UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~2021

☐ 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~~CORPORATION

(Exact name of registrant as specified in its charter)



Delaware			87-0617894
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

27-01 Queens Plaza North	Long Island City	New York	11101
(Address of principal executive offices)			(Zip Code)

(~~718~~) (718) 286-7900

(Registrant’s telephone number, including area code)

~~N/A~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	JBLU	The NASDAQ Stock Market LLC

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☑ Yes ☐ No

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.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of June 30, ~~2020,~~2021, there were ~~272,425,869~~318,022,154 shares outstanding of the registrant’s common stock, par value $0.01.

Table of Contents

JETBLUE AIRWAYS CORPORATION

FORM 10-Q

INDEX


			Page
			~~Page~~
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Balance Sheets - June ~~30, 2020~~ 3 0 , 2021 and December 31, ~~2019~~2020			3
Consolidated Statements of Operations - Three and Six Months Ended June ~~30, 2020~~ 3 0 , 2021 and ~~2019~~2020			5
Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30 , 2021 and 2020 ~~and 2019~~			6
Condensed Consolidated Statements of Cash Flows - Six Months Ended June ~~30, 2020~~ 3 0 , 2021 and ~~2019~~2020			7
Consolidated Statements of Stockholders' Equity - Three and Six Months Ended June ~~30, 2020~~ 3 0 , 2021 and ~~2019~~2020			8
Notes to Condensed Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4543
Item 4. Controls and Procedures			4543

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			4644
Item 1A. Risk Factors			4644
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5044
Item 5. Other Information			44
Item 6. Exhibits			5044

SIGNATURE			44

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except per share data)


	June 30, 2021		December 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,409	$	1,918
Investment securities	1,317		1,135
Receivables, net of allowance of $2, at June 30, 2021 and December 31, 2020, respectively.	276		98
Inventories, net of allowance of $22 and $27, at June 30, 2021 and December 31, 2020, respectively.	59		71
Prepaid expenses and other	135		123
Total current assets	4,196		3,345
PROPERTY AND EQUIPMENT
Flight equipment	10,793		10,256
Predelivery deposits for flight equipment	343		420
Total flight equipment and predelivery deposits, gross	11,136		10,676
Less accumulated depreciation	3,047		2,888
Total flight equipment and predelivery deposits, net	8,089		7,788
Other property and equipment	1,219		1,202
Less accumulated depreciation	629		591
Total other property and equipment, net	590		611
Total property and equipment, net	8,679		8,399
OPERATING LEASE ASSETS	742		804
OTHER ASSETS
Investment securities	1		2
Restricted cash	53		51
Intangible assets, net of accumulated amortization of $379 and $360, at June 30, 2021 and December 31, 2020, respectively.	264		261
Other	480		544
Total other assets	798		858
TOTAL ASSETS	$	14,415	$	13,406

June 30, 2020 December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,561
$ 959
Investment securities 340
369
Receivables, less allowance (2020-$2; 2019-$1) 85
231
Inventories, less allowance (2020-$25; 2019-$22) 71
81
Prepaid expenses and other 720
146
Total current assets 3,777
1,786
PROPERTY AND EQUIPMENT
Flight equipment 10,573
10,332
Predelivery deposits for flight equipment 460
433
Total flight equipment and predelivery deposits, gross 11,033
10,765
Less accumulated depreciation 2,955
2,768
Total flight equipment and predelivery deposits, net 8,078
7,997
Other property and equipment 1,189
1,145
Less accumulated depreciation 565
528
Total other property and equipment, net 624
617
Total property and equipment, net 8,702
8,614
OPERATING LEASE ASSETS 737
912
OTHER ASSETS
Investment securities 3
3
Restricted cash 51
59
Other 757
544
Total other assets 811
606
TOTAL ASSETS $ 14,027
$ 11,918

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except per share data)


	June 30, 2021		December 31, 2020
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	530	$	365
Air traffic liability	1,880		1,122
Accrued salaries, wages and benefits	435		409
Other accrued liabilities	584		215
Current operating lease liabilities	112		113
Current maturities of long-term debt and finance lease obligations	432		450
Total current liabilities	3,973		2,674
LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS	3,998		4,413
LONG-TERM OPERATING LEASE LIABILITIES	697		752
DEFERRED TAXES AND OTHER LIABILITIES
Deferred income taxes	830		922
Air traffic liability - non-current	589		616
Other	515		78
Total deferred taxes and other liabilities	1,934		1,616
COMMITMENTS AND CONTINGENCIES (Note 6)	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, 476 and 474 shares issued and 318 and 316 shares outstanding at June 30, 2021 and December 31, 2020, respectively	5		5
Treasury stock, at cost; 158 and 158 shares at June 30, 2021 and December 31, 2020, respectively	(1,989)		(1,981)
Additional paid-in capital	3,012		2,959
Retained earnings	2,785		2,968
Accumulated other comprehensive income	0		0
Total stockholders’ equity	3,813		3,951
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	14,415	$	13,406

June 30, 2020 December 31, 2019
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $ 347
$ 401
Air traffic liability 1,271
1,119
Accrued salaries, wages and benefits 356
376
Other accrued liabilities 582
295
Current operating lease liabilities 83
128
Short-term borrowings 984
—
Current maturities of long-term debt and finance lease obligations 362
344
Total current liabilities 3,985
2,663
LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS 3,430
1,990
LONG-TERM OPERATING LEASE LIABILITIES 697
690
DEFERRED TAXES AND OTHER LIABILITIES
Deferred income taxes 1,265
1,251
Air traffic liability - loyalty non-current 492
481
Other 64
44
Total deferred taxes and other liabilities 1,821
1,776
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 25 shares authorized, none issued —
—
Common stock, $0.01 par value; 900 shares authorized, 430 and 427 shares issued and 272 and 282 shares outstanding at June 30, 2020 and December 31, 2019, respectively 4
4
Treasury stock, at cost; 158 and 145 shares at June 30, 2020 and December 31, 2019, respectively (1,981 ) (1,782 )
Additional paid-in capital 2,340
2,253
Retained earnings 3,734
4,322
Accumulated other comprehensive (loss) income (3 ) 2
Total stockholders’ equity 4,094
4,799
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 14,027
$ 11,918

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
OPERATING REVENUES
Passenger	$	1,388	$	170	$	2,058	$	1,682
Other	111		45		174		121
Total operating revenues	1,499		215		2,232		1,803
OPERATING EXPENSES
Aircraft fuel and related taxes	336		29		530		394
Salaries, wages and benefits	577		477		1,098		1,078
Landing fees and other rents	174		62		289		174
Depreciation and amortization	133		140		258		279
Aircraft rent	26		16		50		37
Sales and marketing	47		8		70		60
Maintenance, materials and repairs	164		73		268		233
Other operating expenses	261		124		471		394
Special items	(366)		(304)		(655)		(102)
Total operating expenses	1,352		625		2,379		2,547
OPERATING INCOME (LOSS)	147		(410)		(147)		(744)
OTHER EXPENSE
Interest expense	(54)		(40)		(112)		(65)
Capitalized interest	3		3		6		7
Interest income and other expenses	(39)		(3)		(37)		(2)
Total other expense	(90)		(40)		(143)		(60)
INCOME (LOSS) BEFORE INCOME TAXES	57		(450)		(290)		(804)
Income tax benefit	(7)		(130)		(107)		(216)
NET INCOME (LOSS)	$	64	$	(320)	$	(183)	$	(588)

EARNINGS (LOSS) PER COMMON SHARE:
Basic	$	0.20	$	(1.18)	$	(0.58)	$	(2.14)
Diluted	$	0.20	$	(1.18)	$	(0.58)	$	(2.14)

Three Months Ended June 30, Six Months Ended June 30,
2020
2019 2020 2019
OPERATING REVENUES
Passenger $ 170
$ 2,031
$ 1,682
$ 3,833
Other 45
74
121
144
Total operating revenues 215
2,105
1,803
3,977
OPERATING EXPENSES
Aircraft fuel and related taxes 29
484
394
921
Salaries, wages and benefits 477
576
1,078
1,151
Landing fees and other rents 62
121
174
237
Depreciation and amortization 140
127
279
251
Aircraft rent 16
25
37
50
Sales and marketing 8
75
60
141
Maintenance, materials and repairs 73
168
233
324
Other operating expenses 124
277
394
563
Special items (304 ) 2
(102 ) 14
Total operating expenses 625
1,855
2,547
3,652
OPERATING (LOSS) INCOME (410 ) 250
(744 ) 325
OTHER INCOME (EXPENSE)
Interest expense (40 ) (19 ) (65 ) (38 )
Capitalized interest 3
3
7
6
Interest income and other (3 ) 2
(2 ) 1
Total other income (expense) (40 ) (14 ) (60 ) (31 )
(LOSS) INCOME BEFORE INCOME TAXES (450 ) 236
(804 ) 294
Income tax (benefit) expense (130 ) 57
(216 ) 73
NET (LOSS) INCOME $ (320 ) $ 179
$ (588 ) $ 221

(LOSS) EARNINGS PER COMMON SHARE:
Basic $ (1.18 ) $ 0.60
$ (2.14 ) $ 0.73
Diluted $ (1.18 ) $ 0.59
$ (2.14 ) $ 0.73

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in millions)


	Three Months Ended June 30,
	2021		2020
NET INCOME (LOSS)	$	64	$	(320)
Changes in fair value of derivative instruments, net of reclassifications into earnings, net of deferred taxes of $0 and $(1) in 2021 and 2020, respectively	0		3
Total other comprehensive income	0		3
COMPREHENSIVE INCOME (LOSS)	$	64	$	(317)

Three Months Ended June 30,
2020
2019
NET (LOSS) INCOME $ (320 ) $ 179
Changes in fair value of derivative instruments, net of reclassifications into earnings, net of deferred taxes of $(1) and $(1) in 2020 and 2019, respectively 3
2
Total other comprehensive income 3
2
COMPREHENSIVE (LOSS) INCOME $ (317 ) $ 181

Six Months Ended June 30,
2020 2019
NET (LOSS) INCOME $ (588 ) $ 221
Changes in fair value of derivative instruments, net of reclassifications into earnings, net of deferred taxes of $3 and $(1) in 2020 and 2019, respectively (5 ) 4
Total other comprehensive (loss) income (5 ) 4
COMPREHENSIVE (LOSS) INCOME $ (593 ) $ 225


	Six Months Ended June 30,
	2021		2020
NET LOSS	$	(183)	$	(588)
Changes in fair value of derivative instruments, net of reclassifications into earnings, net of deferred taxes of $0 and $3 in 2021 and 2020, respectively	0		(5)
Total other comprehensive income (loss)	0		(5)
COMPREHENSIVE LOSS	$	(183)	$	(593)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Six Months Ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(183)	$	(588)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes	(93)		(198)
Impairment of long-lived assets	0		202
Depreciation	238		255
Amortization	20		24
Stock-based compensation	17		15
Changes in certain operating assets and liabilities	1,439		147
Deferred federal payroll support program grants	185		363
Other, net	35		3
Net cash provided by operating activities	1,658		223
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(524)		(377)
Predelivery deposits for flight equipment	(16)		(57)


Purchase of available-for-sale securities	(520)		(861)
Proceeds from the sale of available-for-sale securities	340		890

Other, net	(2)		0
Net cash used in investing activities	(722)		(405)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	1,010		1,517
Proceeds from short-term borrowings	0		981
Proceeds from sale-leaseback transactions	0		118
Proceeds from issuance of common stock	22		22
Proceeds from issuance of stock warrants	14		18
Repayment of long-term debt and finance lease obligations	(1,481)		(177)
Repayment of short-term borrowings	0		(3)
Acquisition of treasury stock	(7)		(167)
Other, net	(1)		0
Net cash (used in) provided by financing activities	(443)		2,309
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	493		2,127
Cash, cash equivalents and restricted cash at beginning of period	1,969		1,018
Cash, cash equivalents and restricted cash at end of period(1)	$	2,462	$	3,145

SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest (net of amount capitalized)	$	97	$	45
Cash payments for income taxes (net of refunds)	0		0

NON-CASH TRANSACTIONS
Operating lease assets obtained in exchange for operating lease liabilities	$	0	$	2

(1) Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:

	June 30, 2021		June 30, 2020
Cash and cash equivalents	$	2,409	$	2,561

Restricted cash	53		584
Total cash, cash equivalents and restricted cash	$	2,462	$	3,145

Six Months Ended June 30,
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (588 ) $ 221
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Deferred income taxes (198 ) 46
Impairment of long-lived assets 202
—
Depreciation 255
229
Amortization 24
22
Stock-based compensation 15
17
Changes in certain operating assets and liabilities 147
430
Deferred CARES Act grant 363
—
Other, net 3
3
Net cash provided by operating activities 223
968
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (377 ) (328 )
Predelivery deposits for flight equipment (57 ) (142 )
Purchase of held-to-maturity investments —
(289 )
Proceeds from the maturities of held-to-maturity investments —
250
Purchase of available-for-sale securities (861 ) (609 )
Proceeds from the sale of available-for-sale securities 890
545
Other, net —
5
Net cash (used in) investing activities (405 ) (568 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,517
—
Proceeds from short-term borrowings 981
—
Proceeds from sale-leaseback transactions 118
—
Proceeds from issuance of common stock 22
27
Proceeds from issuance of stock warrants 18
—
Repayment of long-term debt and finance lease obligations (177 ) (182 )
Repayment of short-term borrowings (3 ) —
Acquisition of treasury stock (167 ) (256 )
Net cash provided by (used in) financing activities 2,309
(411 )
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 2,127
(11 )
Cash, cash equivalents and restricted cash at beginning of period 1,018
533
Cash, cash equivalents and restricted cash at end of period⁽¹⁾
$ 3,145
$ 522

SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest (net of amount capitalized) $ 27
$ 33
Cash payments for income taxes (net of refunds) —
(88 )
NON-CASH TRANSACTONS
Operating lease assets obtained in exchange for operating lease liabilities $ 2
$ —

⁽¹⁾ Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:
June 30, 2020 June 30, 2019
Cash and cash equivalents $ 2,561
$ 461
Restricted cash 584
61
Total cash, cash equivalents and restricted cash $ 3,145
$ 522

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited, in millions)


	Common Shares	Common Stock		Treasury Shares	Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
Balance at March 31, 2021	475	$	5	158	$	(1,987)	$	2,975	$	2,721	$	0	$	3,714
Net income	—	—		—	—		—		64		—		64

Vesting of restricted stock units	0	—		—	(2)		—		—		—		(2)
Stock compensation expense	—	—		—	—		9		—		—		9
Stock issued under Crewmember stock purchase plan	1	—		—	—		22		—		—		22
Warrants issued under federal support programs	—	—		—	—		6		—		—		6
Balance at June 30, 2021	476	$	5	158	$	(1,989)	$	3,012	$	2,785	$	0	$	3,813

	Common Shares	Common Stock		Treasury Shares	Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at March 31, 2020	428	$	4	158	$	(1,980)	$	2,294	$	4,054	$	(6)	$	4,366
Net loss	—	—		—	—		—		(320)		—		(320)
Other comprehensive income	—	—		—	—		—		—		3		3
Vesting of restricted stock units	0	—		—	(1)		—		—		—		(1)
Stock compensation expense	—	—		—	—		6		—		—		6
Stock issued under Crewmember stock purchase plan	2	—		—	—		22		—		—		22
CARES Act warrant issuance	—	—		—	—		18		—		—		18
Balance at June 30, 2020	430	$	4	158	$	(1,981)	$	2,340	$	3,734	$	(3)	$	4,094

	Common Shares	Common Stock		Treasury Shares	Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
Balance at December 31, 2020	474	$	5	158	$	(1,981)	$	2,959	$	2,968	$	0	$	3,951
Net loss	—	—		—	—		—		(183)		—		(183)
Other comprehensive income	—	—		—	—		—		—		0		0
Vesting of restricted stock units	1	—		—	(8)		—		—		—		(8)
Stock compensation expense	—	—		—	—		17		—		—		17
Stock issued under Crewmember stock purchase plan	1	—		—	—		22		—		—		22
Shares repurchased	—	—		0	0		0		—		—		0
Warrants issued under federal support programs	—	—		—	—		14		—		—		14
Balance at June 30, 2021	476	$	5	158	$	(1,989)	$	3,012	$	2,785	$	0	$	3,813

	Common Shares	Common Stock		Treasury Shares	Treasury Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2019	427	$	4	145	$	(1,782)	$	2,253	$	4,322	$	2	$	4,799
Net loss	—	—		—	—		—		(588)		—		(588)
Other comprehensive loss	—	—		—	—		—		—		(5)		(5)
Vesting of restricted stock units	1	—		—	(7)		—		—		—		(7)
Stock compensation expense	—	—		—	—		15		—		—		15
Stock issued under Crewmember stock purchase plan	2	—		—	—		22		—		—		22
Shares repurchased	—	—		13	(192)		32		—		—		(160)
CARES Act warrant issuance							18						18
Balance at June 30, 2020	430	$	4	158	$	(1,981)	$	2,340	$	3,734	$	(3)	$	4,094

Common
Shares Common
Stock Treasury
Shares Treasury
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at March 31, 2020 428
$ 4
158
$ (1,980 ) $ 2,294
$ 4,054
$ (6 ) $ 4,366
Net (loss) —
—
—
—
—
(320 ) —
(320 )
Other comprehensive income —
—
—
—
—
—
3
3
Vesting of restricted stock units —
—
—
(1 ) —
—
—
(1 )
Stock compensation expense —
—
—
—
6
—
—
6
Stock issued under Crewmember stock purchase plan 2
—
—
—
22
—
—
22
Shares repurchased —
—
—
—
—
—
—
—
CARES Act warrant issuance —
—
—
—
18
—
—
18
Balance at June 30, 2020 430
$ 4
158
$ (1,981 ) $ 2,340
$ 3,734
$ (3 ) $ 4,094

Common
Shares Common
Stock Treasury
Shares Treasury
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at March 31, 2019 423
$ 4
122
$ (1,377 ) $ 2,186
$ 3,795
$ (1 ) $ 4,607
Net income —
—
—
—
—
179
—
179
Other comprehensive income —
—
—
—
—
—
2
2
Vesting of restricted stock units —
—
—
(1 ) —
—
—
(1 )
Stock compensation expense —
—
—
—
8
—
—
8
Stock issued under Crewmember stock purchase plan 2
—
—
—
27
—
—
27
Shares repurchased —
—
7
(125 ) —
—
—
(125 )
Balance at June 30, 2019 425
$ 4
129
$ (1,503 ) $ 2,221
$ 3,974
$ 1
$ 4,697

Common
Shares Common
Stock Treasury
Shares Treasury
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at December 31, 2019 427
$ 4
145
$ (1,782 ) $ 2,253
$ 4,322
$ 2
$ 4,799
Net (loss) —
—
—
—
—
(588 ) —
(588 )
Other comprehensive (loss) —
—
—
—
—
—
(5 ) (5 )
Vesting of restricted stock units 1
—
—
(7 ) —
—
—
(7 )
Stock compensation expense —
—
—
—
15
—
—
15
Stock issued under Crewmember stock purchase plan 2
—
—
—
22
—
—
22
Shares repurchased —
—
13
(192 ) 32
—
—
(160 )
CARES Act warrant issuance —
—
—
—
18
—
—
18
Balance at June 30, 2020 430
$ 4
158
$ (1,981 ) $ 2,340
$ 3,734
$ (3 ) $ 4,094

Common
Shares Common
Stock Treasury
Shares Treasury
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at December 31, 2018 422
$ 4
116
$ (1,272 ) $ 2,203
$ 3,753
$ (3 ) $ 4,685
Net income —
—
—
—
—
221
—
221
Other comprehensive income —
—
—
—
—
—
4
4
Vesting of restricted stock units 1
—
—
(6 ) —
—
—
(6 )
Stock compensation expense —
—
—
—
17
—
—
17
Stock issued under Crewmember stock purchase plan 2
—
—
—
26
—
—
26
Shares repurchased —
—
13
(225 ) (25 ) —
—
(250 )
Balance at June 30, 2019 425
$ 4
129
$ (1,503 ) $ 2,221
$ 3,974
$ 1
$ 4,697

See accompanying notes to condensed consolidated financial statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—Summary of Significant Accounting Policies

Basis of Presentation

JetBlue Airways Corporation, or JetBlue, provides air transportation services across the United States, the Caribbean and Latin America. Our condensed consolidated financial statements include the accounts of JetBlue and our subsidiaries which are collectively referred to as “we” or the “Company”. All majority-owned subsidiaries are consolidated on a line by line basis, with all intercompany transactions and balances being eliminated. These condensed consolidated financial statements and related notes should be read in conjunction with our ~~2019~~2020 audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, or our ~~2019~~2020 Form 10-K.

