accounting Standards Update, orFASB issued ASU 2015-17, 2019-12, Income Taxes Balance Sheet Classification(Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies, and modifies certain guidance related to the accounting for income taxes. This update also removed the requirement to calculate income tax expense for standalone financial statements of Deferred Taxes topicwholly-owned subsidiaries. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020. We have substantially completed our assessment of the new standard and do not expect its adoption to have a material impact on our consolidated financial statements.
Recently Adopted Accounting Standards
In June 2016, the FASB Codification, or Codification. This standardissued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update requires all deferred tax assetsthe use of an "expected loss" model on certain types of financial instruments and liabilitiesrequires consideration of a broader range of reasonable and supportable information to be classified as non-current on the balance sheet instead of separating deferred taxes into currentcalculate credit loss estimates. For trade receivables, loans, and non-current amounts. In addition, valuation allowance allocations between current and non-current deferred tax assetsheld-to-maturity debt securities, entities are no longer required because those allowances alsoto estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be classified as non-current. Our condensed consolidated balance sheetrequired to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. We adopted the requirements of ASU 2016-13 as of January 1, 2020 using a modified retrospective transition approach. The adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update eliminates, adds, and modifies certain disclosure requirements for fair value measurements. We adopted the requirements of ASU 2018-13 as of January 1, 2020. The adoption of ASU 2018-13 did not have a significant impact on our consolidated financial statement disclosures.
Note 2—The COVID-19 Pandemic
The unprecedented coronavirus ("COVID-19") pandemic and the related travel restrictions and physical distancing measures implemented throughout the world have significantly reduced demand for air travel. Beginning in March 2020, large public events were canceled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel, and popular leisure destinations temporarily closed to visitors. Certain countries have imposed bans on international travelers for specified periods or indefinitely.
Demand for air travel began to weaken at the end of February 2020. The pace of decline accelerated throughout March into April 2020 and demand remained depressed throughout the rest of 2020. This decline in demand has had a material adverse impact on our operating revenues and financial position. Our operating revenues for the year ended December 31, 2016 reflects retrospective application. As a result of the adoption, $9 million of deferred tax liabilities previously included within other accrued liabilities and $164 million of deferred tax assets previously included within current assets have been moved to long-term liabilities on our December 31, 2016 balance sheet.
2020
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In February 2016,declined by 63.5% year-over-year. Although demand began to improve as the FASB issued ASU 2016-02, Leases (Topic 842). Under ASU 2016-02, a lessee will recognize liabilities for lease paymentsyear progressed, it remained significantly lower than in prior years. The exact timing and right-of-use assets representing its right to usepace of the underlying asset forrecovery is uncertain given the lease term. While we are still evaluating the fullsignificant impact of adopting the amendments on our consolidated financial statements and disclosures, we have determined that the most significant impact will be our accounting for leased aircraft and other leasing agreements, requiring the presentation of those leases with durations of greater than twelve monthspandemic on the balance sheet. See Note 3 with respect to our operating leases not currently presented on the balance sheet. The amendments are effective for fiscal years beginningoverall U.S. and global economy. Some states have experienced a resurgence of COVID-19 cases after December 15, 2018reopening and includes interim periods within those fiscal years. Early adoption is permitted, and companies are required to use a modified retrospective approach at the earliest period presented.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. The amendments clarified how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. Asas a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The amendments are effectivecertain other states have implemented travel restrictions or advisories for fiscal years beginning after December 15, 2017 and includes interim periods within those years.
In May 2014, the FASB issued ASU 2014-09, Revenuetravelers from Contracts with Customers, which supersedes existing revenue recognition guidance. Under the new standard, a company will recognize revenue when it transfers goods or services to Customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. The standard allows for either full retrospective or modified retrospective adoption. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year to interim and annual reporting periods beginning after December 15, 2017 and permitted early adoption of the standard, but not prior to December 15, 2016.
such states. We have closely assessed the new standard and monitored FASB activity, including the interpretations by the FASB Transition Resource Group for Revenue Recognition throughout 2017. In the fourth quarteralso seen a similar resurgence of 2017, we substantially completed our assessment of the new standard,COVID-19 cases in other countries and we expect to adoptcontinue to see fluctuations in the requirementsnumber of ASU 2014-09 as of January 1, 2018 utilizing the full retrospective method of transition. We will record a cumulative adjustment to retained earnings as of January 1, 2016 for the impacts of the new accounting standard.
For JetBlue,cases, which we believe the most significant impact of the new standard relates to the accounting for our TrueBlue® Loyalty Program. The standard eliminates the incremental cost method for loyalty program accounting which we previously used. We will be required to re-value the liability for points earned on qualifying JetBlue purchases using a relative fair value approach. The application of a relative fair value approach is expected to increase our air traffic liability by approximately $270 million to $300 million, net of breakage, as of the beginning of the retrospective reporting period.
In addition, we currently have a liability for outstanding points that were earned in conjunction with our previous co-branded credit card agreement had been recorded using the residual method. The new standard does not permit the usage of the residual method for this contract and instead, the transaction price will be allocated to the performance obligations on a relative selling price basis. This change is expected to decrease the relative value allocated to the transportation performance obligation and will result in a decreaseactions by governmental authorities restricting activities. We expect the demand environment to remain depressed until the majority of approximately $160 million to $170 million, net of breakage,the U.S. population is vaccinated against COVID-19. Our response to the liabilitypandemic and the measures we take to secure additional liquidity may be modified as we have more clarity on the timing of demand recovery.
In response to the COVID-19 pandemic, since March 2020 we have implemented the following measures to focus on the safety of our customers, our crewmembers, and our business.
Customers and Crewmembers
The safety of our customers and crewmembers continues to be a priority. As the COVID-19 pandemic developed, we took steps to promote physical distancing and implemented new procedures that reflect the recommendations of health experts, including the following:
•Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses enhanced safety and cleaning measures on our flights, at our airports, and in our offices;
•Instituted temperature checks for our customer-facing and support-center crewmembers;
•Updated our sick leave policy to provide up to 14 days of paid sick leave for crewmembers who were diagnosed with COVID-19 or were required to quarantine;
•Implemented a framework for internal contact tracing, crewmember notification, and a return to work clearance process for all crewmembers, wherever they may be located;
•Required face coverings for all crewmembers while boarding, in flight, and when physical distancing cannot be maintained;
•Administered more frequent disinfecting of common surfaces and areas with high touchpoints in our facilities;
•Enhanced daily and overnight cleaning of our aircraft and all facilities, using electrostatic spraying of disinfectant in the cabins of aircraft parked overnight at selected focus cities;
•Required customers to wear face coverings during check-in, boarding, and inflight;
•Limited the number of seats sold on most flights through January 7, 2021;
•Suspended group boarding and implemented a back-to-front boarding process to minimize passing in the aisle;
•Eliminated layovers for crewmembers in New York City and worked with crew transportation companies to ensure physical distancing;
•Implemented jump seat buffers on our flights to further promote physical distancing measures;
•Provided enhanced flexibility to our customers by waiving change and cancel fees for customers with existing bookings made through March 31, 2021, while also extending the expiration date of travel credits issued between February 27, 2020 and June 30, 2020 for flight purchases to 24 months; and
•Announced our partnership with Vault Health to provide discounted at-home COVID-19 testing to customers with pending travel plans.
Our Business
The COVID-19 pandemic drove a significant decline in demand beginning in the second half of March 2020. We significantly reduced our capacity to a level that maintains essential services to align with demand. Our capacity for the year ended December 31, 2020 declined by 48.8% year-over-year. As a result of the beginningsignificant reduction in demand expectations and lower capacity, we have temporarily parked a portion of the retrospective reporting period.our fleet.
Under the new standard, passenger revenue from unused ticketsThe reductions in demand and passenger credits will be recognized in proportion to flown revenue based on estimates of expected expiration or when the likelihood of the Customer exercising their remaining rights becomes remote. Currently, recognition of passenger revenue was at expiration. This change will increase passenger revenue by approximately $20 million to $25 million.
We also expect this standard to resultour capacity have resulted in a change in the timing and classification ofsignificant reduction to our revenue recognition for certain ancillary fees directly related to passenger tickets.revenue. As a result, we expect that these revenues, which were approximately $470 millionhave, and $425 million, in 2017 and 2016, respectively, will be reclassified from other revenue under the current presentationcontinue to passenger revenue after adoption.
The estimated impactimplement cost saving initiatives to reduce our overall level of this ASU is expected to be less than one percent reduction to Operating revenues for both full year 2017 and 2016, and do not expect it to impact anycash spend. Some of the Company's existing debt covenants.
initiatives we have undertaken include:
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•Adjustments in flying capacity to align with the expected demand.
•Temporary consolidations of our operations in certain cities that contain multiple airport locations.
•Renegotiated service rates with business partners and extended payment terms.
•Instituted a company-wide hiring freeze.
•Implemented salary reductions for a portion of our crewmembers, including our officers throughout 2020 and continuing into 2021.
•Offered crewmembers voluntary time off and separation programs, with most departures for the separation program occurring during the third quarter of 2020.
We believe the unprecedented impact of COVID-19 on the demand for air travel and the corresponding decline in revenue will continue to have an adverse impact on our operating cash flow. Given this situation, we have taken actions to increase liquidity, strengthen our financial position, and conserve cash. Some of the actions we have taken since the onset of the pandemic through December 31, 2020 include:
•Executed a $1.0 billion 364-day delayed draw term loan agreement in March 2020 and immediately drew down on the facility for the full amount available. This term loan facility was repaid during the third quarter.
•Borrowed on our existing $550 million revolving credit facility in April 2020.
•Executed a $150 million pre-purchase arrangement of TrueBlue® points with our co-brand credit card partner in April 2020.
•Suspended non-critical capital expenditure projects.
•Amended our purchase agreement with Airbus which changed the timing of our Airbus A321 and A220 deliveries in May and October 2020 resulting in approximately $2.0 billion of reduction in aircraft capital expenditures through 2022.
•Suspended share repurchases.
•Obtained $963 million of government funding under the Payroll Support Program of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is discussed further below.
•Executed a $750 million term loan credit facility and immediately drew down on the facility for the full amount available in June 2020.
•Entered into $563 million of sale-leaseback transactions; which is discussed further below.
•Completed public placements of equipment notes in an aggregate principal amount of $923 million secured by 49 Airbus A321 aircraft in August 2020, which is discussed further in Note 4 to our consolidated financial statements. The net proceeds were primarily used to repay the outstanding borrowings under our 364-day delayed draw term loan facility that was due to be repaid in March 2021.
•Entered into a Loan and Guarantee agreement, as amended, with the United States Department of the Treasury ("Treasury") under the Loan Program of the CARES Act which gives us access to loans in an aggregate principal amount of up to $1.9 billion until May 28, 2021, which is discussed further below. We drew down $115 million under the Loan Program on September 29, 2020.
•Completed the public offering of 42 million shares of our common stock for net proceeds of $583 million in December 2020.
As a result of these activities, we had cash, cash equivalents, and short-term investments of approximately $3.1 billion at December 31, 2020.
In 2020, we executed $563 million of sale-leaseback transactions. Of these transactions, $354 million did not qualify as sales for accounting purposes. The assets associated with these transactions remain on our consolidated balance sheets within property and equipment and the related liabilities under the lease are classified within debt and finance leases obligations. These transactions are treated as cash from financing activities on our consolidated statements of cash flows. The remaining $209 million of sale-leaseback transactions qualified as sales and generated a loss of $106 million. The assets associated with these transactions which qualified as sales are recorded within operating lease assets. The liabilities are recorded within current
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operating lease liabilities and long-term operating lease liabilities on our consolidated balance sheets. These transactions are treated as cash from investing activities on our consolidated statements of cash flows.
Valuation of Long-Lived Assets
Under the Property, Plant, and Equipment topic of the Codification, we are required to assess long-lived assets for impairment when events and circumstances indicate that the assets may be impaired. An impairment of long-lived assets exists when the sum of the estimated undiscounted future cash flows expected to be generated directly by the assets are less than the book value of the assets. Our long-lived assets include both owned and leased properties which are classified as property and equipment, and operating lease assets on our consolidated balance sheets, respectively.
As discussed above, our operations were adversely impacted by the unprecedented decline in demand for travel caused by the COVID-19 pandemic. To determine if impairment exists in our fleet, we grouped our aircraft by fleet-type and estimated their future cash flows based on projections of capacity, aircraft age, and maintenance conditions. Based on the assessment, we determined the future forecasted cash flows from the operation of our Embraer E190 fleet were lower than the carrying value. For those aircraft, including the ones that are under operating lease, and related spare parts in our Embraer E190 fleet, we recorded impairment losses of $273 million for the year ended December 31, 2020. These losses represent the difference between the book value of these assets and their fair value. In determining fair value, we obtained third party valuations for our Embraer E190 fleet, which considered the effects of the current market environment, age of the assets, and marketability. For our owned Embraer E190 aircraft and related spare parts, we made adjustments to the valuations to reflect the impact of their current maintenance conditions to determine fair value. Our estimate of fair value was not based on distressed sales or forced liquidations. The fair value of our Embraer E190 aircraft under operating lease and related parts was based on the present value of current market lease rates utilizing a market discount rate for the remaining term of each lease. Since the fair value of our Embraer E190 fleet was determined using unobservable inputs, it is classified as Level 3 in the fair value hierarchy. We evaluated the remaining fleet types and determined the future cash flows of our Airbus A320 and Airbus A321 fleets exceeded their carrying value as of December 31, 2020. As the extent of the ongoing impact from the COVID-19 pandemic remains uncertain, we will update our assessment as new information becomes available.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act
On March 27, 2020, Congress passed the CARES Act. Under the CARES Act, assistance was made available to the aviation industry in the form of direct payroll support (the "Payroll Support Program") and secured loans (the "Loan Program").
Payroll Support Program
On April 23, 2020, we entered into a Payroll Support Program Agreement (the "PSP Agreement") with the United States Department of the Treasury ("Treasury") governing our participation in the Payroll Support Program. Under the Payroll Support Program, Treasury provided us with a payment of $936 million (the "Payroll Support Payment"), consisting of $685 million in grants and $251 million in an unsecured term loan. The loan has a 10-year term and bears interest on the principal amount outstanding at an annual rate of 1.00% until April 23, 2025, and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% thereafter until April 23, 2030. The principal amount may be repaid at any time prior to maturity at par. In consideration for the Payroll Support Payment, we issued warrants to purchase approximately 2.6 million shares of our common stock to the Treasury at an exercise price of $9.50 per share. The warrants will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at JetBlue's option, in whole or in part at any time. In accordance with the PSP Agreement, we are required to comply with the relevant provisions of the CARES Act which, among other things, includes the following: the requirement to use the Payroll Support Payment exclusively for the continuation of payment of crewmember wages, salaries and benefits; the prohibition on involuntary furloughs and reductions in crewmember pay rates and benefits through September 30, 2020; the requirement that certain levels of commercial air service be maintained until March 1, 2022; the prohibitions on share repurchases and the payment of common stock dividends; and restrictions on the payment of certain executive compensation until March 24, 2022.
On September 30, 2020, Treasury provided us with a payment of $27 million (the "Additional Payroll Support Payment"), consisting of $19 million in grants and $8 million in an unsecured term loan under the PSP Agreement. The terms of the unsecured term loan are identical to those under the initial loan issued on April 23, 2020. In consideration for the Additional Payroll Support Payment, we issued warrants to purchase approximately 85,540 additional shares of our common stock to the Treasury (the "Additional PSP Warrants"). The Additional PSP Warrants have the same terms and exercise price as the initial warrants issued on April 23, 2020 under the Payroll Support Program.
The total payroll support funding of $963 million received under the CARES Act was originally classified as short-term restricted cash since the funds had to be utilized to pay the salaries and benefits costs of our crewmembers. The funds were
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reclassified from short-term restricted cash within prepaid expenses and other on our consolidated balance sheets to cash and cash equivalents when the funds were utilized. No payroll support funding remained available as of December 31, 2020.
The carrying value relating to the payroll support grants was recorded within other accrued liabilities and was recognized as a contra-expense within special items on our consolidated statements of operations as the funds were utilized. The relative fair value of the warrants, estimated to be $19 million, was recorded within additional paid-in capital and reduced the total carrying value of the grants to $685 million. Proceeds from the payroll support grants and from the issuance of warrants were classified within operating activities and financing activities, respectively, on our consolidated statements of cash flows. Our funding from the payroll support grants have been fully utilized as of December 31, 2020.
The carrying value relating to the unsecured term loan is recorded within long-term debt and finance lease obligations on our consolidated balance sheets. The proceeds from the loan were classified as financing activities on our consolidated statement of cash flows.
Loan Program
Under the CARES Act Loan Program as signed in April 2020 and subsequently amended in November 2020, JetBlue has the ability to borrow up to a total of approximately $1.9 billion from the Treasury. If we accept the full amount of the loan, we will issue warrants to purchase approximately 20.5 million shares of our common stock to the Treasury. Any amount received under the Loan Program will be subject to the relevant provisions of the CARES Act, including many of those described above under the Payroll Support Program.
We made an initial drawing of $115 million under the Loan Program on September 29, 2020. In connection with this initial drawing, we entered into a warrant agreement with Treasury, pursuant to which we issued to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share.
As of December 31, 2020, approximately $1.8 billion of the borrowing capacity remained available to us. On January 15, 2021, we entered into a letter agreement with Treasury which provided an extension of the Loan Agreement allowing us the option to access the remaining borrowing capacity through May 28, 2021.
Payroll Tax Deferral
The CARES Act also provides for deferred payments of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. We have deferred $48 million in payments through December 31, 2020.
Income Taxes
Among other things, the CARES Act permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid incomes taxes. As a result, the Company’s effective tax rate includes an income tax benefit related to the anticipated refunds from tax losses generated during 2020 that are permitted to be carried back to certain years when the U.S. federal income tax rate was 35%.
Consolidated Appropriations Act, 2021
On January 15, 2021, we entered into a Payroll Support Program Extension Agreement (the “PSP Extension Agreement”) with Treasury governing our participation in the federal Payroll Support Program for passenger air carriers under the United States Consolidated Appropriations Act, 2021 (the “Payroll Support Program 2”).
Pursuant to the Payroll Support Program 2, on January 15, 2021, Treasury provided to us a payment of approximately $252 million (the “2021 Payroll Support Payment”) under the PSP Extension Agreement. The 2021 Payroll Support Payment includes a grant of approximately $206 million and a loan of $46 million. In consideration for the 2021 Payroll Support Payment, we issued to Treasury warrants to purchase 316,583 shares of our common stock at an exercise price of $14.43 per share. The loan will mature 10 years after issuance and the warrants will expire five years after issuance. These transactions had no impact on our 2020 consolidated financial statements.
Except as noted above, the terms of the PSP Extension Agreement are materially identical to those entered into in connection with the Payroll Support Program under the CARES Act. In connection with the participation in the Payroll Support Program 2, JetBlue may also be entitled to receive an additional disbursement of up to $252 million, including a loan of up to $76 million (with respect to which we would issue to treasury additional warrants to purchase common stock).
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2—3— Revenue Recognition
The Company categorizes the revenue received from contracts with its customers by revenue source as we believe it best depicts the nature, amount, timing, and uncertainty of our revenue and cash flow. The following table provides the revenue recognized by revenue source for the years ended December 31, 2020, 2019, and 2018 (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Passenger revenue | | | | | | |
| Passenger travel | | $ | 2,551 | | | $ | 7,395 | | | $ | 7,061 | |
| Loyalty revenue - air transportation | | 182 | | | 391 | | | 320 | |
| Other revenue | | | | | | |
| Loyalty revenue | | 168 | | | 201 | | | 168 | |
| Other revenue | | 56 | | | 107 | | | 109 | |
| Total revenue | | $ | 2,957 | | | $ | 8,094 | | | $ | 7,658 | |
TrueBlue® points earned from ticket purchases are presented as a reduction to Passenger travel within passenger revenue. Amounts presented in Loyalty revenue - air transportation represent the revenue recognized when TrueBlue® points have been redeemed and the travel has occurred.
