UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20222023
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
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)
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“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☑ | | Accelerated filer | ☐ | | | |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | | |
| | | Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of June 30, 2022,2023, there were 323,854,365333,250,321 shares outstanding of the registrant’s common stock, par value $0.01.
JETBLUE AIRWAYS CORPORATION
FORM 10-Q
INDEX
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Consolidated Balance Sheets - June 30, 20222023 and December 31, 20212022 | |
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Forward-Looking Information
This Quarterly Report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts contained in this Report may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “expects,” “plans,” “intends,” “anticipates,” “indicates,” “remains,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” “seeks,” “goals,” “targets” or the negative of these terms or other similar expressions. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed, or assured. Forward-looking statements contained in this Report include, without limitation, statements regarding our outlook and future results of operations and financial position, our business strategy and plans for future operations, our sustainability initiatives, the impact of industry or other macroeconomic trends affecting our business, seasonality, our expectations regarding the planned wind-down of the Northeast Alliance with American Airlines and the related impact on our business, financial condition and results of operations, and our expectations regarding the outcome of the lawsuits challenging our merger with Spirit. