JETBLUE AIRWAYS CORP (JBLU) FY 2023 MD&A

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I. Item 1A, “Risk Factors” and other parts of this Report.

OVERVIEW

In 2023, we faced a challenging operating environment due to ATC delays, weather-related disruptions, industry cost pressures and engine issues. We also navigated disruptions in our supply chains and those of our business partners, which led to aircraft delivery delays and negatively impacted our ability to source spare parts and complete maintenance on a timely basis, as well as reliability challenges with certain of our aircraft engines. Despite these challenges, we saw revenue growth supported by leisure demand and loyalty program enhancements.

2023 Results

For the year ended December 31, 2023:

•System capacity increased by 6.2% year-over-year.

•We generated $9.6 billion in operating revenue, an increase of $457 million compared to 2022, primarily due to a 7.5% increase in revenue passengers.

•Operating revenue per available seat mile (“RASM”) decreased by 1.2% to 14.04 cents year-over-year.

•Operating expense increased by 4.1% year-over-year to $9.8 billion.

•Operating expense per available seat mile (“CASM”) decreased by 2.0% to 14.37 cents year-over-year.

•Our operating expenses in 2023 and 2022 included the effects of special items. Excluding fuel and related taxes, special items, and operating expenses related to our non-airline businesses, our 2023 adjusted operating expense (1) increased by 11.0% to $6.9 billion, year-over-year.

•Excluding fuel and related taxes, special items, and operating expenses related to our non-airline businesses, our cost per available seat mile (“CASM ex-fuel”) (1) increased by 4.5% to 10.02 cents year-over-year.

•Our operating margin was (2.4)% in 2023 and (3.3)% in 2022. Excluding special items, our adjusted operating margin(1) was (0.3)% in 2023 and (2.0)% in 2022.

•We reported a net loss of $310 million in 2023 compared to a net loss of $362 million in 2022. Excluding special items, adjusted net loss (1) for 2023 of $151 million compared to adjusted net loss of $260 million in 2022.

•Our reported loss per share for 2023 and 2022 was $0.93 and $1.12, respectively. Excluding special items, our adjusted loss per share (1) for 2023 and 2022 was $0.45 and $0.80, respectively.

•During 2023, we took delivery of seven Airbus A321neo aircraft and 10 Airbus A220 aircraft.

We expect our operating results to significantly fluctuate from quarter-to-quarter in the future as a result of various factors, many of which are outside of our control. For example, ATC shortages in the Northeast, which have forced us to cut back our capacity plans to help protect our operations, are expected to continue for at least the near-term and lead to further challenges in the operating environment. 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. Except for uncertainty related to the cost of aircraft fuel, we expect our expenses to continue to increase as we acquire additional aircraft, as our fleet ages, and as we expand the frequency of flights in existing markets as well as enter into new markets.

2023 Developments

Network

During 2023, we began service to the following new destinations (“BlueCities”): Paris, France; Amsterdam, Netherlands; Belize City, Belize; St. Kitts and Nevis. In addition, we announced service to the following destinations which will begin service in 2024: Dublin, Ireland; Edinburgh, Scotland; Tallahassee, Florida; and Tulum, Mexico.

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We remain focused on taking steps to match capacity with demand. In 2023, we announced the closure of two underperforming markets - Havana, Cuba and Burlington, Vermont.

Customer Experience

In 2023, we launched an updated TrueBlue® loyalty program, offering members more value and new opportunities to earn perks. New features include:

•Earn Tiles to Build Your Mosaic, Your Way: Tiles are the new way for TrueBlue® members to track progress toward Mosaic status while unlocking valuable perks along the way.

•More Perks for More Customers: The New TrueBlue® gives customers the ability to choose the rewards that are most valuable to them.

•Take Mosaic to the Next Level: The new and expanded Mosaic now contains four levels, each offering Mosaic Signature Perks to enjoy.

We expect these new value enhancements will strengthen customer engagement with the TrueBlue® loyalty program. We also announced new and improved perks for Mosaic members in JetBlue's TrueBlue® loyalty program starting in 2024, reflecting JetBlue's commitment to identifying new ways to add value to the program.

JetBlue continues its ongoing commitment to enhance the travel experience and promote a comfortable and stress-free journey. We recently announced, a formal family seating guarantee that children 13 years and younger can sit next to an adult traveling with them on the same reservation, for no additional fee.

Pratt and Whitney

In July 2023, Pratt & Whitney, a division of Raytheon Technologies, announced the requirement, mandated by the Federal Aviation Administration (“FAA”), for removal of certain engines for inspection due to contaminated powdered metal used in high-pressure turbine disks on the V2500, PW1100G, and PW1500G engine types. These engines power our Airbus A320, Airbus A220 and Airbus A321neo fleets. The contaminated powdered metal affects engines manufactured between October 2015 and September 2021. Engines are now required for inspection after they have reached a reduced number of cycles dependent on the fleet type. As of December 31, 2023, we had six aircraft and 12 engines grounded for required inspection. The Company currently expects each removed engine to take up to 360 days to complete a shop visit and return to a serviceable condition and expects the number of out of service aircraft to rise to between 13 and 15 by the end of 2024.

We reached a confidential settlement agreement with Pratt & Whitney, which is intended to address damages incurred by us in 2023 due to the grounding of the affected engines. However, into 2024 and beyond, we expect to have a certain number of engines grounded and, therefore, will continue to assess the resulting impact on our future capacity plans. We expect discussions with Pratt & Whitney for further compensation to be ongoing.

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RESULTS OF OPERATIONS

The following discussion is a comparison of the 2023 to 2022 results of operations. Refer to Part II. Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report on Form 10-K for the year ended December 31, 2022 for detailed discussions comparing the 2022 to 2021 period.

2023 Compared to 2022

Overview

We reported a net loss of $310 million, an operating loss of $230 million and operating margin of (2.4)% for the year ended December 31, 2023. This compares to net loss of $362 million, operating loss of $298 million, and operating margin of (3.3)% for the year ended December 31, 2022. Our loss per share was $0.93 for 2023 compared to a loss per share of $1.12 for 2022.

Our 2023 and 2022 reported results included the effects of special items. Adjusting for these one-time items, our adjusted net loss (1) was $151 million, adjusted operating loss (1) was $33 million, and our adjusted operating margin (1) was (0.3)% for 2023. This compares to an adjusted net loss (1) of $260 million, adjusted operating loss (1) of $185 million, and an adjusted operating margin (1) of (2.0)% for 2022. Excluding one-time items, our adjusted loss per share (1) was $0.45 for 2023 compared to an adjusted loss per share of $0.80 for 2022.

Operating Revenues

Passenger revenue accounted for 93.7% of our total operating revenue for the year ended December 31, 2023 and is our primary source of revenue which includes seat revenue and baggage fees. In addition, passenger revenue includes revenue from our ancillary product offerings such as Even More® Space. Revenue generated from international routes, including Puerto Rico and excluding Canada, accounted for 36.8% of our total operating revenues in 2023. Passenger revenue, including certain ancillary fees directly related to passenger tickets, is recognized when the transportation is provided. Passenger revenue from unused tickets and passenger credits are recognized in proportion to flown revenue based on estimates of expected expiration or when the likelihood of the customer exercising his or her remaining rights becomes remote. Other revenue is primarily comprised of the marketing component of the sales of our TrueBlue® points. It also includes revenue from the sale of vacation packages, commissions revenue, airport concessions and advertising revenue.

We measure capacity in terms of available seat miles, which represents the number of seats available for passengers multiplied by the number of miles the seats are flown. Yield, or the average amount one passenger pays to fly one mile, is calculated by dividing passenger revenue by revenue passenger miles. We attempt to increase passenger revenue primarily by increasing our yield per flight which produces higher revenue per available seat mile. Our objective is to optimize our fare mix to increase our overall average fare while continuing to provide our customers with competitive fares.

(1) Refer to our “Regulation G Reconciliation of Non-GAAP Financial Measures” at the end of this section for more information on this non-GAAP measure.

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Operating Expenses

Aircraft Fuel and Related Taxes

Aircraft fuel and related taxes represented 27.6% of our total operating expenses in 2023 compared to 32.8% in 2022. The average fuel price decreased 17.9% in 2023 to $3.03 per gallon. Our fuel consumption increased by 6.5%, or 55 million gallons, due to higher capacity increases as demand for travel grew.

We recognized fuel hedge gains of $7 million and losses of $7 million in 2023 and 2022, respectively, which are recorded in aircraft fuel and related taxes in our consolidated statement of operations.

Salaries, Wages and Benefits

Salaries, wages, and benefits increased $308 million, or 11.2% in 2023, driven by higher wage rates. The wage rate increase was primarily due to the new pilot union contract effective March 1, 2023, which included an initial pay rate increase of 14% and an additional 3% pay rate increase in August 2023. An increase in full-time equivalent (“FTE”) crewmembers also contributed to the increase. The average number of FTEs increased by 2.8% compared to the same period in 2022.

Landing Fees and Other Rents

Landing fees and other rents increased $113 million, or 20.7%, in 2023 primarily due to rate increases at certain BlueCities, higher landing fees and a 4.4% increase in departures compared to 2022. Other rent primarily consists of airport rent at our BlueCities, many of which contain a mix of both variable and fixed rent. We are subject to premium landing fee rates in our focus cities, which are primarily located in the Northeast corridor of the United States, due to heavy traffic.

Depreciation and Amortization

Depreciation and amortization primarily includes owned and finance leased aircraft and spare engines, in-flight entertainment systems, airport leasehold improvements and software development. Depreciation and amortization increased $36 million, or 6.1%, compared to the 2022 period. This increase was primarily driven by 17 aircraft and 12 spare engines delivered and placed into service in 2023. In addition, one aircraft was delivered in 2022 and placed into service in 2023.

Aircraft Rent

Aircraft rent increased $12 million, or 10.4%, in 2023. This increase was driven primarily by incremental engine leases and lease return costs.

Sales and Marketing

Sales and marketing increased $27 million, or 9.2%, in 2023 primarily driven by higher credit card fees, driven by an increase in demand for air travel. Revenue passengers increased by 7.5% in 2023 to 42.5 million compared to 39.6 million in 2022. Advertising and marketing fees also contributed to this increase.

(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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Maintenance, Materials and Repairs

Maintenance, materials, and repairs are generally expensed when incurred unless covered by a long-term flight hour services contract. The average age of our aircraft in 2023 was 12.3 years. As our fleet ages our maintenance costs will increase significantly, both on an absolute basis and as a percentage of our unit costs, as older aircraft require additional, more expensive repairs over time.

In 2023, maintenance, materials and repairs increased by $63 million, or 10.9% compared to 2022. The increase was primarily due to timing and the type of maintenance events that occurred during the period as well as increased repairs due to the aging of our fleet.

Special Items

In 2023, special items included the following:

•$105 million relating to union contract costs; and

•$92 million relating to Spirit costs.

In 2022, special items included the following:

•$52 million relating to an impairment as well as engine exchanges as part of the retirement of our Embraer E190 fleet;

•$33 million relating to union contract costs; and

•$28 million relating to Spirit costs.

Other Operating Expenses

Other operating expenses consist of the following categories: outside services, airport expenses (including expenses related to fueling, ground handling, skycap, security, and catering services), personnel expenses, professional and legal fees, onboard supplies, shop and office supplies, bad debts, communication costs, and taxes other than payroll and fuel taxes.

In 2023, other operating expenses increased by $131 million, or 9.6%, compared to 2022 primarily due to a 6.2% increase in capacity, costs associated with ATC delays and weather-related disruptions during the year.

LIQUIDITY AND CAPITAL RESOURCES

The airline business is capital intensive. Our ability to successfully execute our growth plan 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. As of December 31, 2023, our unrestricted cash, cash equivalents, short-term investments, and long-term marketable securities was $1.7 billion. We believe this will be sufficient to satisfy our liquidity needs for at least the next twelve months, and we expect to meet our long-term liquidity needs with our projected cash from operations, available lines of credit and debt financing. Our adjusted debt to capitalization ratio(1) at December 31, 2023 was 59%, up from 52% at December 31, 2022.

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, maintain financial flexibility, and be prudent with capital spending.

Analysis of Cash Flows

We had unrestricted cash and cash equivalents of $1.2 billion as of December 31, 2023. This compares to $1.0 billion and $2.0 billion as of December 31, 2022 and 2021, respectively. We held both short and long-term investments in 2023, 2022, and 2021. Our investments totaled $564 million as of December 31, 2023 compared to $522 million and $863 million as of December 31, 2022 and 2021, respectively.

Operating Activities

Cash provided by operating activities totaled approximately $400 million in 2023. This compares to cash provided by operating activities of $379 million in 2022 and $1.6 billion in 2021. 2021 includes federal grants received under various payroll support programs, and the initial cash receipts associated with our co-branded credit card agreements, contributing to the decrease in operating cash flows of $1.3 billion in 2022 compared to 2021.

(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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Investing Activities

Cash used in investing activities totaled approximately $1.4 billion, $908 million, and $704 million in 2023, 2022, and 2021, respectively.

During 2023, flight equipment capital expenditures included $946 million related to the purchase of aircraft and spare engines as well as aircraft interior modifications. Flight capital expenditures also included $63 million in spare part purchases. Other property and equipment capital expenditures included ground equipment purchases and facility improvements for $119 million. Investing activities for the current year also included $131 million in Spirit shareholder payments, $78 million in flight equipment pre-delivery deposits and $42 million in net purchases of investment securities.

During 2022, flight equipment capital expenditures included $571 million related to the purchase of aircraft and spare engines as well as aircraft interior modifications. Flight capital expenditures also included $64 million for spare part purchases. Other property and equipment capital expenditures included ground equipment purchases and facility improvements for $132 million. Investing activities in 2022 also included the net proceeds of $321 million from our investment securities, $297 million in Spirit payments and $156 million in flight equipment pre-delivery deposits.

During 2021, flight equipment capital expenditures included $770 million related to the purchase of aircraft and spare engines as well as aircraft interior modifications. Flight capital expenditures also included $44 million for spare part purchases. Other property and equipment capital expenditures included ground equipment purchases and facility improvements for $93 million. Investing activities in 2021 also included the net proceeds of $296 million in investment securities and $88 million for flight equipment pre-delivery deposits.

Financing Activities

Financing activities during the year primarily consisted of the following proceeds:

•$1.3 billion in proceeds from sale leaseback transactions;

•$78 million in proceeds from long-term debt; and

•$53 million in proceeds from the issuance of common stock related to our crewmember stock purchase plan.

These proceeds were partially offset by debt repayments of $347 million on our outstanding debt and finance lease obligations, which included the following repayments:

•$322 million on our term loan debt;

•$24 million on our sale leaseback obligations; and

•$1 million on our finance lease obligations.

Financing activities during 2023 also included $4 million for the acquisition of treasury stock, which represents the return of shares to satisfy tax payments associated with crewmember stock compensation that vested during the period. It also includes $4 million in financing fees related to new debt agreements in 2023 and the extension of our $600 million revolving credit facility agreement.

Financing activities during 2022 primarily consisted of debt repayments of $369 million on our outstanding debt and finance lease obligations, which included the following repayments and extinguishments:

•$351 million on our term loan debt;

•$11 million towards early extinguishment of debt;

•$6 million on our sale leaseback obligations; and

•$1 million on our finance lease obligations.

These principal payments were partially offset by:

•$52 million in proceeds from the issuance of common stock related to our crewmember stock purchase plan.

Financing activities during 2022 also included $37 million in financing fees, of which $35 million relate to the $3.5 billion Senior Secured Bridge Facility to support the purchase of Spirit, and $6 million used for the acquisition of treasury stock, which represents the return of shares to satisfy tax payments associated with crewmember stock compensation that vested during the period.

Financing activities during 2021 primarily consisted of repayments of $1.9 billion on our outstanding debt and finance lease obligations, which included the following repayments:

(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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•$722 million on our term loan facility;

•$550 million on our revolving credit facility; and

•$115 million on our secured loan balance under the CARES Act Loan Program.

These principal payments were partially offset by:

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

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

•$46 million in proceeds from the issuance of common stock related to our crewmember stock purchase plan.

Financing activities during 2021 also included $8 million used for the acquisition of treasury stock which represents the return of shares to satisfy tax payments associated with crewmember stock compensation that vested during the period.

Capital Resources

Depending on market conditions, we anticipate using a mix of cash and debt financing for aircraft scheduled for delivery in 2024. For deliveries after 2024, 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.

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 borrowing amount may vary accordingly. This line of credit bears interest at a floating rate based upon the London Interbank Offered Rate (“LIBOR”), or such replacement index as the bank may determine from time to time in accordance with the terms of the agreement, plus a margin. We did not borrow under this facility in 2023, 2022 or 2021.

We have a revolving Credit and Guaranty Agreement with Citibank N.A. as the administrative agent, for up to $600 million (the “Revolving Facility”). The term of the Revolving Facility runs through October 2025. Borrowings under the Revolving Facility bear interest at a variable rate equal to SOFR, plus a margin. The Revolving Facility is secured by spare parts, aircraft, simulators, and certain other assets as permitted thereunder. The 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. As of and for the years ended December 31, 2023, 2022 and 2021, we did not have a balance outstanding or any borrowings under the Revolving Facility.

Working Capital

We had a working capital deficit of $1.5 billion as of December 31, 2023 compared to a deficit of $1.8 billion as of December 31, 2022. Our working capital deficit decreased by $364 million due to several factors, including an increase in cash and cash equivalents and accounts payable, offset by a decrease in current maturities of long-term debt and air traffic liability.

Working capital deficits can be customary in the airline industry since a large portion of air traffic liability is classified within current liability.

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. We cannot predict what the effect on our business might be from future developments related to the extremely competitive environment in which we operate, or from events beyond our control, such as volatile fuel prices, economic conditions, weather-related disruptions, air traffic control shortages, airport infrastructure challenges, the spread of infectious diseases, the impact of other airline bankruptcies, restructurings or consolidations, U.S. or international military actions, acts of terrorism, or other external geopolitical events and conditions. We believe there is sufficient liquidity available to us to meet our cash requirements for at least the next 12 months.

Debt and Finance Leases

As part of our efforts to effectively manage our balance sheet, 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.

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Other

In February 2022, 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, depository 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 by JetBlue to Treasury under the Acts 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 for transactions not involving a public offering.

None of our lenders or lessors are affiliated with us.

CONTRACTUAL OBLIGATIONS

Our material cash requirements for known contractual and other obligations as of December 31, 2023 includes the following (in millions):

The amounts stated above do not include additional obligations incurred as a result of financing activities executed after December 31, 2023 except as otherwise noted.

(1)The interest rates are fixed for $4.6 billion of our debt and finance lease obligations, with the remaining $109 million having floating interest rates. The estimated floating rate is equal to SOFR plus an applicable margin based on December 31, 2023 rates. The weighted average maturity of all of our debt was 7.3 years as of December 31, 2023.

(2)On January 26, 2024, JetBlue and Airbus amended the Company's aircraft delivery schedule pursuant to which we agreed to defer 41 aircraft originally scheduled for delivery from 2024 through 2027 to revised delivery dates from 2025 through 2029. The table above and the Flight Equipment Purchase Obligation table below reflect our aircraft purchase commitments after giving effect to this revised delivery schedule.

(3)Amounts primarily include non-cancelable commitments for flight equipment maintenance, construction and information technology.

Debt and Finance Lease Obligations

As of December 31, 2023, we were in compliance with the covenants of our debt and lease agreements.

We have $54 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. Approximately 70% of our owned property and equipment and intangible assets at net book value were pledged or committed to be pledged as security under various loan agreements.

Operating Lease Obligations

As of December 31, 2023, we had operating lease obligations for 56 aircraft with lease terms that expire between 2024 and 2028. Our aircraft lease agreements contain termination provisions which include standard maintenance and return conditions. Our policy is to record these lease return conditions when they are probable and the costs can be estimated. As of December 31, 2023, the average age of our operating fleet was 12.3 years. We also lease airport terminal space and other airport facilities in each of our markets, as well as office space and other equipment. Minimum ground and facility rents at JFK totaling $591 million are included in the commitments table above as operating lease obligations. In November 2022, we amended the lease to relinquish a portion of the former Terminal 6 property to allow for development of a new Terminal 6 by our development partners JMP through a $65 million letter of credit in exchange for 5% ownership. This amount is included in restricted cash on the consolidated balance sheets as of December 31, 2023.

(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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We have a long term lease for our primary corporate office in Long Island City until 2039. We have a one-time option to terminate the lease in 2034. At the end of the initial lease term, we have the option to renew the lease for either one renewal term of 10 years, or two renewal terms of five years each. The total committed expenditure for the lease through 2039 is approximately $86 million.

Flight Equipment Purchase Obligations

Our committed future aircraft deliveries are as follows (1):

(1) Refer to the Contractual Obligations table above for additional information on the amended Airbus delivery schedule.

(2) In addition, we have options to purchase an additional 20 A220-300 aircraft.

Committed expenditures for our firm aircraft and spare engines include estimated amounts for contractual price escalations and pre-delivery deposits. We expect to meet our pre-delivery deposit requirements for our aircraft by paying cash or by using short-term borrowing facilities for deposits generally required six to 24 months prior to delivery. Any pre-delivery deposits paid by the issuance of notes are fully repaid at the time of delivery of the related aircraft.

Other Obligations

Our Terminal at JFK, T5, is governed by a lease agreement we entered into with the PANYNJ in 2005. We are responsible for making various payments under the lease. This includes ground rents for the terminal site which began at the time of the lease execution in 2005 and facility rents which commenced in October 2008 upon our occupancy of T5. The facility rents are based on the number of passengers enplaned out of the terminal, subject to annual minimums. The PANYNJ reimbursed us for construction costs of this project in accordance with the terms of the lease, except for approximately $76 million in leasehold improvements provided by us. In 2012, we amended this lease to include additional ground space for our international arrivals facility, T5i, which we opened in November 2014.

OFF-BALANCE SHEET ARRANGEMENTS

We have determined that we hold a variable interest in, but are not the primary beneficiary of, certain pass-through trusts. The beneficiaries of these pass-through trusts are the purchasers of equipment notes issued by us to finance the acquisition of aircraft. Each trust maintains a liquidity facility whereby a third party agrees to make payments sufficient to pay up to 18 months of interest on the applicable certificates if a payment default occurs.

We have also made certain guarantees and indemnities to other unrelated parties that are not reflected on our consolidated balance sheets, which we believe will not have a significant impact on our results of operations, financial condition or cash flows. We have no other off-balance sheet arrangements. See Notes 3, 4, and 11 to our consolidated financial statements included in Part II. Item 8, for a more detailed discussion of our variable interests and other contingencies, including guarantees and indemnities.

(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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CLIMATE CHANGE

Concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit greenhouse gas emissions, including our aircraft and ground operations emissions. Below is a discussion of the regulations that are relevant to JetBlue and the efforts we have taken to address climate change.

Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA")

In October 2016, ICAO passed a resolution adopting CORSIA, which is a global, market-based measure for the airline industry to achieve carbon-neutral growth for international flying beyond 2020. Annual international emissions reporting is required via CORSIA as of the 2019 reporting year, and offsetting compliance is being implemented through multiple phases that began in 2021. ICAO continues to develop details regarding implementation and, while we expect compliance with CORSIA will increase our operating costs, the anticipated cost of compliance with CORSIA is uncertain due to a number of factors, including the volatility in demand for international air travel resulting from the COVID-19 pandemic and the uncertainty in the supply and price of eligible carbon offsets or low-carbon aircraft fuels.

Sustainable Aviation Fuel Tax Credit

One of the various programs within the Inflation Reduction Act of 2022 was the creation of a tax credit for Sustainable Aviation Fuel (“SAF”). In December 2023, the Treasury Department and Internal Revenue Service issued Notice 2024-06 establishing guidance on this credit. The SAF credit applies to a qualified fuel mixture containing sustainable aviation fuel for certain sales or uses in calendar years 2023 and 2024. The credit provides for a $1.25 credit for each gallon of SAF in a qualified mixture, which must have a minimum reduction of 50% in lifecycle greenhouse gas emissions. Additionally, there is a supplemental credit of one cent for each percent that the reduction exceeds 50%, for a total credit range of $1.25 to $1.75 per gallon. We believe this credit will be a meaningful development to stimulate the production of SAF, making it more affordable and widely available. We believe this to be an important step in helping the U.S. airline industry reach its goal of achieving net-zero carbon emissions by 2050, as well as our own goal of net zero emissions by 2040.

SAF Mandates

There are also growing initiatives to mandate use of SAF or otherwise reduce GHG emissions associated with various aircraft design types. For more information, see our risk factor titled “We may be affected by global climate change or by legal, regulatory or market responses to such changes."

In October 2023, the European Commission reached an agreement on the ReFuelEU Aviation initiative. Included in this mandate is supplying a minimum share of SAF at all EU airports – starting at 2% by 2025, 6% by 2030 and 20% by 2035, up to 70% by 2050. Of these amounts, 1.2% in 2030, and 5% in 2035 must be power to liquid (“PtL”) or E-Fuels, increasing to 35% by 2050. This agreement is a step towards the implementation of the “Fit for 55” legislative package to reduce greenhouse gas emissions by at least 55% by 2030. Additionally, France defined its SAF roadmap in 2019, which includes SAF consumption objectives of 2% by 2025, 5% by 2030 and 50% in 2050. JetBlue is working with its fuel providers throughout Europe to comply with and plan for SAF requirements.

California Climate Disclosure Laws

In October 2023, the state of California passed two climate disclosure laws that could impact our operations. These laws require specific disclosures on the amount of Scope 1, 2 and 3 GHG emissions created by an organization, as well as disclosures around climate-related risks and the associated response to those risks, for any entity doing business in California with annual revenue in excess of $1 billion. The potential impacts to our business are not known at this time, but additional costs can be expected in relation to these disclosures. Implementation dates have not yet been finalized, but it is expected that these disclosures will be required beginning in 2026. California also adopted a third law requiring disclosure of certain information related to greenhouse gas emissions reduction claims and the purchase or sale of voluntary carbon offsets, which may require us to incur additional costs.

EU Emissions Trading Scheme

JetBlue launched service to two EU airports in 2023, Charles de Gaulle airport in Paris, France and Schiphol airport in Amsterdam, Netherlands. Following the EU’s adoption of the Emissions Trading System (“ETS”) in 2009, a policy to regulate GHG emissions with subsequent emissions allowances, exemptions have been extended to airlines with flights originating or landing outside of the European Economic Area (“EEA”) through 2026. In future years, however, the European Commission may decide to integrate all extra-EU flights into the EU ETS which may obligate JetBlue EU flights.

Actions Taken to Address Climate Change

JetBlue is committed to proactively responding to climate change by taking meaningful steps to decarbonize our business and mitigating climate risks that may materially impact the business. As one of our key company-wide strategic priorities, we

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are pursuing six key levers to decarbonize our business. We discuss these levers and other sustainability initiatives in “Item 1. Business – Environmental, Social Governance – Environmental.”

Other Impacts of Climate Change

The number of extreme weather events, such as hurricanes, typhoons, wildfires, and rainstorms, is generally expected to increase over time as our climate warms. Occurrences of these extreme weather events may result inflight cancellations, delays, and diversions, impacting our operations and thus adversely affecting our financial results and conditions.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”), requires management to adopt accounting policies as well as make estimates and judgments to develop amounts reported in our financial statements and accompanying notes. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the estimates that are required to prepare our financial statements. We believe our estimates and judgments are reasonable; however, actual results and the timing of recognition of such amounts could differ from those estimates. In addition, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

Critical accounting policies and estimates are defined as those that are reflective of significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. The policies and estimates discussed below have been reviewed with our independent registered public accounting firm and with the Audit Committee of our Board of Directors. For a discussion of these and other significant accounting policies, see Note 1 to our consolidated financial statements included in Part II. Item 8.

Passenger Revenue

Ticket sales and related ancillary fees are initially deferred in air traffic liability. Air traffic liability represents tickets sold but not yet flown, credits which can be used for future travel, and a portion of the liability related to our TrueBlue® loyalty program. The transaction price is allocated to each performance obligation identified in a passenger ticket on a relative standalone basis. Passenger revenue, including certain ancillary fees directly related to passenger tickets, is recognized when transportation is provided.

The majority of passenger tickets sold are non-refundable. Non-refundable fares may be canceled prior to the scheduled departure date for a credit for future travel. Refundable fares may be canceled at any time prior to the scheduled departure date. Failure to cancel a refundable fare prior to departure will result in the cancellation of the original ticket and an issuance of a credit for future travel. Passenger credits can be used for future travel up to a year from the date of booking. Passenger breakage revenue from unused tickets and passenger credits will be recognized in proportion to flown revenue based on estimates of expected expiration when the likelihood of the customer exercising his or her remaining rights becomes remote. Breakage revenue consists of tickets that remain unused past the departure date, have continued validity, and are expected to ultimately expire unused, as well as passenger credits that are not expected to be redeemed prior to expiration. JetBlue uses estimates based on historical experience of expired tickets and credits and considers other factors that could impact future expiration patterns of tickets and credits. Tickets which do not have continued validity past the departure date are recognized as revenue after the scheduled departure date has lapsed.

Loyalty Program

Customers may earn points under our customer loyalty program, TrueBlue®, based on the fare paid and fare product purchased for a flight. Customers can also earn points through business partners such as credit card companies, hotels, car rental companies, and our participating airline partners.

Points Earned From a Ticket Purchase. When a TrueBlue® member travels, we recognize a portion of the fare as revenue and defer in air traffic liabilities the portion that represents the value of the points net of spoilage, or breakage. We allocate the transaction price to each performance obligation on a relative standalone basis. We determine the standalone selling price of TrueBlue® points issued using the redemption value approach. To maximize the use of observable inputs, we utilize the actual ticket value of the tickets purchased with TrueBlue® points. The liability is relieved and passenger revenue is recognized when the points are redeemed and the free travel is provided.

Points Sold to TrueBlue® Partners. Our most significant contract to sell TrueBlue® points is with our co-branded credit card partner Barclays. Co-branded credit card partnerships have the following identified performance obligations: air transportation; use of the JetBlue brand name, and access to our frequent flyer customer lists; advertising; and other airline benefits. In determining the estimated standalone selling price, for co-branded credit card partnerships, JetBlue considers multiple inputs, methods, and assumptions, including: discounted cash flows; estimated redemption value, net of fulfillment discount; points expected to be awarded and redeemed; estimated annual spending by cardholders; estimated annual royalty for use of JetBlue's frequent flyer customer lists; and estimated utilization of other airline benefits. Payments are typically due monthly based on the volume of points sold during the period, and the terms of our marketing contracts are generally from one to ten years. The overall consideration received is allocated to each performance obligation based on its relative standalone selling price. The air transportation element is deferred and recognized as passenger revenue when the points are redeemed. The other elements are recognized as other revenue when the performance obligations related to those services are satisfied, which is generally the same period as when consideration is received from the participating company.

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Amounts allocated to the air transportation element which are initially deferred include a portion that are expected to be redeemed during the following twelve months (included within air traffic liability), and a portion that are not expected to be redeemed during the following twelve months (included within air traffic liability - non-current). We periodically update this analysis and adjust the split between current and non-current liabilities as appropriate.

Points earned by TrueBlue® members never expire. TrueBlue® members can pool points between small groups of people, branded as Points Pooling™. Breakage is estimated using historical redemption patterns to determine a breakage rate. Breakage rates used to estimate breakage revenue are evaluated annually. Changes to breakage estimates impact revenue recognition prospectively.

Accounting for Long-Lived Assets

In accounting for long-lived assets, we make estimates about the expected useful lives, projected residual values, and the potential for impairment. In estimating useful lives and residual values of our aircraft, we have relied upon actual industry experience with the same or similar aircraft types and our anticipated utilization of the aircraft. Changing market prices of new and used aircraft, government regulations, and changes in our maintenance program or operations could result in changes to these estimates.

Our long-lived assets are evaluated for impairment when events and circumstances indicate the assets may be impaired. Indicators include operating or cash flow losses, significant decreases in market value, or changes in technology.

To determine if impairment exists for our aircraft used in operations, we group our aircraft by fleet-type (the lowest level for which there are identifiable cash flows) and then estimate their future cash flows based on projections of capacity, aircraft age, maintenance requirements, and other relevant conditions. An impairment occurs when the sum of the estimated undiscounted future cash flows are less than the aggregate carrying value of the fleet. The impairment loss recognized is the amount by which the fleet's carrying value exceeds its estimated fair value.

Refer to Note 17 to our consolidated financial statements included in Part II. Item 8 for further details of our impairment charges.

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REGULATION G RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

We report our financial results in accordance with GAAP; however, we present certain non-GAAP financial measures in this Report. Non-GAAP financial measures are financial measures that are derived from the consolidated financial statements, but that are not presented in accordance with GAAP. We present these non-GAAP financial measures because we believe they provide useful supplemental information that enables a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial 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 presented in this Report and shows a reconciliation of each such non-GAAP financial measure to its most directly comparable GAAP financial measure.

Operating Expenses, excluding Fuel and Related Taxes, Other Non-Airline Operating Expenses, and Special Items (“Operating Expenses ex-fuel”) and Operating Expense ex-fuel per Available Seat Mile ex-fuel (“CASM ex-fuel”)

Operating Expense per Available Seat Mile (“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 Ventures and JetBlue Travel Products, and special items from total operating expenses to determine Operating Expenses ex-fuel, which is a non-GAAP financial measure, and we exclude the same items from CASM to determine CASM ex-fuel, which is also a non-GAAP financial measure. We believe the impact of these special items distorts our overall trends and that our metrics are more comparable with the presentation of our results excluding such impact.

Special items for 2023 include Spirit costs and union contract costs.

Special items for 2022 included Spirit costs, union contract costs and Embraer E190 fleet transition costs.

Special items for 2021 include contra-expenses recognized on the utilization of federal grants received under various payroll support programs, contra-expenses recognized on the Employee Retention Credits provided by the CARES Act, and union contract costs.

We believe that Operating Expenses ex-fuel and CASM ex-fuel are useful for investors because they provide investors the ability to measure our financial performance excluding items that are beyond our control, such as fuel costs, which are subject to many economic and political factors, as well as items that are not related to the generation of an available seat mile, such as operating expense related to certain non-airline businesses and special items. We believe these non-GAAP measures are more indicative of our ability to manage airline costs and are more comparable to measures reported by other major airlines.

The table below provides a reconciliation of our total operating expenses (“GAAP measure”) to Operating Expenses ex-fuel, and our CASM to CASM ex-fuel for the periods presented.

With respect to JetBlue’s CASM ex-fuel guidance, we are unable to provide a reconciliation of the non-GAAP financial measure to GAAP CASM, the most directly comparable GAAP measure, because the quantification of certain excluded items reflected in the CASM ex-fuel guidance cannot be calculated or predicted at this time without unreasonable efforts. The reconciling information that is unavailable would include a forward-looking range of financial performance measures beyond our control, such as fuel costs, which are subject to many economic and political factors. For the same reasons, we are unable to address the probable significance of the unavailable information, which could have a potentially unpredictable and potentially significant impact on our future GAAP financial results.

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Operating Expense, Adjusted Operating Margin, Income (Loss) before Taxes, Adjusted Pre-tax Margin, Net Income (Loss) and Earnings (Loss) per Share, excluding Special Items and Net Gain (Loss) on Investments

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

Special items for 2023 include Spirit costs and union contract costs.

Special items for 2022 included Spirit costs, union contract costs and Embraer E190 fleet transition costs.

Special items for 2021 include contra-expenses recognized on the utilization of federal grants received under various payroll support programs, contra-expenses recognized on the Employee Retention Credits provided by the CARES Act, and union contract costs.

Certain net gains and losses on our investments were also excluded from our 2023, 2022 and 2021 non-GAAP results.

We believe the impact of these items distort our overall trends and that our metrics are more comparable with the presentation of our results excluding the impact of these items. The table below provides a reconciliation of our GAAP reported amounts to the non-GAAP amounts excluding the impact of these items for the periods presented.

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Adjusted Debt to Capitalization Ratio

Adjusted debt to capitalization ratio is a non-GAAP financial measure which we believe is relevant in assessing the Company's overall debt profile. Adjusted debt includes aircraft operating lease liabilities, in addition to total debt and finance lease obligations. Adjusted capitalization represents total equity plus adjusted debt. Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, our financial measures prepared in accordance with GAAP.

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Glossary of Airline terminology

Airline terminology used in this section and elsewhere in this Report:

•Aircraft utilization - The average number of block hours operated per day per aircraft for the total fleet of aircraft.

•Available seat miles - The number of seats available for passengers multiplied by the number of miles the seats are flown.

•Average fare - The average one-way fare paid per flight segment by a revenue passenger.

•Average fuel cost per gallon - Total aircraft fuel costs, including fuel taxes and effective portion of fuel hedging, divided by the total number of fuel gallons consumed.

•Average stage length - The average number of miles flown per flight.

•Load factor - The percentage of aircraft seating capacity actually utilized, calculated by dividing revenue passenger miles by available seat miles.

•Operating expense per available seat mile - Operating expenses divided by available seat miles.

•Operating expense per available seat mile, excluding fuel - Operating expenses, less aircraft fuel, other non-airline expenses, and special items, divided by available seat miles.

•Operating revenue per available seat mile - Operating revenues divided by available seat miles.

•Passenger revenue per available seat mile - Passenger revenue divided by available seat miles.

•Revenue passengers - The total number of paying passengers flown on all flight segments.

•Revenue passenger miles - The number of miles flown by revenue passengers.

•Yield per passenger mile - The average amount one passenger pays to fly one mile.

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