Contract Liabilities
Our contract liabilities primarily consist of ticket sales for which transportation has not yet been provided, unused credits available to customers, and outstanding loyalty points available for redemption (in millions):
| | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| Air traffic liability - passenger travel | | $ | 964 | | | $ | 929 | |
| Air traffic liability - loyalty program (air transportation) | | 733 | | | 661 | |
| Deferred revenue | | 41 | | | 10 | |
| Total | | $ | 1,738 | | | $ | 1,600 | |
During the years ended December 31, 2020 and 2019, we recognized passenger revenue of $745 million and $878 million respectively, that was included in passenger travel liability at the beginning of the respective periods.
The Company elected the practical expedient that allows entities to not disclose the amount of the remaining transaction price and its expected timing of recognition for passenger tickets if the contract has an original expected duration of one year or less or if certain other conditions are met. We elected to apply this practical expedient to our contract liabilities relating to passenger travel and ancillary services as our tickets or any related passenger credits expire one year from the date of issuance.
In response to the impact of COVID-19 on air travel, we extended the expiration dates for travel credits issued from February 27, 2020 through June 30, 2020 to a 24-month period. Accordingly, any revenue associated with these travel credits, which are initially deferred in air traffic liability, will be recognized within 24 months. Based on our customers' behaviors and estimates of breakage, we expect $80 million of the outstanding travel credits at December 31, 2020 will be recognized into revenue beyond 12 months. We have, accordingly, reclassified this amount to air traffic liability - non-current on our consolidated balance sheets. Given the change in contract duration, our estimates of revenue from unused tickets may be subject to variability and differ from historical experience.
TrueBlue® points are combined in one homogeneous pool and are not separately identifiable. As such, the revenue is comprised of the points that were part of the air traffic liability balance at the beginning of the period as well as points that were issued during the period.
In April 2020, we executed a pre-purchase arrangement of TrueBlue® points with our co-brand credit card partner for $150 million. The funds are expected to be applied to future point purchases ratably over the course of one year. As the funds are not yet associated with a point, they are considered to be short-term and have been included within other accrued liabilities on our consolidated balance sheets. The value of funds received in excess of points acquired for this arrangement was approximately $38 million as of December 31, 2020.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the activity of the current and non-current air traffic liability for our loyalty program, and includes points earned and sold to participating companies (in millions):
| | | | | |
| Balance at December 31, 2018 | $ | 580 | |
TrueBlue® points redeemed | (391) | |
TrueBlue® points earned and sold | 472 | |
| Balance at December 31, 2019 | 661 | |
TrueBlue® points redeemed | (182) | |
TrueBlue® points earned and sold | 254 | |
| Balance at December 31, 2020 | $ | 733 | |
The timing of our TrueBlue® point redemptions can vary; however, the majority of our points are redeemed within approximately three years of the date of issuance.
Note 4—Long-term Debt, Short-term Borrowings and CapitalFinance Lease Obligations
Long-term debt and capitalfinance lease obligations and the related weighted average interest rate at December 31, 20172020 and 20162019 consisted of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2020 | | December 31, 2019 |
| Secured Debt | | | | | | | | |
| Fixed rate specialty bonds, due through 2036 | | 43 | | | 4.9 | % | | 43 | | | 4.9 | % |
| Fixed rate enhanced equipment notes: | | | | | | | | |
| 2019-1 Series AA, due through 2032 | | 567 | | | 2.8 | % | | 589 | | | 2.8 | % |
| 2019-1 Series A, due through 2028 | | 176 | | | 3.0 | % | | 183 | | | 3.0 | % |
| 2019-1 Series B, due through 2027 | | 109 | | | 8.2 | % | | 0 | | | 0 | % |
| 2020-1 Series A, due through 2032 | | 635 | | | 4.1 | % | | 0 | | | 0 | % |
| 2020-1 Series B, due through 2028 | | 172 | | | 7.8 | % | | 0 | | | 0 | % |
| Fixed rate enhanced equipment notes, due through 2023 | | 115 | | | 4.5 | % | | 134 | | | 4.5 | % |
| Fixed rate equipment notes, due through 2028 | | 895 | | | 4.2 | % | | 1,113 | | | 4.2 | % |
| Floating rate equipment notes, due through 2028 | | 153 | | | 2.6 | % | | 201 | | | 4.3 | % |
| Floating rate term loan credit facility, due through 2024 | | 712 | | | 6.4 | % | | 0 | | | 0 | % |
| Secured CARES Act Loan, due through 2025 | | 106 | | | 3.2 | % | | 0 | | | 0 | % |
| Citibank line of credit, due through 2023 | | 550 | | | 2.2 | % | | 0 | | | 0 | % |
| 2020 sale-leaseback transactions, due through 2024 | | 352 | | | 7.6 | % | | 0 | | | 0 | % |
| Finance Leases | | 63 | | | 4.6 | % | | 89 | | | 4.8 | % |
| Unsecured Debt | | | | | | | | |
| Unsecured CARES Act Payroll Support Program loan, due through 2030 | | 259 | | | 2.0 | % | | 0 | | | 0 | % |
| Total debt and finance lease obligations | | 4,907 | | | | | 2,352 | | | |
| Less: Current maturities | | (450) | | | | | (344) | | | |
| Less: Debt acquisition cost | | (44) | | | | | (18) | | | |
| Long-term debt and finance lease obligations | | $ | 4,413 | | | | | $ | 1,990 | | | |
Fixed Rate Specialty Bonds
In November 2005, the Greater Orlando Aviation Authority, or GOAA, issued special purpose airport facilities revenue bonds to JetBlue as reimbursement for certain airport facility construction and other costs. In April 2013, GOAA issued $42 million in special purpose airport facility revenue bonds to refund the bonds issued in 2005. The proceeds from the refunded bonds were loaned to us and we recorded the issuance of $43 million, net of $1 million premium, as long-term debt on our consolidated balance sheets.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | | | | |
| | | 2017 | | 2016 |
| Secured Debt | | | | | | | | |
Floating rate equipment notes, due through 2025(1) | | $ | 153 |
| | 4.7 | % | | $ | 173 |
| | 4.2 | % |
Fixed rate enhanced equipment notes, due through 2023(2) | | 171 |
| | 4.5 | % | | 189 |
| | 4.5 | % |
| Fixed rate equipment notes, due through 2026 | | 716 |
| | 5.4 | % | | 850 |
| | 5.5 | % |
Fixed rate specialty bonds, due through 2036(3) | | 43 |
| | 4.9 | % | | 43 |
| | 4.9 | % |
Capital Leases(4) | | 124 |
| | 4.5 | % | | 140 |
| | 4.3 | % |
| Total debt and capital lease obligations | | 1,207 |
| | | | 1,395 |
| | |
| Less: Current maturities | | (196 | ) | | | | (189 | ) | | |
| Less: Debt acquisition cost | | (8 | ) | | | | (11 | ) | | |
| Long-term debt and capital lease obligations | | $ | 1,003 |
| | | | $ | 1,195 |
| | |
2019-1 Equipment Notes
(1)Interest rates adjust quarterly or semi-annually based on LIBOR, plusIn November 2019, we completed a margin.public placement of equipment notes in an aggregate principal amount of $772 million secured by 25 Airbus A321 aircraft. The equipment notes were issued in two series: (i) Series AA, bearing interest at the rate of 2.75% per annum in the aggregate principal amount equal to $589 million, and (ii) Series A, bearing interest at the rate of 2.95% per annum in the aggregate principal amount equal to $183 million. Principal and interest are payable semi-annually.
(2)In August 2020, we completed a public placement of equipment notes in an aggregate principal amount of $115 million bearing interest at a rate of 8.00% per annum. These equipment notes are secured by 25 Airbus A321 aircraft, which were included in the collateral pool of our 2019-1 Series AA and Series A offerings completed in November 2019. Principal and interest are payable semi-annually.
2020-1 Equipment Notes
In August 2020, we completed a public placement of equipment notes in an aggregate principal amount of $808 million secured by 24 Airbus A321 aircraft. The equipment notes were issued in two series: (i) Series A, bearing interest at the rate of 4.00% per annum in the aggregate principal amount equal to $636 million, and (ii) Series B, bearing interest at the rate of 7.75% per annum in the aggregate principal amount equal to $172 million. Principal and interest are payable semi-annually.
Fixed Rate Enhanced Equipment Notes, Due Through 2023
In March 2014, we completed a private placement of $226 million in pass-through certificates, Series 2013-1. The certificates were issued by a pass-through trust and are not obligations of JetBlue. The proceeds from the issuance of the pass-through certificates were used to purchase equipment notes issued by JetBlue and secured by 14 of our previously unencumbered aircraft. Principal and interest are payable semi-annually.
Fixed Rate Equipment Notes, Due Through 2028
In 2019, we issued $219 million in fixed rate equipment notes due through 2027, which are secured by 10 Airbus A320 aircraft and 2 Airbus A321 aircraft. In 2018, we issued $567 million in fixed rate equipment notes due through 2028, which are secured by 14 Airbus A320 aircraft and 10 Airbus A321 aircraft.
Floating Rate Equipment Notes, Due Through 2028
Interest rates adjust quarterly or semi-annually startingbased on LIBOR, plus a margin. In 2018, we issued $120 million in floating rate equipment notes due through 2028, which are secured by 6 Airbus A320 aircraft and 1 Airbus A321 aircraft.
Floating Rate Term Loan Credit Facility, Due Through 2024
On June 17, 2020, we entered into a $750 million term loan credit facility with Barclays Bank PLC, as administrative agent. The loans under this term loan credit facility bear interest at a variable rate equal to LIBOR (subject to a 1.00% floor), or at our election another rate, in each case, plus a specified margin. Our obligations are secured on a senior basis by airport takeoff and landing slots at LaGuardia Airport, John F. Kennedy International Airport, and Reagan National Airport and the right to use certain intellectual property assets comprising the JetBlue brand. The term loan facility is subject to amortization payments of 5% per year, payable quarterly, commencing on September 2014.30, 2020 with the remaining balance due and payable in a single payment on the maturity date of June 17, 2024. The interest rate on our outstanding balance was 6.25% as of December 31, 2020.
(3)Secured CARES Act Loan Program
As discussed in Note 2 to our consolidated financial statements, under the CARES Act Loan Program, we have the ability to borrow up to a total of approximately $1.9 billion from the Treasury. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company. If we accept the full amount of the loan, we will issue warrants to purchase approximately 20.5 million shares of our common stock to the Treasury. Any amount received under the Loan Program will be subject to the relevant provisions of the CARES Act, including many of those described above under the Payroll Support Program.
Unless otherwise terminated early, all borrowings under the Loan Agreement are due and payable on the fifth anniversary of the initial borrowing date. We made a drawing of $115 million under the Loan Agreement on September 29, 2020. Borrowings under the Loan Agreement bear interest at a variable rate equal to LIBOR (or another rate based on certain market interest rates, plus a margin of 1% per annum, in each case with a floor of 0%), plus a margin of 2.75% per annum. Our
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
obligations under the Loan Agreement are secured by liens on (i) certain eligible aircraft and engine collateral, (ii) certain loyalty program assets, including JetBlue's rights in certain loyalty program agreements, loyalty program data and intellectual property, and (iii) certain cash accounts (collectively, the "Collateral"). Under the terms of the Loan Agreement, we may also pledge eligible spare parts, slots, gates and routes, and additional aircraft, real property, ground support equipment, flight simulators and equity interests. The Loan Agreement includes affirmative and negative covenants that restrict our ability to, among other things, dispose of Collateral, merge, consolidate or sell assets, incur certain additional indebtedness or pay certain dividends. In November 2005,addition, we are required to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities aggregating not less than $550 million and to maintain a minimum ratio of the Greater Orlando Aviation Authority,borrowing base of the Collateral (determined as the sum of a specified percentage of the appraised value of each type of Collateral) to outstanding obligations under the Loan Agreement of not less than 1.6 to 1.0. If we do not meet the minimum collateral coverage ratio, we must either provide additional Collateral to secure our obligations under the Loan Agreement or GOAA, issued special purpose airport facilities revenue bondsrepay the loans by an amount necessary to maintain compliance with the collateral coverage ratio. The Loan Agreement contains events of default customary for similar financings. Upon the occurrence of an event of default, the outstanding obligations under the Loan Agreement may be accelerated and become due and payable immediately. In addition, if certain change of control events occur with respect to JetBlue, we will be required to prepay the loans in full under the Loan Agreement.
In connection with the Loan Agreement and the initial borrowing amount of $115 million, on September 29, 2020, we entered into a warrant agreement with Treasury, pursuant to which we issued to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share.
As of December 31, 2020, approximately $1.8 billion of the borrowing capacity remained available to us. On January 15, 2021, we entered into a letter agreement with Treasury which provided an extension of the Loan Agreement allowing us the option to access the remaining borrowing capacity through May 28, 2021.
Citibank Line of Credit
In August 2019, we amended our revolving Credit and Guaranty Agreement with Citibank N.A. as reimbursementthe administrative agent. The amendment increased our borrowing capacity by $125 million to $550 million and extended the term of the facility through August 2023. Borrowings under the Credit and Guaranty Agreement bear interest at a variable rate equal to LIBOR, plus a margin. The Credit and Guaranty Agreement is secured by spare parts, aircraft, and certain other assets. The Credit and Guaranty Agreement includes covenants that require us to maintain certain minimum balances in unrestricted cash, cash equivalents, and unused commitments available under revolving credit facilities. In addition, the covenants restrict our ability to, among other things, dispose of certain collateral, or merge, consolidate, or sell assets.
We borrowed the full amount of $550 million under this revolving Credit and Guaranty Agreement on April 22, 2020. The interest rate on our outstanding balance was 2.20% as of December 31, 2020.
2020 Sale-Leaseback Transactions
As discussed in Note 2 to our consolidated financial statements, in 2020, we executed $563 million of sale-leaseback transactions. Of these transactions, $354 million did not qualify as sales for certain airport facility constructionaccounting purposes. The assets associated with these transactions remain on our consolidated balance sheets within property and other costs. In April 2013, GOAA issued $42equipment and the related liabilities under the lease are classified within debt and finance leases obligations. These transactions are treated as cash from financing activities on our consolidated statements of cash flows. The remaining $209 million in special purpose airport facility revenue bonds to refund the bonds issued in 2005. of sale-leaseback transactions qualified as sales and generated a loss of $106 million. The proceeds from the refunded bonds were loaned to usassets associated with these transactions which qualified as sales are recorded within operating lease assets. The liabilities are recorded within current operating lease liabilities and we recorded the issuance of $43 million, net of $1 million premium, as long term debtlong-term operating lease liabilities on our consolidated balance sheets. In December 2006, the New York City Industrial Development Agency issued special facility revenue bonds for JFK to usThese transactions are treated as reimbursement to us for certain airport facility construction and other costs. We recorded the principal amount of the bond, net of discounts, as long-term debtcash from investing activities on our consolidated balance sheets because we have issued a guaranteestatements of the debt payments on the bond. This fixed rate debt is secured by leasehold mortgages of our airport facilities. During June 2015, we prepaid the full $32 million principal outstanding on the JFK special facility revenue bonds.cash flows
(4) Finance Leases
As of December 31, 20172020, 2 Airbus A320 aircraft, 2 Airbus A321 aircraft, and 2016, four capitalvarious computer equipment under finance leases were included in property and equipment at a cost of $188 million with accumulated amortization of $54 million. The future minimum lease payments under these non-cancelable leases are $40 million in 2021, $11 million in 2022, $11 million in 2023, $5 million in 2024, and 0 payments in the years thereafter. Included in the future minimum lease payments is $4 million representing interest, resulting in a present value of finance leases of $63 million with a current portion of $37 million and a long-term portion of $26 million.
As of December 31, 2019, 4 finance leased Airbus A320 aircraft and two capital2 finance leased Airbus A321 aircraft were included in property and equipment at a cost of $253$250 million with accumulated amortization of $64$80 million.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unsecured CARES Act Payroll Support Program Loan
As discussed in Note 2 to our consolidated financial statements, on April 23, 2020, we entered into the PSP Agreement under the CARES Act with the Treasury. Pursuant to the agreement, JetBlue received a Payroll Support Payment of $936 million and $56 million, respectively. The future minimum lease payments under these non-cancelable leases are $23 million in 2018, $23 million in 2019, $35 million in 2020, $39 million in 2021, $9 million in 2022 and $14 million in the years thereafter. Included in the future minimum lease payments is $20 million representing interest, resulting in(the "Payroll Support Payment") which included a present valuegrant of capital leases of $124 million with a current portion of $17$685 million and a long-term portionpromissory note for $251 million. The note matures 10 years after issuance and is payable in a lump sum at maturity. As part of $107 million.the agreement, JetBlue issued to the Treasury warrants to acquire more than 2.6 million shares of our common stock under the program at an exercise price of $9.50 per share. The warrants expire five years after issuance. On September 30, 2020, Treasury provided us Additional Payroll Support Payment of $27 million consisting of $19 million in grants and $8 million in an unsecured term loan under the PSP Agreement. The terms of the unsecured term loan are identical to those under the initial loan issued on April 23, 2020. In consideration for the Additional Payroll Support Payment, we issued Additional PSP Warrants to purchase approximately 85,540 additional shares of our common stock to the Treasury. The Additional PSP Warrants have the same terms and exercise price as the initial warrants issued on April 23, 2020.
As of December 31, 2017,2020, we believe we were in material compliance with all of our covenants in relation to our debt and lease agreements.
Maturities of long-termour debt and capitalfinance leases, net of debt acquisition costs, for the next five years are as follows (in millions):
| | | | | | | | |
| | Maturities |
| 2021 | | $ | 440 | |
| 2022 | | 421 | |
| 2023 | | 1,181 | |
| 2024 | | 962 | |
| 2025 | | 308 | |
| Thereafter | | 1,551 | |
|
| | | | |
| Year | | Maturities |
|
| 2018 | | $ | 194 |
|
| 2019 | | 215 |
|
| 2020 | | 179 |
|
| 2021 | | 164 |
|
| 2022 | | 142 |
|
| Thereafter | | 305 |
|
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aircraft, engines, and other equipment and facilitiesfacilities having a net book value of $2.3$6.9 billion at December 31, 20172020 were pledged as security under various financing arrangements. Cash payments for interest related to debt and capitalfinance lease obligations, net of capitalized interest, aggregated $60$128 million, $78$62 million and $93$59 million in 2017, 20162020, 2019, and 2015,2018, respectively.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying amounts and estimated fair values of our long-term debt, net of debt acquisition costs, at December 31, 20172020 and 20162019 were as follows (in millions):
| | | | | December 31, 2017 | | December 31, 2016 | | December 31, 2020 | | December 31, 2019 |
| | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value |
| Public Debt | | | | | | | | | Public Debt | | | | | | | | |
| Fixed rate special facility bonds, due through 2036 | | 42 |
| | 46 |
| | 42 |
| | 45 |
| Fixed rate special facility bonds, due through 2036 | | $ | 42 | | | $ | 45 | | | $ | 42 | | | $ | 46 | |
| Fixed rate enhanced equipment notes: | | Fixed rate enhanced equipment notes: | |
| 2019-1 Series AA, due through 2032 | | 2019-1 Series AA, due through 2032 | | 560 | | | 440 | | | 581 | | | 586 | |
| 2019-1 Series A, due through 2028 | | 2019-1 Series A, due through 2028 | | 174 | | | 152 | | | 181 | | | 186 | |
| 2019-1 Series B, due through 2027 | | 2019-1 Series B, due through 2027 | | 107 | | | 139 | | | 0 | | | 0 | |
| 2020-1 Series A, due through 2032 | | 2020-1 Series A, due through 2032 | | 627 | | | 658 | | | 0 | | | 0 | |
| 2020-1 Series B, due through 2028 | | 2020-1 Series B, due through 2028 | | 170 | | | 223 | | | 0 | | | 0 | |
| Non-Public Debt | | | | | | | | | Non-Public Debt | |
| Fixed rate enhanced equipment notes, due through 2023 | | 169 |
| | 178 |
| | 188 |
| | 197 |
| Fixed rate enhanced equipment notes, due through 2023 | | 114 | | | 116 | | | 133 | | | 141 | |
| Floating rate equipment notes, due through 2025 | | 152 |
| | 159 |
| | 171 |
| | 179 |
| |
| Fixed rate equipment notes, due through 2026 | | 712 |
| | 771 |
| | 843 |
| | 915 |
| |
| Fixed rate equipment notes, due through 2028 | | Fixed rate equipment notes, due through 2028 | | 891 | | | 1,017 | | | 1,107 | | | 1,201 | |
| Floating rate equipment notes, due through 2028 | | Floating rate equipment notes, due through 2028 | | 152 | | | 144 | | | 201 | | | 207 | |
| Floating rate term loan credit facility, due through 2024 | | Floating rate term loan credit facility, due through 2024 | | 702 | | | 759 | | | 0 | | | 0 | |
| Unsecured CARES Act Payroll Support Program loan, due through 2030 | | Unsecured CARES Act Payroll Support Program loan, due through 2030 | | 259 | | | 207 | | | 0 | | | 0 | |
| Secured CARES Act loan, due through 2025 | | Secured CARES Act loan, due through 2025 | | 104 | | | 104 | | | 0 | | | 0 | |
| Citibank line of credit, due through 2023 | | Citibank line of credit, due through 2023 | | 546 | | | 533 | | | 0 | | | 0 | |
| 2020 sale-leaseback transactions, due through 2024 | | 2020 sale-leaseback transactions, due through 2024 | | 352 | | | 393 | | | 0 | | | 0 | |
Total(1) | | $ | 1,075 |
| | $ | 1,154 |
| | $ | 1,244 |
| | $ | 1,336 |
| Total(1) | | $ | 4,800 | | | $ | 4,930 | | | $ | 2,245 | | | $ | 2,367 | |
(1) Total excludes capitalfinance lease obligations of $124$63 million and $140$89 million forat December 31, 20172020 and 2016,2019, respectively.
The estimated fair values of our publicly held long-term debt are classified as Level 2 in the fair value hierarchy. The fair values of our EETC transactionsenhanced equipment notes and our special facility bonds were based on quoted market prices in markets with low trading volumes. The fair value of our non-public debt was estimated using a discounted cash flow analysis based on our borrowing rates for instruments with similar terms and therefore classified as Level 3 in the fair value hierarchy. The fair values of our other financial instruments approximate their carrying values. Refer to Note 1314 to our consolidated financial statements for additional information onan explanation of the fair value.value hierarchy structure.
We have financed certain aircraft with EETCs as oneEnhanced Equipment Trust Certificates, or EETCs. One of the benefits of this structure is being able to finance several aircraft at one time, rather than individually. The structure of EETC financing is that we create pass-through trusts in order to issue pass-through certificates. The proceeds from the issuance of these certificates are then used to purchase equipment notes which are issued by us and are secured by our aircraft. These trusts meet the definition of a variable interest entity, or VIE, as defined in the Consolidations topic of the Codification, and must be considered for consolidation in our consolidated financial statements. Our assessment of theour EETCs considers both quantitative and qualitative factors including the purpose for which these trusts were established and the nature of the risks in each. The main purpose of the trust structure is to enhance the credit worthiness of our debt obligation through certain bankruptcy protection provisions and liquidity facilities, and also to lower our total borrowing cost. We concluded that we are not the primary beneficiary in these trusts due tobecause our involvement in them beingis limited to principal and interest payments on the related notes, the trusts were not set up to pass along variability created by credit risk to us and the likelihood of our defaulting on the notes. Therefore, we have not consolidated these trusts in our consolidated financial statements.
Short-term Borrowings
We have several lines ofMorgan Stanley Delayed Draw Term Loan Agreement
In March 2020, we entered into a 364-day delayed draw term loan credit which bear interest at a floating rate based upon LIBOR plus a margin range of between 1.0% and 2.0%.
Citibank Line of Credit
We have a revolving Credit and Guaranty Agreementagreement with Citibank, N.A.Morgan Stanley Senior Funding Inc., as the administrative agentagent. The delayed draw term loan agreement provided for a term loan facility of up to approximately $425 million. The term$1 billion.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Borrowings under the Credit and Guaranty Agreement bearcredit agreement bore interest at a variable rate equal to LIBOR (but not less than 1% per annum), plus a margin,. The Credit and Guaranty Agreement is or at our election, another rate based on certain market interest rates.
Our obligations under the delayed draw term loan agreement were secured by Slots at John F. Kennedy International Airport, LaGuardia Airportliens on certain aircraft and Reagan National Airport as well as certain other assets. Slots are rights to take-off or land at a specific airport during a specific time period during the day and a means by which airport capacity and congestion can be managed.spare engines. The Credit and Guaranty Agreement includes covenantsdelayed draw term loan agreement included provisions that requirerequired us to maintain certain minimum balances in unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities. In addition,facilities (including the covenants restrict our abilityterm loan facility) aggregating not less than $550 million.
We borrowed the full amount of the delayed draw term loan facility in March 2020. Amortization payments equal to among other things, dispose0.25% of certain collateral, or merge, consolidate, or sell assets. Asthe outstanding principal of and for the years ended December 31, 2017 and 2016, we did not haveterm loan were due on the last day of each quarter during the term. The remaining outstanding principal amount of the term loan was required to be repaid in a single installment on the maturity date on March 15, 2021.
We repaid the full balance outstanding or borrowings underof this linedelayed draw term loan facility during the third quarter of credit.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2020.
Morgan Stanley Line of Credit
We have a revolving line of credit with Morgan Stanley for up to approximately $200 million. This line of credit is secured by a portion of our investment securities held by Morgan Stanley and the amount available to us under this line of credit may vary accordingly. This line of credit bears interest at a floating rate based upon LIBOR, plus a margin. As of and for the years ended December 31, 20172020 and 2016,2019, we did not0t have a balance outstanding or borrowings under this line of credit.
Note 3—5—Leases
Operating lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, we use the rate implicit in the lease to discount lease payments to present value. For leases that do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.
Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees. For facility leases, we account for the lease and non-lease components as a single lease component.
The table below presents the lease-related assets and liabilities recorded on our consolidated balance sheets as of December 31, 2020 and 2019 (in millions):
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | | | As of December 31, |
| | | | 2020 | | 2019 |
| Assets | | Classification on Balance Sheet | | | | |
| Operating lease assets | | Operating lease assets | | $ | 804 | | | $ | 912 | |
| Finance lease assets | | Property and equipment, net | | 131 | | | 171 | |
| Total lease assets | | | | $ | 935 | | | $ | 1,083 | |
| | | | | | |
| Liabilities | | Classification on Balance Sheet | | | | |
| Current: | | | | | | |
| Operating lease liabilities | | Current operating lease liabilities | | $ | 113 | | | $ | 128 | |
| Finance lease liabilities | | Current maturities of long-term debt and finance lease obligations | | 37 | | | 31 | |
| Long-term: | | | | | | |
| Operating lease liabilities | | Long-term operating lease liabilities | | 752 | | | 690 | |
| Finance lease liabilities | | Long-term debt and finance lease obligations | | 26 | | | 58 | |
| Total lease liabilities | | | | $ | 928 | | | $ | 907 | |
| | | | | | |
| | | | As of December 31, |
| | | | 2020 | | 2019 |
| Weighted average remaining lease term (in years) | | | | |
| Operating leases | | 9 | | 11 |
| Finance leases | | 2 | | 3 |
| Weighted average discount rate | | | | |
| Operating leases | | 5.99 | % | | 5.95 | % |
| Finance leases | | 4.60 | % | | 4.75 | % |
Flight Equipment Leases
We leaseoperated a fleet of 267 aircraft all of our facilities at the airports we serve, office space and other equipment. These leases have varying terms and conditions, with some having early termination clauses which we determine to be the lease expiration date. The length of the lease depends upon the type of asset being leased, with the latest lease expiring in 2035. Total rental expense for all of our operating leases was $315 million in 2017, $294 million in 2016 and $298 million in 2015. Asas of December 31, 2017, we have approximately $30 million in assets that serve as collateral for letters of credit. These letters of credit relate to a certain number of our leases and are included in restricted cash.
As of December 31, 2017, 44 of the 243 aircraft in2020. Of our fleet, 62 aircraft were leasedaccounted for under operating leases and 4 aircraft were accounted for under finance leases. These aircraft leases generally have long durations with lease expiration dates ranging from 2018remaining terms of nine months to 2028. Nonefive years.
The majority of the 44 aircraft operating leases have variable rate rent payments based on LIBOR. Leases for 40 of our aircraft can generally be renewed at rates based on fair market value at the end of the lease term for one or two years.years. NaN of our aircraft operating leases have variable rent payments. We have purchase options for 4240 of our aircraft leases at the end of their lease term.terms. These purchase options are at fair market value and have a one-time option during the term at fixed amounts that were expected to approximate the fair market value at lease inception.
We bought outAs a result of the operating leases on three Airbus A320 aircraftunprecedented decline in demand for approximately $51travel caused by the COVID-19 pandemic, we recorded impairment losses of $273 million nine Airbus A320 aircraft for approximately $164 million, and six Airbus 320 aircraft for approximately $110 million, during 2017, 2016, and 2015 respectively.
Future minimum lease payments under noncancelable operating leases, including those described above, with initial or remaining terms in excess of onethe year at ended December 31, 2017,2020 relating to our Embraer E190 fleet. These losses were attributed to aircraft and related spare parts including the ones under operating leases. Refer to note 18 to our consolidated financial statements for further details.
Facility Leases
Our facility leases are as follows (in millions):
|
| | | | | | | | | | | | |
| | | Aircraft | | Other | | Total |
| 2018 | | $ | 71 |
| | $ | 99 |
| | $ | 170 |
|
| 2019 | | 59 |
| | 91 |
| | 150 |
|
| 2020 | | 57 |
| | 74 |
| | 131 |
|
| 2021 | | 51 |
| | 66 |
| | 117 |
|
| 2022 | | 45 |
| | 62 |
| | 107 |
|
| Thereafter | | 139 |
| | 378 |
| | 517 |
|
| Total minimum operating lease payments | | $ | 422 |
| | $ | 770 |
| | $ | 1,192 |
|
Inprimarily for space at the pastairports we have entered into sale-leaseback arrangements with a third party lender for 40 of our operating aircraft. The sale-leasebacks occurred simultaneously with the delivery of the related aircraft to us from their manufacturers. Each sale-leaseback transaction was structured with a separate trust set up by the third party lender, the assets of which consist of the one aircraft initially transferred to it following the sale by us and the subsequent lease arrangement with us. Because of their limited capitalization and the potential need for additional financial support, these trustsserve. These leases are VIEs as defined in the Consolidations topic of the Codification and must be considered for consolidation in our financial statements. Our assessment of each trust considers both quantitative and qualitative factors, including whether we have the power to direct the activities and to what extent we participate in the sharing of benefits and losses of the trusts. JetBlue does not retain any equity interests in any of these trusts and our obligations to them are limited to the fixed rental payments we are required to make to them. These were approximately $316 million as of December 31, 2017 and are reflected in the future minimum lease payments in the table above. Our only interest in these entities is the purchase options to acquire the aircraft as specified above. Since there are no other arrangements, either implicit or explicit, between us and the individual trusts that would result in our absorbing additional variability from the trusts, we concluded we are not the primary beneficiary of these trusts. We account for these leasesclassified as operating leases followingand reflect our use of passenger terminal service facilities consisting of ticket counters, gate space, operations support area, and baggage service offices. We lease space directly or indirectly from the appropriatelocal airport authority on varying terms dependent on prevailing practices at each airport. The remaining terms of our airport leases vary from 2 months to 14 years. Our leases at certain airports contain provisions for periodic adjustments of rental rates based on the operating costs of the airports or the frequency of use of the facilities. Some of these leases also include renewal options and/or termination options that are factored into our determination of lease guidancepayments when appropriate. Because of the variable nature of the rates, these leases are not recorded as required by the Leases topic in the Codification.operating lease assets and operating lease liabilities on our consolidated balance sheets.
We also have leases for our corporate offices, training center, and various hangars and airport support facilities at our focus cities.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4—JFK Terminal 5Other Ground and Property Equipment
We operate outlease certain IT assets, ground support equipment, and various other pieces of T5 at JFK and our occupancy is governed by variousequipment. The lease agreements with the PANYNJ. Under the terms of our ground support equipment are less than 12 months. The amount of other equipment we have is not significant.
Lease Costs
The table below presents certain information related to our lease costs during the facility lease agreement we were responsible foryears ended December 31, 2020, 2019, and 2018 (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Operating lease cost | | $ | 160 | | | $ | 180 | | | $ | 185 | |
| Short-term lease cost | | 1 | | | 2 | | | 2 | |
| Finance lease cost: | | | | | | |
| Amortization of assets | | 6 | | | 9 | | | 10 | |
| Interest on lease liabilities | | 2 | | | 3 | | | 3 | |
| Variable lease cost | | 282 | | | 391 | | | 379 | |
| Sublease income | | (5) | | | (19) | | | (15) | |
| Total net lease cost | | $ | 446 | | | $ | 566 | | | $ | 564 | |
Other Information
The table below presents supplemental cash flow information related to leases during the construction of the 635,000 square foot 26-gate terminal, a parking garage, roadwaysyears ended December 31, 2020, 2019, and an AirTrain Connector, all of which are owned by the PANYNJ and collectively referred to as the T5 Project. In 2014, we completed construction of our an international arrivals facility and additional gates, T5i. T5i includes six international arrival gates comprised of three new gates and three converted gates from T5, as well as an international arrivals hall with full U.S. Customs and Border Protection services.2018 (in millions):
We executed an extension to the original T5 lease in 2013.
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Cash paid for amounts included in the measurement of lease liabilities | | | | | | |
| Operating cash flows for operating leases | | $ | 146 | | | $ | 136 | | | $ | 151 | |
| Operating cash flows for finance leases | | 4 | | | 5 | | | 5 | |
| Financing cash flows for finance leases | | 28 | | | 17 | | | 17 | |
Lease Commitments
The lease, as amended, now incorporates a total of approximately 19 acres of space for our T5 facilities and ends on the 28th anniversary of the date of beneficial occupancy of T5i. We have the option to terminate the agreement in 2033, five years prior to the end of the originaltable below presents scheduled lease term of October 2038. We are responsible for various payments under the leases, including ground rents which are reflected in the future minimum lease payments table in Note 3,for operating and facility rents which are included below. The facility rents are based upon the number of passengers enplaned out of the terminal, subject to annual minimums.
We were considered the owner of the T5 Project for financial reporting purposes only and have been required to reflect an asset and liability for the T5 Projectfinance leases recorded on our consolidated balance sheets, since constructionas of December 31, 2020 (in millions):
| | | | | | | | | | | | | | |
| | As of December 31, 2020 |
| | Operating Leases | | Finance Leases |
| 2021 | | $ | 160 | | | $ | 40 | |
| 2022 | | 151 | | | 11 | |
| 2023 | | 141 | | | 11 | |
| 2024 | | 119 | | | 5 | |
| 2025 | | 82 | | | 0 | |
| Thereafter | | 493 | | | 0 | |
| Total minimum lease payments | | 1,146 | | | 67 | |
| Less: amount of lease payment representing interest | | (281) | | | (4) | |
| Present value of future minimum lease payment | | 865 | | | 63 | |
| Less: current obligations under leases | | (113) | | | (37) | |
| Long-term lease obligations | | $ | 752 | | | $ | 26 | |
We did not have any lease commitments that have not yet commenced in 2005. The costas of the T5 Project and the related liability are being accounted for as a financing obligation. Our constructionDecember 31, 2020.
Total costs incurred for the elements of the T5 Project were $637 million, of which $561 million is classified as Assets Constructed for Others and the remaining $76 million is classified as leasehold improvements in our consolidated balance sheets. Assets Constructed for Others are being amortized over the shorter of the 25 year non-cancelable lease term or their economic life. We recorded amortization expense of $22 million, $23 million, and $23 million during in 2017, 2016 and 2015, respectively. Our total expenditures relating to T5i were approximately $207 million, all of which were incurred prior to 2016 and are classified as leasehold improvements in our consolidated balance sheets.JETBLUE AIRWAYS CORPORATION
The PANYNJ has reimbursed us for the amounts currently included in Assets Constructed for Others. These reimbursements and related interest are reflected as Construction Obligation in our consolidated balance sheets. When the facility rents are paid they are treated as a debt service on the Construction Obligation, with the portion not relating to interest reducing the principal balance. Minimum estimated facility payments including escalations associated with the facility lease are estimated to be $40 million per year in 2018 through 2022 and $456 million thereafter. The portion of these scheduled payments serving to reduce the principal balance of the Construction Obligation is $17 million in 2018, $18 million in 2019, $19 million in 2020, $20 million in 2021 and $21 million in 2022. Payments could exceed these amounts depending on future enplanement levels at JFK. Scheduled facility payments representative of interest totaled $24 million in 2017, $25 million in 2016 and $25 million in 2015.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5—6—Stockholders’ Equity
In September 2012, ourOn December 8, 2017, the Board of Directors authorizedapproved a share repurchase program for up to 25 million shares of common stock over a 5 year period.
On June 16, 2015, we entered into an accelerated share repurchase agreement, or ASR, with Goldman, Sachs & Co., or Goldman Sachs, paying $150 million for an initial delivery of approximately 6.1 million shares. The terms of the ASR concluded on September 15, 2015 with Goldman Sachs delivering approximately 0.7 million additional shares to JetBlue. A total of approximately 6.8 million shares was repurchased under this ASR, with an average price paid per share of $22.06.
In September 2015, JetBlue entered into an agreement for the repurchase of up to 778,460 shares per day, structured pursuant to Rule 10b5-1 and 10b-18 under the Securities Exchange Act of 1934 as amended, with a maximum of 3 million shares to be repurchased. The repurchases commenced on October 30, 2015 and terminated on November 18, 2015 with 3 million shares repurchased for approximately $77 million.
On September 10, 2015, our Board of Directors authorized a share repurchase program for up to $250 million worth of shares of common stock over a three year period beginning on January 1, 2016. On December 7, 2016, the Board approved certain changes to ourtwo-year share repurchase program, or the 2016 Repurchase2017 Authorization, to increase the aggregate authorization in the value of the program, to up to $500$750 million worth of shares,common stock beginning on January 1, 2018. The 2017 Authorization was completed in 2019.
On September 19, 2019, the Board of Directors approved a share repurchase program, or the 2019 Authorization, of up to $800 million worth of common stock beginning on October 1, 2019 and extended the term of the program through ending no later than December 31, 2019. The program includes2021.