These condensed consolidated financial statements are unaudited and have been prepared by us following the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC. In our opinion they reflect all adjustments, including normal recurring items, that are necessary to present fairly the results for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States, or GAAP, have been condensed or omitted as permitted by such rules and regulations; however, we believe that the disclosures are adequate to make the information presented not misleading.

Due to the impacts from the coronavirus ("COVID-19") pandemic, seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, and other factors, our operating results for the periods presented herein are not necessarily indicative of the results that may be expected for other interim periods or the entire fiscal year.

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 investments such as time deposits 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 fair value hierarchy. We did 0t record any material gains or losses on these securities during the three and six months ended June 30, 2021 or 2020. Refer to Note 8 to our condensed consolidated financial statements for an explanation of the fair value hierarchy structure.

Held-to-maturity investment securities. ~~The contractual maturities of our~~We did not have any held-to-maturity investments as of June 30, ~~2020 were not greater than 24 months.~~2021 and December 31, 2020. We did ~~not~~0t record any significant gains or losses on these securities during the three and six months ended June 30, ~~2020~~2021 or ~~2019. The estimated fair value of these investments approximated their carrying value as of June 30, 2020 and December 31, 2019, respectively.~~2020.

The aggregate carrying values of our short-term and long-term investment securities consisted of the following at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions):

June 30, 2020 December 31, 2019
Available-for-sale securities
Time deposits $ 294
$ 325
Commercial paper 20
20
Debt securities 8
6
Total available-for-sale securities 322
351
Held-to-maturity securities
Corporate bonds 21
21
Total held-to-maturity securities 21
21
Total investment securities $ 343
$ 372


	June 30, 2021		December 31, 2020
Available-for-sale securities
Time deposits	$	1,311	$	1,130
Debt securities	7		7
Total available-for-sale securities	1,318		1,137
Total investment securities	$	1,318	$	1,137

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~~$46 million and ~~$41~~$40 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~

2020.

Equity Method Investments

Investments 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 ~~FASB~~Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ~~("Codification"~~(the "Codification"). The carrying amount of our equity method investments was ~~$35~~$32 million ~~and $38~~and $34 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included within other assets on our consolidated balance sheets.

Recently ~~Issued~~Adopted 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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies, and modifies certain guidance related to the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, with early adoption permitted. We are still evaluating the full impact of adopting the update on our consolidated financial statements.

~~Recently Adopted Accounting Standards~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~. The update requires the use of an "expected loss" model on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans, and held-to-maturity debt securities, entities are required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be required 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~~2019-12 as of January 1, ~~2020 using a modified retrospective transition approach.~~2021. The adoption of ASU ~~2016-13~~2019-12 did not have a material impact on our condensed consolidated financial statements.

In August ~~2018,~~2020, the FASB issued ASU ~~2018-13,~~2020-06, ~~Fair Value Measurement (Topic 820)~~Debt —Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): ~~Disclosure Framework - Changes to the Disclosure Requirements~~Accounting for ~~Fair Value Measurement~~Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"). This update simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, this update amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The ~~update eliminates, adds,~~treasury stock method is no longer available. Entities may adopt the requirements of ASU 2020-06 using either a full or modified retrospective approach, and ~~modifies certain disclosure requirements~~it is effective for ~~fair value measurements.~~interim and annual reporting periods beginning after December 15, 2021. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2020. We adopted the requirements of ASU ~~2018-13~~2020-06 as of January 1, ~~2020.~~2021. The adoption ~~of ASU 2018-13~~ did not have ~~a significant~~an impact on our condensed consolidated financial ~~statement disclosures.~~statements as we did not have any convertible instruments outstanding as of December 31, 2020. As discussed in Note 3 to our condensed consolidated financial statements, in March 2021, we completed a private offering for $750 million of 0.50% convertible notes due 2026. We evaluated the conversion feature of this note offering for embedded derivatives in accordance with ASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on our assessment, we concluded that separate accounting for the conversion feature of this note offering is not required. The carrying value of this convertible note was included within long-term debt and finance lease obligations on our consolidated balance sheet as of June 30, 2021.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 2—~~The COVID-19 Pandemic~~

The unprecedented and rapid spread of the 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 has remained depressed. This decline in demand has had a material adverse impact on our operating revenues and financial position. During the second quarter of 2020, our operating revenues were 90% lower than the same quarter of 2019. Although demand began to improve during the second quarter, it remains significantly lower than in prior years. The length and severity of the reduction in demand due to the pandemic remains uncertain; accordingly, we expect the adverse impact to continue in the third quarter of 2020 and beyond. While we are planning for a modest recovery in demand during the third quarter of 2020, 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. Some states have experienced a resurgence of COVID-19 cases after reopening and as a result, certain other states, such as New York, have implemented travel restrictions or advisories for travelers from such states. Our response to the pandemic and the measures we take to secure additional liquidity may be modified as we have more clarity in the timing of demand recovery.

~~In response to these developments, 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 our highest priority. As the COVID-19 pandemic has developed, we have taken a number of steps to promote physical distancing and to implement new procedures that reflect the recommendations of health experts, including some of the following:

~~Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses our safety 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 have been diagnosed with COVID-19 or are required to quarantine;~~

~~Implemented a framework for internal contact tracing, crewmember notification, and return to work clearance process for all crewmembers, wherever they may be located;~~

~~Required face covering 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;~~

~~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 available to be sold on most flights; we plan to continue blocking middle seats on large aircraft and aisle seats on smaller aircraft for those not traveling together through September 8, 2020;

~~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 while also extending the expiration date of travel credits to 24 months; and~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~Retained an infectious disease specialist to conduct regular calls which are open to all crewmembers.~~

~~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 second quarter of 2020 declined by 85% year-over-year. For the third quarter of 2020, we expect capacity to be down by at least 45%, as compared to the same period in prior year. As a result of the significant reduction in demand expectations and lower capacity, we have temporarily parked approximately 30% of our fleet.

The reduction in demand and our capacity has 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 our business partners and extended payment terms.~~

•~~Instituted a company-wide hiring freeze.~~

~~Implemented salary reductions of 20% to 50% for our officers.~~

~~Offered crewmembers voluntary time off and separation programs, with most departures for the separation programs scheduled for August 2, 2020.~~

At June 30, 2020, we had cash, cash equivalents, short-term investments, and short-term restricted cash of approximately $3.4 billion. 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 immediate actions to increase liquidity, strengthen our financial position, and conserve cash. Some of the actions we have taken through June 30, 2020 include:

~~Executed a new $1.0 billion 364-day delayed draw term loan agreement and immediately drew down on the facility for the full amount available.~~

~~Borrowed on our existing $550 million revolving credit facility.~~


•	~~Executed a $150 million pre-purchase arrangement of TrueBlue~~^® ~~points with our co-brand credit card partner.~~

~~Suspended non-critical capital expenditure projects.~~

~~Amended our purchase agreement with Airbus to defer several aircraft deliveries, resulting in a $1.1 billion reduction in aircraft capital expenditures through 2022.~~

~~Suspended share repurchases.~~

~~Obtained $936 million of government funding under 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.~~

~~Entered into $118 million of sale-leaseback transactions in June; which is discussed further below.~~

As a result of these activities, we had $3.1 billion in unrestricted and short-term restricted cash as of June 30, 2020. The $936 million of CARES Act funding represents short-term restricted cash since the funds must be utilized to pay the salaries and benefits costs of our crewmembers through September 30, 2020. The funds are reclassified from short-term restricted cash within prepaid expenses and other on our consolidated balance sheets to cash and cash equivalents when the funds are utilized. As of June 30, 2020, $533 million of CARES Act funding remained available.

In June 2020, we executed $118 million of sale-leaseback transactions. These transactions 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 condensed consolidated statements of cash flows.

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~In July 2020, we executed $267 million of sale-leaseback transactions.~~

~~We continue to evaluate future financing opportunities to leverage our unencumbered assets in an effort to build additional levels of liquidity.~~

~~Valuation of Long-Lived Assets~~

For the three months ended March 31, 2020, we recorded an impairment loss of $202 million related to aircraft, including the ones that are under operating leases, and related spare parts in our Embraer E190 fleet.

~~We did not record any additional impairment losses on our long-lived assets for the three months ended June 30, 2020.~~

~~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, maintenance requirements, and other relevant conditions. Based on the assessment, we determined the future cash flows of our fleet exceeded their carrying values as of June 30, 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.

~~Valuation of Indefinite-Lived Intangibles~~

Our intangible assets consist primarily of acquired take-off and landing slots, or Slots, at certain domestic airports. 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 result in no amortization expense. We evaluate our 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 various market factors to determine if events and circumstances could reasonably have affected the fair value. We performed an impairment assessment as of June 30, 2020 and determined our indefinite-lived intangible assets are not impaired.

~~The Coronavirus Aid, Relief, and Economic Security Act~~

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") which is intended to provide relief and support to the U.S. economy. Under the CARES Act, assistance is available to the aviation industry in the form of direct payroll support (the "Payroll Support Program") and secured loans (the "Loan 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.

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

As previously discussed, the $936 million of CARES Act funding represents short-term restricted cash since the funds must be utilized to pay the salaries and benefits costs of our crewmembers through September 30, 2020. The funds are reclassified from short-term restricted cash within prepaid expenses and other on our consolidated balance sheets to cash and cash equivalents when the funds are utilized. As of June 30, 2020, $533 million of CARES Act funding remained available.

The carrying value relating to the payroll support grants is recorded within other liabilities and will be recognized as a contra-expense within special items on our consolidated statements of operations as the funds are utilized. The relative fair value of the warrants, estimated to be $18 million, was recorded within stockholder's equity and reduced the carrying value of the grants to $667 million. Proceeds from the payroll support grants and from the issuance of warrants were classified within operating activities and financing activities, respectively, on our condensed consolidated statements of cash flows.

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 which were classified as financing activities on our consolidated statement of cash flows.

On April 29, 2020, we submitted our application for the Loan Program of the CARES Act. Under the Loan Program, we expect to have the ability, through September 30, 2020, to borrow up to approximately $1.1 billion from the Treasury for a term of up to five years with an interest rate of LIBOR plus a margin. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company, with the form of the collateral to be determined. If we accept the full amount of the loan, we will issue warrants to purchase approximately 12.0 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 have entered into a non-binding letter of intent with the Treasury for the Loan Program but have not yet decided if we will are going to take all or part of the loan amount.

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 $20 million in payments through June 30, 2020. We expect to defer approximately $31 million of additional payments for the remainder of 2020.

~~Income Taxes~~

Among other things, the CARES Act allows a five-year carryback period for tax losses generated in 2018 through 2020. As a result, our effective tax rate includes an income tax benefit of $35 million recognized during the six months ended June 30, 2020, related to tax losses generated during 2020 that are permitted to be carried back to certain tax years when the U.S. federal income tax rate was 35%. This benefit was partially offset by $10 million of valuation allowance related to foreign tax credits. Because realizability is dependent on future income, we will continuously update our assessment and it is possible additional tax attributes may require a valuation allowance in future periods.

~~Note 3—~~ Revenue Recognition

The Company categorizes the revenues 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 revenues recognized by revenue source for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in millions):

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Passenger revenue
Passenger travel $ 145
$ 1,936
$ 1,553
$ 3,649
Loyalty revenue - air transportation 25
95
129
184
Other revenue
Loyalty revenue 38
49
88
93
Other revenue 7
25
33
51
Total revenue $ 215
$ 2,105
$ 1,803
$ 3,977

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Passenger revenue
Passenger travel	$	1,322	$	145	$	1,945	$	1,553
Loyalty revenue - air transportation	66		25		113		129
Other revenue
Loyalty revenue	81		38		126		88
Other revenue	30		7		48		33
Total revenue	$	1,499	$	215	$	2,232	$	1,803

~~For the three~~TrueBlue® is our customer loyalty program designed to reward and ~~six months ended June 30, 2020,~~recognize our customers. 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.

In June 2021, the Company entered into an Amended and Restated Co-Branded Card Agreement with Barclaycard® (the "Co-Brand Agreement"). The ~~corresponding amounts within~~Co-Brand Agreement, which amends and restates the ~~three~~existing Barclaycard® Co-Brand Agreement, extends the term to 2031 and ~~six months ended June 30, 2019 have been reclassified~~modifies certain other terms. The terms of the Co-Brand Agreement are effective January 1, 2021. The performance obligations such air transportation; use of the JetBlue brand name, and access to ~~be comparable~~our frequent flyer customer lists; advertising; and other airline benefits. are consistent with the ~~current period presentation. These reclassifications do not impact total passenger revenue.~~previous agreement. We continue to use the accounting method that allocates the consideration received based on the relative selling prices of those performance obligations. The increase in loyalty program revenues are primarily related to brand and non-air transportation elements. In addition, in July 2021, the Company entered into an Amended and Restated Co-Branded Card Agreement with MasterCard® to continue our partnership as network provider under the Co-Brand Agreements.

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):

June 30, 2020 December 31, 2019
Air traffic liability - passenger travel $ 1,047
$ 929
Air traffic liability - loyalty program (air transportation) 676
661
Deferred revenue 40
10
Total $ 1,763
$ 1,600


	June 30, 2021		December 31, 2020
Air traffic liability - passenger travel	$	1,628	$	964


Air traffic liability - loyalty program and deferred revenue	1,350		825
Total	2,978		1,789

During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized passenger ~~revenue~~revenue of ~~$666~~$371 million and ~~$819~~$666 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 generally expire one year from the date of issuance.

In response to COVID-19, we announced for certain travel credits that are recorded in our air traffic liability, principally those travel credits issued from February 27, 2020 through June 30, 2020, will be given an extended expiration life of 24 months. Accordingly, any revenue associated with these travel credits will be recognized within 24 months. We continue to monitor our customers' behavior to determine whether any portion of these travel credits may need to be classified as 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~~

Table of ~~TrueBlue~~Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

^®
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 carrying value of this arrangement was approximately $113 million as of June 30, 2020. The proceeds from this arrangement were classified within operating activities on our condensed consolidated statements of cash flows.

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 for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in millions):

Balance at December 31, 2019 $ 661
TrueBlue^® points redeemed
(129 )
TrueBlue^® points earned and sold
144
Balance at June 30, 2020 $ 676

Balance at December 31, 2018 $ 580
TrueBlue^® points redeemed
(184 )
TrueBlue^® points earned and sold
221
Balance at June 30, 2019 $ 617

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


Balance at December 31, 2020	$	733
TrueBlue® points redeemed	(113)
TrueBlue® points earned and sold	186
Balance at June 30, 2021	$	806

Balance at December 31, 2019	$	661
TrueBlue® points redeemed	(129)
TrueBlue® points earned and sold	144
Balance at June 30, 2020	$	676

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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 4—3—Long-term Debt, Short-term Borrowings and Finance Lease Obligations

During the six months ended June 30, ~~2020,~~2021, we made ~~scheduled principal~~ payments of ~~$180 million~~$1.5 billion on our outstanding debt and finance lease obligations.

We had pledged aircraft, engines, other equipment, and facilities with a net book value of ~~$6.3~~$6.6 billion at June 30, ~~2020~~2021 as security under various financing arrangements.

At June 30, ~~2020,~~2021, scheduled maturities of our ~~short-term borrowings,~~ long-term debt and finance lease obligations were ~~$177~~$218 million for the remainder of ~~2020, $1.4 billion in~~ 2021, ~~$348~~$390 million in 2022, ~~$878~~$599 million in 2023, ~~$897~~$340 million in 2024, $305 million in 2025, and ~~$1.1~~$2.6 billion thereafter.

The carrying amounts and estimated fair values of our long-term debt, net of debt acquisition costs, at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows (in millions):

June 30, 2020 December 31, 2019
Carrying Value
Estimated Fair Value⁽²⁾
Carrying Value
Estimated Fair Value⁽²⁾
Public Debt
Fixed rate special facility bonds, due through 2036 $ 42
$ 43
$ 42
$ 46
Fixed rate enhanced equipment notes:
Series AA, due through 2032 574
419
581
586
Series A, due through 2028 179
147
181
186
Non-Public Debt
Fixed rate enhanced equipment notes, due through 2023 125
125
133
141
Floating rate equipment notes, due through 2028 176
162
201
207
Fixed rate equipment notes, due through 2028 984
1,001
1,107
1,201
Floating rate term loan credit facility, due through 2024 717
764
—
—
Unsecured CARES Act Payroll Support Program loan, due through 2025 251
217
—
—
2020 sale-leaseback transactions, due through 2024 117
134
—
—
Citibank line of credit, due through 2023 546
520
—
—
Total⁽¹⁾
$ 3,711
$ 3,532
$ 2,245
$ 2,367


	June 30, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value(2)		Carrying Value		Estimated Fair Value(2)
Public Debt
Fixed rate special facility bonds, due through 2036	$	42	$	46	$	42	$	45
Fixed rate enhanced equipment notes:
2019-1 Series AA, due through 2032	546		460		560		440
2019-1 Series A, due through 2028	170		155		174		152
2019-1 Series B, due through 2027	101		133		107		139
2020-1 Series A, due through 2032	607		672		627		658
2020-1 Series B, due through 2028	161		216		170		223
Non-Public Debt
Fixed rate enhanced equipment notes, due through 2023	100		102		114		116
Fixed rate equipment notes, due through 2028	796		806		891		1,017
Floating rate equipment notes, due through 2028	128		126		152		144
Floating rate term loan credit facility, due through 2024	0		0		702		759
Unsecured CARES Act Payroll Support Program loan, due through 2030	259		222		259		207
Secured CARES Act Loan, due through 2025	105		108		104		104
Citibank line of credit, due through 2023	0		0		546		533
2020 sale-leaseback transactions, due through 2024	350		387		352		393
Unsecured Consolidated Appropriations Act Payroll Support Program Extension loan, due through 2031	144		123		0		0
0.50% convertible senior notes due 2026	734		675		0		0
Unsecured American Rescue Plan Act of 2021 Payroll Support loan, due through 2031	132		113		0		0
Total(1)	$	4,375	$	4,344	$	4,800	$	4,930

(1) Total excludes finance lease obligations of ~~$81~~$55 million and ~~$89~~$63 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

(2) The estimated fair ~~values~~values of our publicly held long-term debt are classified as Level 2 in the fair value hierarchy. The fair values of our enhanced 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 98 to our condensed consolidated financial statements for an explanation of the fair value hierarchy structure.

1613

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

We have financed certain aircraft with Enhanced 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 financial statements. Our assessment of our 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 because our involvement in them is 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 financial statements.

Unsecured Consolidated Appropriations Act Payroll Support Program Extension Loan

On January 15, 2021, we entered into a Payroll Support Program Extension Agreement (the "PSP Extension Agreement") with the United States Department of the Treasury ("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"). During the six months ended June 30, 2021, Treasury provided us with total payments of $580 million (the "Payroll Support 2 Payments") under the program, consisting of $436 million in grants and $144 million in unsecured term loans, with funding received on January 15, 2021, March 5, 2021 and April 29, 2021. The loans have a 10-year term and bear interest on the principal amount outstanding at an annual rate of 1.00% until January 15, 2026, and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% thereafter until January 15, 2031. In consideration for the Payroll Support 2 Payments, we issued warrants to purchase approximately 1.0 million shares of our common stock to the Treasury at an exercise price of $14.43 per share. The warrants will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at our option, in whole or in part at any time. In accordance with the PSP Extension Agreement, we are required to comply with the relevant provisions of the Payroll Support Program 2 which, among other things, includes the following: the requirement to use the Payroll Support 2 Payments 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 March 31, 2021; 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 October 1, 2022.

