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Table of Contents

 
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 September 30, 2020
or
    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
jetbluelogoa15.jpg
JETBLUE AIRWAYS 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) 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 September 30, 2020, there were 272,483,649 shares outstanding of the registrant’s common stock, par value $0.01.
 


Table of Contents

JETBLUE AIRWAYS CORPORATION
FORM 10-Q
INDEX
 
Page
PART I. FINANCIAL INFORMATION
 
 
 
PART II. OTHER INFORMATION
 



2

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except per share data)



 
September 30, 2020
 
December 31, 2019
ASSETS
 
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
2,453

 
$
959

Investment securities
566

 
369

Receivables, less allowance (2020-$2; 2019-$1)
91

 
231

Inventories, less allowance (2020-$26; 2019-$22)
70

 
81

Prepaid expenses and other
275

 
146

Total current assets
3,455

 
1,786

PROPERTY AND EQUIPMENT
 
 
 
Flight equipment
10,103

 
10,332

Predelivery deposits for flight equipment
441

 
433

Total flight equipment and predelivery deposits, gross
10,544

 
10,765

Less accumulated depreciation
2,799

 
2,768

Total flight equipment and predelivery deposits, net
7,745

 
7,997

Other property and equipment
1,210

 
1,145

Less accumulated depreciation
580

 
528

Total other property and equipment, net
630

 
617

Total property and equipment, net
8,375

 
8,614

OPERATING LEASE ASSETS
833

 
912

OTHER ASSETS
 
 
 
Investment securities
3

 
3

Restricted cash
52

 
59

Other
715

 
544

Total other assets
770

 
606

TOTAL ASSETS
$
13,433

 
$
11,918

 

See accompanying notes to condensed consolidated financial statements.
3

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except per share data)

 
September 30, 2020
 
December 31, 2019
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES
 
 
 
Accounts payable
$
407

 
$
401

Air traffic liability
1,253

 
1,119

Accrued salaries, wages and benefits
391

 
376

Other accrued liabilities
244

 
295

Current operating lease liabilities
113

 
128

Current maturities of long-term debt and finance lease obligations
400

 
344

Total current liabilities
2,808

 
2,663

LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS
4,439

 
1,990

LONG-TERM OPERATING LEASE LIABILITIES
782

 
690

DEFERRED TAXES AND OTHER LIABILITIES
 
 
 
Deferred income taxes
1,092

 
1,251

Air traffic liability - loyalty non-current
512

 
481

Other
83

 
44

Total deferred taxes and other liabilities
1,687

 
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, 431 and 427 shares issued and 273 and 282 shares outstanding at September 30, 2020 and December 31, 2019, respectively
4

 
4

Treasury stock, at cost; 158 and 145 shares at September 30, 2020 and December 31, 2019, respectively
(1,981
)
 
(1,782
)
Additional paid-in capital
2,355

 
2,253

Retained earnings
3,341

 
4,322

Accumulated other comprehensive (loss) income
(2
)
 
2

Total stockholders’ equity
3,717

 
4,799

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
13,433

 
$
11,918




See accompanying notes to condensed consolidated financial statements.
4

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 September 30,
 
Nine Months Ended September 30,
 
2020

2019
 
2020
 
2019
OPERATING REVENUES
 
 
 
 
 
 
 
Passenger
$
445

 
$
2,005

 
$
2,126

 
$
5,838

Other
47

 
81

 
169

 
225

Total operating revenues
492

 
2,086

 
2,295

 
6,063

OPERATING EXPENSES
 
 
 
 
 
 
 
Aircraft fuel and related taxes
102

 
471

 
496

 
1,392

Salaries, wages and benefits
482

 
580

 
1,560

 
1,731

Landing fees and other rents
84

 
125

 
258

 
362

Depreciation and amortization
127

 
134

 
407

 
385

Aircraft rent
23

 
26

 
60

 
76

Sales and marketing
24

 
74

 
84

 
215

Maintenance, materials and repairs
111

 
158

 
344

 
482

Other operating expenses
167

 
271

 
560

 
833

Special items
(112
)
 

 
(214
)
 
14

Total operating expenses
1,008

 
1,839

 
3,555

 
5,490

OPERATING (LOSS) INCOME
(516
)
 
247

 
(1,260
)
 
573

OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
Interest expense
(56
)
 
(18
)
 
(121
)
 
(57
)
Capitalized interest
3

 
4

 
10

 
10

Gain on equity method investments

 
15

 