Our share repurchase programs include authorization for repurchases in open market transactions pursuant to Rules 10b-18 and/or 10b5-1 of the Securities and Exchange Act, of 1934, as amended and/or one or more accelerated stock repurchase programs through privately-negotiated accelerated stock repurchase transactions.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 7, 2016,In 2018, we entered into an3 separate ASR agreement with Goldman Sachs paying $60 millionagreements for an initial deliverya sum of approximately 2.7 million shares. The terms of the ASR concluded on December 29, 2016 with Goldman Sachs delivering approximately 0.2 million additional shares to JetBlue.$375 million. A total of approximately 2.919.1 million shares waswere repurchased under thisthese ASR agreements with an average price paid per share of $20.74.$19.60.
Also on November 7, 2016,In 2019, we entered into a4 separate ASR agreement with Morgan Stanley & Co. LLC, or Morgan Stanley, paying $60 millionagreements for an initial deliverya sum of approximately 2.7 million shares. The terms of the ASR concluded on December 30, 2016 with Morgan Stanley delivering approximately 0.2 million additional shares to JetBlue.$535 million. A total of approximately 2.928.1 million shares waswere repurchased under thisthese ASR agreements with an average price paid per share of $20.93.$19.02.
On March 6, 2017, JetBlue entered into an ASR agreement with Barclays Bank PLC, or Barclays, paying $100 million for an initial deliveryDuring the first quarter of approximately 4.1 million shares. The terms of the ASR concluded on April 24, 2017 with Barclays delivering approximately 0.8 million additional shares to JetBlue. A total of 4.92020, we repurchased 13.0 million shares at an average price of $20.23$12.27 per share, were repurchased under the agreement.
On April 27, 2017, JetBlue entered into an ASR agreement with Goldman Sachs, paying $150 million for an initial delivery of approximately 5.4 million shares. The terms of the ASR concluded on July 24, 2017 with Goldman Sachs delivering approximately 1.4 million additional shares to JetBlue. A total of 6.8 million shares, at an average price of $21.99 per share, were repurchased under the agreement.
On September 11, 2017, JetBlue entered into an ASR agreement with Morgan Stanley, paying $130 million for an initial delivery of approximately 5.4 million shares. The terms of the ASR concluded on September 26, 2017 with Morgan Stanley delivering approximately 1.5 million additional shares to JetBlue. A total of 6.9 million shares, at an average price of $18.86 per share, were repurchased under the agreement. The Morgan Stanley ASR completed our 2016 Repurchase Authorization.share.
The total shares purchased by JetBlue under each of the ASRs in 2017, 20162020, 2019, and 20152018 were based on the volume weighted average prices of JetBlue's common stock during the terms of the respective agreements.
In accordance with the PSP Agreement and the Loan Agreement with the Treasury, we are prohibited from making any share repurchases. We have suspended our share repurchase program as of March 31, 2020.
On December 8, 2017,4, 2020, we completed the Boardpublic offering of Directors approved42.0 million shares of our common stock at a two year share repurchase authorization starting on January 1, 2018,public offering price of up$14.40 per share. We intend to $750 million worth of shares. The authorization can be executed through repurchases in open market transactions pursuant to Rules 10b-18 and/or 10b5-1 ofuse the Securities and Exchange Act of 1934, as amended, and/or one or more privately-negotiated accelerated stock repurchase transactions.net proceeds from the offering for general corporate purposes.
As of December 31, 2017,2020, we had a total of 26.626.5 million sharesshares of our common stock reserved for issuance. These shares are primarily related to our equity incentive plans. ReferRefer to Note 78 to our consolidated financial statements for further details on our share-based compensation.
As of December 31, 2017,2020, we had a total of 96.6158.0 million sharesshares of treasury stock, the majority of which relate to shares repurchased under our share repurchase program and the return of borrowed shares under our share lending agreement with Morgan Stanley which was terminated in January 2016.stock.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6—7—(Loss) Earnings Per Share
Basic earnings per share is calculated by dividing net (loss) income by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated similarly but includes potential dilution from restricted stock units, the Crewmember Stock Purchase Plan, and any other potentially dilutive instruments using the treasury stock method. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share amounts were 2.0 million for the year ended December 31, 2020. There were 0 anti-dilutive common stock equivalents for the years ended December 31, 2019 and 2018.
The following table shows how we computed basic and diluted earnings per common share for the years ended December 31 (dollars and share data in millions):
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Numerator: | | | | | | |
| Net income | | $ | 1,147 |
| | $ | 759 |
| | $ | 677 |
|
| Effect of dilutive securities: | | | | | | |
| Interest on convertible debt, net of income taxes and profit sharing | | — |
| | 2 |
| | 4 |
|
| Net income applicable to common stockholders after assumed conversions for diluted earnings per share | | $ | 1,147 |
| | $ | 761 |
| | $ | 681 |
|
| Denominator: | | | | | | |
| Weighted average shares outstanding for basic earnings per share | | 328.7 |
| | 326.5 |
| | 315.1 |
|
| Effect of dilutive securities: | | | | | | |
| Employee stock options and restricted stock units | | 1.7 |
| | 2.1 |
| | 2.8 |
|
| Convertible debt | | — |
| | 13.6 |
| | 26.9 |
|
| Adjusted weighted average shares outstanding and assumed conversions for diluted earnings per share | | 330.4 |
| | 342.2 |
| | 344.8 |
|
As of December 31, 2015, a total of approximately 1.4 million shares of our common stock, which were lent to Morgan Stanley, our share borrower pursuant to the terms of our share lending agreement were issued and outstanding for corporate law purposes, but were returned during January 2016. Holders of the borrowed shares had all the rights of a holder of our common stock. However, because the share borrower had to return all borrowed shares to us, or identical shares or, in certain circumstances of default by the counterparty, the cash value thereof, the borrowed shares were not considered outstanding for the purpose of computing and reporting basic or diluted earnings per share.
During 2016 holders voluntarily converted approximately $86 million in principal amount of the 6.75% Series B convertible debentures. As a result, we issued 17.6 million shares of our common stock. During 2015 holders voluntarily converted approximately $68 million in principal amount of the 5.5% Series B convertible debentures. As a result, we issued 15.2 million shares of our common stock. | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Net (loss) income | | $ | (1,354) | | | $ | 569 | | | $ | 189 | |
| | | | | | |
| Weighted average basic shares | | 277.5 | | | 296.6 | | | 312.9 | |
| Effect of dilutive securities | | 2.0 | | | 1.8 | | | 1.6 | |
| Weighted average diluted shares | | 279.5 | | | 298.4 | | | 314.5 | |
| | | | | | |
| Earnings per common share | | | | | | |
| Basic | | $ | (4.88) | | | $ | 1.92 | | | $ | 0.60 | |
| Diluted | | $ | (4.88) | | | $ | 1.91 | | | $ | 0.60 | |
As discussed in Note 5,6 to our consolidated financial statements, JetBlue entered into ASRsvarious ASR agreements in 2017, 20162020, 2019, and 20152018 and purchased approximately 18.713.0 million, 5.828.1 million, and 6.819.1 million shares, respectively, for $380$160 million, $120$535 million, and $150$375 million, respectively. The number of shares repurchased are based on the volume weighted average prices of JetBlue's common stock during the term of the ASR agreements. JetBlue also repurchased 3 million shares pursuant to Rule 10b5-1 and 10b-18 under the Securities Exchange Act
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7—8—Share-Based Compensation
We have various equity incentive plans under which we have granted stock awards to our eligible Crewmemberscrewmembers and members of our Board of Directors. These include the JetBlue Airways Corporation Restated and Amended 2002 Stock Incentive Plan, or 2002 Plan, which was replaced by the JetBlue Airways Corporation 2011 Incentive Compensation Plan, or 2011 Plan, and the JetBlue Airways Corporation 2020 Omnibus Equity Incentive Plan, or the 2020 Plan.
The 2002 Plan was replaced by the 2011 Plan and has an immaterial amount of vested deferred stock units outstanding as of December 31, 2020.
The 2011 Plan was replaced by the 2020 Plan in May 2020.
We additionally have a Crewmember Stock Purchase Plan, or CSPP, that is available to all eligible Crewmembers. Both the 2011 Plan and CSPP were amended in 2015 by Shareholders at our annual meeting.crewmembers.
Unrecognized stock-based compensation expense which was approximately $21.6$21.2 million as of December 31, 2017, related2020. This amount relates to a total of 2.12.4 million unvested restricted stock units, or RSUs, performance stock units, or PSUs, and deferred stock units, or DSUs, that were outstanding under our 2011 Plan.and 2020 Plans. We expect to recognize this stock-based compensation expense over a weighted average period of approximately one year.17 months.
The total stock-based compensation expense, which is included within salaries, wages and benefits on our consolidated statements of operations, for the years ended December 31, 2017, 20162020, 2019, and 20152018 was $29$28 million, $23$31 million, and $20$28 million, respectively.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2011 Incentive Compensation Plan
At our Annual Shareholders Meeting held on May 26, 2011, our Shareholdersshareholders approved the JetBlue Airways Corporation 2011 Incentive Compensation Plan. This replaced the Restated and Amended 2002 Stock Incentive Plan, or 2002 Plan, which was set to expire at the end of 2011. Upon inception, the 2011 Plan had 15.0 million shares of our common stock reserved for issuance. The 2011 Plan, by its terms, will terminate no later than May 2021. RSUs vest in annual installments over three years which can be accelerated upon the occurrence of a change in control. Under this plan, we grant RSUs to certain Crewmembers and members of our Board of Directors.crewmembers. Our policy is to grant RSUs based on the market price of the underlying common stock on the date of grant. Under this plan, we grant DSUs to members of our Board of Directors, and PSUs to certain members of our executive leadership team.
The 2011 Plan was amended and restated effective January 1, 2014, to include the definition of retirement eligibility. Once a Crewmembercrewmember meets the definition, they will continue to vest their shares as if they remained employed by JetBlue, regardless of their actual employment status with the Company. In accordance with the Compensation-Stock Compensation topic of the Codification, the grant’s explicit service condition is non-substantive and the grant has effectively vested at the time retirement eligibility is met.
At our Annual Shareholders Meeting held on May 21, 2015, our Shareholdersshareholders approved amendments to the 2011 Plan increasing the number of shares of Company common stock that remain available for issuance under the plan by 7.5 million.
Restricted Stock Units
The following is a summary of RSU activity under the 2011 Plan for the year ended December 31, 20172020 (in millions except per share data):
| | | | | | | | | | | | | | |
| | | Shares | | Weighted Average Grant Date Fair Value |
| Nonvested at beginning of year | | 2.0 | | | $ | 18.59 | |
| Granted | | 1.2 | | | 17.96 | |
| Vested | | (0.9) | | | 18.99 | |
| Forfeited | | (0.2) | | | 18.07 | |
| Nonvested at end of year | | 2.1 | | | 18.08 | |
|
| | | | | | |
| | | Shares | | Weighted Average Grant Date Fair Value |
| Nonvested at beginning of year | | 1.8 |
| | $16.77 |
| Granted | | 0.9 |
| | 19.76 |
|
| Vested | | (1.0 | ) | | 14.04 |
|
| Forfeited | | (0.1 | ) | | 19.69 |
|
| Nonvested at end of year | | 1.6 |
| | $20.14 |
The total intrinsic value, determined as of the date of vesting, for all RSUs that vested and converted to shares of common stock during the year ended December 31, 2017, 20162020, 2019 and 20152018 was $20$18 million $30, $15 million and $33$16 million, respectively. The weighted average grant-date fair value of share awards during the years ended December 31, 2017, 20162020, 2019 and 20152018 was $19.76, $22.95,$17.96, $17.27, and $17.09,$20.62, respectively.
The vesting period for DSUs under the 2011 Plan is either one or three years of service. Once vested, shares are issued six months and one day following a Director’s departure from our Board of Directors. During the years ended December 31, 2017, 20162020, 2019, and 2015,2018, we granted a nominal amount of DSUs, almost all of which remain outstanding at December 31, 2017. 2020.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2017, 20162019 and 2015,2018, we granted a nominal amount of PSUs to members of our executive leadership team, payment of which are based upon achievements of certain performance criteria. No PSUs were granted in 2020 as a result of the economic uncertainty brought on by the COVID-19 pandemic.
Amended and Restated 2002 StockThe 2011 Plan which was set to expire in May 2021 was replaced by JetBlue Airways Corporation 2020 Omnibus Equity Incentive Plan in May 2020.
2020 Omnibus Equity Incentive Plan
At our Annual Shareholders Meeting held on May 14, 2020, our shareholders approved the JetBlue Airways Corporation 2020 Omnibus Equity Incentive Plan. Upon inception, the 2020 Plan had 10.5 million shares of our common stock reserved for issuance. The 20022020 Plan, included stock options issued during 1999 through 2001 under a previousby its terms, will terminate no later than May 2030. Under the 2020 plan, as well as all options issued from 2002 through adoption of the 2011 Plan. It provided for incentive and non-qualified stock options andwe grant RSUs to be granted to certain Crewmemberscrewmembers and members of our Board of Directors. Additionally, it providedThe vesting periods for the RSUs varies by grant but no less than one year. We also grant DSUs to be granted to members of our Board of Directors. The 2002 Plan became effective followingDirectors, and PSUs to certain members of our initial public offering in April 2002. executive leadership team under the 2020 Plan.
We began issuinghave only granted an insignificant amount of RSUs in 2007 and DSUs in 2008. Prior to 2011, the DSUs vested immediately upon being granted. The RSUs vested in annual installments over three years which could be accelerated upon the occurrence of a change in control as defined in the 2002 Plan. Our policy to grant RSUs was based on the market price of the underlying common stock on the date of grant. No additional grants were made from this plan after the adoption of the 2011 Plan. Since December 31, 2014, there were no RSUs outstanding under the 2002 Plan.2020 Plan since its adoption in May 2020.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
All options issued under the 2002 Plan expire ten years from the date of grant, with the last options vesting in 2012. Our policy is to grant options with an exercise price equal to the market price of the underlying common stock on the date of grant.
The following is a summary of stock option activity for the year ended December 31, 2017 (in millions except per share data):
|
| | | | | | |
| | | Shares | | Weighted Average Grant Date Fair Value |
| Outstanding at beginning of year | | 0.4 |
| | $10.90 |
| Exercised | | (0.4 | ) | | 10.90 |
|
| Outstanding at end of year | | — |
| | — |
|
| Vested at end of year | | — |
| | — |
|
The total intrinsic value, determined as of the date of exercise, of options exercised during the years ended December 31, 2017, 2016 and 2015 was $4 million, $6 million and $34 million, respectively. Total cash received from option exercises during the years ended December 31, 2017, 2016 and 2015 was $4 million, $10 million and $59 million, respectively. We have not granted any stock options since 2008 and those previously granted became fully expensed in 2012. Following Shareholder approval of the 2011 Plan, we stopped granting new equity awards under the 2002 Plan.
Crewmember Stock Purchase PlanPlans
In May 2011, our Shareholdersshareholders approved the 2011 Crewmember Stock Purchase Plan, or the 2011 CSPP. At inception, the 2011 CSPP had 8.0 million shares of our common stock reserved for issuance. The CSPP, by its terms, will terminate no later than the last business day of April 2021.
At our Annual Shareholders Meeting held on May 21, 2015, our Shareholdersshareholders approved amendments to the CSPP increasing the number of shares of Company common stock that remain available for issuance under the plan by 15 million.
In May 2020, our shareholders approved the JetBlue Airways Corporation 2020 Crewmember Stock Purchase Plan, or the 2020 CSPP to replace the 2011 CSPP which was set to expire in April 2021. At inception, the 2020 CSPP had 17.5 million shares of our common stock reserved for issuance. The 2020 CSPP, hasby its terms, will termination no later than May 2030. The other terms of the 2020 CSPP are substantially identical to those of the 2011 CSPP.
Our CSPPs have a series of six month-month offering periods, with a new offering period beginning on the first business day of May and November each year. Crewmembers can only join an offering period onenroll in CSPP nearly year-round, with the start date.exception of specific blackout dates. Crewmembers may contribute up to 10% of their pay towards the purchase of common stock via payroll deductions. Purchase dates occur on the last business day of April and October each year. The purchase price is the stock price on the purchase date, less a 15% discount. The compensation cost relating to the discount is recognized over the offering period. The total expense recognized relating to the CSPPour CSPPs for the years ended December 31, 2017, 20162020, 2019, and 20152018 was approximately $8 million, $6 million, $9 million and $5$9 million, respectively. Under this plan, Crewmembersthe plans, crewmembers purchased 2.54.1 million, 2.23.2 million, and 1.33.2 million new shares for the years ended December 31, 2017, 20162020, 2019, and 2015,2018, respectively, at weighted average prices of $17.46, $15.88,$8.94, $16.06, and $19.25$15.21 per share, respectively.
Under the CSPP,CSPPs, should we be acquired by merger or sale of substantially all of our assets or sale of more than 50% of our outstanding voting securities, all outstanding purchase rights will automatically be exercised immediately prior to the effective date of the acquisition at a price equal to 85% of the fair market value per share immediately prior to the acquisition.
Taxation
The Compensation-Stock Compensation topic of the FASB Codification requires deferred taxes be recognized on temporary differences that arise with respect to stock-based compensation attributable to nonqualified stock options and awards. However, no tax benefit is recognized for stock-based compensation attributable to incentive stock options, or ISO, or CSPP shares until there is a disqualifying disposition, if any, for income tax purposes. A portion of our historical stock-based compensation was attributable to ISO and CSPP shares; therefore, our effective tax rate was subject to fluctuation.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8—9—Income Taxes
Our income tax expense (benefit) expense consisted of the following for the years ended December 31 (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Deferred: | | | | | | |
| Federal | | $ | (247) | | | $ | 119 | | | $ | 82 | |
| State | | (82) | | | 20 | | | 7 | |
| Foreign | | 0 | | | 0 | | | 1 | |
| Deferred income tax (benefit) expense | | (329) | | | 139 | | | 90 | |
| Current: | | | | | | |
| Federal | | (199) | | | 36 | | | (61) | |
| State | | (9) | | | 19 | | | (5) | |
| Foreign | | (2) | | | 5 | | | 6 | |
| Current income tax (benefit) expense | | (210) | | | 60 | | | (60) | |
| Total income tax (benefit) expense | | $ | (539) | | | $ | 199 | | | $ | 30 | |
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Deferred: | | | | | | |
| Federal | | $ | (361 | ) | | $ | 245 |
| | $ | 351 |
|
| State | | 25 |
| | 25 |
| | 26 |
|
| Foreign | | 23 |
| | — |
| | — |
|
| Deferred income tax (benefit) expense | | (313 | ) | | 270 |
| | 377 |
|
| Current: | | | | | | |
| Federal | | 94 |
| | 129 |
| | 20 |
|
| State | | 18 |
| | 26 |
| | 16 |
|
| Foreign | | (25 | ) | | 32 |
| | 7 |
|
| Current income tax expense | | 87 |
| | 187 |
| | 43 |
|
| Total income tax (benefit) expense | | $ | (226 | ) | | $ | 457 |
| | $ | 420 |
|
The Tax Cuts and Jobs Act, or TheOn March 27, 2020, the CARES Act was enacted on December 22, 2017. The Act made significant changesin response to the Federal tax code, including a reductionCOVID-19 pandemic. The CARES Act permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in the Federal corporate statutory tax rate from 35%2018, 2019, and 2020 to 21%. At December 31, 2017, the Company was ablebe carried back to make a reasonable estimateeach of the tax effectsfive preceding taxable years to generate a refund of enactment of The Act as written, on the existing deferred tax balances.previously paid incomes taxes. As a result, of these estimates, the Company recognized a provisionalCompany’s effective tax rate includes an income tax benefit in the amount of $570 million. During 2018, the Company will continue to refine the calculations as we gain a more thorough understanding of the Act, including those related to the deductibility of purchased assets, stateanticipated refunds from tax treatment, amounts relatedlosses generated during 2020 that are permitted to Crewmember compensation as well as changes in interpretations of The Act and additional regulatory guidance that may be issued.carried back to certain years when the U.S. federal income tax rate was 35%.