On April 29, 2021, Treasury provided us an Additional Payroll Support 2 Payment of $76 million, consisting of $53 million in grants and $23 million in an unsecured term loan under the PSP Extension Agreement. In consideration for the Additional Payroll Support 2 Payment, we issued warrants to Treasury to purchase approximately 0.2 million additional shares of our common stock at an exercise price of $14.43 per share. The terms of the unsecured term loan and additional warrants are identical to those issued in the first quarter of 2021 under the Payroll Support Program 2.

The carrying value relating to the payroll support extension grants were recorded within other accrued liabilities and were recognized as a contra-expense within special items on our consolidated statements of operations as the funds are utilized. The relative fair value of the warrants, estimated to be $9 million, were recorded within additional paid-in capital and reduced the total carrying value of the grants to $427 million. Proceeds from the payroll support extension grants and from the issuance of warrants were classified within operating activities and financing activities, respectively, on our condensed consolidated statements of cash flows. Our funding from the payroll support extension grants received under Payroll Support Program 2 was fully utilized as of June 30, 2021.

The carrying value relating to the unsecured term loans is recorded within long-term debt and finance lease obligations on our consolidated balance sheets. The proceeds from the loans were classified as financing activities on our condensed consolidated statement of cash flows.

0.50% Convertible Senior Notes due 2026

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In March 2021, we completed a private offering for $750 million of 0.50% convertible notes due 2026. The notes are general unsecured senior obligations and will rank equal in right of payment with all of our existing and future senior unsecured indebtedness and senior in right of payment to our existing and future subordinated debt. The notes will effectively rank junior in right of payment to any of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all of our indebtedness and other liabilities. The net proceeds from this offering were approximately $734 million.

Holders of the notes may convert them into shares of our common stock prior to January 1, 2026 only under certain circumstances (such as upon the satisfaction of the sale price condition, the satisfaction of the trading price condition, notice of redemption, or specified corporate events) and thereafter at any time at a rate of 38.5802 shares of common stock per $1,000 principal amount of notes, which corresponds to an initial conversion price of approximately $25.92 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events, including, but not limited to, the issuance of certain stock dividends on common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets, cash dividends and certain issuer tender or exchange offers.

Upon conversion, the notes will be settled in cash up to the aggregate principal amount of the notes to be converted and, at our election, in shares of our common stock, cash or a combination of cash and shares of our common stock in respect of the remainder, if any, of our conversion obligation.

We are not required to redeem or retire the notes periodically. We may, at our option, redeem any of the notes for cash at a redemption price of 100% of their principal amount, plus accrued and unpaid interest at any time on or after April 1, 2024 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide a notice of redemption to the holders.

As discussed in Note 1 to our condensed consolidated financial statements, we early adopted the provisions of ASU 2020-06. Accordingly, we evaluated the conversion feature of this note offering for embedded derivatives in accordance with ASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on our assessment, separate accounting for the conversion feature of this note offering is not required.

Unsecured American Rescue Plan Act of 2021 Payroll Support Program

On May 6, 2021, we entered into a Payroll Support 3 Agreement (the "PSP3 Agreement") with Treasury governing our participation in the federal payroll support program for passenger air carriers under Section 7301 of the American Rescue Plan Act of 2021 (the "Payroll Support Program 3"). In the second quarter of 2021, Treasury provided us with total payments of $541 million (the "Payroll Support 3 Payments") under the program, consisting of $409 million in grants (the "PSP3 grants") and $132 million in unsecured term loans (the "PSP3 loans") with funding received on May 6, 2021 and June 3, 2021. The PSP3 loans have a 10-year term and bear interest on the principal amount outstanding at an annual rate of 1.00% until May 6, 2026, and the applicable SOFR plus 2.00% thereafter until May 6, 2031. In consideration for the Payroll Support 3 Payments, we issued warrants (the "PSP3 warrants") to purchase approximately 0.7 million shares of our common stock to the Treasury at an exercise price of $19.90 per share. The PSP3 warrants will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at our option, in whole or in part at any time.

The carrying value relating to the PSP3 grants are recorded within other accrued liabilities and are recognized as a contra-expense within special items on our consolidated statements of operations as the funds are utilized. The relative fair value of the warrants, estimated to be $5 million, are recorded within additional paid-in capital and reduced the total carrying value of the grants to $404 million. Proceeds from the PSP3 grants and from the issuance of PSP3 warrants are classified within operating activities and financing activities, respectively, on our condensed consolidated statements of cash flows. As of June 30, 2021, the carrying value of our PSP3 grants was approximately $186 million.

The carrying value relating to the PSP3 loans is recorded within long-term debt and finance lease obligations on our consolidated balance sheets. The proceeds from the loans are classified as financing activities on our condensed consolidated statement of cash flows.

Floating Rate Term Loan Credit Facility

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On June 17, 2020, we entered into a $750 million term loan credit facility with Barclays Bank PLC, as administrative ~~agent.~~agent (the "Term Loan"). The loans ~~under this term loan credit facility~~thereunder 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~~were 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. 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.The ~~term loan facility~~Term Loan is subject to amortization payments of 5% per year, payable quarterly, commencing on September 30, 2020 with the remaining balance due and payable in a single payment on the maturity date of June 17, 2024.

~~The~~On June 17, 2021, the Company voluntarily repaid a portion of its outstanding borrowings under the Term Loan. On June 30, 2021, the Company repaid the full amount of outstanding borrowings under the Term Loan, which, together with its repayment of June 17, 2021, totaled approximately $722 million, plus accrued interest ~~rate on our outstanding balance was 6.25% as~~and associated fees. As of June 30, ~~2020.~~2021, all obligations under the Term Loan, including all pledges of collateral were terminated in full.

~~Unsecured~~ The Coronavirus Aid, Relief, and Economic Security (CARES) Act

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (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").

CARES Act Payroll Support Program ~~Loan~~

~~As discussed in Note 2 to our condensed consolidated financial statements, on~~On April 23, 2020, we entered into a Payroll Support Program Agreement (the "PSP Agreement") under the CARES Act with the ~~Treasury. Pursuant~~Treasury governing our participation in the Payroll Support Program. Under the Payroll Support Program, Treasury provided us with payments which totaled $963 million (the "Payroll Support Payments") consisting of $704 million in grants and $259 million in unsecured term loans, with payments received on April 23, 2020 and September 30, 2020. The loans have a 10-year term and bear interest on the principal amount outstanding at an annual rate of 1.00% until April 23, 2025, and the applicable SOFR plus 2.00% thereafter until April 23, 2030. The principal amount may be repaid at any time prior to the agreement, JetBlue received a payment of $936 million which included a grant of $685 million and a promissory note for $251 million. The note matures 10 years after issuance and is payable in a lump summaturity at ~~maturity.~~par. As part of the agreement, JetBlue issued to the Treasury warrants to acquire more than ~~2.6~~2.7 million shares of our common stock under the ~~program.~~program at an exercise price of $9.50 per share. The warrants will expire five years after ~~issuance.~~issuance and will be exercisable either through net cash settlement or net share settlement, at our option, in whole or in part at any time.

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 condensed consolidated statements of cash flows. Our funding from the payroll support grants under the CARES Act were fully utilized as of December 31, 2020.

Secured CARES Act Loan Program

Under the CARES Act Loan Program, JetBlue had the ability to borrow up to a total of approximately $1.9 billion from the Treasury. We entered into a loan and guarantee agreement (the "Loan Agreement") with the Treasury and made an initial drawing of $115 million under the CARES Act 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. The warrants will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at our option, in whole or in part at any time.

Unless otherwise terminated early, all borrowings under the CARES Act Loan Program are due and payable on the fifth anniversary of the initial borrowing date. Borrowings 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 obligations under the CARES Act Loan Program are secured by liens on (i) certain eligible aircraft and engine collateral and (ii) certain cash accounts (collectively, the "Collateral"). Under the terms of the CARES Act Loan Program, we

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

may also pledge eligible spare parts, slots, gates and routes, and additional aircraft, real property, ground support equipment, flight simulators and equity interests. The CARES Act Loan Program 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 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 (determined as the sum of a specified percentage of the appraised value of each type of Collateral) to outstanding obligations under the CARES Act Loan Program 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 CARES Act Loan Program or repay the loans by an amount necessary to maintain compliance with the collateral coverage ratio. The CARES Act Loan Program contains events of default customary for similar financings. Upon the occurrence of an event of default, the outstanding obligations under the CARES Act Loan Program 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 CARES Act Loan Program.

In May 2021, we notified the Treasury of our intent to forego our remaining borrowing capacity of approximately $1.8 billion and subsequently on June 2, 2021 the liens on certain eligible engines and certain loyalty program assets, including JetBlue's rights in certain loyalty program agreements, loyalty program data and intellectual property, were released from the Collateral.

As of June 30, 2021, $115 million remained outstanding under the Loan Agreement.

Fixed Rate Enhanced Equipment Notes

2020-1A and B 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.

2019-1B Equipment Notes

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 Sale-Leaseback Transactions

~~On June 26,~~In 2020, we ~~entered into $118~~executed $563 million of sale-leaseback transactions. ~~These~~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 ~~condensed~~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 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.

We did not execute any sale-leaseback transactions in the second quarter of 2021.

Citibank ~~Line of~~Revolving Credit Agreement

~~In August 2019, we amended our~~We have a revolving Credit and Guaranty Agreement with Citibank N.A. as the administrative ~~agent. The amendment increased our borrowing capacity by $125 million~~agent, for up to $550 million ~~and extended the~~(the "Revolving Facility"). The term of the ~~facility~~Revolving Facility runs through August 2023. Borrowings under the ~~Credit and Guaranty Agreement~~Revolving Facility bear interest at a variable rate equal to LIBOR, plus a margin. The ~~Credit and Guaranty Agreement was previously~~Revolving Facility is secured by Slots at John F. Kennedy International Airport, LaGuardia Airport, 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. On May 29, 2020, we exercised our pre-existing right and removed the Slots from the collateral pool to the facility. In exchange for the Slots, we added unencumbered aircraft, simulators, and certain other assets ~~to the facility~~ as ~~permitted.~~permitted thereunder. The ~~Credit and Guaranty Agreement~~Revolving Facility 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 facility on April 22, 2020. The interest rate on our outstanding balance was 2.99% as of June 30, 2020.~~

~~Short-term Borrowings~~

~~Morgan Stanley Delayed Draw Term Loan Agreement~~

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In March 2020, we entered into a Delayed Draw Term Loan Credit Agreement with Morgan Stanley Senior Funding Inc., as the administrative agent. The credit agreement provides for a term loan facility of up to $1 billion. Borrowings under the credit agreement bear interest at a variable rate equal to LIBOR (but not less than 1% per annum), plus a margin, or at our election, another rate based on certain market interest rates.

Our obligations under the credit agreement are secured by liens on certain aircraft and spare engines. The credit agreement includes provisions that require us to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities (including the term loan facility) aggregating not less than $550 million.

We borrowed the full amount of $550 million under this revolving credit facility on April 22, 2020.

We repaid the ~~term loan~~full balance of this facility in ~~March 2020. Amortization payments equal to 0.25%~~the first quarter of 2021 and all the ~~outstanding principal of~~collateral securing the ~~term loan will be due on~~borrowings under the last day of each quarter during the term. The remaining outstanding principal amount of the term loan must be repaid in a single installment on the maturity date on March 15, 2021. We may prepay all or a portion of the term loan from time to time, at par plus accrued and unpaid interest.

facility has been released. As of and for the quarter ended June 30, ~~2020,~~2021, we ~~had~~did not have a balance ~~of $997 million~~ outstanding or any borrowings under this term loan facility. The carrying value is reflected net of $13 million in unamortized issuance cost on our consolidated balance sheets. The interest rate on our outstanding balance was 2.75% as of June 30, 2020.the Revolving Facility.

Short-term

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 periods ended June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we did not have a balance outstanding or any borrowings under this line of credit.

Note 5—4—Earnings (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, convertible notes, and any other potentially dilutive instruments using the treasury stock ~~method.~~and if-converted methods. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share amounts ~~were~~ were 1.2 million for the three months ended June 30, 2020. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share amounts were 3.6 million and 1.6 million for the ~~three and~~ six months ended June 30, 2021 and June 30, 2020, ~~respectively. There were no anti-dilutive common stock equivalents during the three and six months ended June 30, 2019.~~respectively.

The following table shows how we computed basic and diluted earnings per common share for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (dollars and share data in millions):


												Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended June 30,					Six Months Ended June 30,						2021		2020		2021		2020
	2020			2019		2020			2019
Net (loss) income	$	(320	)	$	179	$	(588	)	$	221
Net income (loss)											Net income (loss)	$	64	$	(320)	$	(183)	$	(588)

Weighted average basic shares	271.7			300.3		275.1			303.1		Weighted average basic shares	317.7		271.7		317.0		275.1
Effect of dilutive securities	—			1.5		—			1.5		Effect of dilutive securities	3.8		0		0		0
Weighted average diluted shares	271.7			301.8		275.1			304.6		Weighted average diluted shares	321.5		271.7		317.0		275.1

(Loss) earnings per common share
Earnings (loss) per common share:											Earnings (loss) per common share:
Basic	$	(1.18	)	$	0.60	$	(2.14	)	$	0.73	Basic	$	0.20	$	(1.18)	$	(0.58)	$	(2.14)
Diluted	$	(1.18	)	$	0.59	$	(2.14	)	$	0.73	Diluted	$	0.20	$	(1.18)	$	(0.58)	$	(2.14)

On February 24, 2020, JetBlue entered into an accelerated share repurchase agreement, or ASR, paying $160 million for an initial delivery of 6.6 million shares. The term of the ASR concluded on March 16, 2020 with a 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.

Our share repurchase program has been suspended since March 31, 2020.

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

On June 13, 2019, JetBlue entered into an ASR, paying $125 million for an initial delivery of 5.2 million shares. The term of the ASR concluded on August 13, 2019 with delivery of 1.5 million additional shares to JetBlue on August 15, 2019. A total of 6.7 million shares, at an average price of $18.58 per share, were repurchased under the agreement.

On March 11, 2019, JetBlue entered into an ASR, paying $125 million for an initial delivery of 6.1 million shares. The term of the ASR concluded on May 21, 2019 with the delivery of 1.3 million additional shares to JetBlue on May 22, 2019. A total of 7.4 million shares, at an average price of $16.93 per share, were repurchased under the agreement.

Note 6—5—Crewmember Retirement Plan

We sponsor a retirement savings 401(k) defined contribution plan, or the Plan, covering all of our crewmembers where we match 100% of our crewmember contributions up to 5% of their eligible wages. The contributions vest over three years and are measured from a crewmember's hire date. Crewmembers are immediately vested in their voluntary contributions.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Another component of the Plan is a Company discretionary contribution of 5% of eligible non-management crewmember compensation, which we refer to as Retirement Plus. Retirement Plus contributions vest over three years and are measured from a crewmember'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.

~~Effective August 1, 2018,~~Our pilots receive a non-elective Company contribution of ~~15%~~16% 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.~~contributions. Refer to Note 106 to our condensed consolidated financial statements for additional information. The Company's non-elective contribution of ~~15%~~16% of eligible pilot compensation vests after three years of service.

Our 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 and the equivalent of Retirement Plus contributions for pilots. 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.

Total 401(k) company match, Retirement Plus, Retirement Advantage, pilot retirement contribution, and profit sharing expensed for the ~~three months ended June 30, 2020 and 2019 was $41 million and $49 million, respectively, while the total amount expensed for the~~ six months ended June 30, 2021 and 2020 ~~and 2019~~ was ~~$92~~$100 million and ~~$98~~$92 million, respectively.

Note 7—6—Commitments and Contingencies

Flight Equipment Commitments

As of June 30, ~~2020,~~2021, our firm aircraft orders consisted of 7665 Airbus A321neo aircraft and 7067 Airbus A220 aircraft, ~~all~~ scheduled for delivery through ~~2026.~~2027. Committed expenditures for these aircraft and related flight equipment, including estimated amounts for contractual price escalations and predelivery deposits as of June 30, 2021 is approximately $0.4 billion for the remainder of ~~2020, $1.1 billion in~~ 2021, ~~$0.9~~$0.8 billion in 2022, ~~$1.7~~$1.6 billion in 2023, $1.8 billion in 2024, $1.2 billion in 2025, and ~~$2.0~~$1.6 billion thereafter.

In October 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. In March 2021, the U.S. Trade Representative announced a four-month suspension of the tariff that was followed by an announcement in June 2021 that the suspension will be extended for five years. We continue to work with our business partners, including Airbus, to evaluate the potential financial and operational impact ~~of these announcements~~ on our future aircraft ~~deliveries.~~deliveries, including after the suspension is lifted. The continued imposition of the tariff could substantially increase the cost of new Airbus aircraft 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.

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

As of June 30, ~~2020,~~2021, we had approximately ~~$25~~$26 million in assets serving as collateral for letters of credit relating to a certain number of our leases. These are included in restricted cash and expire at the end of the related lease terms. Additionally, we had approximately ~~$25~~$26 million pledged related to our workers' compensation insurance policies and other business partner agreements, which will expire according to the terms of the related policies or agreements.

In April 2014, ALPA was certified by the National Mediation Board, or 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 compensation, benefits, work rules, and other policies.

Amid the COVID-19 pandemic, we ~~have signed a letter of agreement~~reached an Agreement in Principle with ALPA ~~that will~~to avoid involuntary furloughs of our pilots ~~until May~~through at least October 1, 2021 in exchange for short-term changes to the collective bargaining agreement.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In April 2018, JetBlue inflight crewmembers elected to be solely represented by the Transport Workers Union of America, or TWU. The National Mediation Board, or 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 ~~we are working with~~ the ~~TWU to reach~~TWU. The parties have re-engaged in negotiations for a collective bargaining agreement.

Except as noted above, our crewmembers do not have third party representation.

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 GAAP, where appropriate. In making a determination regarding accruals, using available information, we evaluate the likelihood of an unfavorable outcome in legal or regulatory proceedings to which we are a party 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 consolidated results of operations, liquidity, or financial condition.

Note 8—7—Financial Derivative Instruments and Risk Management

As part of our risk management strategy, 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 jet fuel. Prices for the underlying commodities have historically been highly correlated to jet 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. 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 fuel derivative that we enter into. This treatment is provided for under ~~the~~ASC 815, Derivatives and Hedging ~~topic of the Codification~~ which allows for gains and losses on 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. When the underlying jet 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. If a hedge does not qualify for hedge accounting, the periodic changes in its fair value are recognized in interest income and other. All cash flows related to our fuel hedging derivatives are classified as operating cash flows.

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

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.

~~The following table illustrates the approximate hedge percentages of our projected~~We did not have any fuel ~~usage by quarter~~hedging contracts outstanding as of June 30, ~~2020, related to our outstanding fuel hedging contracts that were designated as cash flow hedges for accounting purposes.~~



	~~Jet fuel call spread option agreements~~
~~Third Quarter 2020~~	19	%
~~Fourth Quarter 2020~~	20	%

2021 or December 31, 2020.

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):

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

June 30, 2020 December 31, 2019
Fuel derivatives
Asset fair value recorded in prepaid expense and other⁽¹⁾
$ —
$ 8
Longest remaining term (months) 6
6
Hedged volume (barrels, in thousands) 1,220
2,112
Estimated amount of existing losses (gains) expected to be reclassified into earnings in the next 12 months $ 3
$ (2 )

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Fuel derivatives
Hedge effectiveness losses recognized in aircraft fuel expense $ 1
$ 2
$ 3
$ 4
Losses on derivatives resulting from the discontinuance of hedge accounting recognized in interest income and other 3
—
5
—
Hedge losses (gains) on derivatives recognized in comprehensive income —
(1 ) 11
(1 )
Percentage of actual consumption economically hedged 32 % 7 % 24 % 7 %

~~(1) Gross asset of each contract prior to consideration of offsetting positions with each counterparty and prior to the impact of collateral paid.~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Fuel derivatives
Hedge effectiveness losses recognized in aircraft fuel expense	$	0		$	1		$	0		$	3
Losses on derivatives resulting from the discontinuance of hedge accounting recognized in interest income and other	0			3			0			5
Hedge losses on derivatives recognized in comprehensive income	0			0			0			11
Percentage of actual consumption economically hedged	0		%	32		%	0		%	24		%

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 that 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 receivable 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.

There were no0 offsetting derivative instruments as of June 30, ~~2020 and~~2021 or December 31, ~~2019.~~2020.

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~JETBLUE AIRWAYS CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Note 9—8—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.

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 as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions):


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	1,740	$	100	$	0	$	1,840
Available-for-sale investment securities	0		1,318		0		1,318

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

June 30, 2020
Level 1 Level 2 Level 3 Total
Assets
Cash equivalents $ 1,409
$ 300
$ —
$ 1,709
Available-for-sale investment securities —
322
—
322
Aircraft fuel derivatives —
—
—
—


	December 31, 2019									December 31, 2020
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets									Assets
Cash equivalents	$	611	$	30	$	—	$	641	Cash equivalents	$	1,330	$	130	$	0	$	1,460
Available-for-sale investment securities	—		351		—		351		Available-for-sale investment securities	0		1,137		0		1,137
Aircraft fuel derivatives	—		8		—		8

~~Refer~~Refer to Note 43 to ~~our~~our condensed consolidated financial statements for fair value information related to our outstanding debt obligations as of June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Cash equivalents

Our cash equivalents include money market securities and time deposits which are readily convertible into cash, have maturities of three months or less when purchased, and are considered to be highly liquid and easily tradable. The 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

Our available-for-sale investment securities 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 ~~not~~0t record any material gains or losses on these securities during the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~

~~Aircraft Fuel Derivatives~~

Our aircraft fuel derivatives include call 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.

2020.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note ~~10—~~9—Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) includes changes in fair value of our aircraft fuel derivatives which qualify for hedge accounting. A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 is as follows (in millions):

Aircraft Fuel Derivatives⁽¹⁾⁽²⁾

Total
Balance of accumulated (loss), at March 31, 2020 $ (6 )
$ (6 )
Reclassifications into earnings, net of deferred taxes of $(1) 3

3
Change in fair value, net of deferred taxes of $0 —

—
Balance of accumulated (loss), at June 30, 2020 $ (3 )
$ (3 )

Balance of accumulated (loss), at March 31, 2019 $ (1 )
$ (1 )
Reclassifications into earnings, net of deferred taxes of $(1) 1

1
Change in fair value, net of deferred taxes of $0 1

1
Balance of accumulated income, at June 30, 2019 $ 1

$ 1


	Aircraft Fuel Derivatives(1)(2)
Balance of accumulated income, at March 31, 2021	$	0
Reclassifications into earnings, net of deferred taxes of $0	0
Change in fair value, net of deferred taxes of $0	0
Balance of accumulated income, at June 30, 2021	$	0

Balance of accumulated (loss), at March 31, 2020	$	(6)
Reclassifications into earnings, net of deferred taxes $(1)	3
Change in fair value, net of deferred taxes of $0	0
Balance of accumulated (loss), at June 30, 2020	$	(3)

A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 is as follows (in millions):


	Aircraft Fuel Derivatives(1)(2)
Balance of accumulated income, at December 31, 2020	$	0
Reclassifications into earnings, net of deferred taxes of $0	0
Change in fair value, net of deferred taxes of $0	0
Balance of accumulated income, at June 30, 2021	$	0

Balance of accumulated income, at December 31, 2019	$	2
Reclassifications into earnings, net of deferred taxes $(2)	6
Change in fair value, net of deferred taxes of $5	(11)
Balance of accumulated (loss), at June 30, 2020	$	(3)

Aircraft Fuel Derivatives⁽¹⁾⁽²⁾
Total
Balance of accumulated income, at December 31, 2019 $ 2
$ 2
Reclassifications into earnings, net of deferred taxes of $(2) 6
6
Change in fair value, net of deferred taxes of $5 (11 ) (11 )
Balance of accumulated (loss), at June 30, 2020 $ (3 ) $ (3 )

Balance of accumulated (loss), at December 31, 2018 $ (3 ) $ (3 )
Reclassifications into earnings, net of deferred taxes $(1) 3
3
Change in fair value, net of deferred taxes of $0 1
1
Balance of accumulated income, at June 30, 2019 $ 1
$ 1

(1) Reclassified to aircraft fuel expense.

(2) WeIn 2020, we 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 $2 million and $4 million that were previously deferred in other comprehensive loss were reclassified to interest income and other during the three and six months ended June 30, 2020, respectively.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note ~~11—~~10—Special Items

The following is a listing of special items presented on our consolidated statements of operations for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in millions):


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019		2020			2019			2021			2020			2021			2020
Special Items											Special Items
CARES Act payroll support grant recognition⁽¹⁾	$	(304	)	$	—	$	(304	)	$	—
Federal payroll support grant recognition(1)											Federal payroll support grant recognition(1)	$	(357)		$	(304)		$	(644)		$	(304)
CARES Act employee retention credit(2)											CARES Act employee retention credit(2)	(9)			0			(11)			0
Fleet impairment⁽²⁾⁽³⁾	—			—		202			—		0			0			0			202
Embraer E190 fleet transition costs⁽³⁾	—			—		—			9
Union contract costs⁽⁴⁾	—			2		—			5
Total	$	(304	)	$	2	$	(102	)	$	14	Total	$	(366)		$	(304)		$	(655)		$	(102)

(1) As discussed in Note 23 to our condensed consolidated financial statements, ~~on April 23, 2020,~~ we ~~entered into a PSP Agreement with the Treasury governing our participation~~are participants in ~~the~~ Payroll Support Program ~~under the CARES Act. Under the~~2 and Payroll Support Program 3, both of which are federal support programs for air carriers (the "Programs"). In the six months ended June 30, 2021, Treasury provided us with ~~a Payroll Support Payment of $936 million,~~payroll support funding totaling $1.1 billion, consisting of ~~$685~~$845 million in grants and ~~$251~~$276 million in an unsecured term ~~loan.~~loans under the Programs. The ~~Payroll Support Payment is~~payroll support funds under these Programs are to be used exclusively for the continuation of payment of crewmember wages, salaries and benefits. The carrying ~~value~~values of the payroll support grants isare recorded within other liabilities and will be recognized as ~~a contra-expense~~contra-expenses within special items on our consolidated statements of operations as the funds are utilized. We utilized ~~$304~~$357 million and $644 million of the payroll support grants under the Programs for the three and six months ended June 30, ~~2020.~~2021, respectively.

(2) The Employee Retention Credit ("ERC") under the CARES Act is a refundable tax credit which encourages businesses 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. Our policy is to recognize the ERC when it is filed with the Internal Revenue Service. We recognized $9 million and $11 million of ERC as a contra-expense within special items on our consolidated statements of operations for the three and six months ended June 30, 2021, respectively.

~~(2)~~(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 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.

~~We did not record any additional impairment losses on our long-lived assets for the three months ended June 30, 2020.~~

~~As discussed in Note 2 to our condensed consolidated financial statements, our~~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, maintenance requirements, and other relevant conditions. Based on the assessment, we determined the future 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 an impairment loss of $0 and $202 million for the three and six months ended June 30, 2020, respectively. These losses represent the difference between the book value of these assets and their fair value. We estimated the fair value of our Embraer E190 fleet using 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. We evaluated the remaining fleet and determined the future cash flows of our Airbus A320 and Airbus A321 fleet exceeded their carrying ~~values~~value as of June 30, ~~2020.~~ 2021.

No impairment loss was recorded for the three and six months ended June 30, 2021.

As the extent of the ongoing impact from the COVID-19 pandemic remains uncertain, we will update our assessment as new information becomes available.

(3) 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 for 60 additional aircraft. For the six months ended June 30, 2019, fleet transition costs include certain contract termination costs associated with the transition.

(4) 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 compensation, benefits, work rules, and other policies. For the three and six months ended June 30, 2019, union contract costs primarily include various one-time costs incurred to implement the provisions of the collective bargaining agreement into our systems.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The ~~Coronavirus (COVID-19) Pandemic~~

~~The unprecedented and rapid spread of the coronavirus ("COVID-19")~~COVID-19 pandemic ~~and the related travel restrictions and physical distancing measures implemented throughout the world~~continues to 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 has remained depressed. This decline in demand has had~~ a ~~material adverse~~significant impact on our operating revenues and financial position. ~~During~~We began seeing signs of recovery in February 2021 that continued to progress throughout the second quarter of ~~2020, our operating revenues were 90% lower than the same quarter of 2019. Although demand began to improve during the quarter, it remains significantly lower than in prior years.~~2021. The length and severity of the reduction in travel demand due to the COVID-19 pandemic ~~remain uncertain; accordingly,~~are uncertain, but with increasing vaccination rates, reductions in infection rates related to new COVID-19 variants and easing of travel advisories and restrictions, we believe customer confidence will continue to grow, leading to increased demand throughout the summer of 2021. We expect widespread vaccinations to result in sustained demand improvement going forward, with recovery of domestic demand preceding the recovery of international demand in most regions. If consumer confidence and demand for air travel returns, we expect ~~the adverse impact~~ to ~~continue~~return to 2019 capacity levels in the ~~third~~second half of 2021.

Second Quarter 2021 Results

Our second quarter 2020 results were adversely impacted by the COVID-19 pandemic. As a result, the comparisons to 2020 are inflated and are not necessarily indicative of future operating results. In certain cases we have also provided comparisons of our second quarter 2021 results to our second quarter 2019 results which is more reflective of pre-pandemic operations.

•Second quarter system capacity increased by 465.6% year-over-year and decreased by (14.9)% versus the second quarter of 2019.

•Revenue for the second quarter of 2021 increased by $1,284 million to $1,499 million and decreased by (28.8)% versus the second quarter of 2019.

•Operating revenue per available seat mile (RASM) for the three months ended June 30, 2021 increased by 23.4% to 10.99 cents.

•Operating expense for the three months ended June 30, 2021 increased by 116.3% to 1,352 million and decreased by (27.2)% versus the second quarter of 2019.

•Operating expense per available seat mile (CASM) for the three months ended June 30, 2021 decreased by (61.7)% to 9.91 cents.

•Our operating expense for the second quarter of 2021 and 2020 included the effects of special items. In the second quarter of 2021, we recognized $357 million of contra-expense representing the amount of federal payroll support extension grants provided by the payroll support programs, that were utilized during the period, and $9 million of contra-expense related to the recognition of Employee Retention Credits provided by the CARES Act. Our operating expense for the second quarter of 2020 included $304 million of payroll support grants under the CARES act as a contra-expense within special items on our consolidated statement of operations. Excluding fuel and ~~beyond. While~~related taxes, special items, as well as operating expenses related to our non-airline businesses, our operating expense increased by 53.7% to $1,371 million.

•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) decreased by (72.8)% to 10.05 cents for the second quarter of 2021.

•Our reported earnings (loss) per share for the second quarter of 2021 and 2020 were $0.20 and $(1.18), respectively. Excluding special items, our adjusted loss per share(1) for the second quarter of 2021 and 2020 were $(0.65) and $(2.02), respectively.

Since February 2021, we have seen a meaningful rebound in the demand for leisure travel. We are ~~planning for a modest recovery~~encouraged by the improving booking trends, and believe the ongoing acceleration in demand ~~during~~will continue throughout the ~~third quarter~~summer, subject to the increase in vaccination rates, reductions in COVID-19 infection rates, including those associated with new variants, and easing of 2020, 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. Some states have experienced a resurgence of COVID-19 cases after reopening and as a result, certain other states, such as New York, have implemented travel ~~restrictions or advisories for travelers from such states. Our~~restrictions. We expect to increase capacity in response to the ~~pandemic and the measures we take to secure additional liquidity may be modified as we have more clarity in the timing~~level of ~~demand recovery.~~

~~In response to these developments, since March 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 our highest priority. As the COVID-19 pandemic has developed, we~~demand. We have taken a number of steps to ~~promote physical distancing~~position ourselves for recovery when demand for air travel returns to pre-pandemic levels.

Network

In February 2021, we added service to Miami and Key West which further expanded our relevance in South Florida.

In April 2021, we operated our inaugural flight between New York's John F. Kennedy International Airport ("JFK") to ~~implement new procedures~~Guatemala City's La Aurora International Airport, making us the only airline that ~~reflect the recommendations of health experts, including some of the following:~~

~~Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses our safety 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 have been diagnosed with COVID-19 or are required to quarantine;~~

~~Implemented a framework for internal contact tracing, crewmember notification, and return to work clearance process for all crewmembers, wherever they may be located;~~

~~Required face covering 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;~~

~~Enhanced~~offers 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;~~

~~Suspended group boarding and implemented a back-to-front boarding process to minimize passing in the aisle;~~

~~Eliminated layovers for crewmembers in~~service between 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;~~

Guatemala's capital city.

⁽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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In June 2021, we launched daily service to Los Cabos, Mexico from JFK and Los Angeles International Airport.

~~Provided enhanced flexibility~~In July 2021, we launched services to Kalispell/Glacier Park International Airport in Montana with up to three weekly flights from JFK and launched service to Boise Airport in Idaho from JFK with up to four weekly flights.

We also anticipate launching service from JFK to London Heathrow in August 2021 and London Gatwick in September 2021. Service from Boston’s Logan International Airport to London will launch in summer 2022. London will be our first destination in Europe.

Commercial Partnerships

We continue to develop our strategic relationship with American Airlines Group Inc. ("American"). In February 2021, we began codeshare operations under our alliance agreement on select flights.

Enabled by our alliance with American, in April 2021, we announced our plans to add seven new destinations between late 2021 and 2022 to our ~~customers by waiving change and cancel fees while~~route map. We also ~~extending the expiration date of travel credits~~announced significant growth plans at New York's LaGuardia Airport ("LGA") where we plan to ~~24 months; and~~

~~Retained an infectious disease specialist to conduct regular calls which are open to all crewmembers.~~

~~Our Business~~

~~The COVID-19 pandemic drove a significant decline in demand beginning~~launch 40 new routes in the ~~second half~~coming months, many enabled by the Northeast Alliance; doubling our presence in LGA by the end of ~~March 2020.~~ 2021.

We ~~have significantly reduced~~believe our partnership with American will create more capacity, seamless connectivity for travelers in the northeast, and offer more choices for customers across the networks of both airlines. By leveraging our Northeast Alliance with American, we look to re-build business market frequencies ahead of an expected business travel recovery in the fall. In addition, we expect this relationship will also accelerate our recovery as the travel industry adapts to new trends as a ~~level that maintains essential services to align with demand. Our capacity for~~result of the COVID-19 pandemic.

Fleet

We took delivery of six aircraft in the second quarter of ~~2020 declined by 85% year-over-year. For~~2021 and paid for each delivery with cash on hand.

In connection with our plans to begin service to London, we took delivery of our first two Airbus A321LR aircraft, the ~~third quarter~~long range model of ~~2020, we expect capacity to be down by at least 45%, as compared to~~ the ~~same period~~Airbus A321, in the ~~prior year. As~~second quarter.

Given the new growth opportunities being provided by our Northeast alliance, we are re-examining our Fleet to ensure we are well equipped to capitalize fully on current and near term conditions. We have a ~~result~~plan to delay our retirement schedule for our owned E190s which offers a constructive way to profitably grow in the Northeast while protecting the balance sheet. We will of ~~the significant reduction in demand expectations and lower capacity, we have temporarily parked approximately 30% of~~course remain flexible with our ~~fleet.~~

~~Adjustments in flying capacity~~fleet to align with the ~~expected demand.~~demand environment.

•~~Temporary consolidations of~~Also in the second quarter, we placed our ~~operations in certain cities that contain multiple airport locations.~~

~~Renegotiated service rates with our business partners and extended payment terms.~~

•~~Instituted a company-wide hiring freeze.~~

~~Implemented salary reductions of 20% to 50% for our officers.~~

~~Offered crewmembers voluntary time off and separation programs, with most departures for the separation programs scheduled for August 2, 2020.~~

~~At June 30, 2020, we had cash, cash equivalents, short-term investments, and short-term restricted cash of approximately $3.4 billion.~~first two Airbus A220 aircraft into service. 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 immediate actions to increase liquidity, strengthen our financial position, and conserve cash. Someeconomics of the ~~actions~~Airbus A220 aircraft, which have approximately 30% lower direct cost per seat as compared to our Embraer E190 fleet, will be pivotal in helping us reshape our cost structure and rebuild our margin as we ~~have taken~~begin to recover from the pandemic.

Additionally we placed two new Airbus A321neo aircraft into service which will help reduce C02 emissions with improved fuel economy through ~~June 30, 2020 include:~~newly designed engine technology and cabin changes.

~~Executed~~Customer Experience

In February 2021, we unveiled a reimagined version of our Mint® experience, our premium product offering. The new ~~$1.0 billion 364-day delayed draw term loan agreement and immediately drew down on~~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 offer the ~~facility for the full amount available.~~

~~Borrowed on our existing $550 million revolving credit facility.~~


•	~~Executed a $150 million pre-purchase arrangement of TrueBlue~~^® ~~points with our co-brand credit card partner.~~

~~Suspended non-critical capital expenditure projects.~~

~~Amended our purchase agreement with Airbus to defer several aircraft deliveries, resulting~~most space in a ~~$1.1 billion reduction in aircraft capital expenditures through 2022.~~

~~Suspended share repurchases.~~

~~Obtained $936 million of government funding under The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is discussed further below.~~

~~Executed~~premium experience from any U.S. airline based on personal square footage per passenger seat. We debuted this new premium service with a ~~$750 million term loan credit facility and immediately drew down on the facility for the full amount available.~~

~~Entered into $118 million of sale-leaseback transactions in June; which is discussed further below.~~

16-seat individual

⁽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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

suite layout in June 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.

We also updated our Fare Options platform giving our customers more choices and flexibility by eliminating change and cancel fees on our Blue, Blue Extra, Blue Plus, and Mint® fares. Beginning in July 2021, customers who purchased these fares on our domestic flights will also be guaranteed overhead bin space for one carry-on bag.

In ~~June 2020,~~March 2021, we ~~executed $118 million of sale-leaseback transactions. These transactions did not qualify as sales~~introduced Paisley by JetBlue ("Paisley"), a new travel website that leverages smart technology to provide individually tailored offers our customers based on their itinerary. We believe Paisley will add breadth to our product offerings, learn more about our customers' preferences, and contribute to future earnings growth.

Outlook for ~~accounting purposes. The assets associated with these transactions remain~~2021

As we continue to navigate through the pandemic, we are optimistic about the future. Based on our ~~consolidated balance sheets within property~~current planning assumptions, we expect capacity for the third quarter of 2021 to be flat to down three percent as compared to the same period in 2019.

Revenue is expected to decline between 4% and ~~equipment~~9% in the third quarter of 2021 as compared to the same period in 2019. We expect the demand acceleration which began in February 2021 to continue as larger portions of the U.S. population become vaccinated against COVID-19 and travel advisories and restrictions begin to ease. We are closely monitoring the latest news with respect to the COVID variants and the ~~related liabilities under~~potential impact that continued spread of these variants could have on the ~~lease are classified within debt and finance leases obligations. These transactions are treated as cash from financing activities on our condensed consolidated statements of cash flows.~~

~~In July 2020, we executed $267 million of sale-leaseback transactions.~~demand for air travel.

We ~~continue~~presently expect third quarter 2021 operating expenses to ~~evaluate future financing opportunities to leverage our unencumbered assets in an effort to build additional levels of liquidity.~~

~~The Coronavirus Aid, Relief, and Economic Security Act~~

~~On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") which is intended to provide relief and support~~increase by approximately 11-13% as compared to the ~~U.S. economy. Under~~same period in 2019. We plan to continue managing our cost structure, while mitigating near term cost pressures from higher fuel prices, airport rents and landing fees, and labor costs as we ramp up our operations if we begin to see a return of capacity back to pre-pandemic levels.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2021 vs. 2020

Overview

We reported a net income of $64 million, operating income of $147 million and an operating margin of 9.8% for the ~~CARES Act, assistance~~three months ended June 30, 2021. This compares to a net loss of $320 million, an operating loss of $410 million and an operating margin of (190.8)% for the three months ended June 30, 2020. Earnings per share were $0.20 for the second quarter of 2021 and $(1.18) of loss per diluted share for the same period in 2020.

Our reported results for the second quarter of 2021 and 2020 included the effects of special items. Adjusting for these special items(1), our adjusted net loss was $(206) million, adjusted operating loss was $(219), adjusted operating margin was (14.6)%, and adjusted loss per share was $(0.65) for the second quarter of 2021. This compares to adjusted net loss of $(548) million, adjusted operating loss of $(714) million, adjusted operating margin was (332.6)%, and adjusted diluted loss per share of $(2.02) for the second quarter of 2020.

On-time performance, as defined by the Department of Transportation, or DOT, is ~~available~~arrival within 14 minutes of scheduled arrival time. In the second quarter of 2021, our systemwide on-time performance was 73.8% compared to 92.9% for the ~~aviation industry~~same

period in 2020. Our completion factor increased by 13.3% points to 99.2% in the ~~form~~second quarter of ~~direct payroll support (the "Payroll Support Program") and secured loans (the "Loan 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~~2021 from 85.9% 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~~same period 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 requirement against 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, 2022.2020.

⁽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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We lowered our cash burn from an average of $18 million per day during the second half of March to approximately $8 million per day by the end of June. We expect our daily cash burn to average between $7 million and $9 million during the third quarter of 2020.

~~Preparing for Recovery~~

~~As the COVID-19 pandemic progresses, we have made 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 is 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. 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.

In July 2020, we announced our intention to enter into a strategic relationship with American Airlines Group Inc. This arrangement, once finalized, includes an alliance agreement with reciprocal code sharing on domestic and international routes from New York (John F. Kennedy International Airport, LaGuardia Airport, and Newark Liberty International Airport) and Boston. The arrangement does not include our future transatlantic flying. The implementation of the alliance agreement is subject to governmental review and approval.

~~Second Quarter 2020 Results~~

The unprecedented and rapid spread of COVID-19 and the related travel restrictions and physical distancing measures implemented throughout the world have significantly reduced demand for air travel. Demand for air travel began to weaken at the end of February 2020. The pace of decline accelerated throughout March into April 2020 and has remained depressed through the second quarter. This decline in demand has had a material adverse impact on our operating revenues and financial position. Although demand began to improve during the quarter, it remains significantly lower than the prior year.

~~Second quarter system capacity decreased by 84.9% year over year.~~

~~Revenue decreased by $1.9 billion compared to the second quarter of 2019.~~

~~Operating revenue per available seat mile (RASM) for the three months ended June 30, 2020 decreased by 32.2% to 8.91 cents.~~

~~Operating expense for the three months ended June 30, 2020 decreased by 66.3% to $625 million.~~

~~Operating expense per available seat mile (CASM) for the three months ended June 30, 2020 increased by 123.7% to 25.9 cents.~~

⁽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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Our operating expense for the second quarter of 2020 and 2019 included the effects of special items. For the second quarter of 2020, we recognized $304 million of payroll support grants under the CARES Act as a contra-expense within special items on our consolidated statements of operations. Our operating expense for the second quarter of 2019 included $2 million of special items related to the implementation of our pilots' collective bargaining agreement. Excluding fuel and related taxes, special items, as well as operating expenses related to our non-airline businesses, our operating expense decreased by 34.3% to $891 million.


•	~~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 by 336.6% to 36.95 cents.~~

•

Our reported loss per share for the second quarter of 2020 was $(1.18) compared to reported earnings per diluted share of $0.59 for the second quarter of 2019. Our results for the second quarter of 2020 and 2019 included the effects of special items. Excluding special items, our adjusted (loss) earnings per diluted share⁽¹⁾ ~~for the second quarter of 2020 and 2019 were $(2.02) and $0.60, respectively.~~

~~We lowered our cash burn from an average of $18 million per day during the second half of March to approximately $8 million per day by the end of June.~~

~~Outlook for 2020~~

The length and severity of the reduction in demand due to the COVID-19 pandemic is uncertain; accordingly, we expect the adverse impact to continue in the third quarter of 2020 and beyond. While we are planning for a modest recovery in demand during the third quarter of 2020, 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. Our response to the pandemic and the measures we take to secure additional liquidity may be modified as we have more clarity in the timing of demand 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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~RESULTS OF OPERATIONS~~

~~Three Months Ended June 30, 2020 vs. 2019~~

~~Overview~~

We reported a net loss of $320 million, operating loss of $410 million and an operating margin of (190.8)% for the three months ended June 30, 2020. This compares to a net income of $179 million, an operating income of $250 million and an operating margin of 11.9% for the three months ended June 30, 2019. Loss per share was $(1.18) for the second quarter of 2020 compared to $0.59 of earnings per diluted share for the same period in 2019.

~~Our reported results for the second quarter of 2020 and 2019 included the effects of special items. Adjusting for these special items~~⁽¹⁾, our adjusted net loss was $548 million, adjusted operating loss was $714 million, adjusted operating margin was (332.6)%, and adjusted loss per share was $(2.02) for the second quarter of 2020. This compares to adjusted net income of $180 million, adjusted operating income of $252 million, adjusted operating margin was 12.0%, and adjusted diluted earnings per share of $0.60 for the second quarter of 2019.

On-time performance, as defined by the Department of Transportation, or DOT, is arrival within 14 minutes of scheduled arrival time. In the second quarter of 2020, our systemwide on-time performance was 92.9% compared to 74.8% for the same period in 2019. Our completion factor decreased by 13.4 points to 85.9% in the second quarter of 2020 from 99.3% in the same period in 2019.

Operating Revenues


(Revenues in millions; percent changes based on unrounded numbers)	Three Months Ended June 30,						Year-over-Year Change
	2021			2020			$		%
Passenger revenue	$	1,388		$	170		$	1,218	715.5	%
Other revenue	111			45			66		148.0
Total operating revenues	$	1,499		$	215		$	1,284	597.7	%

Average Fare	$	174.90		$	276.35		$	(101.45)	(36.7)	%
Yield per passenger mile (cents)	12.82			20.86			(8.04)		(38.5)
Passenger revenue per ASM (cents)	10.18			7.06			3.12		44.2
Operating revenue per ASM (cents)	10.99			8.91			2.08		23.4
Average stage length (miles)	1,279			1,183			96		8.1
Revenue passengers (thousands)	7,938			616			7,322		1,188.5
Revenue passenger miles (millions)	10,804			816			9,988		1,223.7
Available Seat Miles (ASMs) (millions)	13,645			2,413			11,232		465.6
Load Factor	79.2		%	33.8		%			45.4		pts.

(Revenues in millions; percent changes based on unrounded numbers) Three Months Ended June 30, Year-over-Year Change
2020 2019 $ %
Passenger revenue $ 170
$ 2,031
$ (1,861 ) (91.6 )%
Other revenue 45
74
(29 ) (39.7 )
Total operating revenues $ 215
$ 2,105
$ (1,890 ) (89.8 )%

Average Fare $ 276.35
$ 184.24
$ 92.11
50.0 %
Yield per passenger mile (cents) 20.86
14.74
6.12
41.5

Passenger revenue per ASM (cents) 7.06
12.68
(5.62 ) (44.3 )
Operating revenue per ASM (cents) 8.91
13.14
(4.23 ) (32.2 )
Average stage length (miles) 1,183
1,147
36
3.1

Revenue passengers (thousands) 616
11,026
(10,410 ) (94.4 )
Revenue passenger miles (millions) 816
13,782
(12,966 ) (94.1 )
Available Seat Miles (ASMs) (millions) 2,413
16,029
(13,616 ) (84.9 )
Load Factor 33.8 % 86.0 % (52.2 ) pts.

Passenger revenue is our primary source of revenue, which includes seat revenue and baggage fees, as well as revenue from our ancillary product offerings such as Even ~~More~~^®More® Space. The ~~decrease~~increase in passenger revenue of ~~$1.9 billion,~~$1,218 million, or ~~91.6%~~715.5%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, was primarily driven by the ~~unprecedented decline~~increase in demand for travel ~~tied to~~as we recover from the COVID-19 ~~and its effects.~~pandemic. Revenue passengers ~~decreased by 94.4%~~increased to ~~0.6~~7.9 million for the three months ended June 30, ~~2020~~2021 from ~~11.0 million~~616 thousand for the same period in ~~2019.~~2020.

Operating Expenses

In detail, our operating costs per available seat mile, or ASM, were as follows:


(in millions; per ASM data in cents; percent changes based on unrounded numbers)	Three Months Ended June 30,				Year-over-Year Change				Cents per ASM
	2021		2020		$		%		2021	2020	% Change
Aircraft fuel and related taxes	$	336	$	29	$	307	1,051.8	%	2.46	1.21	103.7	%
Salaries, wages and benefits	577		477		100		20.9		4.23	19.78	(78.6)
Landing fees and other rents	174		62		112		180.7		1.27	2.57	(50.4)
Depreciation and amortization	133		140		(7)		(4.9)		0.98	5.81	(83.2)
Aircraft rent	26		16		10		63.8		0.19	0.66	(71.0)
Sales and marketing	47		8		39		508.9		0.35	0.32	7.7
Maintenance, materials and repairs	164		73		91		122.8		1.20	3.05	(60.6)
Other operating expenses	261		124		137		110.5		1.91	5.12	(62.8)
Special items	(366)		(304)		(62)		20.2		(2.68)	(12.62)	(78.7)
Total operating expenses	$	1,352	$	625	$	727	116.3	%	9.91	25.90	(61.7)	%

Total operating expenses excluding special items(1)	$	1,718	$	929	$	789	84.8	%	12.59	38.52	(67.3)	%

Aircraft Fuel and Related Taxes

Aircraft fuel and related taxes increased by $307 million, for the three months ended June 30, 2021 compared to the same period in 2020. The average fuel price for the three months ended June 30, 2021 increased by 98.8% to $1.91 per gallon. Our fuel consumption increased by 479.3%, or 146 million gallons, due to increased demand as we recover from the COVID-19

⁽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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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Operating Expenses~~

~~In detail, our operating costs per available seat mile, or ASM, were as follows:~~

(in millions; per ASM data in cents; percent changes based on unrounded numbers) Three Months Ended June 30, Year-over-Year Change Cents per ASM
2020
2019 $ % 2020 2019 % Change
Aircraft fuel and related taxes $ 29
$ 484
$ (455 ) (94.0 )% 1.21
3.02
(59.9 )%
Salaries, wages and benefits 477
576
(99 ) (17.1 ) 19.78
3.59
450.8
Landing fees and other rents 62
121
(59 ) (48.8 ) 2.57
0.75
240.1
Depreciation and amortization 140
127
13
10.2
5.81
0.79
632.2
Aircraft rent 16
25
(9 ) (36.7 ) 0.66
0.16
320.8
Sales and marketing 8
75
(67 ) (89.6 ) 0.32
0.47
(31.0 )
Maintenance, materials and repairs 73
168
(95 ) (56.4 ) 3.05
1.05
189.8
Other operating expenses 124
277
(153 ) (55.3 ) 5.12
1.74
196.9
Special items (304 ) 2
(306 ) (13,121.7 ) (12.62 ) 0.01
(86,618.4 )
Total operating expenses $ 625
$ 1,855
$ (1,230 ) (66.3 )% 25.90
11.58
123.7 %

Total operating expenses excluding special items⁽¹⁾
$ 929
$ 1,853
$ (924 ) (49.9 )% 38.52
11.57
233.1 %

~~Aircraft Fuel and Related Taxes~~

Aircraft fuel and related taxes decreased by $455 million, or 94.0%, for the three months ended June 30, 2020 compared to the same period in 2019. The average fuel price for the three months ended June 30, 2020 decreased by 55.4% to $0.96 per gallon. Our fuel consumption decreased by 86.5%, or 194 million gallons, due to capacity reductions in response to lower demand as a result of the COVID-19 pandemic. We expect ~~lower~~our fuel consumption ~~for~~to gradually increase in 2021 as we continue to recover from the ~~rest of 2020 consistent with anticipated ongoing~~pandemic and add capacity ~~adjustments in response to COVID-19.~~back into the system.

Salaries, Wages and Benefits

Salaries, wages and benefits ~~decreased $99~~increased $100 million, or ~~17.1%~~20.9%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, driven primarily by the ~~actions taken as a result of decreased~~increase in demand for ~~air~~ travel ~~due to the COVID-19 pandemic.~~driving up total hours worked by our crewmembers. Beginning in March 2020, we instituted a company-wide hiring freeze, implemented salary and wage reductions of 20% to 50% for our officers, and reduced work hours for all other management workgroups. ~~In June 2020, we announced a voluntary separation program to our crewmembers, with most departures scheduled for August 2, 2020.~~

Landing Fees and Other Rents

Landing fees and other rents ~~decreased $59~~increased $112 million, or ~~48.8%~~180.7%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019~~2020 primarily due to ~~capacity reductions~~increases in ~~response~~rates as well as increases in customers and departures. We currently expect rents and landing fees to ~~the significant decline in demand beginning in the second half~~continue to increase into 2022 due to increased rates and a higher volume of ~~March 2020 amid the COVID-19 pandemic.~~flights.

Depreciation and Amortization

Depreciation and amortization ~~increased $13~~decreased $(7) million, or ~~10.2%~~(4.9)%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019. Since~~2020. Beginning in June ~~30, 2019,~~2020, we ~~have placed nine new~~entered into sale-leaseback transactions for our aircraft resulting in a decline in depreciation expense. This decline in expense was essentially offset by an increase in aircraft rent as we converted owned aircraft into ~~service, bought out the leases of two aircraft, and completed the cabin restyle on more than 40~~leased aircraft. ~~The average number of aircraft increased by 3.6% during the second quarter of 2020 as compared to the same period in 2019.~~

Aircraft Rent

Aircraft rent ~~decreased $9~~increased $10 million, or ~~36.7%~~63.8%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019 as~~2020. Beginning in June 2020, we ~~bought out the leases~~entered into sale-leaseback transactions for some of ~~two aircraft. We purchased~~our aircraft resulting in an ~~Airbus A320~~increase in aircraft ~~and an Airbus A321 aircraft from its lessor in the third quarter of 2019 and first quarter of 2020, respectively.~~

⁽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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

rent.

Sales and Marketing

Sales and marketing ~~decreased $67~~increased $39 million, or ~~89.6%~~508.9%, for the three months ended June 30, ~~2020~~2021 compared to the same

period in ~~2019~~2020 driven by ~~lower credit card fees and computer reservation system charges as~~an increase in sales in the period due to an increase in demand ~~declined amid the COVID-19 pandemic.~~for travel.

Maintenance Materials and Repairs

Maintenance materials and repairs ~~decreased $95~~increased $91 million, or ~~56.4%~~122.8%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, primarily driven by an increase in maintenance deferred during the ~~reduction in flying and timing~~COVID-19 pandemic. As of ~~heavy maintenance visits and engine maintenance.~~June 30, 2020, we had approximately 115 aircraft parked.

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.

Other operating expenses ~~decreased $153~~increased $137 million, or ~~55.3%~~110.5%, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019~~2020 due to ~~capacity reductions in response to the significant decline~~an increase in demand ~~beginning in~~to fly as we begin to come out of the ~~second half of March 2020 coupled with~~COVID-19 pandemic.

We continue to focus on driving efficiencies and productivity across our business. We expect the benefits from ~~cost saving initiatives implemented amid~~ the ~~COVID-19 pandemic.~~run-rate savings associated with our Structural Cost Program to continue.

Special Items

For the three months ended June 30, ~~2020,~~2021, special items included a contra-expense of ~~$304~~$357 million which represents the amount of ~~CARES Act~~ payroll support grants utilized during the period. ~~Special~~In addition, special items ~~for the three months ended June 30, 2019 consisted~~included a contra-expense of $2$9 million ~~of one-time costs~~ related to the ~~implementation~~recognition of ~~our pilots' collective bargaining agreement which became effective on August 1, 2018.~~

~~Income Taxes~~

The Company's effective tax rate was 28.7% and 24.1% for the three months ended June 30, 2020 and 2019, respectively. Our effective tax rate includes an income tax benefit of $23 million recognized during the three months ended June 30, 2020, related to tax losses generated during 2020 that are permitted underEmployee Retention Credits provided by the CARES ~~Act to be carried back to certain tax years when the U.S. federal income tax rate was 35%. This benefit was partially offset by $10 million of valuation allowance related to foreign tax credits.~~

~~Six Months Ended June 30, 2020 vs. 2019~~

~~Overview~~

We reported a net loss of $588 million, operating loss of $744 million and an operating margin of (41.3)% for the six months ended June 30, 2020. This compares to a net income of $221 million, an operating income of $325 million and an operating margin of 8.2% for the six months ended June 30, 2019. Loss per share was $(2.14) for the six months ended June 30, 2020 compared to $0.73 of earnings per diluted share for the same period in 2019.

~~Our reported results for the six months ended June 30, 2020 and 2019 included the effects of special items. Adjusting for these special items~~⁽¹⁾, our adjusted net loss was $664 million, adjusted operating loss was $846 million, adjusted operating margin was (46.9)%, and adjusted loss per share was $(2.42) for the six months ended June 30, 2020. This compares to adjusted net income of $232 million, adjusted operating income of $339 million, adjusted operating margin was 8.5%, and adjusted diluted earnings per share of $0.76 for the six months ended June 30, 2019.

act.

⁽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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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, 2021 vs. 2020

Overview

We reported a net loss of $183 million, an operating loss of $147 million and an operating margin of (6.6)% for the six months ended June 30, 2021. This compares to a net loss of $588 million, an operating loss of $744 million and an operating margin of (41.3)% for the six months ended June 30, 2020. Loss per share was $(0.58) for the six months ended June 30, 2021 compared to loss per share of $(2.14) for the same period in 2020.

Our reported results for the six months ended June 30, 2021 and 2020 included the effects of special items. Adjusting for these special items(1), our adjusted net loss was $665 million, adjusted operating loss was $802 million, adjusted operating margin was (35.9)%, and adjusted loss per share was $(2.10) for the six months ended June 30, 2021. This compares to adjusted net loss of $664 million, adjusted operating loss of $846 million, adjusted operating margin of (46.9)%, and adjusted loss per share of $(2.42) for the six months ended June 30, 2020.

Operating Revenues


(Revenues in millions; percent changes based on unrounded numbers)	Six Months Ended June 30,						Year-over-Year Change						(Revenues in millions; percent changes based on unrounded numbers)	Six Months Ended June 30,						Year-over-Year Change
	2020			2019			$			%				2021			2020			$		%
Passenger revenue	$	1,682		$	3,833		$	(2,151	)	(56.1	)%		Passenger revenue	$	2,058		$	1,682		$	376	22.4	%
Other revenue	121			144			(23		)	(15.2	)		Other revenue	174			121			53		42.9
Total operating revenues	$	1,803		$	3,977		$	(2,174	)	(54.7	)%		Total operating revenues	$	2,232		$	1,803		$	429	23.7	%

Average Fare	$	191.83		$	180.89		$	10.94		6.1	%		Average Fare	$	165.93		$	191.83		$	(25.90)	(13.5)	%
Yield per passenger mile (cents)	15.00			14.46			0.54			3.8			Yield per passenger mile (cents)	12.39			15.00			(2.61)		(17.4)
Passenger revenue per ASM (cents)	9.72			12.18			(2.46		)	(20.2	)		Passenger revenue per ASM (cents)	9.05			9.72			(0.67)		(6.9)
Operating revenue per ASM (cents)	10.42			12.64			(2.22		)	(17.5	)		Operating revenue per ASM (cents)	9.82			10.42			(0.60)		(5.8)
Average stage length (miles)	1,163			1,150			13			1.1			Average stage length (miles)	1,278			1,163			115		9.9
Revenue passengers (thousands)	8,766			21,191			(12,425		)	(58.6	)		Revenue passengers (thousands)	12,401			8,766			3,635		41.5
Revenue passenger miles (millions)	11,208			26,516			(15,308		)	(57.7	)		Revenue passenger miles (millions)	16,611			11,208			5,403		48.2
Available Seat Miles (ASMs) (millions)	17,304			31,466			(14,162		)	(45.0	)		Available Seat Miles (ASMs) (millions)	22,734			17,304			5,430		31.4
Load Factor	64.8		%	84.3		%				(19.5	)	pts.	Load Factor	73.1		%	64.8		%			8.3		pts.