 
15

Interest income and other
(9
)
 
6

 
(10
)
 
7

Total other income (expense)
(62
)
 
7

 
(121
)
 
(25
)
(LOSS) INCOME BEFORE INCOME TAXES
(578
)
 
254

 
(1,381
)
 
548

Income tax (benefit) expense
(185
)
 
67

 
(400
)
 
140

NET (LOSS) INCOME
$
(393
)
 
$
187

 
$
(981
)
 
$
408

 
 
 
 
 
 
 
 
(LOSS) EARNINGS PER COMMON SHARE:
 
 
 
 
 
 
 
Basic
$
(1.44
)
 
$
0.63

 
$
(3.58
)
 
$
1.36

Diluted
$
(1.44
)
 
$
0.63

 
$
(3.58
)
 
$
1.35




See accompanying notes to condensed consolidated financial statements.
5

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in millions)

 
Three Months Ended September 30,
 
2020

2019
NET (LOSS) INCOME
$
(393
)
 
$
187

Changes in fair value of derivative instruments, net of reclassifications into earnings, net of deferred taxes of $(1) and $0 in 2020 and 2019, respectively
1

 
(2
)
Total other comprehensive income (loss)
1

 
(2
)
COMPREHENSIVE (LOSS) INCOME
$
(392
)
 
$
185

 
 
 
 
 
Nine Months Ended September 30,
 
2020
 
2019
NET (LOSS) INCOME
$
(981
)
 
$
408

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
(4
)
 
2

Total other comprehensive (loss) income
(4
)
 
2

COMPREHENSIVE (LOSS) INCOME
$
(985
)
 
$
410


                                                                                                                                                                                                           

See accompanying notes to condensed consolidated financial statements.
6

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)

 
Nine Months Ended September 30,
 
2020

2019
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net (loss) income
$
(981
)
 
$
408

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Deferred income taxes
(351
)
 
87

Impairment of long-lived assets
258

 

Depreciation
374

 
349

Amortization
33

 
36

Stock-based compensation
20

 
24

Gain on equity method investments

 
(15
)
Changes in certain operating assets and liabilities
242

 
314

Deferred CARES Act grant
49

 

Losses on sale-leaseback transactions
106

 

Other, net
27

 
(5
)
Net cash (used in) provided by operating activities
(223
)
 
1,198

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(529
)
 
(505
)
Predelivery deposits for flight equipment
(67
)
 
(172
)
Purchase of held-to-maturity investments

 
(353
)
Proceeds from the maturities of held-to-maturity investments
21

 
495

Purchase of available-for-sale securities
(1,162
)
 
(761
)
Proceeds from the sale of available-for-sale securities
944

 
730

Proceeds from sale-leaseback transactions
209

 

Other, net
(1
)
 
(11
)
Net cash (used in) investing activities
(585
)
 
(577
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term debt
2,541

 
218

Proceeds from short-term borrowings
981

 

Proceeds from sale-leaseback transactions
236

 

Proceeds from issuance of common stock
22

 
27

Proceeds from issuance of stock warrants
28

 

Repayment of long-term debt and finance lease obligations
(272
)
 
(258
)
Repayment of short-term borrowings
(1,000
)
 

Acquisition of treasury stock
(167
)
 
(381
)
Other, net

 
(3
)
Net cash provided by (used in) financing activities
2,369

 
(397
)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
1,561

 
224

Cash, cash equivalents and restricted cash at beginning of period
1,018

 
533

Cash, cash equivalents and restricted cash at end of period(1)
$
2,579

 
$
757

 
 
 
 

See accompanying notes to condensed consolidated financial statements.
7

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)

 
Nine Months Ended September 30,
 
2020

2019
SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
Cash payments for interest (net of amount capitalized)
$
37

 
$
50

Cash payments for income taxes (net of refunds)

 
(54
)
NON-CASH TRANSACTONS
 
 
 
Right-of-use assets acquired under operating leases
$
144

 
$
6

 
 
 
 
(1) Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:
 
September 30, 2020
 
September 30, 2019
Cash and cash equivalents
$
2,453

 
$
695

Short-term restricted cash recorded within prepaid expenses and other
74

 

Restricted cash
52

 
62

Total cash, cash equivalents and restricted cash
$
2,579

 
$
757

 
 
 
 

See accompanying notes to condensed consolidated financial statements.
8

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 (Loss)
 
Total
Balance at June 30, 2020
 
430

 
$
4

 
158

 
$
(1,981
)
 