The effective tax rate on income before income taxes differed from the federal income tax statutory rate for the years ended December 31 for the following reasons (in millions):
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Income tax expense at statutory rate | | $ | 322 |
| | $ | 425 |
| | $ | 384 |
|
| State income tax, net of federal benefit | | 28 |
| | 34 |
| | 28 |
|
| Adjustment of net deferred tax liability from enacted tax rate change | | (570 | ) | | — |
| | — |
|
| Other, net | | (6 | ) | | (2 | ) | | 8 |
|
| Total income tax (benefit) expense | | $ | (226 | ) | | $ | 457 |
| | $ | 420 |
|
Cash payments for income taxes were $139 million in 2017, $173 million in 2016 and $42 million in 2015.
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Income tax (benefit) expense at statutory rate | | $ | (398) | | | $ | 161 | | | $ | 45 | |
| State income tax, net of federal benefit | | (71) | | | 31 | | | 8 | |
| Adjustment of net deferred tax liability from enacted tax rate change | | 0 | | | 0 | | | (28) | |
| Nondeductible expenses | | 5 | | | 8 | | | 5 | |
| Net operating loss carryback | | (73) | | | 0 | | | 0 | |
| Foreign tax credit re-characterization | | (13) | | | 0 | | | 0 | |
| Foreign rate differential | | 2 | | | (3) | | | (2) | |
| Valuation allowance | | 10 | | | 0 | | | 0 | |
| Unrecognized tax benefit | | (3) | | | 0 | | | 0 | |
| Other, net | | 2 | | | 2 | | | 2 | |
| Total income tax (benefit) expense | | $ | (539) | | | $ | 199 | | | $ | 30 | |
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of our deferred tax assets and liabilities as of December 31 are as follows (in millions):
| | | | | | | | | | | | | | |
| | 2020 | | 2019 |
| Deferred tax assets: | | | | |
| Deferred revenue/gains | | $ | 161 | | | $ | 127 | |
| Employee benefits | | 71 | | | 47 | |
| Foreign tax credit | | 81 | | | 42 | |
| Net operating loss carryforward | | 335 | | | 31 | |
| Operating lease liabilities | | 204 | | | 212 | |
| Rent expense | | 33 | | | 17 | |
| Total deferred tax assets | | 885 | | | 476 | |
| Valuation allowance | | (69) | | | (31) | |
| Deferred tax assets, net | | 816 | | | 445 | |
| Deferred tax liabilities: | | | | |
| Accelerated depreciation | | (1,538) | | | (1,423) | |
| Operating lease assets | | (197) | | | (236) | |
| Other | | (3) | | | (37) | |
| Total deferred tax liabilities | | (1,738) | | | (1,696) | |
| Net deferred tax liability | | $ | (922) | | | $ | (1,251) | |
|
| | | | | | | | |
| | | 2017 | | 2016 |
| Deferred tax assets: | | | | |
| Deferred revenue/gains | | 95 |
| | 121 |
|
| Terminal 5 lease | | 45 |
| | 38 |
|
| Employee benefits | | 32 |
| | 41 |
|
| Foreign tax credit | | 23 |
| | — |
|
| Rent expense | | 22 |
| | 34 |
|
| Other | | 6 |
| | 8 |
|
| Deferred tax assets, net | | 223 |
| | 242 |
|
| Deferred tax liabilities: | | | | |
| Accelerated depreciation | | (1,256 | ) | | (1,596 | ) |
| Deferred tax liabilities | | (1,256 | ) | | (1,596 | ) |
| Net deferred tax liability | | $ | (1,033 | ) | | $ | (1,354 | ) |
In evaluating the realizability of the deferred tax assets, we assess whether it is more likely than not that some portion, or all, of the deferred tax assets, will be realized. We consider, among other things, the generation of future taxable income (including reversals of deferred tax liabilities) during the periods in which the related temporary differences will become deductible. At December 31, 2020, we provided a $69 million valuation allowance to reduce the deferred tax assets to an amount that we consider is more likely than not to be realized. Of the total valuation allowance, $59 million relates to foreign NOL carryforward, and $10 million relates to U.S. foreign tax credit carryforward that begins to expire in 2021.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as followfollows (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Unrecognized tax benefits at January 1, | | $ | 36 | | | $ | 33 | | | $ | 31 | |
| | | | | | |
| Increases for tax positions taken during the period | | 1 | | | 6 | | | 5 | |
| Decreases for tax positions taken during a prior period | | (5) | | | (3) | | | (3) | |
| Unrecognized tax benefits December 31, | | $ | 32 | | | $ | 36 | | | $ | 33 | |
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Unrecognized tax benefits at January 1, | | $ | 26 |
| | $ | 21 |
| | $ | 16 |
|
| Increases for tax positions taken during a prior period | | 2 |
| | 10 |
| | — |
|
| Increases for tax positions taken during the period | | 6 |
| | 5 |
| | 6 |
|
| Decreases for tax positions taken during a prior period | | (3 | ) | | (4 | ) | | (1 | ) |
| Decreases for settlement with tax authorities during the period | | — |
| | (6 | ) | | — |
|
| Unrecognized tax benefits December 31, | | $ | 31 |
| | $ | 26 |
| | $ | 21 |
|
Interest and penalties accrued on unrecognized tax benefits were not significant. If recognized, $15$12 million of the unrecognized tax benefits as of December 31, 20172020 would impact our effective tax rate. We do not expect any significant change in the amount of the unrecognized tax benefits within the next twelve months. As a result of net operating losses and statute of limitations in our major tax jurisdictions, years 2004 through 20162019 remain subject to examination by the relevant tax authorities.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9—Employee10—Crewmember Retirement Plan
We sponsor a retirement savings 401(k) defined contribution plan, or the Plan, covering all of our Crewmemberscrewmembers where we match 100% of our Crewmembercrewmember contributions up to 5% of their eligible wages. The contributions vest over fivethree years and are measured from a Crewmember’screwmember’s hire date. Crewmembers are immediately vested in their voluntary contributions.
Another component of the Plan is a Company discretionary contribution of 5% of eligible non-management Crewmembercrewmember compensation, which we refer to as Retirement Plus. Retirement Plus contributions vest over three years and are measured from a Crewmember’screwmember’s hire date.
Certain Federal Aviation Administration, or FAA, licensed crewmembers receive an additional contribution of 3% of eligible compensation, which we refer to as Retirement Advantage.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For15% of eligible pilot compensation per the terms of the finalized collective bargaining agreement between JetBlue and the Air Line Pilots Association, or ALPA, in lieu of the above 401(k) Company matching contribution, Retirement Plus, and Retirement Advantage contributions. Refer to Note 11 to our consolidated financial statements for additional information. The Company's non-elective contribution of 15% of eligible pilot compensation vests after three years of service prior to 2017, ourservice.
Our non-management Crewmembers were also eligible to receive profit sharing, calculated as 15% of adjusted pre-tax income before profit sharing and special items with the result reduced by Retirement Plus contributions. Beginning with 2017, non-management Crewmemberscrewmembers are eligible to receive profit sharing, calculated as 10% of adjusted pre-tax income before profit sharing and special items up to a pre-tax margin of 18%. with the result reduced by Retirement Plus contributions and the equivalent of Retirement Plus contributions for pilots. If JetBlue's resulting pre-tax margin exceeds 18%, non-management Crewmemberscrewmembers will receive 20% profit sharing on amounts above an 18% pre-tax margin. The result is reduced by Retirement Plus contributions and Crewmembers may elect to have their profit sharing contributed directly to the Plan.
Certain Federal Aviation Administration, or FAA-licensed Crewmembers, receive an additional contribution of 3% of eligible compensation, which we refer to as Retirement Advantage. Total 401(k) company match, Retirement Plus, Retirement Advantage, pilot retirement contribution, and profit sharing and Retirement Advantage expensed in for the years ended December 31, 2017, 20162020, 2019, and 20152018 were $182$177 million $290, $196 million, and $256$172 million, respectively.
Note 10—11—Commitments
Flight Equipment Commitments
As of December 31, 2017,2020, our firm aircraft orders consisted of 10 Airbus A321 current engine option (ceo) aircraft, 25 Airbus A320 new engine option (neo) aircraft, 6072 Airbus A321neo aircraft 24 Embraer E190and 69 Airbus A220 aircraft, and 10 spare enginesall scheduled for delivery through 2024.2027. Committed expenditures for these aircraft and related flight equipment, including estimated amounts for contractual price escalations and predeliverypre-delivery deposits, will beis approximately $0.8 billion in 2018, $1.0 billion in 2019, $1.42021, $0.7 billion in 2020,2022, $1.5 billion in 2021, $1.52023, $1.8 billion in 20222024, $1.2 billion in 2025 and $1.1$1.6 billion thereafter. We are scheduled to receive 108 new Airbus A321ceoA321neo aircraft and 7 new Airbus A220 aircraft in 2018, and depending on market conditions, we anticipate paying cash for some portion of our 2018 deliveries.
We amended our purchase agreement with Airbus in April 2017 which changed the timing of certain of our Airbus A321ceo and Airbus A321neo deliveries.2021.
In conjunctionOctober 2019, the Office of the U.S. Trade Representative announced a 10% tariff on new commercial aircraft and related parts imported from certain European Union member states, which include aircraft and other parts we are already contractually obligated to purchase, including those noted above. The U.S. Trade Representative increased the tariff to 15% effective March 2020. We continue to work with our intentionbusiness partners, including Airbus, to expandevaluate the potential financial and operational impact of these announcements on our Mint™ experience, we amended our purchase agreement with Airbus during July 2016 to add 30 incremental Airbus A321future aircraft with scheduled deliveries between 2017 and 2023. We expect 15deliveries. The continued imposition of the incremental 30tariff could substantially increase the cost of new Airbus A321 aircraft to be delivered with the current engine option. Our amendment includes flexibility to take deliveries in our Mint™ or all-core configuration. We anticipate the remaining 15 aircraft to be Airbus A321neo, scheduled to be delivered beginning in 2020. We have the option to take certain A321neo deliveries with the Long Range configuration, the A321-LR.and parts.
Other Commitments
We utilize several credit card processors to process our ticket sales. Our agreements with these processors do not contain covenants, but do generally allow the processor to withhold cash reserves to protect the processor from potential liability for tickets purchased, but not yet used for travel. While we currently do not have any collateral requirements related to our credit card processors, we may be required to issue collateral to our credit card processors, or other key business partners, in the future.
As of December 31, 2017,2020, we had approximately $24$23 million pledged related to our workersworkers' compensation insurance policies and other business partner agreements, which will expire according to the terms of the related policies or agreements.
Except for our pilots, our Crewmembers do not have third-party representation. In April 2014, JetBlue pilots elected to be solely representedALPA was certified by ALPA. Thethe National Mediation Board, or NMB, certified ALPA as the representative body for JetBlue pilots and we are working with ALPA to reachafter winning a representation election. We reached a final agreement for our first collective bargaining agreement which was ratified by the pilots in July 2018. The agreement is a four-year, renewable contract, which became effective August 1, 2018 and included compensation, benefits, work rules, and other policies.
Amid the COVID-19 pandemic, we reached an Agreement in Principle with ALPA to avoid involuntary furloughs of our pilots through at least October 1, 2021 in exchange for short-term changes to the collective bargaining agreement.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2018, JetBlue inflight crewmembers elected to be solely represented by the Transport Workers Union of America, or TWU. The NMB certified the TWU as the representative body for JetBlue inflight crewmembers. In November 2020, our inflight crewmembers voted to reject the tentative collective bargaining agreement between JetBlue and TWU. We are currently working with TWU to determine next steps.
As of December 31, 2020, approximately 51 percent of our full-time equivalent crewmembers were represented by unions.
Except as noted above, our crewmembers do not have third party representation.
We enter into individual employment agreements with each of our non-unionized FAA-licensed Crewmemberscrewmembers which include dispatchers, technicians, and inspectors as well as air traffic controllers. Each employment agreement is for a term of five years and automatically renews for an additional five years unless either the Crewmembercrewmember or we elect not to renew it by giving at least 90 days' notice before the end of the relevant term. Pursuant to these agreements, these Crewmemberscrewmembers can only be terminated for cause. In the event of a downturn in our business that would require a reduction in work hours, we are obligated to pay these Crewmemberscrewmembers a guaranteed level of income and to continue their benefits if they do not obtain other aviation employment.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11—12—Contingencies
We self-insure a portion of our losses from claims related to workers’ compensation, environmental issues, property damage, medical insurance for Crewmemberscrewmembers, and general liability. Losses are accrued based on an estimate of the ultimate aggregate liability for claims incurred, using standard industry practices and our actual experience.
We are a party to many routine contracts under which we indemnify third parties for various risks. These indemnities consist of the following:
All of our bank loans, including our aircraft and engine mortgages obligate us to reimburse the bank for any increased costs arising from regulatory changes, including changes in reserve requirements and bank capital requirements; these obligations are standard terms present in loans of this type. These indemnities would increase the interest rate on our debt if they were to be triggered. In all cases, we have the option to repay the loan and avoid the increased costs. These terms match the length of the related loan up to 15 years.
Under both aircraft leases with foreign lessors and aircraft and engine mortgages with foreign lenders, we have agreed to customary indemnities concerning withholding tax law changes. Under these contracts we are responsible, should withholding taxes be imposed, for paying such amount of additional rent or interest as is necessary to ensure that the lessor or lender still receives, after taxes, the rent stipulated in the lease or the interest stipulated under the loan. The term of these indemnities matches the length of the related lease or loan up to 20 years.
We have various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under these contracts we have agreed to standard language indemnifying the lessor against environmental liabilities associated with the real property or operations described under the agreement, even if we are not the party responsible for the initial event that caused the environmental damage. In the case of fuel consortia at airports, these indemnities are generally joint and several among the participating airlines. We have purchased a standalone environmental liability insurance policy to help mitigate this exposure. Our existing aviation hull and liability policy includes some limited environmental coverage when a cleanup is part of an associated single identifiable covered loss.
Under certain contracts, we indemnify specified parties against legal liability arising out of actions by other parties. The terms of these contracts range up to 25 years. Generally,Generally, we have liability insurance protecting ourselves for the obligations we have undertaken relative to these indemnities.
We are unable to estimate the potential amount of future payments under the foregoing indemnities and agreements.
Under a certain number of our operating lease agreements we are required to restore certain property or equipment to its original form upon expiration of the related agreement. We have recorded the estimated fair value of these retirement obligations of approximately $4approximately $5 million as of December 31, 2017.2020. This liability may increase over time.
We are unable to estimate the potential amount of future payments under the foregoing indemnities and agreements.
Legal Matters
Occasionally, we are involved in various claims, lawsuits, regulatory examinations, investigations, and other legal matters involving suppliers, crewmembers, customers, and governmental agencies, arising, for the most part, in the ordinary course of business. The outcome of litigation and other legal matters is always uncertain. The Company believes it has valid defenses to the legal matters currently pending against it, is defending itself vigorously, and has recorded accruals determined in accordance with U.S. GAAP, where appropriate. In making a determination regarding accruals, using available information, we evaluate the
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
likelihood of an unfavorable outcome in legal or regulatory proceedings to which we are a party to and record a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. These subjective determinations are based on the status of such legal or regulatory proceedings, the merits of our defenses, and consultation with legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates. It is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to our consolidated results of operations, liquidity, or financial condition.
To date, none of these types of litigation matters, most of which are typically covered by insurance, has had a material impact on our operations or financial condition. We have insured and continue to insure against most of these types of claims. A judgment on any claim not covered by, or in excess of, our insurance coverage could materially adversely affect our financial condition orconsolidated results of operations.operations, liquidity, or financial condition.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12—13—Financial Derivative Instruments and Risk Management
As part of our risk management techniques, we periodically purchase over the counter energy derivative instruments and enter into fixed forward price agreements, or FFPs, to manage our exposure to the effect of changes in the price of aircraft fuel. Prices for the underlying commodities have historically been highly correlated to aircraft fuel, making derivatives of them effective at providing short-term protection against volatility in average fuel prices. We also periodically enter into jet fuel basis swaps for the differential between heating oil and jet fuel, to further limit the variability in fuel prices at various locations.
To manage the variability of the cash flows associated with our variable rate debt, we have also entered into interest rate swaps. We do not hold or issue any derivative financial instruments for trading purposes.
Aircraft fuel derivatives
We attempt to obtain cash flow hedge accounting treatment for each aircraft fuel derivative that we enter into. This treatment is provided for under the Derivatives and Hedging topic of the Codification. ItCodification which allows for gains and losses on the effective portion of qualifying hedges to be deferred until the underlying planned jet fuel consumption occurs, rather than recognizing the gains and losses on these instruments into earnings during each period they are outstanding. The effective portion of realized aircraft fuel hedging derivative gains and losses is recognized in aircraft fuel expense in the period the underlying fuel is consumed.
Ineffectiveness can occuroccurs, in certain circumstances, when the change in the total fair value of the derivative instrument differs from the change in the value of our expected future cash outlays for the purchase of aircraft fuelfuel. ASU 2017-12, Derivatives and is recognized immediately in interest incomeHedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, eliminated the requirement for companies to separately measure and other. Likewise, ifrecord ineffectiveness after initial qualification. If a hedge does not qualify for hedge accounting, the periodic changes in its fair value are recognized in the period of the change in interest income and other. When aircraft fuel is consumed and the related derivative contract settles, any gain or loss previously recorded in other comprehensive income is recognized in aircraft fuel expense. All cash flows related to our fuel hedging derivatives are classified as operating cash flows.
Our current approach to fuel hedging is to enter into hedges on a discretionary basis without a specific target of hedge percentage needs. We view our hedge portfolio as a form of insurance to help mitigate the impact of price volatility and protect us against severe spikes in oil prices, when possible.
We did not have any fuel hedging contracts outstanding as of December 31, 2017.
Interest rate swaps
The final interest payment relating to our interest rate swaps took place in August 2016. As such, as of December 31, 2017, we did not have any notional debt outstanding related to these swaps. These interest rate hedges effectively swapped floating rate debt for fixed rate debt. They took advantage of lower borrowing rates in existence at the time of the hedge transaction as compared to the date our original debt instruments were executed. The notional amount decreased over time to match scheduled repayments of the related debt.
All of our interest rate swap contracts qualified as cash flow hedges in accordance with the Derivatives and Hedging topic of the Codification. Since all of the critical terms of our swap agreements matched the debt to which they pertain, there was no ineffectiveness relating to these interest rate swaps for the years ended December 31, 2016 or 2015, and all related unrealized losses were deferred in accumulated other comprehensive income. We recognized approximately a $1 million gain in interest expense for the year ended December 31, 2016 and we recognized approximately $1 million in additional interest expense as the related interest payments were made during the year ended December 31, 2015.
2020.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below reflects quantitative information related to our derivative instruments and where these amounts are recorded in our financial statements (dollar amounts in millions).:
| | | | | | | | | | | | | | |
| | As of December 31, |
| | 2020 | | 2019 |
| Fuel derivatives | | | | |
Asset fair value recorded in prepaid expenses and other(1) | | $ | 0 | | | $ | 8 | |
| Longest remaining term (months) | | 0 | | 6 |
| Hedged volume (barrels, in thousands) | | 0 | | | 2,112 | |
| Estimated amount of existing (gains) losses expected to be reclassified into earnings in the next 12 months | | $ | 0 | | | $ | (2) | |
|
| | | | | | | | |
| | | As of December 31, |
| | | 2017 | | 2016 |
| Fuel derivatives | | | | |
Asset fair value recorded in prepaid expense and other(1) | | $ | — |
| | $ | 22 |
|
| Longest remaining term (months) | | — |
| | 12 |
|
| Hedged volume (barrels, in thousands) | | — |
| | 1,920 |
|
| Estimated amount of existing (gains) expected to be reclassified into earnings in the next 12 months | | — |
| | (22 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | | 2020 | | 2019 | | 2018 |
| Fuel derivatives | | | | | | |
| Hedge effectiveness (gains) losses recognized in aircraft fuel expense | | $ | 7 | | | $ | 5 | | | $ | 2 | |
| Losses on derivatives resulting from the discontinuance of hedge accounting recognized in interest income and other | | $ | 8 | | | $ | 0 | | | $ | 0 | |
| Hedge (gains) losses on derivatives recognized in comprehensive income | | $ | 11 | | | $ | (1) | | | $ | 6 | |
| Percentage of actual consumption economically hedged | | 25 | % | | 6 | % | | 4 | % |
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Fuel derivatives | | | | | | |
| Hedge effectiveness (gains) losses recognized in aircraft fuel expense | | $ | (15 | ) | | $ | (9 | ) | | $ | 126 |
|
| (Gains) losses on derivatives not qualifying for hedge accounting recognized in other expense | | — |
| | — |
| | 1 |
|
| Hedge (gains) losses on derivatives recognized in comprehensive income | | 6 |
| | (34 | ) | | 29 |
|
| Percentage of actual consumption economically hedged | | 10 | % | | 12 | % | | 17 | % |
| |
(1) | Gross asset of each contract prior to consideration of offsetting positions with each counterparty and prior to impact of collateral paid. |
Any outstanding derivative instrument exposes us to credit loss in connection with our fuel contracts in the event of nonperformance by the counterparties to the agreements, but we do not expect any of our counterparties will fail to meet their obligations. The amount of such credit exposure is generally the fair value of our outstanding contracts for which we are in a liabilityreceivable position. To manage credit risks we select counterparties based on credit assessments, limit our overall exposure to any single counterparty, and monitor the market position with each counterparty. Some of our agreements require cash deposits from either JetBlue or our counterparty if market risk exposure exceeds a specified threshold amount.
We have master netting arrangements with our counterparties allowing us the right of offset to mitigate credit risk in derivative transactions. The financial derivative instrument agreements we have with our counterparties may require us to fund all, or a portion of, outstanding loss positions related to these contracts prior to their scheduled maturities. The amount of collateral posted, if any, is periodically adjusted based on the fair value of the hedge contracts. Our policy is to offset the liabilities represented by these contracts with any cash collateral paid to the counterparties.
The impact ofThere were 0 offsetting derivative instruments is depicted below (in millions):as of December 31, 2020 and 2019.
|
| | | | | | | | | | | | | | | | | | | | |
| | | Gross Amount of Recognized | | Gross Amount of Cash Collateral | | Net Amount Presented on Balance Sheet |
| | | Assets | | Liabilities | | Offset | | Assets | | Liabilities |
| Fuel derivatives | | | | | | | | | | |
| As of December 31, 2017 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| As of December 31, 2016 | | $ | 22 |
| | $ | — |
| | $ | — |
| | $ | 22 |
| | $ | — |
|
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13—14—Fair Value
Under the Fair Value Measurements and Disclosures topic of the Codification, disclosures are required about how fair value is determined for assets and liabilities and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs as follows:
Level 1 - observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - quoted prices in active markets for similar assets and liabilities, and other inputs that are observable directly or indirectly for the asset or liability; or
Level 3 - unobservable inputs for the asset or liability, such as discounted cash flow models or valuations.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a listing of our assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2020 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | | | | | | | | |
| Cash equivalents | | $ | 1,330 | | | $ | 130 | | | $ | 0 | | | $ | 1,460 | |
| Available-for-sale investment securities | | 0 | | | 1,137 | | | 0 | | | 1,137 | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | | As of December 31, 2017 |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Cash equivalents | | $ | 173 |
| | $ | — |
| | $ | — |
| | $ | 173 |
|
| Available-for-sale investment securities | | — |
| | 136 |
| | — |
| | 136 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2019 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | | | | | | | | |
| Cash equivalents | | $ | 611 | | | $ | 30 | | | $ | 0 | | | $ | 641 | |
| Available-for-sale investment securities | | 0 | | | 351 | | | 0 | | | 351 | |
| Aircraft fuel derivatives | | 0 | | | 8 | | | 0 | | | 8 | |
|
| | | | | | | | | | | | | | | | |
| | | As of December 31, 2016 |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Cash equivalents | | $ | 313 |
| | $ | — |
| | $ | — |
| | $ | 313 |
|
| Available-for-sale investment securities | | 115 |
| | 220 |
| | — |
| | 335 |
|
| Aircraft fuel derivatives | | — |
| | 22 |
| | — |
| | 22 |
|
Refer to Note 4 to our consolidated financial statements for fair value information related to our outstanding debt obligations as of December 31, 2020 and 2019. The carrying values of all other financial instruments approximated their fair values at December 31, 20172020 and 2016. Refer to Note 2 for fair value information related to our outstanding debt obligations as of December 31, 2017 and 2016.2019.
Cash equivalents
Our cash equivalents include money market securitiessecurities, commercial paper, and commercial papertime deposits which are readily convertible into cash, have maturities of 90 daysthree months or less when purchased, and are considered to be highly liquid and easily tradable. TheseThe money market securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. The fair values of remaining instruments are based on observable inputs in non-active markets, which are therefore classified as Level 2 in the hierarchy.
Available-for-sale investment securities
Included in ourOur available-for-sale investment securities are U.S. treasury bills,include investments such as time deposits, commercial paper, and convertible debt securities. The fair values of these instruments are based on observable inputs in non-active markets, which are therefore classified as Level 2 in the hierarchy. We did not0t record any material gains or losses on these securities during the yearyears ended December 31, 2017 or 2016.2020, 2019, and 2018.
Aircraft fuel derivatives
Our aircraft fuel derivatives include swaps, caps, collars, and basis swapscall spread options which are not traded on public exchanges. Their fair values are determined using a market approach based on inputs that are readily available from public markets for commodities and energy trading activities; therefore, they are classified as Level 2 inputs. The data inputs are combined into quantitative models and processes to generate forward curves and volatilities related to the specific terms of the underlying hedge contracts. There were no aircraft fuel derivatives outstanding as of December 31, 2017.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14—15—Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) includes changes in fair value of our aircraft fuel derivatives and interest rate swap agreements, which qualify for hedge accounting. A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes for the years ended December 31, 2017, 20162020, 2019, and 20152018 is as follows (in millions):
| | | | | | | | | | | | | | |
| | Aircraft Fuel Derivatives(1)(2) | | Total |
| Balance of accumulated income, at December 31, 2017 | | $ | 0 | | | $ | 0 | |
| Reclassifications into earnings, net of deferred taxes of $0 | | 1 | | | 1 | |
| Change in fair value, net of deferred taxes of $2 | | (4) | | | (4) | |
| Balance of accumulated (loss), at December 31, 2018 | | (3) | | | (3) | |
| Reclassifications into earnings, net of deferred taxes of $(1) | | 4 | | | 4 | |
| Change in fair value, net of deferred taxes of $0 | | 1 | | | 1 | |
| Balance of accumulated income, at December 31, 2019 | | 2 | | | 2 | |
| Reclassifications into earnings, net of deferred taxes of $(5) | | 9 | | | 9 | |
| Change in fair value, net of deferred taxes of $5 | | (11) | | | (11) | |
| Balance of accumulated income, at December 31, 2020 | | $ | 0 | | | $ | 0 | |
|
| | | | | | | | | | | | |
| | | Aircraft Fuel Derivatives(1) | | Interest Rate Swaps(2) | | Total |
| Balance of accumulated (losses), at December 31, 2014 | | (63 | ) | | — |
| | (63 | ) |
| Reclassifications into earnings (net of $49 of taxes) | | 77 |
| | 1 |
| | 78 |
|
| Change in fair value (net of $(11) of taxes) | | (18 | ) | | — |
| | (18 | ) |
| Balance of accumulated income (losses), at December 31, 2015 | | (4 | ) | | 1 |
| | (3 | ) |
| Reclassifications into earnings (net of $(4) of taxes) | | (5 | ) | | (1 | ) | | (6 | ) |
| Change in fair value (net of $12 of taxes) | | 22 |
| | — |
| | 22 |
|
| Balance of accumulated income, at December 31, 2016 | | $ | 13 |
| | $ | — |
| | $ | 13 |
|
| Reclassifications into earnings (net of $(6) of taxes) | | (9 | ) | | — |
| | (9 | ) |
| Change in fair value (net of $(2) of taxes) | | (4 | ) | | — |
| | (4 | ) |
| Balance of accumulated income, at December 31, 2017 | | — |
| | — |
| | — |
|
| (1) Reclassified to aircraft fuel expense | | | | | | |
| (2) Reclassified to interest expense | | | | | | |
(1)Reclassified to aircraft fuel expense.
(2)In 2020, the Company made several capacity reductions in response to the COVID-19 pandemic. These capacity reductions led to the discontinuance of hedge accounting on a number of our aircraft fuel derivatives as the forecasted consumption of aircraft fuel was no longer probable. Losses of $5 million that were previously deferred in other comprehensive loss were reclassified to interest income and other during the year ended December 31, 2020.
Note 15—16—Geographic Information
Under the Segment Reporting topic of the Codification, disclosures are required for operating segments that are regularly reviewed by chief operating decision makers. Air transportation services accounted for substantially all of the Company’s operations in 2017, 20162020, 2019 and 2015.2018.
Operating revenues are allocated to geographic regions, as defined by the Department of Transportation, or DOT, based upon the origination and destination of each flight segment. We currently serve 33 locationsAs of December 31, 2020, we served 31 locations in the Caribbean and Latin American region, or Latin America as defined by the DOT. However, our management includes our three3 destinations in Puerto Rico and two destinations1 destination in the U.S. Virgin Islands in our Caribbean and Latin America allocation of revenues. Therefore, we have reflected these locations within the Caribbean and Latin America region in the table below. Operating revenues by geographic regions for the years ended December 31 are summarized below (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Domestic | | $ | 1,890 | | | $ | 5,633 | | | $ | 5,386 | |
| Caribbean & Latin America | | 1,067 | | | 2,461 | | | 2,272 | |
| Total | | $ | 2,957 | | | $ | 8,094 | | | $ | 7,658 | |
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Domestic | | $ | 5,001 |
| | $ | 4,751 |
| | $ | 4,521 |
|
| Caribbean & Latin America | | 2,014 |
| | 1,881 |
| | 1,895 |
|
| Total | | $ | 7,015 |
| | $ | 6,632 |
| | $ | 6,416 |
|
Our tangible assets primarily consist of our fleet of aircraft, which is deployed system wide,systemwide, with no individual aircraft dedicated to any specific route or region; therefore our assets do not require any allocation to a geographic area.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16—17—Quarterly Financial Data (Unaudited)
Quarterly results of operations for the years ended December 31, 20172020 and 20162019 are summarized below (in millions, except per share amounts):
|
| | | | | | | | | | | | | | | | |
| | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter |
| 2017 | | | | | | | | |
| Operating revenues | | $ | 1,604 |
| | $ | 1,842 |
| | $ | 1,813 |
| | $ | 1,756 |
|
| Operating income | | 147 |
| | 354 |
| | 310 |
| | 189 |
|
Net income(1) | | 85 |
| | 211 |
| | 179 |
| | 672 |
|
| Basic earnings per share | | $ | 0.25 |
| | $ | 0.64 |
| | $ | 0.55 |
| | $ | 2.09 |
|
Diluted earnings per share(1) | | $ | 0.25 |
| | $ | 0.64 |
| | $ | 0.55 |
| | $ | 2.08 |
|
| 2016 | | | | | | | | |
| Operating revenues | | $ | 1,616 |
| | $ | 1,643 |
| | $ | 1,732 |
| | $ | 1,641 |
|
| Operating income | | 349 |
| | 313 |
| | 354 |
| | 296 |
|
| Net income | | 207 |
| | 181 |
| | 199 |
| | 172 |
|
| Basic earnings per share | | $ | 0.64 |
| | $ | 0.56 |
| | $ | 0.61 |
| | $ | 0.51 |
|
| Diluted earnings per share | | $ | 0.61 |
| | $ | 0.53 |
| | $ | 0.58 |
| | $ | 0.50 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter |
| 2020 | | | | | | | | |
| Operating revenues | | $ | 1,588 | | | $ | 215 | | | $ | 492 | | | $ | 661 | |
Operating (loss)(1) | | (334) | | | (410) | | | (516) | | | (454) | |
Net (loss)(1) | | (268) | | | (320) | | | (393) | | | (373) | |
| | | | | | | | |
(Loss) per share(1) | | $ | (0.97) | | | $ | (1.18) | | | $ | (1.44) | | | $ | (1.31) | |
| | | | | | | | |
| | | | | | | | |
| 2019 | | | | | | | | |
| Operating revenues | | $ | 1,871 | | | $ | 2,105 | | | $ | 2,086 | | | $ | 2,031 | |
Operating income(2) | | 76 | | | 250 | | | 247 | | | 227 | |
Net income(2)(3) | | 42 | | | 179 | | | 187 | | | 161 | |
| | | | | | | | |
| Basic earnings per share | | $ | 0.14 | | | $ | 0.60 | | | $ | 0.63 | | | $ | 0.56 | |
Diluted earnings per share(2)(3) | | $ | 0.14 | | | $ | 0.59 | | | $ | 0.63 | | | $ | 0.56 | |
(1) DuringOur 2020 results include the effects of various special items. We record special items of $202 million, or ($0.55) per share in the first quarter of 2020, $(304) million, or $0.84 per share in the second quarter of 2020, $(112) million, or $0.31 per share in the third quarter of 2020, and $(69) million, or $0.19 per share in the fourth quarter of 2017,2020. See Note 18 to our consolidated financial statements for details.
(2) Our 2019 reported results include special items related to the Embraer E190 fleet transition and the ratification of our pilots' collective bargaining agreement. We recorded special items of $12 million or ($0.02) per diluted share in the first quarter and $2 million or ($0.01) per diluted share in the second quarter of 2019. See Note 18 to our consolidated financial statements for details.
(3) During the third quarter of 2019, we recorded a one-time tax benefitgain of $570$15 million, or $1.76$0.04 per diluted share, on one of our equity method investments related to its fair value measurement upon the enactmentclosing of a subsequent financing round.
The Tax Cuts and Jobs Act.sum of the quarterly results may not equal the annual amount reported due to immaterial rounding differences.
The sum of the quarterly earnings per share amounts does not equal the annual amount reported since per share amounts are computed independently for each quarter and for the full year based on respective weighted-averageweighted average common shares outstanding and other dilutive potential common shares.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18—Special Items
The following is a listing of special items presented on our consolidated statements of operations (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, |
| | | | | 2020 | | 2019 | | 2018 |
| Special Items | | | | | | | | | |
CARES Act payroll support grant recognition(1) | | | | | $ | (685) | | | $ | 0 | | | $ | 0 | |
CARES Act employee retention credit(2) | | | | | (36) | | | 0 | | 0 |
Fleet impairment(3) | | | | | 273 | | | 0 | | | 0 | |
Severance and benefit costs(4) | | | | | 59 | | | 0 | | | 0 | |
Losses on sale-leaseback transactions(5) | | | | | 106 | | | 0 | | | 0 | |
Embraer E190 fleet transition costs(6) | | | | | 0 | | | 6 | | | 362 | |
Union contract costs(7) | | | | | 0 | | | 8 | | | 73 | |
| Total | | | | | $ | (283) | | | $ | 14 | | | $ | 435 | |
(1) As discussed in Note 2 to our consolidated financial statements, we entered into a PSP Agreement with the Treasury governing our participation in the Payroll Support Program under the CARES Act. Under the Payroll Support Program, Treasury provided us with payroll support funding totaling $963 million, consisting of $704 million in grants and $259 million in an unsecured term loan. The payroll support funds were to be used exclusively for the continuation of payment of crewmember wages, salaries and benefits. The carrying value of the payroll support grants which totaled to $685 million (after consideration of the warrants we issued) was recorded within other liabilities and were recognized as a contra-expense within special items on our consolidated statements of operations as the funds were utilized. The payroll support grants were fully utilized in 2020.
(2) The Employee Retention Credit (ERC) under the CARES Act is a refundable tax credit which encourages business to keep employees on the payroll during the COVID-19 pandemic. Eligible employers can qualify for up to $5,000 of credit for each employee based on qualified wages paid after March 12, 2020 and before January 1, 2021. Qualified wages are the wages paid to an employee for the time that the employee is not providing services due to an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. We recognized $36 million of ERC as a contra-expense within special items on our consolidated statements of operations in 2020.
(3) Under the Property, Plant, and Equipment topic of the Codification, we are required to assess long-lived assets for impairment when events and circumstances indicate that the assets may be impaired. An impairment of long-lived assets exists when the sum of the forecasted undiscounted future cash flows expected to be generated directly by the assets are less than the book value of the assets. Our long-lived assets include both owned and leased properties which are classified as property and equipment, and operating lease assets on our consolidated balance sheets, respectively.
As discussed in Note 2 to our consolidated financial statements, our operations were adversely impacted by the unprecedented decline in demand for travel caused by the COVID-19 pandemic. To determine if impairment exists in our fleet, we grouped our aircraft by fleet-type and estimated their future cash flows based on projections of capacity, aircraft age, and maintenance conditions. Based on the assessment, we determined the future cash flows from the operation our Embraer E190 fleet were lower than the carrying value. For those aircraft, including the ones that are under operating lease, and related spare parts in our Embraer E190 fleet, we recorded impairment losses of $273 million for the year ended December 31, 2020. These losses represent the difference between the book value of these assets and their fair value. In determining fair value, we obtained third party valuations for our Embraer E190 fleet, which considered the effects of the current market environment, age of the assets, and marketability. For our owned Embraer E190 aircraft and related spare parts, we made adjustments to the valuations to reflect the impact of their current maintenance conditions to determine fair value. Our estimate of fair value was not based on distressed sales or forced liquidations. The fair value of our Embraer E190 aircraft under operating lease and related parts was based on the present value of current market lease rates utilizing a market discount rate for the remaining term of each lease. Since the fair value of our Embraer E190 fleet was determined using unobservable inputs, it is classified as Level 3 in the fair value hierarchy. We evaluated the remaining fleet types and determined the future cash flows of our Airbus A320 and Airbus A321 fleets exceeded their carrying value as of December 31, 2020. As the extent of the ongoing impact from the COVID-19 pandemic remains uncertain, we will update our assessment as new information becomes available.
JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) The unprecedented declines in demand and in our capacity caused by COVID-19 has led to a significant reduction to our staffing needs. In June 2020, we announced a voluntary separation program which allowed eligible crewmembers the opportunity to voluntarily separate from the Company in exchange for severance, health coverage for a specified period of time, and travel privileges based on years of service. Virtually all of our crewmembers were eligible to participate in the voluntary separation program with the exception of our union-represented crewmembers and crewmembers of our wholly-owned subsidiaries (JetBlue Technology Ventures and JetBlue Travel Products). Separation agreements for the majority of the crewmembers who elected to participate in the voluntary program were executed in the third quarter. One-time costs of $59 million, consisting of severance and health benefits, were recorded for the year ended December 31, 2020 in connection with the program. Approximately $44 million of this charge was disbursed during the year. Accruals related to the voluntary separation program are primarily recorded in accrued salaries, wages and benefits, and accounts payable on our consolidated balance sheets. The remaining balance is expected to be disbursed throughout 2021.
(5) In 2020, we executed $563 million of sale-leaseback transactions. Of these transactions, $354 million did not qualify as sales for accounting purposes. The remaining $209 million qualified as sales and generated a loss of $106 million. These losses represent the difference between the book value of these assets and their fair value. We estimated the fair value of the related aircraft considering third party valuations and considered specific circumstances such as aircraft age, maintenance requirements and condition, and therefore classified as Level 3 in the fair value hierarchy.
(6) In July 2018, we announced our decision to exit the Embraer E190 fleet and order 60 Airbus A220-300 aircraft, formerly known as the Bombardier CS300, for expected deliveries beginning in 2020 with the option to purchase 60 additional aircraft. For the year ended December 31, 2018, fleet transition costs include a $319 million impairment charge of flight equipment and other property and equipment related to our fleet review and certain termination costs associated with the transition. We assessed our Embraer E190 asset group by comparing projected undiscounted cash flows over the remaining time period we expect to utilize the aircraft to the book value of the asset group and determined the book value was in excess of the cash flows. We estimated the fair value of our Embraer E190 asset group using third party valuations and considering specific circumstances of our fleet such as aircraft age, maintenance requirements and condition, and therefore classified as Level 3 in the fair value hierarchy. We reassessed our Embraer E190 assets and adjusted the depreciable lives and salvage value to align with our expected transition dates to the Airbus A220-300 through 2025.
Fleet transition costs for the year ended December 31, 2019 include certain contract termination costs associated with the transition.
In 2019, we converted 10 of our options for the A220-300 aircraft into firm orders. Options for 50 additional A220-300 aircraft deliveries remain available to us as of December 31, 2020.
(7) In April 2014, ALPA was certified by NMB as the representative body for JetBlue pilots after winning a representation election. We reached a final agreement for our first collective bargaining agreement which was ratified by the pilots in July 2018. The agreement is a four-year renewable contract, which became effective August 1, 2018 and included changes to compensation, benefits, work rules, and other policies. For the year ended December 31, 2018, contract costs include the one-time $50 million ratification bonus and other negotiated contractual provisions related to our pilots' collective bargaining agreement. Union contract costs for the year ended December 31, 2019 include various one-time costs incurred to implement the provisions of the collective bargaining agreement into our IT systems.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, to allow timely decisions regarding required disclosure. Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2017.2020. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2017.2020.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 20172020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.
Ernst & Young LLP, the independent registered public accounting firm that audited our Consolidated Financial Statementsconsolidated financial statements included in this Annual Report on Form 10-K, audited the effectiveness of our internal control over financial reporting as of December 31, 2017.2020. Ernst & Young LLP has issued their report which is included elsewhere herein.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2017, thereThere were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our controls performed during the quarter ended December 31, 20172020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Code of Ethics
We adopted a Code of Ethics within the meaning of Item 406(b) of SEC Regulation S-K. This Code of Ethics applies to our principal executive officer, principal financial officer, and principal accounting officer. This Code of Ethics is publicly available on our website at http://investor.jetblue.com. If we make substantive amendments to this Code of Ethics or grant any waiver, including any implicit waiver, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K within four days of such amendment or waiver.
Executive Officers of the Registrant
Certain information concerning JetBlue’s executive officers as of the date of this Report follows. There are no family relationships between any of our executive officers.
Robin Hayes, age 51,54, is our Chief Executive Officer and President.Officer. He was promoted to President on January 1, 2014 and Chief Executive Officer on February 16, 2015.2015 and served as our President from January 2014 to May 2018. He joined JetBlue as its Chief Commercial Officer in 2008, after nineteen years at British Airways. In his last role at British Airways, Mr. Hayes served as Executive Vice President for The Americas and before that he served in a number of operational and commercial positions in the UK and Germany.
Joanna Geraghty, age 48, is our President and Chief Operating Officer. She was appointed to the position in May 2018. Ms. Geraghty joined JetBlue in 2005 and was most recently our Executive Vice President Customer Experience from 2014 to 2018. She served as Executive Vice President Chief People Officer from 2010 to 2014 and was previously the airline's Vice President and Associate General Counsel and Director of Litigation and Regulatory Affairs.
Steve Priest, age 47,50,is our Chief Financial Officer, a position he has held since February 2017. Mr. Priest joined JetBlue in August 2015 as our Vice President Structural Programs. Prior to JetBlue, he worked at British Airways from 1996 to 2015 where he served as Senior Vice President of the carrier’s North Atlantic joint venture business with American Airlines, Iberia, and Finnair, as well as several other leadership roles.
James HnatBrandon Nelson, age 46, is our General Counsel and Corporate Secretary. He was appointed to the position in November 2018. Mr. Nelson joined JetBlue in 2005 and previously served as Director, Corporate Counsel and Assistant Secretary before being promoted in 2009 to Vice President, Associate General Counsel. Prior to JetBlue, Mr. Nelson practiced corporate and business litigation law at firms in California and New York, including Shearman & Sterling LLP.
Eash Sundaram, age 49, was our Chief Digital & Technology Officer. Mr. Sundaram joined JetBlue in March 2012 as our Chief Information Officer. Prior to joining JetBlue, Mr. Sundaram served as the Chief Information Officer at Pall Corporation and has also held various leadership positions in the Healthcare and Supply Chain Management industries.
Mr. Sundaram retired from his role as our Chief Digital & Technology Officer effective February 2, 2021.
Scott Laurence, age 47, is our Executive Vice President Corporate Affairs, General CounselHead of Revenue and SecretaryPlanning. He was appointed to the role in June 2019 and has served in this capacity since April 2007. Previously, he served as our Senior Vice President, General Counsel and Assistant Secretary from March 2006, as General Counsel and Assistant Secretary from February 2003 to March 2006 and as Associate General Counsel from June 2001 to January 2003. Prior to joining JetBlue, Mr. Hnat worked as an attorney at Milbank, Tweed, Hadley & McCloy LLP, where he specialized in aircraft finance transactions and at Condon & Forsyth LLP where he specialized in airline defense litigation. Mr. Hnat is a member of the bar of New York and Massachusetts.
Marty St. George, age 54, is our Executive Vice President Commercial and Planning, a position he has held since February 2015 and is responsible for airline and network planning, marketing, sales and revenue. Prior to this appointment, Mr. St. George served as our Senior Vice President - Commercial. Mr. St. George joined JetBlue in July 20062008. Mr. Laurence oversees JetBlue's sales and has held several roles including Senior Vice President - Marketingrevenue management organization, network planning, and Commercial Strategy and Vice President - Planning.operational planning & anlaysis. Prior to joinng JetBlue, Mr. St. George held marketing and network planningLaurence served in various commercial roles at US Airways and United Airlines and US Airways.for 13 years.
Alexander Chatkewitz, age 53,56, is our Vice President and Chief Accounting Officer, a position he has held since December 2014. Prior to joining JetBlue, Mr. Chatkewitz worked at Philip Morris International, where he served as Vice President & Controller - Financial Reporting & Accounting Research since 2008. Prior to Phillip Morris, he served for a decade as Altria Group’s Vice President Assistant Controller - Financial Reporting & Consolidations. Mr. Chatkewitz also held positions at Marsh & McLennan Companies as well as the audit practice of Deloitte & Touche.
The other information required by this Item will be included in and is incorporated herein by reference from our definitive proxy statement for our 20182021 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of our 20172020 fiscal year, or our 20182021 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in and is incorporated herein by reference from our 20182021 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The table below provides information relating to our equity compensation plans, including individual compensation arrangements, under which our common stock is authorized for issuance as of December 31, 2017,2020, as adjusted for stock splits:
| | | | | | | | | | | | | | | | | | | | |
| Plan Category | | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights | | Weighted average
exercise price of
outstanding
options, warrants
and rights | | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in first
column) |
| Equity compensation plans approved by security holders | | 2,852,358 | | $ | 17.47 | | | 26,520,293 |
| Equity compensation plans not approved by security holders | | — | | | — | | | — | |
| Total | | 2,852,358 | | $ | 17.47 | | | 26,520,293 |
|
| | | | | | | | | | |
| Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) |
| Equity compensation plans approved by security holders | | 2,450,000 |
| | $ | 18.23 |
| | 24,105,221 |
|
| Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
| Total | | 2,450,000 |
| | $ | 18.23 |
| | 24,105,221 |
|
Refer to Note 78 to our consolidated financial statements for further information regarding the material features of the above plans.
Other information required by this Item will be included in and is incorporated herein by reference from our 2021 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will be included in and is incorporated herein by reference from our 20182021 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item will be included in and is incorporated herein by reference from our 20182021 Proxy Statement.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
| | | | | | | | | | |
| | | | |
| 1. | | Financial statements: | | |
| | Reports of Independent Registered Public Accounting Firm | | |
| | Consolidated Balance Sheets — December 31, 20172020 and December 31, 20162019 | | |
| | Consolidated Statements of Operations — For the years ended December 31, 2017, 20162020, 2019 and 20152018 | | |
| | Consolidated Statements of Comprehensive Income — For the years ended December 31, 2017, 20162020, 2019 and 20152018 | | |
| | Consolidated Statements of Cash Flows — For the years ended December 31, 2017, 20162020, 2019 and 20152018 | | |
| | Consolidated Statements of Stockholders’ Equity — For the years ended December 31, 2017, 20162020, 2019 and 20152018 | | |
| | Notes to Consolidated Financial Statements | | |
| 2. | | Financial Statement Schedules: | | |
| | Report of Independent Registered Public Accounting Firm on Financial Statement Schedule | | S-1 |
| | Schedule II — Valuation of Qualifying Accounts and Reserves | | S-2 |
| | Quarterly Financial Data | | S-3 |
| | All other schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or notes thereto. | | |
| 3. | | Exhibits: See accompanying Exhibit Index included after the signature page of this Report for a list of the exhibits filed or furnished with or incorporated by reference in this Report. | | |
ITEM 16. FORM 10-K SUMMARY
Omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | JETBLUE AIRWAYS CORPORATION |
| | | | | | (Registrant) |
| | | |
| Date: | | February 16, 2018March 2, 2021 | | | | By: | | /s/ Alexander Chatkewitz |
| | | | | | | | Vice President, Controller, and
Chief Accounting Officer (Principal
(Principal Accounting Officer) |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James G. HnatBrandon Nelson his or her attorney-in-fact with power of substitution for him or her in any and all capacities, to sign any amendments, supplements or other documents relating to this Annual Report on Form 10-K which he or she deems necessary or appropriate, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that such attorney-in-fact or their substitute may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated (and, as indicated with an asterisk, representing at least a majority of the members of the Board of Directors).indicated.
| | | | | | | | | | | | | | |
| | | | |
| Signature | | Capacity | | Date |
Signature | | Capacity | | Date |
| /s/ Robin Hayes | | |
/S/ ROBIN HAYES | | Chief Executive Officer and Director
(Principal Executive Officer) | | February 16, 2018March 2, 2021 |
| Robin Hayes | | | |
| | | | |
/S/ STEVE PRIESTs/ Steve Priest | | Chief Financial Officer (Principal
(Principal Financial Officer) | | February 16, 2018March 2, 2021 |
| Steve Priest | | | |
| | |
/S/ ALEXANDER CHATKEWITZs/ Alexander Chatkewitz | | Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer) | | February 16, 2018March 2, 2021 |
| Alexander Chatkewitz | | | |
| | | | |
/S/ PETER BONEPARTHs/ B. Ben Baldanza | | Director | | February 16, 2018March 2, 2021 |
Peter Boneparth *B. Ben Baldanza | | | | |
| | |
/S/ DAVID CHECKETTS | | Director | | February 16, 2018 |
David Checketts * | | | | |
| | |
/S/ VIRGINIA GAMBALE | | Director | | February 16, 2018 |
Virginia Gambale * | | | | |
| | |
/S/ STEPHAN GEMKOW | | Director | | February 16, 2018 |
Stephan Gemkow * | | | | |
| | |
/S/ STANLEY MCCHRYSTAL | | Director | | February 16, 2018 |
Stanley McChrystal * | | | | |
| | | | |
/S/ JOEL PETERSON | | Director | | February 16, 2018 |
Joel Peterson * | | | | |
| | | | |
/S/ FRANK SICA | | Director | | February 16, 2018 |
Frank Sica * | | | | |
| | | | |
/S/ THOMAS WINKELMANN | | Director | | February 16, 2018 |
Thomas Winkelmann * | | | | |
Exhibit Index
|
| | |
2.1/s/ Peter Boneparth | | Director | | March 2, 2021 |
| Peter Boneparth | | | | |
2.1(a) | | |
| /s/ Monte Ford | | Director | | March 2, 2021 |
2.1(b)Monte Ford | | | | |
| | |
3.1/s/ Virginia Gambale | | Director | | March 2, 2021 |
| Virginia Gambale | | | | |
| | |
| /s/ Ellen Jewett | | Director | | March 2, 2021 |
| Ellen Jewett | | | | |
| | |
| /s/ Robert Leduc | | Director | | March 2, 2021 |
| Robert Leduc | | | | |
| | |
| /s/ Teri P. McClure | | Director | | March 2, 2021 |
| Teri P. McClure | | | | |
| | | | |
| /s/ Sarah Robb O'Hagan | | Director | | March 2, 2021 |
| Sarah Robb O'Hagan | | | | |
| | | | |
| /s/ Vivek Sharma | | Director | | March 2, 2021 |
| Vivek Sharma | | | | |
| | | | |
| /s/ Thomas Winkelmann | | Director | | March 2, 2021 |
| Thomas Winkelmann | | | | |
Exhibit Index
| | | | | | | | |
| 3.1 | | |
| | |
3.23.1(a) | | |
| | |
3.33.2 | | |
| | |
| 3.3 | | |
| | |
| 4.1 | | |
| | |
4.24.3 | | |
| | |
4.2(a) | | Amendment No. 1, dated as of June 30, 2003, to Amended and Restated Registration Rights Agreement, dated as of August 10, 2000, by and among JetBlue Airways Corporation and the Stockholders named therein—incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3, filed on July 3, 2003, as amended on July 10, 2003 (File No. 333-106781). |
| | |
4.2(b) | | |
| | |
4.2(c) | | |
| | |
4.2(d)4.3(a) | | AmendmentTrust Supplement No. 4,2019-1AA, dated as of June 22, 2006,November 12, 2019, between JetBlue Airways Corporation and Wilmington Trust Company, as Class AA Trustee, to Amended and Restated Registration Rightsthe Pass Through Trust Agreement dated as of August 10, 2000, by and among JetBlue Airways Corporation and the Stockholders named therein—November 12, 2019—incorporated by reference to Exhibit 4.194.2 to our Registration StatementCurrent Report on Form S-3 ASR,8-K dated November 12, 2019. |
| | |
| 4.3(b) | | |
| | |
| 4.3(c) | | |
| | |
| 4.3(d) | | |
| | |
| 4.3(e) | | |
| | |
| 4.3(f) | | |
| | |
| 4.3(g) | | |
| | |
| 4.3(h) | | Participation Agreement (N976JT), dated as of November 12, 2019, among JetBlue Airways Corporation, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein*—incorporated by reference to Exhibit 4.9 to our Current Report on Form 8-K dated November 12, 2019. |
| | |
| 4.3(i) | | |
| | | | | | | | |
| | |
| 4.3(j) | | |
| | |
| 4.3(k)† | | Schedule I |
| | |
| 4.3(l) | | |
| | |
4.44.3(m) | | |
| | |
| 4.3(n) | | |
| | |
| 4.3(o) | | |
| | |
| 4.3(p)**** | | Intercreditor Agreement (2020-1), dated as of August 17, 2020, among JetBlue Airways Corporation, Wilmington Trust Company, as Trustee of the JetBlue Airways Pass Through Trust 2020-1A and the JetBlue Airways Pass Through Trust 2020-1B, Natixis S.A., acting through its New York Branch, as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent-incorporated by reference to Exhibit 4.6 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020. |
| | |
| 4.3(q)**** | | Revolving Credit Agreement (2020-1A), dated as of August 17, 2020, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of JetBlue Airways Pass Through Trust 2020-1A and as Borrower, and Natixis S.A., acting through its New York Branch, as Class A Liquidity Provider-incorporated by reference to Exhibit 4.7 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020. |
| | |
| 4.3(r)**** | | Revolving Credit Agreement (2020-1B), dated as of August 17, 2020, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of JetBlue Airways Pass Through Trust 2020-1B and as Borrower, and Natixis S.A., acting through its New York Branch, as Class B Liquidity Provider-incorporated by reference to Exhibit 4.8 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020. |
| | |
4.3(s)****, †† | | Participation Agreement (N946JL), dated as of August 17, 2020, among JetBlue Airways Corporation, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein-incorporated by reference to Exhibit 4.9 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020. |
| | |
| | | | | | | | |
4.3(t)****, †† | | |
| | |
4.3(u)****, ††† | | Participation Agreement (N2002J), dated as of August 17, 2020, among JetBlue Airways Corporation, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein-incorporated by reference to Exhibit 4.11 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020. |
| | |
4.3(v)****, ††† | | |
| | |
| 4.3(w) | | Form of Series 2020-1 Equipment Notes (included in Exhibits 4.3.(t) and 4.3(v))-incorporated by reference to Exhibits 4.10 and 4.12 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020. |
| | |
| 4.3(x)†† | | |
| | |
| 4.3(y)††† | | |
| | |
| 4.3(z) | | |
| | |
| 4.3(aa) | | |
| | |
| 4.3(ab)**** | | Amended and Restated Intercreditor Agreement (2019-1), dated as of August 27, 2020, among JetBlue Airways Corporation, Wilmington Trust Company, as Trustee of the JetBlue Airways Pass Through Trust 2019-1AA, the JetBlue Airways Pass Through Trust 2019-1A and the JetBlue Airways Pass Through Trust 2019-1B, Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent-incorporated by reference to Exhibit 4.4 to our Current Report on Form 8-K dated August 27, 2020 and filed on August 28, 2020. |