Passenger revenue is our primary source of revenue, which includes seat revenue and baggage fees, as well as revenue from our ancillary product offerings such as Even More^® Space. The ~~decrease~~increase in passenger revenue of ~~$2.2 billion,~~$376 million, or ~~56.1%~~22.4%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, was primarily driven by the ~~unprecedented decline~~increase in demand for travel ~~tied~~as we begin to come out of the COVID-19 ~~and its effects.~~pandemic which began in March of 2020. Revenue passengers ~~decreased~~increased by ~~58.6%~~41.5% to ~~8.8~~12.4 million for the six months ended June 30, ~~2020~~2021 from ~~21.2~~8.8 million for the same period in ~~2019.~~2020.

~~Operating Expenses~~

~~In detail, our operating costs per available seat mile, or ASM, were as follows:~~

(in millions; per ASM data in cents; percent changes based on unrounded numbers) Six Months Ended June 30, Year-over-Year Change Cents per ASM
2020 2019 $ % 2020 2019 % Change
Aircraft fuel and related taxes $ 394
$ 921
$ (527 ) (57.2 )% 2.28
2.93
(22.2 )%
Salaries, wages and benefits 1,078
1,151
(73 ) (6.3 ) 6.23
3.66
70.3
Landing fees and other rents 174
237
(63 ) (26.6 ) 1.00
0.75
33.5
Depreciation and amortization 279
251
28
11.1
1.61
0.80
102.0
Aircraft rent 37
50
(13 ) (25.6 ) 0.22
0.16
35.4
Sales and marketing 60
141
(81 ) (57.1 ) 0.35
0.45
(22.0 )
Maintenance, materials and repairs 233
324
(91 ) (27.9 ) 1.35
1.03
31.2
Other operating expenses 394
563
(169 ) (30.2 ) 2.27
1.78
27.0
Special items (102 ) 14
(116 ) (831.0 ) (0.59 ) 0.04
(1,429.3 )
Total operating expenses $ 2,547
$ 3,652
$ (1,105 ) (30.2 )% 14.72

11.60

26.9 %

Total operating expenses excluding special items⁽¹⁾
$ 2,649
$ 3,638
$ (989 ) (27.2 )% 15.31

11.56

32.5 %

⁽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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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Expenses

In detail, our operating costs per available seat mile, or ASM, were as follows:


(in millions; per ASM data in cents; percent changes based on unrounded numbers)	Six Months Ended June 30,				Year-over-Year Change				Cents per ASM
	2021		2020		$		%		2021	2020	% Change
Aircraft fuel and related taxes	$	530	$	394	$	136	34.3	%	2.33	2.28	2.2	%
Salaries, wages and benefits	1,098		1,078		20		1.9		4.83	6.23	(22.5)
Landing fees and other rents	289		174		115		66.4		1.27	1.00	26.7
Depreciation and amortization	258		279		(21)		(7.6)		1.13	1.61	(29.7)
Aircraft rent	50		37		13		35.7		0.22	0.22	3.3
Sales and marketing	70		60		10		15.7		0.31	0.35	(11.9)
Maintenance, materials and repairs	268		233		35		14.7		1.18	1.35	(12.7)
Other operating expenses	471		394		77		19.7		2.07	2.27	(8.9)
Special items	(655)		(102)		(553)		(541.8)		(2.88)	(0.59)	(388.5)
Total operating expenses	$	2,379	$	2,547	$	(168)	(6.6)	%	10.46	14.72	(28.9)	%

Total operating expenses excluding special items(1)	$	3,034	$	2,649	$	385	14.5	%	13.34	15.31	(12.9)	%

Aircraft Fuel and Related Taxes

Aircraft fuel and related taxes ~~decreased~~increased by ~~$527~~$136 million, or ~~57.2%~~34.3%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The average fuel price for the six months ended June 30, ~~2020 decreased~~2021 increased by ~~17.4%~~5.8% to ~~$1.74~~$1.84 per gallon. Our fuel consumption ~~decreased~~increased by ~~48.2%~~27.0%, or ~~211~~61 million gallons, due to capacity ~~reductions in response to lower~~increases as demand ~~as a result of the COVID-19 pandemic.~~for travel grew. We expect ~~lower~~our fuel consumption ~~for~~to gradually increase in 2021 as we continue to recover from the ~~rest of 2020 consistent with anticipated ongoing~~pandemic and add capacity ~~adjustments in response to COVID-19.~~back into the system.

Salaries, Wages and Benefits

Salaries, wages and benefits ~~decreased $73~~increased by $20 million, or ~~6.3%~~1.9%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, driven primarily by the ~~actions taken as a result of decreased~~increase in demand for ~~air~~ travel ~~due to~~driving up total hours worked by our crewmembers. In the ~~COVID-19 pandemic. Beginning~~comparison period, beginning in March 2020, we instituted a company-wide hiring freeze, implemented salary reductions of 20% to 50% for our officers, and reduced work hours for all other management workgroups. InAs of June ~~2020,~~30, 2021, we ~~announced a voluntary separation program~~have approximately 20,000 crewmembers compared to ~~our~~approximately 21,500 crewmembers ~~with most departures scheduled for August 2,~~at June 30, 2020.

Landing Fees and Other Rents

Landing fees and other rents ~~decreased $63~~increased by $115 million, or ~~26.6%~~66.4%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019~~2020 primarily due to ~~capacity reductions~~increases in ~~response~~rates, customers, and departures as demand for travel increases.

We expect cost pressures in landing fees and other rents due to increases in rates at the ~~significant decline in demand beginning~~airports we serve, coupled with an increase in the ~~second half~~number of ~~March 2020 amid the COVID-19 pandemic.~~departures as we ramp up our operations.

Depreciation and Amortization

Depreciation and amortization ~~increased $28~~decreased by $21 million, or ~~11.1%~~7.6%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019. Since~~2020. This decrease was primarily attributed to the impairment of our E190 fleet and related spare parts in 2020. In addition, we also executed a number of sale-leaseback transactions towards the second half of 2020, the majority of which qualified as sales for accounting purposes. As a result of these sales, we no longer record depreciation expense on the assets. The costs associated with leasing these assets back from the purchaser are included in Aircraft Rent on our consolidated statements of operations.

(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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The decreases described above were partially offset by additional depreciation expenses related to four new aircraft that were placed into service since June 30, ~~2019, we have placed nine new aircraft into service, bought out the leases of two aircraft, and completed the cabin restyle on more than 40 aircraft.~~2020. The average number of aircraft increased by ~~3.0%~~2.8% during the six months ended June 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020.

Aircraft Rent

Aircraft rent ~~decreased~~increased $13 million, or ~~25.6%~~35.7%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019 as~~2020. As discussed above, we ~~bought out~~executed a number of sale-leaseback transactions towards the ~~leases of two aircraft. We purchased an Airbus A320 aircraft and an Airbus A321 aircraft from its lessor in the third quarter of 2019 and first quarter~~second half of 2020, ~~respectively.~~the majority of which qualified as sales for accounting purposes. The assets associated with these transactions which qualified as sales are recorded within operating lease assets and rent expenses are recognized throughout the life of the related lease terms.

Sales and Marketing

Sales and marketing ~~decreased $81~~increased $10 million, or ~~57.1%~~15.7%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019~~2020 driven by ~~lower~~higher credit card fees and computer reservation system charges which are directly related to demand increases as ~~demand declined amid~~we recover from the ~~COVID-19~~ pandemic.

Maintenance Materials and Repairs

Maintenance materials and repairs ~~decreased $91~~increased $35 million, or ~~27.9%~~14.7%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, primarily driven by ~~the reduction~~an increase in ~~flying~~maintenance events. During 2020, we parked aircraft and ~~timing of heavy~~deferred non-essential maintenance ~~visits~~expenditures to conserve cash.

We expect expenses relating to maintenance, materials, and ~~engine maintenance.~~repairs to increase throughout 2021.

Other Operating Expenses

Other operating expenses ~~decreased $169~~increased $77 million, or ~~30.2%~~19.7%, for the six months ended June 30, ~~2020~~2021 compared to the same period in ~~2019~~2020 due to capacity ~~reductions~~increases in response to the ~~significant decline~~increase in demand ~~beginning in the second half of March 2020 coupled with the benefits~~as we recover from ~~cost saving initiatives implemented amid~~ the COVID-19 pandemic.

⁽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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Special Items

Special ~~Items~~items for the six months ended June 30, 2021 included the following:

•Contra-expense of $(644) million, which represents the amount of federal payroll support grants utilized during the period; and

•Contra-expenses of $(11) million related to the recognition of Employee Retention Credits provided by the CARES Act.

For the six months ended June 30, 2020, special items ~~included~~include a contra-expense of $304 million which represents the amount of CARES Act payroll support grants utilized during the period, and the impairment charge of $202 million on our Embraer E190 fleet. ~~Special items for the six months ended June 30, 2019 consisted of $9 million of one-time costs related~~

(1) Refer to our ~~2018 decision to transition out~~''Regulation G Reconciliation of Non-GAAP Financial Measures" at the ~~Embraer E190 fleet and $5 million~~end of ~~one-time costs related to the implementation~~this section for more information on this non-GAAP measure.

Table of ~~our pilots' collective bargaining agreement which became effective on August 1, 2018.~~Contents

~~Income Taxes~~PART I. FINANCIAL INFORMATION

The Company's effective tax rate was 26.8% and 24.9% for the six months ended June 30, 2020 and 2019, respectively. Our effective tax rate includes an income tax benefit of $35 million recognized during the six months ended June 30, 2020, related to tax losses generated during 2020 that are permitted under the CARES Act to be carried back to certain tax years when the U.S. federal income tax rate was 35%. This benefit was partially offset by $10 million of valuation allowance related to foreign tax credits. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth our operating statistics for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:


	Three Months Ended June 30,						Year-over-Year Change			Six Months Ended June 30,						Year-over-Year Change				Three Months Ended June 30,						Year-over-Year Change		Six Months Ended June 30,						Year-over-Year Change
(percent changes based on unrounded numbers)	2020			2019			%			2020			2019			%			(percent changes based on unrounded numbers)	2021			2020			%		2021			2020			%
Operational Statistics																			Operational Statistics
Revenue passengers (thousands)	616			11,026			(94.4	)		8,766			21,191			(58.6	)		Revenue passengers (thousands)	7,938			616			1,188.5		12,401			8,766			41.5
Revenue passenger miles (RPMs) (millions)	816			13,782			(94.1	)		11,208			26,516			(57.7	)		Revenue passenger miles (RPMs) (millions)	10,804			816			1,223.7		16,611			11,208			48.2
Available seat miles (ASMs) (millions)	2,413			16,029			(84.9	)		17,304			31,466			(45.0	)		Available seat miles (ASMs) (millions)	13,645			2,413			465.6		22,734			17,304			31.4
Load factor	33.8		%	86.0		%	(52.2	)	pts	64.8		%	84.3		%	(19.5	)	pts	Load factor	79.2		%	33.8		%	45.4	pts	73.1		%	64.8		%	8.3	pts
Aircraft utilization (hours per day)	1.6			12.1			(86.8	)		6.1			11.9			(48.7	)		Aircraft utilization (hours per day)	8.8			1.6			450.0		7.4			6.1			21.3

Average fare	$	276.35		$	184.24		50.0			$	191.83		$	180.89		6.1			Average fare	$	174.90		$	276.35		(36.7)		$	165.93		$	191.83		(13.5)
Yield per passenger mile (cents)	20.86			14.74			41.5			15.00			14.46			3.8			Yield per passenger mile (cents)	12.82			20.86			(38.5)		12.39			15.00			(17.4)
Passenger revenue per ASM (cents)	7.06			12.68			(44.3	)		9.72			12.18			(20.2	)		Passenger revenue per ASM (cents)	10.18			7.06			44.2		9.05			9.72			(6.9)
Operating revenue per ASM (cents)	8.91			13.14			(32.2	)		10.42			12.64			(17.5	)		Operating revenue per ASM (cents)	10.99			8.91			23.4		9.82			10.42			(5.8)
Operating expense per ASM (cents)	25.90			11.58			123.7			14.72			11.60			26.9			Operating expense per ASM (cents)	9.91			25.90			(61.7)		10.46			14.72			(28.9)
Operating expense per ASM, excluding fuel⁽¹⁾	36.95			8.46			336.6			12.90			8.56			50.7			Operating expense per ASM, excluding fuel(1)	10.05			36.95			(72.8)		10.92			12.90			(15.3)

Departures	12,896			93,040			(86.1	)		96,191			182,276			(47.2	)		Departures	67,253			12,896			421.5		111,302			96,191			15.7
Average stage length (miles)	1,183			1,147			3.1			1,163			1,150			1.1			Average stage length (miles)	1,279			1,183			8.1		1,278			1,163			9.9
Average number of operating aircraft during period	262.0			253.0			3.6			260.6			253.0			3.0			Average number of operating aircraft during period	269.0			262.0			2.7		268.0			260.6			2.8
Average fuel cost per gallon, including fuel taxes	$	0.96		$	2.16		(55.4	)		$	1.74		$	2.10		(17.4	)		Average fuel cost per gallon, including fuel taxes	$	1.91		$	0.96		98.8		$	1.84		$	1.74		5.8
Fuel gallons consumed (millions)	30			224			(86.5	)		227			438			(48.2	)		Fuel gallons consumed (millions)	176			30			479.3		288			227			27.0
Average number of full-time equivalent crewmembers										16,759			18,454						Average number of full-time equivalent crewmembers									15,416			16,759

Historical trends may not continue. The ongoing COVID-19 pandemic ~~has caused major~~continues to cause disruptions onin our operations induring the ~~first half of 2020.~~three months ended June 30, 2021. We expect our operating results to significantly fluctuate from quarter-to-quarter in the future due to the uncertainties surrounding the COVID-19 pandemic, its impact on the economy and consumer behavior, and various other factors which are outside of our control. Consequently, we believe quarter-to-quarter comparisons of our operating results may not necessarily be meaningful; you should not rely on our results for any one quarter as an indication of our future performance.

⁽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.

3533

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONSOLIDATED BALANCE SHEET ANALYSIS

The following is a discussion of the significant changes between June 30, 2021, and December 31, 2020.


(in millions)
Selected Balance Sheet Data:	June 30, 2021	December 31, 2020	$ Change	% Change
ASSETS
Cash and cash equivalents	2,409	1,918	491	25.6	%
Investment securities	1,317	1,135	182	16.0	%
Receivables, net of allowance of $2, at June 30, 2021 and December 31, 2020, respectively.	276	98	178	181.9	%
Flight equipment	10,793	10,256	537	5.2	%
LIABILITIES
Air traffic liability	1,880	1,122	758	67.5	%
Other accrued liabilities	584	215	369	171.7	%
LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS	3,998	4,413	(415)	(9.4)	%

Cash and cash equivalents

Cash and cash equivalents increased by $491 million, or 25.6%, primarily related to $1.6 billion cash from operations, including $1.1 billion funds related to the various PSP programs. Our cash portion at June 30, 2021 also benefited from the initial cash payments associated with our new Co-Branded Credit Card agreement.The increase to cash was offset by $1.4 billion of debt principal repayments.

Investment securities

Investment securities increased by $182 million, or 16.0%, primarily driven by an increase in time deposits.

Receivables, less allowance

Receivables increased by $178 million, as a result of improvements in demand which led to an increase in receivables from our credit card processors.

Flight equipment

Flight equipment increased by $537 million, or 5.2%, principally driven by aircraft capital expenditures made in the first half of 2021. Additional information related to our aircraft capital expenditures are provided within our discussion of investing activities under the "Liquidity and Capital Resources" section below.

Air traffic liability

Air traffic liability increased by $758 million, or 67.5%, driven by the improvements in demand as customers begin to gain confidence to travel and resumed booking travel further in advance. The cash collected from customers for future travel is recorded on our balance sheet until the point in time that the customer travels.

Other accrued liabilities

Other accrued liabilities increased by $369 million, or 171.7%, primarily as a result of the unused portion of our payroll support extension grants received under the Consolidated Appropriations Act.

As discussed in Note 3 to our condensed consolidated financial statements, on January 15, 2021, we entered into a PSP Extension Agreement with the Treasury governing our participation in the Payroll Support Program 2. In the first half of 2021, Treasury provided us with Payroll Support 2 Payments totaling $580 million. These payments consist of $436 million in grants and $144 million in unsecured term loans. In consideration for the Payroll Support 2 Payments, we issued warrants to Treasury to purchase approximately 1.0 million shares of our common stock at an exercise price of $14.43 per share.

On May 6, 2021, we entered into a Payroll Support 3 Agreement with Treasury governing our participation in the federal

(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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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

payroll support program for passenger air carriers under Section 7301 of the American Rescue Plan Act of 2021. In the second quarter of 2021, Treasury provided us with total payments of $541 million under the program, consisting of $409 million in grants and $132 million in unsecured term loans. In consideration for the Payroll Support 3 Payments, we issued warrants to purchase approximately 0.7 million shares of our common stock to the Treasury at an exercise price of $19.90 per share.

Long-term debt and finance lease obligations

Long-term debt and finance lease obligations decreased by $(415) million, or (9.4)%. In the first quarter of 2021, we completed the issuance of our 0.50% Convertible Senior Notes due 2026 in the amount of $750 million and also received $276 million in unsecured term loans under the Payroll Support Program 2. These increases were partially offset by $768 million of principal payments on our debt and finance lease obligations and $722 million repayment of outstanding borrowings under the Term Loan. As the business continues to recover we will continue to look for opportunities to reduce our overall level of debt.

LIQUIDITY AND CAPITAL RESOURCES

The airline business is capital intensive. Our ability to successfully execute our 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, investment securities on hand, and available lines of credit. Additionally, our unencumbered assets could be an additional source of liquidity, if necessary.

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 and maintain financial flexibility.

~~Impact of the COVID-19 Pandemic~~

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 second quarter of 2020 declined by 85% year-over-year. For the third quarter of 2020, we expect capacity to be down by at least 45% compared to the prior year. As a result of the significant reduction in demand expectations and lower capacity, we have temporarily parked approximately 30% of our fleet.

The reductions in demand and 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 our business partners and extended payment terms.~~

•~~Instituted a company-wide hiring freeze.~~

~~Implemented salary reductions of 20% to 50% for our officers.~~

~~Offered crewmembers voluntary time off and separation programs, with most departures for the separation programs scheduled for August 2, 2020.~~

At June 30, ~~2020,~~2021, we had cash, cash equivalents, and short-term investments ~~and short-term restricted cash~~ of approximately ~~$3.4~~$3.7 billion. ~~We believe the unprecedented impact of COVID-19 on the demand~~Our business and operating results for ~~air travel and the corresponding decline in revenue will~~2021 continue to ~~have~~be impacted by the COVID-19 pandemic and we expect to maintain an adverse impact on our operating cash flow. Given this situation, we have taken immediate actions to increase liquidity, strengthen our financial position, and conserve cash. Some of the actions we have taken through June 30, 2020 include:

~~Executed a new $1.0 billion 364-day delayed draw term loan agreement and immediately drew down on the facility for the full amount available.~~

~~Borrowed on our existing $550 million revolving credit facility.~~


•	~~Executed a $150 million pre-purchase arrangement of TrueBlue~~^® ~~points with our co-brand credit card partner.~~

~~Suspended non-critical capital expenditure projects.~~

~~Amended our purchase agreement with Airbus to defer several aircraft deliveries, resulting in a $1.1 billion reduction in aircraft capital expenditures through 2022.~~

~~Suspended share repurchases.~~

~~Obtained $936 million of government funding under 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.~~

~~Entered into $118 million of sale-leaseback transactions; which is discussed further below.~~

⁽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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

As a result of these activities, we had $3.1 billion in unrestricted and short-term restricted cash as of June 30, 2020. The $936 million of CARES Act funding represents short-term restricted cash since the funds must be utilized to pay the salaries and benefits costs of our crewmembers through September 30, 2020. The funds are reclassified from short-term unrestricted cash within prepaid expenses and other on our consolidated balance sheets to cash and cash equivalents when the funds are utilized. As of June 30, 2020, $533 million of CARES Act funding remained available.

~~In July 2020,~~on hand as we ~~executed $267 million of sale-leaseback transactions.~~

~~We will continue to evaluate future financing opportunities to leverage our unencumbered assets in an effort to build additional levels of liquidity~~.

Analysis of Cash Flows

Operating Activities

We rely primarily on operating cash flows to provide working capital for current and future operations. Cash flows from operating activities were ~~$223~~$1,658 million and ~~$968~~$223 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Lower ~~earnings,~~losses, principally driven by lower operating expenses coupled with federal payroll support extension grants received under the ~~unprecedented decline in demand for travel caused by COVID-19~~Consolidated Appropriations Act and the initial cash payments associated with our new Co-Branded Credit Card Agreement all contributed to the ~~decrease~~increase in operating cash flows.

Investing Activities

Investing activities for the six months ended June 30, 2021 included $340 million in proceeds from maturities of investment securities.

During the six months ended June 30, 2021, capital expenditures related to our purchase of flight equipment included $340 million related to the purchase of seven Airbus A321neo aircraft and spare engines, $59 million related to the purchase of two A220 aircraft and spare engines $27 million for spare part purchases, $57 million in work-in-progress relating to flight equipment, and $16 million for flight equipment deposits. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $41 million.

During the six months ended June 30, 2020, capital expenditures related to our purchase of flight equipment included $200 million related to the purchase of three Airbus A321neo aircraft, one Airbus A321 lease buyout, the purchase of several spare engines, $104 million in work-in-progress relating to flight equipment, $7 million for spare part purchases, and $57 million for flight equipment deposits. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $66 million. Investing activities also included the net proceeds from investment securities of $29 million. ~~We continue to limit our capital expenditures to only those critical to our operations as we navigate through the COVID-19 pandemic.~~

In May 2020, we amended our purchase agreement with Airbus which updated the delivery schedules of our Airbus A321 and A220 deliveries. We are scheduled to receive four new Airbus A321neo aircraft and our first Airbus A220 aircraft for the remainder of 2020. We expect the aircraft deferrals will result in a $1.1 billion reduction in aircraft capital expenditures through 2022.

During the six months ended June 30, 2019, capital expenditures related to our purchase of flight equipment included $139 million related to the purchase of one Airbus A321neo aircraft and several spare engines, $91 million in work-in-progress relating to flight equipment, $35 million for spare part purchases, and $142 million for flight equipment deposits. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $63 million. Investing activities also included the net purchase of $103 million in investment securities.

~~Financing Activities~~

~~Financing activities for the six months ended June 30, 2020 primarily consisted of net proceeds of $2.2 billion from drawdowns of various credit facilities which include the following:~~

• ~~$981 million from our 364-day 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:~~

⁽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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financing Activities

Financing activities for the six months ended June 30, 2021 primarily consisted of the following:

•Net proceeds of $734 million from the issuance of our 0.50% Convertible Senior Notes due 2026; and

•Net proceeds of $276 million and $14 million from the issuances of unsecured term loans and warrants, respectively, in connection with the Payroll Support Program 2 and Payroll Support Program 3 under the Consolidated Appropriations Act.

These proceeds were more than offset by principal payments of $1.5 billion on our outstanding debt and finance lease obligations, $550 million of which were associated with the payoff of our revolving Credit and Guaranty Agreement.

Financing activities for the six months ended June 30, 2020 primarily consisted of the following:

• $981 million in net proceeds from the drawdown of our 364-day term loan facility;

• $717 million from our term loan facility with Barclays Bank PLC as administrative agent

•$550 million from our revolving credit facility with Citibank N.A as administrative agent

•Proceeds of $251 million and $18 million from the issuance of unsecured term loan and warrants, respectively, in connection with the Payroll Support Program under the CARES Act;

•$118 million of sale-leaseback transactions; and

•$22 million of proceeds from the issuance of common stock related to our crewmember stock purchase ~~plan.~~plan

~~These proceeds are partially offset by scheduled maturities of $180 million relating to debt~~CARES Act Loan Program

Under the CARES Act Loan Program as signed in September 2020 and finance lease obligations and the acquisitions of treasury shares of $167 million, of which $160 million related to our accelerated share repurchases, or ASR. Our share repurchase program has been suspended since March 31, 2020.

~~On April 29,~~subsequently amended in November 2020, we ~~submitted our application for~~had the ~~Loan Program of the CARES Act. Under the Loan Program, we expect to have the~~ ability ~~through September 30, 2020,~~ to borrow up to a total of approximately ~~$1.1~~$1.9 billion from the Treasury for a term of up to five years with an interest rate of LIBOR plus a margin. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company, with collateral to be determined.Treasury. If we ~~accept~~accepted the full amount of the loan, we ~~will issue~~would have issued warrants to purchase approximately ~~12.0~~20.5 million shares of our common stock to the Treasury. Any amount received under the CARES Act Loan Program ~~will be~~would have been subject to the relevant provisions of the CARES Act, including many of those ~~described under~~governing the Payroll Support Program.

We ~~have~~made an initial drawing of $115 million under the CARES Act Loan Program on September 29, 2020. In connection with this initial drawing, we entered into a ~~non-binding~~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.

On January 15, 2021, we entered into a letter agreement with Treasury which provided an extension of ~~intent with~~the Loan Agreement allowing us the option to access the remaining borrowing capacity through May 28, 2021. In May 2021, we notified the Treasury ~~for~~of our intent to forego our remaining approximately $1.8 billion borrowing capacity and subsequently on June 2, 2021 the ~~Loan Program but have not yet decided if we are going to take all or part~~liens on certain eligible engines and certain loyalty program assets, including JetBlue's rights in certain loyalty program agreements, loyalty program data and intellectual property, were released from the collateral package.

As of June 30, 2021, $115 million of the borrowings under the CARES Act loan ~~amount.~~

Financing activities for the six months ended June 30, 2019 primarily consisted of the acquisitions of treasury shares of $256 million, of which $250 million related to our accelerated share repurchases, and scheduled maturities of $182 million relating to debt and finance lease obligations, partially offset by $27 million of proceeds from the issuance of common stock.remained outstanding.

In March 2019, we filed an automatic shelf registration statement with the SEC. Under this shelf registration statement, we may 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. We may utilize this 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 various federal government support programs 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.

Working Capital

We had a working capital ~~deficit~~ of ~~$208 million and $877~~$223 million at June 30, ~~2020 and~~2021 compared to $671 million at December 31, ~~2019, respectively. Working capital deficits can be customary in the airline industry because a significant portion of air traffic liability is classified as a current liability.~~2020. Our working capital ~~deficit~~ decreased by ~~$669~~$448 million due to several factors, including ~~cash proceeds~~an overall increase in our air traffic liability which was attributed to the increase in customer bookings as demand for air travel begins to recover from ~~long-term debt financing activities and lower level of operational payables resulting from various cost saving initiatives amid~~ the COVID-19 pandemic.

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 and government assistance, ~~from the CARES Act,~~ which may be available to us.

(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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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, including the effectiveness of the available vaccines and the associated distribution, and its impact on the economy and consumer behavior, the extremely competitive environment in which we operate, or from events beyond our control, such as volatile fuel prices, economic conditions, weather-related disruptions, airport infrastructure challenges, the spread of infectious diseases, the impact of other airline bankruptcies, restructurings or consolidations, U.S. military actions, or acts of terrorism.

As part of our efforts to effectively manage our balance sheet and improve Return on Invested Capital, or ROIC, we expect to continue to actively manage our debt balances. Our approach to debt management includes managing the mix of fixed and floating rate debt, annual maturities of debt, and the weighted average cost of debt. Additionally, our unencumbered assets allow some flexibility in managing our cost of debt and capital requirements.

⁽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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Contractual Obligations

Our contractual obligations at June 30, ~~2020~~2021 include the following (in billions):


	Payments due in															Payments due in
	Total		2020		2021		2022		2023		2024		Thereafter			Total		2021		2022		2023		2024		2025		Thereafter
Debt and finance lease obligations⁽¹⁾	$	5.5	$	0.3	$	1.5	$	0.5	$	1.0	$	1.0	$	1.2	Debt and finance lease obligations(1)	$	5.1	$	0.3	$	0.5	$	0.7	$	0.4	$	0.4	$	2.8
Operating lease obligations	1.1		0.1		0.1		0.1		0.1		0.1		0.6		Operating lease obligations	1.1		0.1		0.2		0.1		0.1		0.1		0.5
Flight equipment purchase obligations⁽²⁾	7.9		0.4		1.1		0.9		1.7		1.8		2.0		Flight equipment purchase obligations(2)	7.4		0.4		0.8		1.6		1.8		1.2		1.6
Other obligations⁽³⁾	2.7		0.2		0.3		0.4		0.4		0.4		1.0		Other obligations(3)	3.0		0.2		0.4		0.5		0.4		0.4		1.1
Total	$	17.2	$	1.0	$	3.0	$	1.9	$	3.2	$	3.3	$	4.8	Total	$	16.6	$	1.0	$	1.9	$	2.9	$	2.7	$	2.1	$	6.0

The amounts stated above do not include additional obligations incurred as ofa result of financing activities executed after June 30, ~~2020.~~2021.

(1) Includes actual interest and estimated interest for floating-rate debt based on June 30, ~~2020~~2021 rates.

(2) Amounts represent obligations based on the current delivery schedule set forth in our Airbus order book as of June 30, ~~2020.~~2021.

(3) Amounts include ~~noncancelable~~non-cancelable commitments for the purchase of goods and services.

As of June 30, ~~2020, we believe~~2021, we are in compliance with the covenants of our debt and lease agreements. We have approximately ~~$25~~$26 million of restricted cash pledged under standby letters of credit related to certain leases that will expire at the end of the related lease terms.

As of June 30, ~~2020,~~2021, we operated a fleet of 130 Airbus A320 aircraft, 63 Airbus A321 aircraft, 920 Airbus ~~321neo~~A321neo aircraft, ~~130~~three Airbus ~~A320~~A220 aircraft, and 60 Embraer E190 aircraft. Of our fleet, ~~216~~210 are owned by us, 4062 are leased under operating leases, and ~~six~~four are leased under finance leases. Our owned aircraft include aircraft associated with sale-leaseback transactions that did not qualify as sales for accounting purposes. As of June 30, ~~2020,~~2021, the average age of our operating fleet was 1111.5 years.

Our ~~future~~ aircraft order book as of June 30, ~~2020~~2021 is as follows:


Year	Airbus A321neo	Airbus A220	Total	Year	Airbus A321neo	Airbus A220	Total
2020	4	1	5
2021	10	7	17	2021	1	5	6
2022	7	8	15	2022	3	9	12
2023	15	19	34	2023	11	18	29
2024	15	22	37	2024	13	22	35
2025	13	12	25	2025	11	12	23
2026	12	1	13	2026	12	1	13
2027				2027	14	—	14
Total	76	70	146	Total	65	67	132

Expenditures for our aircraft and spare engines include estimated amounts for contractual price escalations and predelivery deposits. We expect to meet our predelivery deposit requirements for our aircraft by paying cash or by using short-term borrowing facilities for deposits required six to 24 months prior to delivery. Any predelivery 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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Depending on market conditions, we anticipate using a mix of cash and debt financing ~~the~~for aircraft scheduled for delivery in ~~2020.~~2021. For deliveries after ~~2020,~~2021, although we believe debt and/or lease financing should be available to us, we cannot give any assurance that we will be able to secure financing on attractive terms, if at all. While these financings may or may not result in an increase in liabilities on our balance sheet, we expect our fixed costs to increase regardless of the financing method ultimately chosen. 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.

In October 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 in March 2020. In March 2021, the U.S. Trade Representative announced a four-month suspension of the tariff which was followed by an announcement in June 2021 that the suspension will be extended for five years. We continue to work with our business partners, including Airbus, to evaluate the potential financial and operational impact ~~of these announcements~~ on our future aircraft ~~deliveries.~~deliveries, including once the suspension is lifted. The continued imposition of the tariff could substantially increase the cost of new Airbus aircraft and parts.

Off-Balance Sheet Arrangements

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 condensed consolidated financial statements. Our 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 have not made 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. They maintain liquidity facilities 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 balance sheet, 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.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates included in our ~~2019~~2020 Form 10-K.

Forward-Looking Information

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 Report, 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, including the effectiveness of the available vaccines, the associated distribution and vaccination rates, the infection rates associated with COVID-19 ~~pandemic~~variants, travel advisories and restrictions 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 various federal government support programs such as the CARES ~~Act;~~Act, and the Consolidated Appropriations Act, 2021; 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; volatility in fuel prices, maintenance costs and interest

(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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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

⁽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.~~

~~Table of Contents~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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, 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; 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 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, those described in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures about Market Risk" in this Report and our recently filed periodic report on Forms 10-K and 10-Q, as well as our other filings with the SEC. 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.

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.

⁽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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

REGULATION G RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial measures in this report. Non-GAAP financial measures are financial measures that are derived from the condensed consolidated financial statements, but that are not presented in accordance with generally accepted accounting principles in the United States, or 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 and therefore is useful for investors.~~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 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 Expenses 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 the relevant periods are summarized in the table below. We exclude aircraft fuel and related taxes, operating expenses related to other non-airline businesses, such as JetBlue Technology Ventures and JetBlue Travel Products, and special items from operating expenses to determine CASM ex-fuel, which is a non-GAAP financial measure. ~~In 2020,~~

For the three and six months ended June 30, 2021, special items include contra-expenses recognized on the utilization of payroll support extension grants received under the payroll support programs, and contra-expenses recognized on the Employee Retention Credits provided by the CARES Act.

Special items for the three and six months ended June 30, 2020 include contra-expenses recognized on the utilization of payroll support grants received under the CARES Act and the impairment charge of our Embraer E190 fleet. ~~Special items for 2019 include one-time costs related to the Embraer E190 fleet transition as well as one-time costs related to the implementation of our pilots' collective bargaining agreement.~~

We believe that CASM ex-fuel is useful for investors because it provides investors the ability to measure financial performance excluding items beyond our control, such as fuel costs, which are subject to many economic and political factors, or not related to the generation of an available seat mile, such as operating expense related to certain non-airline 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.


NON-GAAP FINANCIAL MEASURE RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL
	Three Months Ended June 30,								Six Months Ended June 30,
	2021				2020				2021				2020
($ in millions; per ASM data in cents)	$		per ASM		$		per ASM		$		per ASM		$		per ASM
Total operating expenses	$	1,352	$	9.91	$	625	$	25.90	$	2,379	$	10.46	$	2,547	$	14.72
Less:
Aircraft fuel and related taxes	336		2.46		29		1.21		530		2.33		394		2.28
Other non-airline expenses	11		0.08		9		0.36		20		0.09		22		0.13
Special items	(366)		(2.68)		(304)		(12.62)		(655)		(2.88)		(102)		(0.59)
Operating expenses, excluding fuel	$	1,371	$	10.05	$	891	$	36.95	$	2,484	$	10.92	$	2,233	$	12.90

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions; per ASM data in cents) $ per ASM $ per ASM $ per ASM $ per ASM
Total operating expenses $ 625
$ 25.90
$ 1,855
$ 11.58
$ 2,547
$ 14.72
$ 3,652
$ 11.60
Less:
Aircraft fuel and related taxes 29
1.21
484
3.02
394
2.28
921
2.93
Other non-airline expenses 9
0.36
12
0.09
22
0.13
23
0.07
Special items (304 ) (12.62 ) 2
0.01
(102 ) (0.59 ) 14
0.04
Operating expenses, excluding fuel $ 891
$ 36.95
$ 1,357
$ 8.46
$ 2,233
$ 12.90
$ 2,694
$ 8.56
Operating Expense, Loss before Taxes, Net Loss and Loss per Share, excluding special items

Our GAAP results in the applicable periods were impacted by credits and charges that were deemed special items.

For the three months ended June 30, 2020, special items included a contra-expense which represents the amount of CARES Act payroll support grants utilized during the period. For the six months ended June 20, 2020, special items included the impairment charge of our Embraer E190 fleet resulting from the decline in demand caused by the COVID-19 pandemic.

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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Operating Expense, Income before Taxes, Net Income and Earnings per Share, excluding special items~~

~~Our GAAP results in the applicable periods were impacted by charges that are deemed special items.~~ We believe the impacts of these items make our results difficult to compare to prior periods as well as future periods and guidance, and, as a result, we exclude these items from the calculation of certain adjusted results, which are non-GAAP financial measures. In 2020, special items include contra-expenses recognized on the utilization of payroll support grants received under the CARES Act and the impairment charge of our Embraer E190 fleet. Special items for the 2019 include one-time costs related to the Embraer E190 fleet transition as well as one-time costs related to the implementation of our pilots' collective bargaining agreement. We believe the impactsimpact of these items distort our overall trends and that our metrics ~~and results~~ are ~~enhanced~~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~~impact of these items.

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE, INCOME BEFORE TAXES, NET INCOME AND EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS
Three Months Ended June 30, Six Months Ended June 30,
(in millions except per share amounts) 2020
2019 2020 2019
Total operating revenues $ 215
$ 2,105
$ 1,803
$ 3,977

Total operating expenses $ 625
$ 1,855
$ 2,547
$ 3,652
Less: Special items (304 ) 2
(102 )
14
Total operating expenses excluding special items $ 929
$ 1,853
$ 2,649
$ 3,638

Operating (loss) income $ (410 ) $ 250
$ (744 ) $ 325
Add back: Special items (304 )
2
(102 ) 14
Operating (loss) income excluding special items $ (714 ) $ 252
$ (846 ) $ 339

Operating margin excluding special items (332.6 )% 12.0 % (46.9 )% 8.5 %

(Loss) income before income taxes $ (450 ) $ 236
$ (804 ) $ 294
Add back: Special items (304 ) 2
(102 ) 14
(Loss) income before income taxes excluding special items $ (754 ) $ 238
$ (906 ) $ 308

Pre-tax margin excluding special items (351.0 )% 11.3 % (50.2 )% 7.8 %

Net (loss) income $ (320 ) $ 179
$ (588 ) $ 221
Add back: Special items (304 ) 2
(102 ) 14
Less: Income tax (expense) benefit related to special items (76 ) 1
(26 ) 3
Net (loss) income excluding special items $ (548 ) $ 180
$ (664 ) $ 232

(Loss) Earnings Per Common Share:
Basic $ (1.18 ) $ 0.60
$ (2.14 ) $ 0.73
Add back: Special items, net of tax (0.84 ) —
(0.28 ) 0.03
Basic excluding special items $ (2.02 ) $ 0.60
$ (2.42 ) $ 0.76

Diluted $ (1.18 ) $ 0.59
$ (2.14 ) $ 0.73
Add back: Special items, net of tax (0.84 ) 0.01
(0.28 ) 0.03
Diluted excluding special items $ (2.02 ) $ 0.60
$ (2.42 ) $ 0.76


NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE, LOSS BEFORE TAXES, NET LOSS AND LOSS PER SHARE EXCLUDING SPECIAL ITEMS
	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except per share amounts)	2021			2020			2021			2020
Total operating revenues	$	1,499		$	215		$	2,232		$	1,803

Total operating expenses	$	1,352		$	625		$	2,379		$	2,547
Less: Special items	(366)			(304)			(655)			(102)
Total operating expenses excluding special items	$	1,718		$	929		$	3,034		$	2,649

Operating income (loss)	$	147		$	(410)		$	(147)		$	(744)
Add back: Special items	(366)			(304)			(655)			(102)
Operating loss excluding special items	$	(219)		$	(714)		$	(802)		$	(846)

Operating margin excluding special items	(14.6)		%	(332.6)		%	(35.9)		%	(46.9)		%

Income (loss) before income taxes	$	57		$	(450)		$	(290)		$	(804)
Add back: Special items	(366)			(304)			(655)			(102)
Loss before income taxes excluding special items	$	(309)		$	(754)		$	(945)		$	(906)

Pre-tax margin excluding special items	(20.6)		%	(351.0)		%	(42.3)		%	(50.2)		%

Net income (loss)	$	64		$	(320)		$	(183)		$	(588)
Add back: Special items	(366)			(304)			(655)			(102)
Less: Income tax (expense) benefit related to special items	(96)			(76)			(173)			(26)
Net loss excluding special items	$	(206)		$	(548)		$	(665)		$	(664)

Earnings Per Common Share:
Basic	$	0.20		$	(1.18)		$	(0.58)		$	(2.14)
Add back: Special items, net of tax	(0.85)			(0.84)			(1.52)			(0.28)
Basic excluding special items	$	(0.65)		$	(2.02)		$	(2.10)		$	(2.42)

Diluted	$	0.20		$	(1.18)		$	(0.58)		$	(2.14)
Add back: Special items, net of tax	(0.85)			(0.84)			(1.52)			(0.28)
Diluted excluding special items and gain on equity method investments	$	(0.65)		$	(2.02)		$	(2.10)		$	(2.42)

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PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Free Cash Flow

The table below reconciles cash provided by operations determined in accordance with GAAP to Free Cash Flow, a non-GAAP financial measure. Management believes that Free Cash Flow is a relevant metric in measuring our financial strength and is useful to investors 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 GAAP.


NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF FREE CASH FLOW
	Six Months Ended June 30,
(in millions)	2021		2020
Net cash provided by operating activities	$	1,658	$	223
Less: Capital expenditures	(524)		(377)
Less: Predelivery deposits for flight equipment	(16)		(57)
Free Cash Flow	$	1,118	$	(211)

NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF FREE CASH FLOW
Six Months Ended June 30,
(in millions) 2020 2019
Net cash provided by operating activities $ 223
$ 968
Less: Capital expenditures (377 ) (328 )
Less: Predelivery deposits for flight equipment (57 ) (142 )
Free Cash Flow $ (211 ) $ 498

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PART I. FINANCIAL INFORMATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Except as described below, there have been no material changes in market risks from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in our ~~2019~~2020 Form 10-K.

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 June 30, ~~2020~~2021 cost per gallon of fuel. Based on projected fuel consumption for the next 12 months, including the impact of our hedging position, such an increase would result in an increase to aircraft fuel expense of approximately ~~$71 million.~~$166 million. As of June 30, ~~2020,~~2021, we had not hedged ~~approximately 20%~~any of our projected fuel requirement for the remainder of 2021.~~2020. All hedge contracts existing at~~ ~~June 30, 2020~~ ~~settle by December 31, 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. Refer to Note 8 to our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information.

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 ~~$2.4~~$3.9 billion of our debt and finance lease obligations, with the remaining ~~$2.4~~$0.2 billion having floating interest rates. As of June 30, ~~2020,~~2021, if interest rates were on average 100 basis points higher in ~~2020,~~2021, our annual interest expense would increase by ~~approximately $25 million.~~an insignificant amount. This amount is determined by considering the impact of the hypothetical change in interest rates on our variable rate debt.

If interest rates were to average 100 basis points lower in ~~2020~~2021 than they were during ~~2019,~~2020, our interest income from cash and investment balances would decrease by approximately ~~$4 million.~~and insignificant amount. This amount is determined by considering the impact of the hypothetical change in interest rates on the balances of our ~~cash and cash equivalents~~money market funds and short-term, interest-bearing investment ~~securities balances~~ for the trailing twelve month period.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 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 June 30, ~~2020~~.2021. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, ~~2020~~.2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our controls performed during the quarter ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. 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.~~business. Refer to Note 76 to our condensed ~~consolidated~~consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

ITEM 1A. RISK FACTORS

Part I, Item 1A "Risk Factors" of our ~~2019~~2020 Form 10-K, includes a discussion of our risk factors which are incorporated herein. ~~The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Form 10-K. Except as presented below, there~~There have been no material changes from the risk factors associated with our business previously disclosed in our Form 10-K.

The global pandemic resulting from a novel strain of coronavirus has had an adverse impact that has been material to the Company's business, operating results, financial condition and liquidity, and the duration and spread of the pandemic could result in additional adverse impacts. The outbreak of another disease or similar public health threat in the future could also have an adverse effect on the Company's business, operating results, financial condition and liquidity.

A novel strain of coronavirus ("COVID-19"), which was first reported in December 2019, was declared a "Public Health Emergency of International Concern" by the World Health Organization (the "WHO"). On March 13, 2020, the U.S. government declared a national emergency and the U.S. Department of State subsequently issued a global Level 4 "do not travel" advisory advising U.S. citizens to avoid all international travel due to the global impact of COVID-19. The U.S. government has also implemented enhanced screenings, mandatory 14-day quarantine requirements and other travel restrictions in connection with the COVID-19 pandemic, including restrictions on travel from international locations, and many foreign and U.S. state governments instituted similar measures and declared states of emergency.

In the United States and other locations around the world, public events, such as conferences, sporting events, and concerts, have been canceled, attractions, including theme parks and museums, have been closed, cruise lines have suspended operations, and schools and businesses are operating with remote attendance, among other actions.

Other governmental restrictions and regulations that may be implemented in the future in response to COVID-19 could include additional travel restrictions (including expanded restrictions on domestic air travel within the United States), quarantines of additional populations (including our personnel), and restrictions on our ability to access our facilities or aircraft or requirements to collect additional passenger data. In addition, governments, non-governmental organizations, and entities in the private sector have issued and may continue to issue non-binding advisories or recommendations regarding air travel or other physical distancing measures, including limitations on the number of persons that should be present at public gatherings. These restrictions and regulations have had, and will continue to have a material adverse impact on our business, operating results, financial condition, and liquidity.

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 in the first half of 2020, resulting in a net loss of $588 million for the six months ended June 30, 2020. The Company expects its results of operations for full-year 2020 to be materially impacted. For planning purposes, the Company has assumed that demand will remain depressed for the remainder of 2020. In response to decreased demand, the Company reduced scheduled capacity, relative to 2019, by approximately 85% for the second quarter of 2020, with at least a 45% reduction expected for the third quarter of 2020. The Company plans to proactively manage capacity until there are meaningful signs of a recovery in demand. 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.

In addition to the schedule reductions discussed above, the Company has reduced its planned capital expenditures and reduced operating expenditures for the remainder of 2020 (including by postponing projects deemed non-critical to the Company's operations), 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, executed a number of aircraft sale-leaseback transactions, and temporarily grounded certain of its fleet.

The Company continues to focus on reducing expenses and managing its liquidity. The Company currently expects to lower its cash burn from an average of $18 million per day during the second half of March to an average of between $7 million and $9 million per day in the third quarter of 2020. For this purpose, "cash burn" is defined as net cash revenues, less cash operating costs, capital expenditures, and debt payments. Proceeds from the issuance of new debt (excluding expected

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aircraft financing), government grants associated with the Payroll Support Program of the CARES Act (defined below) are not included in this figure. We expect to continue to modify our cost management structure, liquidity-raising efforts and capacity as the timing of demand recovery becomes more certain.

On April 23, 2020, we entered into a Payroll Support Program Agreement (the "PSP Agreement") under the CARES Act 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 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 requirement against 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. The Company also expects to have the ability if approved, through September 30, 2020, to borrow up to approximately $1.1 billion from the U.S. Treasury Department for a term of up to five years pursuant to the Loan Program under the CARES Act. The grants and/or loans under the CARES Act will subject the Company and its business to certain restrictions, including, but not limited to, restrictions on the payment of dividends and the ability to repurchase JetBlue's equity securities, requirements to maintain certain levels of scheduled service, requirements to maintain employment levels through September 30, 2020, requirements to issue warrants for JetBlue common stock to Treasury and certain limitations on executive compensation. The substance and duration of these restrictions will materially affect the Company's operations, and the Company may not be successful in managing these impacts. 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.

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 could be conducted in the near term, 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, and financial condition.

The full extent of the ongoing impact of COVID-19 on the Company's longer-term operational and financial performance will depend on future developments, many of which are outside of our control, including the effectiveness of the mitigation strategies discussed above, the duration and spread of COVID-19 and related travel advisories and restrictions, the impact of COVID-19 on overall long-term demand for air travel, the impact of COVID-19 on the financial health and operations of the Company's business partners and future governmental actions, all of which are highly uncertain and cannot be predicted. The COVID-19 pandemic has had a material impact on the Company, and the continuation of reduced demand could have a material adverse effect on the Company's business, operating results, financial condition, and liquidity.

In addition, an outbreak of another disease or similar public health threat, or fear of such an event, that affects travel demand, travel behavior or travel restrictions could have a material adverse impact on the Company's business, financial condition and operating results. Outbreaks of other diseases could also result in increased government restrictions and regulation, such as those actions described above or otherwise, which could adversely affect our operations.

Even after the COVID-19 pandemic has moderated and the enhanced screenings, quarantine requirements, and travel restrictions have eased, we may continue to experience similar adverse effects to our businesses, consolidated results of operations, financial position and cash flows resulting from a recessionary economic environment that may persist. The impact that the COVID-19 pandemic will have on our businesses, consolidated results of operations, financial position and cash flows could exacerbate the risks identified in “Item 1A. Risk Factors” in our Annual Report on Form 10-K.

~~We are subject to certain restrictions on our business as a result of our participation in governmental programs under the CARES Act.~~

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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 requirement against 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. The substance and duration of these restrictions will materially affect the Company's operations, and the Company may not be successful in managing these impacts. 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.

The Company also expects to have the ability if approved, through September 30, 2020, to borrow up to approximately $1.1 billion from the U.S. Treasury Department for a term of up to five years pursuant to the Loan Program under the CARES Act. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company, with collateral to be determined. If we accept the full amount of the loan, we will issue warrants to purchase approximately 12.0 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. We have entered into a non-binding letter of intent with the Treasury for the Loan Program but have not yet decided if we will participate. Any loans under the CARES Act will subject the Company and its business to the restrictions described above.

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 lease and debt financings, leases of airport property, secured loan facilities and other facilities, and other material cash obligations. In addition, the Company has substantial noncancelable 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 currently intends to 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. 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. In addition, the Company has received $936 million of funding under 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 discussed in the Company's 2019 Form 10-K, as updated by this report, including risks related to future results arising from the COVID-19 pandemic. 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 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 covenants and provisions 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

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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 anticipate this will continue to be the case for the near 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 I, Item 2. 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 June 30, 2020.

COVID-19 has materially disrupted our strategic operating plans in the near-term, and there are risks to our business, operating results and financial condition associated with executing our strategic operating plans in the long-term. In recent years, we have announced several strategic operating plans, including several revenue-generating initiatives and plans to optimize our 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. In 2020, demand has been, and is expected to continue to be, significantly impacted by COVID-19, which has materially disrupted the timely 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.

The Company may never realize the full value of its intangible assets or its long-lived assets causing it to record impairments that may 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 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, in the first quarter of 2020, the Company recorded impairment charges of $202 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.

~~Table of Contents~~

~~PART II. OTHER INFORMATION~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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 for repurchases in open market transactions pursuant to Rules 10b-18 and/or 10b5-1 of the Exchange Act, and/or one or more privately-negotiated accelerated stock repurchase transactions. The timing, price, and volume of any repurchases will be based on market conditions and other relevant factors. In accordance with the ~~PSP~~Payroll Support Program Agreement, the Payroll Support Program Extension Agreement, and the Loan Agreement with the Treasury, we are prohibited from making any share ~~repurchases.~~repurchases through September 30, 2022. We have ~~accordingly~~ suspended our share repurchase ~~program. No shares were repurchased during~~program as of March 31, 2020. The acquisition of treasury stock reflected on our condensed consolidated statement of cash flows for the three months ended June 30, ~~2020.~~2021 represents the return of shares to satisfy tax payments associated with crewmember stock compensation that vested during the period.

In consideration for the Payroll Support ~~Payment, on April 23, 2020,~~2 Payments, during the six months ended June 30, 2021 we issued warrants to purchase approximately ~~2.6~~$1 million shares of common stock to the Treasury at an exercise price of ~~$9.50~~$14.43 per share. In consideration for the Payroll Support 3 Payments, during the six months ended June 30, 2021 we issued warrants to purchase approximately $0.7 million shares of common stock to the Treasury at an exercise price of $19.90 per share. See Note 23 to our condensed consolidated financial statements.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See accompanying Exhibit Index included after the signature page of this Report for a list of the exhibits filed or furnished with this Report.

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EXHIBIT INDEX



Exhibit Number		Exhibit
~~3.1~~4.1*		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of JetBlue Airways Corporation—incorporated by reference to Exhibit 3.1 to our Current Report on From 8-K dated May 14, 2020 and filed on May 20, 2020
~~3.2~~	~~Amended and Restated Bylaws of JetBlue Airways Corporation as of May 14, 2020—incorporated by reference to Exhibit 3.2 to our Current Report on From 8-K dated May 14, 2020 and filed on May 20, 2020~~
~~3.3.~~	Amended and Restated Bylaws of JetBlue Airways Corporation as of May 14, 2020 (marked)—incorporated by reference to Exhibit 3.3 to our Current Report on From 8-K dated May 14, 2020 and filed on May 20, 2020
~~4.1~~	Warrant Agreement, dated as of ~~April 23, 2020,~~May 6, 2021, between JetBlue Airways Corporation and the United States Department of the ~~Treasury—incorporated by reference to Exhibit 4.1 to our Quarterly Report on From 10-Q for the quarter ended March 31, 2020~~Treasury
~~4.2~~4.2*		Form of Warrant ~~(incorporated by reference to~~(included as Annex B to Exhibit 4.1)~~—incorporated by reference to Exhibit 4.2 to our Quarterly Report on From 10-Q for the quarter ended March 31, 2020~~
~~10.1~~10.1*		Payroll Support Program 3 Agreement, dated as of ~~April 23, 2020,~~May 6, 2021, between JetBlue Airways Corporation and the United States Department of the ~~Treasury—incorporated by reference to Exhibit 10.3 to our Quarterly Report on From 10-Q for the quarter ended March 31, 2020~~Treasury
~~10.2~~10.2*		Promissory Note, dated as of ~~April 23, 2020,~~May 6, 2021 issued by JetBlue Airways Corporation in the name of the United States Department of the ~~Treasury—~~Treasury
10.3		Offer Letter between Ursula Hurley and JetBlue Airways Corporation, dated June 15, 2021—incorporated by reference to Exhibit 10.1 to our current report on Form 8-K dated May 11, 2021 and filed on June 21, 2021.
10.4		Form of Performance-Contingent Executive Retention Award Agreement—incorporated by reference to Exhibit 10.4 to our Quarterly Report on ~~From~~Form 10-Q for the quarter ended March 31, ~~2020~~2021.
~~10.3~~10.5*		~~Term Loan Credit Agreement~~JetBlue Executive Retention Award - Ursula Hurley dated as of June 17, 2020 among JetBlue Airways Corporation, as Borrower, the subsidiaries of the Borrower party hereto, as Guarantors, the Lenders party hereto, and Barclays Bank PLC, as Administrative Agent—incorporated by reference to Exhibit 10.1 to our Current Report on From 8-K dated June 17, 2020February 12, 2021
10.4**10.6		~~Amendment No. 14 to Airbus Family Purchase Agreement,~~JetBlue Executive Retention Award - Ursula Hurley dated ~~as of May 4, 2020, between Airbus S.A.S. and JetBlue Airways Corporation~~April 12, 2021
~~10.5†~~10.7*		~~JetBlue Airways Corporation 2020~~Form of Performance Share Unit Award Agreement (2020 Omnibus ~~Equity~~ Incentive ~~Plan—incorporated by reference to Exhibit 10.31 to our Current Report on From 8-K dated May 14, 2020 and filed on May 20, 2020~~Plan)
~~10.6†~~10.8*		~~JetBlue Airways Corporation 2020 Crewmember Stock Purchase Plan—incorporated by reference to Exhibit 10.35 to our Current Report on From 8-K dated May 14, 2020 and filed on May 20, 2020~~Form of RSU Award Agreement for Non-Employee Directors (2020 Omnibus Incentive Plan)
31.110.9		Form of RSU Award Agreement, Crewmembers (2020 Omnibus Incentive Plan)
10.10*		Form of Deferred Stock Unit Award Agreement (2020 Omnibus Incentive Plan)
31.1*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
31.2*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32**		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
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)
†		~~Compensatory plans in which directors and executive officers of JetBlue participate.~~
*		~~Filed herewith.~~
**		~~Furnished~~Filed herewith.
***		Certain confidential information contained in this exhibit, marked by [***], has been omitted because it (i) is not material and (ii) would likely cause competitive harm to the Company if it were to be publicly disclosed.Furnished herewith.

5145

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SIGNATURE

Pursuant to the requirements 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:

July ~~31, 2020~~30, 2021

By:

/s/ Alexander Chatkewitz

Vice President, Controller, and

Chief Accounting Officer

(Principal Accounting Officer)

5246



Balance at December 31, 2019	$	661
TrueBlue^® points redeemed	(129		)
TrueBlue^® points earned and sold	144
Balance at June 30, 2020	$	676

Balance at December 31, 2018	$	580
TrueBlue^® points redeemed	(184		)
TrueBlue^® points earned and sold	221
Balance at June 30, 2019	$	617



	Aircraft Fuel Derivatives⁽¹⁾⁽²⁾			Total
Balance of accumulated (loss), at March 31, 2020	$	(6	)	$	(6	)
Reclassifications into earnings, net of deferred taxes of $(1)	3			3
Change in fair value, net of deferred taxes of $0	—			—
Balance of accumulated (loss), at June 30, 2020	$	(3	)	$	(3	)

Balance of accumulated (loss), at March 31, 2019	$	(1	)	$	(1	)
Reclassifications into earnings, net of deferred taxes of $(1)	1			1
Change in fair value, net of deferred taxes of $0	1			1
Balance of accumulated income, at June 30, 2019	$	1		$	1



NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE, INCOME BEFORE TAXES, NET INCOME AND EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS
	Three Months Ended June 30,						Six Months Ended June 30,
(in millions except per share amounts)	2020			2019			2020			2019
Total operating revenues	$	215		$	2,105		$	1,803		$	3,977

Total operating expenses	$	625		$	1,855		$	2,547		$	3,652
Less: Special items	(304		)	2			(102		)	14
Total operating expenses excluding special items	$	929		$	1,853		$	2,649		$	3,638

Operating (loss) income	$	(410	)	$	250		$	(744	)	$	325
Add back: Special items	(304		)	2			(102		)	14
Operating (loss) income excluding special items	$	(714	)	$	252		$	(846	)	$	339

Operating margin excluding special items	(332.6		)%	12.0		%	(46.9		)%	8.5		%

(Loss) income before income taxes	$	(450	)	$	236		$	(804	)	$	294
Add back: Special items	(304		)	2			(102		)	14
(Loss) income before income taxes excluding special items	$	(754	)	$	238		$	(906	)	$	308

Pre-tax margin excluding special items	(351.0		)%	11.3		%	(50.2		)%	7.8		%

Net (loss) income	$	(320	)	$	179		$	(588	)	$	221
Add back: Special items	(304		)	2			(102		)	14
Less: Income tax (expense) benefit related to special items	(76		)	1			(26		)	3
Net (loss) income excluding special items	$	(548	)	$	180		$	(664	)	$	232

(Loss) Earnings Per Common Share:
Basic	$	(1.18	)	$	0.60		$	(2.14	)	$	0.73
Add back: Special items, net of tax	(0.84		)	—			(0.28		)	0.03
Basic excluding special items	$	(2.02	)	$	0.60		$	(2.42	)	$	0.76

Diluted	$	(1.18	)	$	0.59		$	(2.14	)	$	0.73
Add back: Special items, net of tax	(0.84		)	0.01			(0.28		)	0.03
Diluted excluding special items	$	(2.02	)	$	0.60		$	(2.42	)	$	0.76