$
2,340

 
$
3,734

 
$
(3
)
 
$
4,094

Net (loss)
 

 

 

 

 

 
(393
)
 

 
(393
)
Other comprehensive income
 

 

 

 

 

 

 
1

 
1

Vesting of restricted stock units
 
1

 

 

 

 

 

 

 

Stock compensation expense
 

 

 

 

 
5

 

 

 
5

CARES Act warrant issuance
 

 

 

 

 
10

 

 

 
10

Balance at September 30, 2020
 
431

 
$
4

 
158

 
$
(1,981
)
 
$
2,355

 
$
3,341

 
$
(2
)
 
$
3,717

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common
Shares
 
Common
Stock
 
Treasury
Shares
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Balance at June 30, 2019
 
425

 
$
4

 
129

 
$
(1,503
)
 
$
2,221

 
$
3,974

 
$
1

 
$
4,697

Net income
 

 

 

 

 

 
187

 

 
187

Other comprehensive (loss)
 

 

 

 

 

 

 
(2
)
 
(2
)
Vesting of restricted stock units
 

 

 

 

 

 

 

 

Stock compensation expense
 

 

 

 

 
7

 

 

 
7

Shares repurchased
 

 

 
8

 
(125
)
 

 

 

 
(125
)
Balance at September 30, 2019
 
425

 
$
4

 
137

 
$
(1,628
)
 
$
2,228

 
$
4,161

 
$
(1
)
 
$
4,764

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 

 

 

 

 

 
(981
)
 

 
(981
)
Other comprehensive (loss)
 

 

 

 

 

 

 
(4
)
 
(4
)
Vesting of restricted stock units
 
2

 

 

 
(7
)
 

 

 

 
(7
)
Stock compensation expense
 

 

 

 

 
20

 

 

 
20

Stock issued under Crewmember stock purchase plan
 
2

 

 

 

 
22

 

 

 
22

Shares repurchased
 

 

 
13

 
(192
)
 
32

 

 

 
(160
)
CARES Act warrant issuance
 

 

 

 

 
28

 

 

 
28

Balance at September 30, 2020
 
431

 
$
4

 
158

 
$
(1,981
)
 
$
2,355

 
$
3,341

 
$
(2
)
 
$
3,717

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 

 

 

 

 

 
408

 

 
408

Other comprehensive income
 

 

 

 

 

 

 
2

 
2

Vesting of restricted stock units
 
1

 

 
1

 
(6
)
 

 

 

 
(6
)
Stock compensation expense
 

 

 

 

 
24

 

 

 
24

Stock issued under Crewmember stock purchase plan
 
2

 

 

 

 
26

 

 

 
26

Shares repurchased
 

 

 
20

 
(350
)
 
(25
)
 

 

 
(375
)
Balance at September 30, 2019
 
425

 
$
4

 
137

 
$
(1,628
)
 
$
2,228

 
$
4,161

 
$
(1
)
 
$
4,764


See accompanying notes to condensed consolidated financial statements.
9

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 audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, or our 2019 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.
Held-to-maturity investment securities. We did not have any held-to-maturity investments as of September 30, 2020. We did not record any significant gains or losses on these securities during the three and nine months ended September 30, 2020 or 2019. The estimated fair value of these investments approximated their carrying value as of December 31, 2019.
The aggregate carrying values of our short-term and long-term investment securities consisted of the following at September 30, 2020 and December 31, 2019 (in millions):
 
September 30, 2020
 
December 31, 2019
Available-for-sale securities
 
 
 
Time deposits
$
561

 
$
325

Commercial paper

 
20

Debt securities
8

 
6

Total available-for-sale securities
569

 
351

Held-to-maturity securities
 
 
 
Corporate bonds

 
21

Total held-to-maturity securities

 
21

Total investment securities
$
569

 
$
372


Other Investments
Our wholly-owned subsidiary, JetBlue Technology Ventures, LLC, or JTV, has equity investments in emerging companies which do not have readily determinable fair values. In accordance with Accounting Standards Update ("ASU") 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, we account for these investments using a measurement alternative which allows entities to measure these investments at cost, less any impairment, adjusted for changes from observable price changes in orderly transactions for identifiable or similar investments of the same issuer. The carrying amount of these investments was $40 million and $41 million as of September 30, 2020 and December 31, 2019, respectively.



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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 September 30, 2020 and December 31, 2019, respectively.
 
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 Accounting Standards Codification ("Codification"). The carrying amount of our equity method investments was $35 million and $38 million as of September 30, 2020 and December 31, 2019, respectively, and is included within other assets on our consolidated balance sheets.

Recently Issued Accounting Standards  
New accounting rules and disclosure requirements can impact our financial results and the comparability of our financial statements. The authoritative literature which has recently been issued and that we believe will impact our consolidated financial statements is described below. There are also several new proposals under development. If and when enacted, these proposals may have a significant impact on our financial statements.
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 as of January 1, 2020 using a modified retrospective transition approach. The adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update eliminates, adds, and modifies certain disclosure requirements for fair value measurements. We adopted the requirements of ASU 2018-13 as of January 1, 2020. The adoption of ASU 2018-13 did not have a significant impact on our consolidated financial statement disclosures.


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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 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 third quarter of 2020, our operating revenues were 76% lower than the same quarter of 2019. Although demand improved compared to the second quarter of 2020, it remains significantly lower than in prior years. The exact timing and pace of the recovery is uncertain given the significant impact of the pandemic on the overall U.S. and global economy. 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. We have also seen a similar resurgence of COVID-19 cases in other countries and we expect to see fluctuations in the number of cases, which we believe will result in actions by governmental authorities restricting activities. We expect the demand environment to remain depressed until an accepted treatment and/or vaccine for COVID-19 is widely available. Our response to the pandemic and the measures we take to secure additional liquidity may be modified as we have more clarity on the timing of demand recovery.
In response to 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 a priority. As the COVID-19 pandemic has developed, we have taken steps to promote physical distancing and implemented new procedures that reflect the recommendations of health experts, including some of the following:
Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses enhanced safety and cleaning measures on our flights, at our airports, and in our offices;
Instituted temperature checks for our customer-facing and support-center crewmembers;
Updated our sick leave policy to provide up to 14 days of paid sick leave for crewmembers who have been diagnosed with COVID-19 or are required to quarantine;
Implemented a framework for internal contact tracing, crewmember notification, and a return to work clearance process for all crewmembers, wherever they may be located;
Required face coverings for all crewmembers while boarding, in flight, and when physical distancing cannot be maintained;
Administered more frequent disinfecting of common surfaces and areas with high touchpoints in our facilities;
Enhanced daily and overnight cleaning of our aircraft and all facilities, using electrostatic spraying of disinfectant in the cabins of aircraft parked overnight at selected focus cities;
Required customers to wear face coverings during check-in, boarding, and inflight;
Limited the number of seats available to be sold on most flights; we plan to continue limiting the capacity on our flights to less than 70% through December 1, 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;


12

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Provided enhanced flexibility to our customers by waiving change and cancel fees for customers with existing bookings made through February 28, 2021, while also extending the expiration date of travel credits issued between February 27, 2020 and June 30, 2020 for flight purchases to 24 months; and
Announced our partnership with Vault Health to provide discounted at-home COVID-19 testing to customers with pending travel plans.
Our Business
The COVID-19 pandemic drove a significant decline in demand beginning in the second half of March 2020. We have significantly reduced our capacity to a level that maintains essential services to align with demand. Our capacity for the third quarter of 2020 declined by 58% year-over-year. For the fourth 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 a portion of our fleet.
The reductions in demand and in our capacity have resulted in a significant reduction to our revenue. As a result, we have, and will continue to implement cost saving initiatives to reduce our overall level of cash spend. Some of the initiatives we have undertaken include:
Adjustments in flying capacity to align with the expected demand.
Temporary consolidations of our operations in certain cities that contain multiple airport locations.
Renegotiated service rates with business partners and extended payment terms.
Instituted a company-wide hiring freeze.
Implemented salary reductions of 20% to 50% for our officers through September 30, 2020, and 10% to 20% in the fourth quarter of 2020.
Offered crewmembers voluntary time off and separation programs, with most departures for the separation program occurring during the third quarter.
At September 30, 2020, we had cash, cash equivalents, short-term investments, and short-term restricted cash of approximately $3.1 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 actions to increase liquidity, strengthen our financial position, and conserve cash. Some of the actions we have taken since the onset of the pandemic through September 30, 2020 include:
Executed a new $1.0 billion 364-day delayed draw term loan agreement in March 2020 and immediately drew down on the facility for the full amount available. This term loan facility was repaid during the third quarter.
Borrowed on our existing $550 million revolving credit facility in April 2020.
Executed a $150 million pre-purchase arrangement of TrueBlue® points with our co-brand credit card partner in April 2020.
Suspended non-critical capital expenditure projects.
Amended our purchase agreement with Airbus which changed the timing of our Airbus A321 and A220 deliveries in May 2020.
Suspended share repurchases.
Obtained $963 million of government funding under the Payroll Support Program of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is discussed further below.
Executed a $750 million term loan credit facility and immediately drew down on the facility for the full amount available in June 2020.
Entered into $445 million of sale-leaseback transactions; which is discussed further below.
Completed public placements of equipment notes in an aggregate principal amount of $923 million secured by 49 Airbus A321 aircraft in August 2020, which is discussed further in Note 4 to our condensed consolidated financial