| | |
| 4.3(ac)**** | | Revolving Credit Agreement (2019-1B), dated as of August 27, 2020, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of JetBlue Airways Pass Through Trust 2019-1B and as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Class B Liquidity Provider-incorporated by reference to Exhibit 4.5 to our Current Report on Form 8-K dated August 27, 2020 and filed on August 28, 2020. |
| | |
| 4.3(ad)****, †††† | | First Amendment to Participation Agreement (N976JT), dated as of August 27, 2020, among JetBlue Airways Corporation, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein-incorporated by reference to Exhibit 4.6 to our Current Report on Form 8-K dated August 27, 2020 and filed on August 28, 2020. |
| | |
| 4.3(ae)†††† | | |
| | |
| | | | | | | | |
| 4.3(af) | | Form of Series 2019-1 Equipment Notes (incorporated by reference to Exhibit 4.11 to our Form 8-K filed on November 12, 2019, as amended by Exhibit 4.7 to our Current Report on Form 8-K dated August 27, 2020 and filed on August 28, 2020). |
| | |
| 4.3(ag)†††† | | |
| | |
| 4.4 | | |
| | |
|
| | |
4.54.14 | | |
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4.5(a) | | |
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4.9 | | |
| | |
4.9(f)4.14(a) | | |
| | |
| 4.15 | | |
| | |
4.9(g)4.15(a) | | |
| | |
| 4.16+ | | |
| | |
| 4.16(a)+ | | |
| | |
4.9(h)4.17+ | | |
| | |
4.9(i)10.3** | | |
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4.10 | | |
| | |
4.10(a) | | |
| | |
4.11 | | |
| | |
4.12 | | |
| | |
4.13 | | |
| | |
10.3** | | |
| | |
| 10.3(a)** | | |
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| 10.3(b)** | | |
|
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| 10.3(c)** | | |
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| 10.3(d)** | | |
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| 10.3(e)** | | |
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| 10.3(f)** | | |
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| 10.3(g)** | | |
| | | | | | | | |
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| 10.3(h)** | | |
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| 10.3(i)** | | |
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| 10.3(j)** | | |
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| 10.3(k)** | | |
| | |
| 10.3(l)** | | |
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| 10.3(m)** | | |
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| 10.3(n)** | | |
| | |
| 10.3(o)** | | |
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| 10.3(p)** | | |
| | |
|
| | |
| 10.3(q)** | | |
| | |
| 10.3(r)** | | |
| | |
| 10.3(s)** | | |
| | |
| 10.3(t)** | | |
| | |
| 10.3(u)** | | |
| | |
| 10.3(v)** | | |
| | |
| 10.3(w)** | | |
| | |
| | | | | | | | |
| 10.3(x)** | | |
| | |
| 10.3(y)** | | |
| | |
| 10.3(z)** | | |
| | |
| 10.3(aa)** | | |
| | |
| 10.3(ab)** | | |
| | |
| 10.3(ac)** | | |
| | |
| 10.3(ad)** | | |
| | |
|
| | |
| 10.3(ae)** | | |
| | |
| 10.3(af)** | | |
| | |
10.4**10.3(ag) | | |
| | |
10.5** | | |
| | |
10.1510.15+ | | |
| | |
| 10.17** | | |
| | |
| 10.17(a)** | | |
| | �� |
| 10.17(b)** | | |
| | |
| 10.17(c)** | | |
| | |
| 10.17(d)** | | |
| | |
| | | | | | | | |
| 10.17(e)** | | |
| | |
| 10.17(f)** | | |
| | |
| 10.17(g)** | | |
|
| | |
| | |
| 10.17(h)** | | |
| | |
| 10.17(i)** | | |
| | |
| 10.17(j)** | | |
| | |
| 10.17(k)** | | |
| | |
| 10.17(l)** | | |
| | |
| 10.17(m)** | | |
| | |
| 10.17(n)** | | |
| | |
| 10.17(o)** | | |
| | |
| 10.17(p)** | | |
| | |
| 10.17(q)** | | |
| | |
|
| | |
| 10.17(s)** | | |
| | |
| 10.17(t)** | | |
| | |
| 10.18** | | |
| | |
| 10.18(a)** | | |
| | |
| 10.18(b)** | | |
| | |
| 10.18(c)** | | |
| | |
| 10.18(d)** | | |
| | |
| 10.18(e)** | | |
| | |
| 10.18(f)** | | |
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| 10.18(g)** | | |
| | |
| 10.18(h)** | | |
| | |
| 10.18(i)** | | |
| | |
| | | | | | | | |
| 10.18(k)** | | |
| | |
| 10.20 | | |
| | |
| 10.20(a) | | |
| | |
| 10.21* | | |
| | |
| 10.22* | | |
| | |
| 10.22(a)* | | |
| | |
| 10.30** | | |
| | |
| 10.31* | |
|
| | |
| 10.31(a)* | | |
| | |
10.31(b)10.31(f)* | | |
| | |
10.31(c)* | | |
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10.31(d)* | | |
| | |
10.31(e)* | | |
| | |
10.31(f)* | | |
| | |
|
| | |
| 10.31(g)* | | |
| | |
| 10.31(h)* | | |
| | |
10.31(i)10.31(j)* | | |
| | |
10.31(j)* | | |
| | |
| 10.33** | | |
| | |
10.33(a)10.33(b)** | | |
| | |
10.33(b)** | | |
| | |
| 10.33(c)** | | |
| | |
| 10.33(d)** | | |
| | | | | | | | |
| | |
| 10.33(e)** | | |
| | |
| 10.33(f)** | | |
| | |
| 10.33(g)** | | |
| | |
| 10.33(h)** | | |
| | |
10.33(i)*** | | |
| | |
|
| | |
10.34*10.33(j)** | | |
| | |
| 10.33(k)** | | |
| | |
10.34(a)10.33(l)*** | | |
| | |
| 10.33(m)**** | | |
| | |
10.35*10.33(n)**** | | |
| | |
| 10.33(o)**** | | |
| | |
| 10.33(p)****, + | | |
| | |
| 10.35* | | |
| | |
| 10.36 | | Amended and Restated Credit and Guaranty Agreement, dated as of April 6, 2017 among JetBlue Airways Corporation, as Borrower, the Subsidiaries of JetBlue party thereto from time to time, as guarantors, the Lenders party thereto from time to time, and Citibank, N.A., as Administrative Agent—incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. |
| | |
10.3710.36(a) | | SlotFirst Amendment, dated August 1, 2019, to the Amended and Gate SecurityRestated Credit and Guaranty Agreement, dated as of April 23, 2013 between6, 2017, among JetBlue Airways Corporation, as Grantor,Borrower, the Subsidiaries of the Borrower party thereto as Guarantors, the Lenders party thereto and Citibank, N.A., as Administrative Agent—incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 2013.2019. |
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| | | | | | | | |
10.37(a)10.36(b)**** | | SecuritySecond Amendment, dated February 20, 2020, to the Amended and Restated Credit and Guaranty Agreement, Ratification, dated as of April 6, 2017, betweenamong JetBlue Airways Corporation, as Borrower, the Subsidiaries of the Borrower party thereto as Guarantors, the Lenders party thereto and Citibank, N.A., as Administrative Agent—incorporated by reference to Exhibit 10.210.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.March 31, 2020. |
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| 10.38** | | |
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| 10.38(a)** | | |
| | |
| 10.39* | | |
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| 10.41* | | |
| | |
| 10.41(a)* | | |
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10.42*10.41(b)* | | |
| | |
| 10.44* | | |
| | |
| 10.44(a)* | | |
| | |
| 10.45** | | |
| | |
| 10.46 | | |
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| 10.47 | | |
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| 10.48 | | |
| | |
10.4310.49 | | Term Loan Credit Agreement and General Release, dated as of February 23, 2017, betweenJune 17, 2020 among JetBlue Airways Corporation, as Borrower, the subsidiaries of the Borrower party hereto, as Guarantors, the Lenders party hereto, and James F. Leddy—Barclays Bank PLC, as Administrative Agent—incorporated by reference to Exhibit 10.1 to our Current Report on From 8-K dated June 17, 2020. |
| | |
| 10.50* | | |
| | |
| 10.51* | | |
| | | | | | | | |
| | |
| 10.52***** | | Loan and Guarantee Agreement, dated as of September 29, 2020, among JetBlue Airways Corporation, as Borrower, the Subsidiaries of JetBlue Airways Corporation party thereto from time to time, as Guarantors, the United States Department of the Treasury, as Lender, and The Bank of New York Mellon as Administrative Agent and Collateral Agent—incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. |
| | |
| 10.52(a)+ | | Amendment, dated November 3, 2020, to Loan and Guarantee Agreement, dated as of September 29, 2020, among JetBlue Airways Corporation, as Borrower, the Subsidiaries of JetBlue Airways Corporation party thereto from time to time, as Guarantors, the United States Department of the Treasury, as Lender, and The Bank of New York Mellon as Administrative Agent and Collateral Agent. |
| | |
| 10.53 | | |
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12.1 | | |
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21.1 | | |
| | |
|
| | |
2310.54**** | | |
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| 10.54(a)**** | | |
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| 10.55**** | | |
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| 10.56**** | | |
| | |
| 10.57+ | | |
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| 10.58+ | | |
| | |
| 21.1+ | | |
| | |
| 23+ | | |
| | |
31.131.1+ | | |
| | |
31.231.2+ | | |
| | |
3232++ | | |
| | |
99.2101.INS | | XBRL Instance Document |
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| 101.SCH | | XBRL Taxonomy Extension Schema Document |
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| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document |
| | |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Letter | | | | | |
†
| Pursuant to Instruction 2 to Item 601 of ApprovalRegulation S-K, Exhibit 4.3(k) filed herewith contains a list of documents applicable to each Aircraft (other than Aircraft bearing Registration No. N976JT) that relate to the offering of the JetBlue Airways Pass Through Certificates, Series 2019-1, which documents are substantially identical to those which are filed herewith as Exhibits 4.3(h) and 4.3(i), except for the information identifying such Aircraft in question and various information relating to the principal amounts of the Equipment Notes relating to such Aircraft. Exhibit 4.3(k) sets forth the details by which such documents differ from the Citycorresponding representative sample of Long Beach Departmentdocuments filed herewith as Exhibits 4.3(h) and 4.3(i) with respect to Aircraft bearing Registration No. N976JT. |
| |
| †† | Pursuant to Instruction 2 to Item 601 of Public Works,Regulation S-K, Exhibit 4.3(x), incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K dated May 22, 2001, approving City Council Resolution C-27843 regarding Flight Slot Allocation at Long Beach Municipal Airport—August 17, 2020 and filed on August 18, 2020, contains a list of documents applicable to each Aircraft (other than Aircraft bearing Registration No. N946JL) that relate to the offering of the JetBlue Airways Pass Through Certificates, Series 2020-1, which documents are substantially identical to those which were filed as Exhibits 4.9 and 4.10 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020, incorporated by reference herein, except for the information identifying such Aircraft in question and various information relating to the principal amounts of the Equipment Notes relating to such Aircraft. Exhibit 99.1 sets forth the details by which such documents differ from the corresponding representative sample of documents filed as Exhibits 4.9 and 4.10 with respect to Aircraft bearing Registration No. N946JL. |
| |
| ††† | Pursuant to Instruction 2 to Item 601 of Regulation S-K, Exhibit 4.3(y), incorporated herein by reference to Exhibit 99.2 to the Registration Statementour Current Report on Form S-1,8-K dated August 17, 2020 and filed on August 18, 2020, contains a list of documents applicable to each Aircraft (other than Aircraft bearing Registration No. N2002J) that relate to the offering of the JetBlue Airways Pass Through Certificates, Series 2020-1, which documents are substantially identical to those which were filed as amended (FileExhibits 4.11 and 4.12 to our Current Report on Form 8-K dated August 17, 2020 and filed on August 18, 2020, incorporated by reference herein, except for the information identifying such Aircraft in question and various information relating to the principal amounts of the Equipment Notes relating to such Aircraft. Exhibit 99.2 sets forth the details by which such documents differ from the corresponding representative sample of documents filed as Exhibits 4.11 and 4.12 with respect to Aircraft bearing Registration No. 333-82576). |
| | |
101.INS | | XBRL Instance Document |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document |
| | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| N2002J. |
| |
*†††† | Pursuant to Instruction 2 to Item 601 of Regulation S-K, Exhibit 4.3(ag), incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K dated August 28, 2020 and filed on August 28, 2020, contains a list of documents applicable to each Aircraft (other than Aircraft bearing Registration No. N976JT) that relate to the offering of the JetBlue Airways Pass Through Certificates, Series 2019-1B, which documents are substantially identical to those which were filed as Exhibits 4.6 and 4.7 to our Current Report on Form 8-K dated August 28, 2020 and filed on August 28, 2020, incorporated by reference herein, except for the information identifying such Aircraft in question and various information relating to the principal amounts of the Equipment Notes relating to such Aircraft. Exhibit 99.3 sets forth the details by which such documents differ from the corresponding representative sample of documents filed as Exhibits 4.6 and 4.7 with respect to Aircraft bearing Registration No. N976JT. |
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| + | Filed herewith |
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| ++ | Furnished herewith |
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| * | Compensatory plans in which the directors and executive officers of JetBlue participate. |
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| ** | Pursuant to a Confidential Treatment Request under Rule 24b-2 filed with and approved by the SEC, portions of this exhibit have been omitted. |
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| *** | Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and has been provided separately to the Securities and Exchange Commission pursuant to a Confidential Treatment Request filed with the Commission. |
| |
(1)**** | Documents substantially identicalInformation in all material respectsthis exhibit identified by brackets is confidential and has been excluded pursuant to the document filed as Exhibit 4.4 to our Current Report on Form 8-K dated March 24, 2004 (which exhibit relates to formation of JetBlue Airways Pass Through Trust, Series 2004-1G-1-O and the issuance of Three-Month LIBOR plus 0.375% JetBlue Airways Pass Through Trust, Series 2004-1G-1-O, Pass Through Certificates) have been entered into with respect to formation of each of JetBlue Airways Pass Through Trusts, Series 2004-1G-2-O and Series 2004-1C-O and the issuance of each of Three-Month LIBOR plus 0.420% JetBlue Airways Pass Through Trust, Series 2004-1G-2-O and Three-Month LIBOR plus 4.250% JetBlue Airways Pass Through Trust, Series 2004-1C-O. Pursuant to Instruction 2 of Item 601601(b)(10)(iv) of Regulation S-K Exhibit 99.1, incorporated by referencebecause it (i) is not material and (ii) would likely cause competitive harm to our Current Report on Form 8-K dated March 24, 2004 (File No. 000-49728), sets forth the terms by which such substantially identical documents differ from Exhibit 4.7(c).Company if publicly disclosed. |
| |
(2)***** | Documents substantially identical in all material respects to the document filed as Exhibit 4.14 our Current Report on Form 8-K dated March 24, 2004 (which exhibit relates to an above-cap liquidity facility provided on behalf of the JetBlue Airways Corporation Pass Through Trust 2004-1G-1-O) have been entered into with respect to the above-cap liquidity facilities provided on behalf of the JetBlue Airways Corporation Pass Through Trust 2004-1G-2-O and the JetBlue Airways Corporation Pass Through Trust 2004-1C-O. Pursuant to Instruction 2 of Item 601601(a)(5) of Regulation S-K, Exhibit 99.2, incorporated by referenceschedules have been omitted and will be furnished on a supplemental basis to our Current Report on Form 8-K dated March 24, 2004 (File No. 000-49728), sets forth the terms by which such substantially identical documents differ from Exhibit 4.7(m).Securities and Exchange Commission upon request. |
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(3) | Documents substantially identical in all material respects to the document filed as Exhibit 4.4 to our Current Report on Form 8-K dated November 9, 2004 (which exhibit relates to formation of JetBlue Airways Pass Through Trust, Series 2004-2G-1-O and the issuance of Three-Month LIBOR plus 0.375% JetBlue Airways Pass Through Trust, Series |
2004-2G-1-O, Pass Through Certificates) have been entered into with respect to formation
| |
(4) | Documents substantially identical in all material respects to the document filed as Exhibit 4.14 to our Current Report on Form 8-K dated November 9, 2004 (which exhibit relates to an above-cap liquidity facility provided on behalf of the JetBlue Airways Corporation Pass Through Trust 2004-2G-1-O) have been entered into with respect to the above-cap liquidity facilities provided on behalf of the JetBlue Airways Corporation Pass Through Trust 2004-2G-2-O and the JetBlue Airways Corporation Pass Through Trust 2004-2C-O. Pursuant to Instruction 2 of Item 601 of Regulation S-K, Exhibit 99.2, incorporated by reference to our Current Report on Form 8-K dated November 9, 2004 (File No. 000-49728), sets forth the terms by which such substantially identical documents differ from Exhibit 4.8(m). |
Financial Statement Schedule
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of JetBlue Airways Corporation
Opinion on the Financial Statement Schedules
We have audited the consolidated financial statements of JetBlue Airways Corporation (the Company) as of December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and have issued our report thereon dated February 16, 2018 (included elsewhere in this Annual Report on Form 10-K). Our audits also included the financial statement schedule listed in Item 15(2) of this Annual Report on Form 10-K. In our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.
Basis for Opinion
This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's schedule based on our audits. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
New York, New York
February 16, 2018
S-1
JETBLUE AIRWAYS CORPORATION
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in millions)
| | | | | | | | | | | | | | Balance at
beginning of
period | | Additions Charged to
Costs and
Expenses | | Deductions | | Balance at
end of
period |
| | | Balance at
beginning of
period | | Additions Charged to
Costs and
Expenses | | Deductions | | Balance at
end of
period | |
| Year Ended December 31, 2017 | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2020 | | | | | | | | |
| Valuation allowance for deferred tax assets | | Valuation allowance for deferred tax assets | | $ | 31 | | | $ | 38 | | | $ | 0 | | | $ | 69 | |
| Allowance for obsolete inventory parts | | Allowance for obsolete inventory parts | | 22 | | | 5 | | | 0 | | | 27 | |
| Allowance for doubtful accounts | | $ | 5 |
| | $ | — |
| | $ | 4 |
| (1) | $ | 1 |
| Allowance for doubtful accounts | | 1 | | | 6 | | | 5 | | (1) | 2 | |
| Total | | Total | | $ | 54 | | | $ | 49 | | | $ | 5 | | | $ | 98 | |
| Year Ended December 31, 2019 | | Year Ended December 31, 2019 | |
| Valuation allowance for deferred tax assets | | Valuation allowance for deferred tax assets | | $ | 21 | | | $ | 10 | | | $ | 0 | | | $ | 31 | |
| Allowance for obsolete inventory parts | | 12 |
| | 2 |
| | — |
| (2) | 14 |
| Allowance for obsolete inventory parts | | 18 | | | 4 | | | 0 | | | 22 | |
| Allowance for doubtful accounts | | Allowance for doubtful accounts | | 1 | | | 6 | | | 6 | | (1) | 1 | |
| Total | | 17 |
| | 2 |
| | 4 |
| | 15 |
| Total | | $ | 40 | | | $ | 20 | | | $ | 6 | | | $ | 54 | |
| Year Ended December 31, 2016 | | | | | | | | | |
| Year Ended December 31, 2018 | | Year Ended December 31, 2018 | |
| Valuation allowance for deferred tax assets | | Valuation allowance for deferred tax assets | | $ | 1 | | | $ | 20 | | | $ | 0 | | | $ | 21 | |
| Allowance for obsolete inventory parts | | Allowance for obsolete inventory parts | | 14 | | | 4 | | | 0 | | | 18 | |
| Allowance for doubtful accounts | | $ | 6 |
| | $ | — |
| | $ | 1 |
| (1) | $ | 5 |
| Allowance for doubtful accounts | | 1 | | | 6 | | | 6 | | (1) | 1 | |
| Allowance for obsolete inventory parts | | 10 |
| | 2 |
| | — |
| (2) | 12 |
| |
| Total | | 16 |
| | 2 |
| | 1 |
| | 17 |
| Total | | $ | 16 | | | $ | 30 | | | $ | 6 | | | $ | 40 | |
| Year Ended December 31, 2015 | | | | | | | | | |
| Allowance for doubtful accounts | | $ | 6 |
| | $ | 4 |
| | $ | 4 |
| (1) | $ | 6 |
| |
| Allowance for obsolete inventory parts | | 8 |
| | 2 |
| | — |
| (2) | 10 |
| |
| Total | | 14 |
| | 6 |
| | 4 |
| | 16 |
| |
| |
(1) | Uncollectible accounts written off, net of recoveries. |
(1)Uncollectible accounts written off, net of recoveries.
S-2