13

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


statements. The net proceeds were primarily used to repay the outstanding borrowings under our 364-day delayed draw term loan facility that was due to be repaid in March 2021.
Entered into a Loan and Guarantee agreement with the United States Department of the Treasury ("Treasury") under the Loan Program of the CARES Act which gives us access to loans in an aggregate principal amount of up to $1.14 billion until March 26, 2021, which is discussed further below. We made a drawing of $115 million under the Loan Program on September 29, 2020.
As a result of these activities, we had $2.5 billion in unrestricted and short-term restricted cash as of September 30, 2020
In the second quarter of 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.
In the third quarter of 2020, we executed $327 million of sale-leaseback transactions. Of these transactions, $118 million did not qualify as sales for accounting purposes. The remaining $209 million qualified as sales and generated a loss of $106 million. The assets associated with sale-leaseback 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 condensed consolidated statements of cash flows.
In October 2020, we further amended our our purchase agreement with Airbus to defer several aircraft deliveries, resulting in approximately $2.0 billion of reduction in aircraft capital expenditures through 2022.
We also executed $59 million of sale-leaseback transactions in October 2020.
In November 2020, we entered into an agreement with the Treasury to increase our borrowing capacity under the Loan Program of the CARES Act to $1.95 billion.
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
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 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 $56 million and $258 million for the three and nine months ended September 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 value as of September 30, 2020. As the extent of the ongoing impact from the COVID-19 pandemic remains uncertain, we expect to update our assessment from time to time, 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


14

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


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 September 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 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").
On April 23, 2020, we entered into a Payroll Support Program Agreement (the "PSP Agreement") with the United States Department of the Treasury ("Treasury") governing our participation in the Payroll Support Program. Under the Payroll Support Program, Treasury provided us with a payment of $936 million (the "Payroll Support Payment"), consisting of $685 million in grants and $251 million in an unsecured term loan. The loan has a 10-year term and bears interest on the principal amount outstanding at an annual rate of 1.00% until April 23, 2025, and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% thereafter until April 23, 2030. The principal amount may be repaid at any time prior to maturity at par. In consideration for the Payroll Support Payment, we issued warrants to purchase approximately 2.6 million shares of our common stock to the Treasury at an exercise price of $9.50 per share. The warrants will expire five years after issuance, and will be exercisable either through net cash settlement or net share settlement, at JetBlue's option, in whole or in part at any time. In accordance with the PSP Agreement, we are required to comply with the relevant provisions of the CARES Act which, among other things, includes the following: the requirement to use the Payroll Support Payment exclusively for the continuation of payment of crewmember wages, salaries and benefits; the prohibition on involuntary furloughs and reductions in crewmember pay rates and benefits through September 30, 2020; the requirement that certain levels of commercial air service be maintained until March 1, 2022; the prohibitions on share repurchases and the payment of common stock dividends; and restrictions on the payment of certain executive compensation until March 24, 2022.
On September 30, 2020, Treasury provided us a payment of $27 million (the "Additional Payroll Support Payment"), consisting of $19 million in grants and $8 million in an unsecured term loan under the PSP Agreement. The terms of the unsecured term loan are identical to those under the initial loan issued on April 23, 2020. In consideration for the Additional Payroll Support Payment, we issued warrants to purchase approximately 85,540 additional shares of our common stock to the Treasury at an exercise price of $9.50 per share (the "Additional PSP Warrants"). The Additional PSP Warrants have the same terms and exercise price as the initial warrants issued on April 23, 2020 under the Payroll Support Program.
The total payroll support funding of $963 million received under the CARES Act was originally classified as short-term restricted cash since the funds had to be utilized to pay the salaries and benefits costs of our crewmembers. The funds 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 September 30, 2020, $74 million of payroll support 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 $19 million, was recorded within stockholder's equity and reduced the total carrying value of the grants to $685 million. As of September 30, 2020, the carrying value of the grants was $49 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 the loan 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 have the ability to borrow up to approximately $1.14 billion from the Treasury. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company. If we accept the full amount of the loan, we will issue warrants to purchase approximately 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.


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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


On September 29, 2020, we entered into a Loan and Guarantee Agreement (the "Loan Agreement") with the Treasury under the Loan Program of the CARES Act. Pursuant to the Loan Agreement, Treasury agreed to extend loans to us in an aggregate principal amount of up to $1.14 billion until March 26, 2021, subject to specified terms. Unless otherwise terminated early, all borrowings under the Loan Agreement are due and payable on the fifth anniversary of the initial borrowing date. We drew $115 million under the Loan Agreement on September 29, 2020. Borrowings under the Loan Agreement bear interest at a variable rate equal to LIBOR (or another rate based on certain market interest rates, plus a margin of 1% per annum, in each case with a floor of 0%), plus a margin of 2.75% per annum. Our obligations under the Loan Agreement are secured by liens on (i) certain eligible aircraft collateral, (ii) certain loyalty program assets, including JetBlue's rights in certain loyalty program agreements, loyalty program data and intellectual property, and (iii) certain cash accounts (collectively, the "Collateral"). Under the terms of the Loan Agreement, we may also pledge eligible spare parts, slots, gates and routes, and additional aircraft, real property, ground support equipment, flight simulators and equity interests. The Loan Agreement includes affirmative and negative covenants that restrict our ability to, among other things, dispose of Collateral, merge, consolidate or sell assets, incur certain additional indebtedness or pay certain dividends. In 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 Loan Agreement of not less than 1.6 to 1.0. If we do not meet the minimum collateral coverage ratio, we must either provide additional Collateral to secure our obligations under the Loan Agreement or repay the loans by an amount necessary to maintain compliance with the collateral coverage ratio. The Loan Agreement contains events of default customary for similar financings. Upon the occurrence of an event of default, the outstanding obligations under the Loan Agreement may be accelerated and become due and payable immediately. In addition, if certain change of control events were to occur with respect to JetBlue, we would be required to prepay the loans in full under the Loan Agreement.
In connection with the Loan Agreement, on September 29, 2020, we entered into a warrant agreement with Treasury, pursuant to which we agreed to issue to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share.
As previously discussed, we entered into an agreement with the Treasury to increase our borrowing capacity under the Loan Program of the CARES Act to $1.95 billion in November 2020.
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 $36 million in payments through September 30, 2020. We expect to defer approximately $13 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 related to anticipated refunds from tax losses generated during 2020 that are permitted to be carried back to certain years when the U.S. federal income tax rate was 35%. A benefit of $10 million was recorded in the quarter related to the release of a valuation allowance to adjust deferred tax assets to an amount we consider is more likely than not to be realized. Because realizability is dependent on future income, we plan to continue monitoring and updating our assessment and it is possible 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 nine months ended September 30, 2020 and 2019 (in millions):


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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2020
2019
 
2020
2019
Passenger revenue
 
 
 
 
 
Passenger travel
$
420

$
1,914

 
$
1,973

$
5,563

Loyalty revenue - air transportation
25

91

 
153

275

Other revenue
 
 
 
 
 
Loyalty revenue
38

54

 
127

146

Other revenue
9

27

 
42

79

Total revenue
$
492

$
2,086

 
$
2,295

$
6,063


TrueBlue® points earned from ticket purchases are presented as a reduction to Passenger travel within passenger revenue. Amounts presented in Loyalty revenue - air transportation represent the revenue recognized when TrueBlue® points have been redeemed and the travel has occurred.
Contract Liabilities
Our contract liabilities primarily consist of ticket sales for which transportation has not yet been provided, unused credits available to customers, and outstanding loyalty points available for redemption (in millions):
 
September 30, 2020
 
December 31, 2019
Air traffic liability - passenger travel
$
1,020

 
$
929

Air traffic liability - loyalty program (air transportation)
703

 
661

Deferred revenue
42

 
10

Total
$
1,765

 
$
1,600


During the nine months ended September 30, 2020 and 2019, we recognized passenger revenue of $697 million and $856 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 the impact of COVID-19 on air travel, we extended the expiration dates for travel credits issued from February 27 through June 30, 2020 to a 24 month period. Accordingly, any revenue associated with these travel credits, which are deferred in air traffic liability, 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 of TrueBlue® points with our co-brand credit card partner for $150 million. The funds are expected to be applied to future point purchases ratably over the course of one year. As the funds are not yet associated with a point, they are considered to be short-term and have been included within other accrued liabilities on our consolidated balance sheets. The carrying value of this arrangement was approximately $75 million as of September 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 nine months ended September 30, 2020 and 2019 (in millions):


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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, 2019
$
661

TrueBlue® points redeemed
(153
)
TrueBlue® points earned and sold
195

Balance at September 30, 2020
$
703

 
 
Balance at December 31, 2018
$
580

TrueBlue® points redeemed
(275
)
TrueBlue® points earned and sold
342

Balance at September 30, 2019
$
647


The timing of our TrueBlue® point redemptions can vary; however, the majority of our points are redeemed within approximately three years of the date of issuance.

Note 4—Long-term Debt, Short-term Borrowings and Finance Lease Obligations
During the nine months ended September 30, 2020, we made principal payments of $1.3 billion on our outstanding debt and finance lease obligations. Of this amount, $998 million represents the early repayment of outstanding balance on our 364-day delayed draw term loan facility during the third quarter.
We had pledged aircraft, engines, other equipment, and facilities with a net book value of $6.2 billion at September 30, 2020 as security under various financing arrangements.
At September 30, 2020, scheduled maturities of our long-term debt and finance lease obligations were $95 million for the remainder of 2020, $438 million in 2021, $417 million in 2022, $1.1 billion in 2023, $966 million in 2024, and $1.9 billion thereafter.


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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


The carrying amounts and estimated fair values of our long-term debt, net of debt acquisition costs, at September 30, 2020 and December 31, 2019 were as follows (in millions):
 
September 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:
 
 
 
 
 
 
 
  2019-1 Series AA, due through 2032
574

 
414

 
581

 
586

  2019-1 Series A, due through 2028
179

 
146

 
181

 
186

2019-1 Series B, due through 2027
114

 
142

 

 

2020-1 Series A, due through 2032
628

 
611

 

 

2020-1 Series B, due through 2028
170

 
213

 

 

Non-Public Debt
 
 
 
 
 
 
 
Fixed rate enhanced equipment notes, due through 2023
114

 
115

 
133

 
141

Floating rate equipment notes, due through 2028
164

 
150

 
201

 
207

Fixed rate equipment notes, due through 2028
935

 
920

 
1,107

 
1,201

Floating rate term loan credit facility, due through 2024
709

 
750

 

 

Unsecured CARES Act Payroll Support Program loan, due through 2030
259

 
192

 

 

Secured CARES Act Loan, due through 2025
105

 
100

 

 

2020 sale-leaseback transactions, due through 2024
235

 
262

 

 

Citibank line of credit, due through 2023
546

 
520

 

 

Total(1)
$
4,774

 
$
4,578

 
$
2,245

 
$
2,367


(1) Total excludes finance lease obligations of $65 million and $89 million at September 30, 2020 and December 31, 2019, respectively.
(2) The estimated fair values of our publicly held long-term debt are classified as Level 2 in the fair value hierarchy. The fair values of our 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 9 to our condensed consolidated financial statements for an explanation of the fair value hierarchy structure.
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.
Floating Rate Term Loan Credit Facility


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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. The loans under this term loan credit facility bear interest at a variable rate equal to LIBOR (subject to a 1.00% floor), or at our election another rate, in each case, plus a specified margin. Our obligations are secured on a senior basis by airport takeoff and landing slots at LaGuardia Airport, John F. Kennedy International Airport, and Reagan National Airport and the right to use certain intellectual property assets comprising the JetBlue brand. The term loan facility is subject to amortization payments of 5% per year, payable quarterly, commencing on September 30, 2020 with the remaining balance due and payable in a single payment on the maturity date of June 17, 2024.
The interest rate on our outstanding balance was 6.25% as of September 30, 2020.
Unsecured CARES Act Payroll Support Program Loan
As discussed in Note 2 to our condensed consolidated financial statements, on April 23, 2020, we entered into the PSP Agreement under the CARES Act with the Treasury. Pursuant to the agreement, JetBlue received a Payroll Support Payment of $936 million (the "Payroll Support Payment") 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 sum at maturity. As part of the agreement, JetBlue issued to the Treasury warrants to acquire more than 2.6 million shares of our common stock under the program. The warrants expire five years after issuance.
On September 30, 2020, Treasury provided us Additional Payroll Support Payment of $27 million consisting of $19 million in grants and $8 million in an unsecured term loan under the PSP Agreement. The terms of the unsecured term loan are identical to those under the initial loan issued on April 23, 2020. In consideration for the Additional Payroll Support Payment, we issued Additional PSP Warrants to purchase approximately 85,540 additional shares of our common stock to the Treasury at an exercise price of $9.50 per share. The Additional PSP Warrants have the same terms and exercise price as the initial warrants issued on April 23, 2020.
Secured CARES Act Loan Program
As discussed in Note 2 to our condensed consolidated financial statements, on April 29, 2020, we submitted our application for the Loan Program of the CARES Act. Under the Loan Program, we have the ability to borrow up to approximately $1.14 billion from the Treasury. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company. If we accept the full amount of the loan, we will issue warrants to purchase approximately 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.
On September 29, 2020, we entered into the Loan Agreement with the Treasury under the Loan Program of the CARES Act. Pursuant to the Loan Agreement, Treasury agreed to extend loans to us in an aggregate principal amount of up to $1.14 billion until March 26, 2021, subject to specified terms. Unless otherwise terminated early, all borrowings under the Loan Agreement are due and payable on the fifth anniversary of the initial borrowing date. We made a drawing of $115 million under the Loan Agreement on September 29, 2020. Borrowings under the Loan Agreement bear interest at a variable rate equal to LIBOR (or another rate based on certain market interest rates, plus a margin of 1% per annum, in each case with a floor of 0%), plus a margin of 2.75% per annum. Our obligations under the Loan Agreement are secured by liens on (i) certain eligible aircraft collateral, (ii) certain loyalty program assets, including JetBlue's rights in certain loyalty program agreements, loyalty program data and intellectual property, and (iii) certain cash accounts (collectively, the "Collateral"). Under the terms of the Loan Agreement, we may also pledge eligible spare parts, slots, gates and routes, and additional aircraft, real property, ground support equipment, flight simulators and equity interests. The Loan Agreement includes affirmative and negative covenants that restrict our ability to, among other things, dispose of Collateral, merge, consolidate or sell assets, incur certain additional indebtedness or pay certain dividends. In 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 Loan Agreement of not less than 1.6 to 1.0. If we do not meet the minimum collateral coverage ratio, we must either provide additional Collateral to secure our obligations under the Loan Agreement or repay the loans by an amount necessary to maintain compliance with the collateral coverage ratio. The Loan Agreement contains events of default customary for similar financings. Upon the occurrence of an event of default, the outstanding obligations under the Loan Agreement may be accelerated and become due and payable immediately. In addition, if certain change of control events occur with respect to JetBlue, we will be required to prepay the loans in full under the Loan Agreement.



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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


In connection with the Loan Agreement, on September 29, 2020, we entered into a warrant agreement with Treasury, pursuant to which we agreed to issue to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share.
In November 2020, we entered into an agreement with the Treasury to increase our borrowing capacity under the Loan Program of the CARES Act to $1.95 billion.
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
In the second quarter of 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.
In the third quarter of 2020, we executed $327 million of sale-leaseback transactions. Of these transactions, $118 million did not qualify as sales for accounting purposes. The remaining $209 million qualified as sales and generated a loss of $106 million. The assets associated with sale-leaseback 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 condensed consolidated statements of cash flows.
Citibank Line of Credit
In August 2019, we amended our revolving Credit and Guaranty Agreement with Citibank N.A. as the administrative agent. The amendment increased our borrowing capacity by $125 million to $550 million and extended the term of the facility through August 2023. Borrowings under the Credit and Guaranty Agreement bear interest at a variable rate equal to LIBOR, plus a margin. The Credit and Guaranty Agreement was previously 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. The Credit and Guaranty Agreement includes covenants that require us to maintain certain minimum balances in unrestricted cash, cash equivalents, and unused commitments available under revolving credit facilities. In addition, the covenants restrict our ability to, among other things, dispose of certain collateral, or merge, consolidate, or sell assets.
We borrowed the full amount of $550 million under this revolving credit facility on April 22, 2020. The interest rate on our outstanding balance was 2.22% as of September 30, 2020.
Short-term Borrowings
Morgan Stanley Delayed Draw Term Loan Agreement
In March 2020, we entered into a 364-day delayed draw term loan credit agreement with Morgan Stanley Senior Funding Inc., as the administrative agent. The delayed draw term loan agreement provided 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.


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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION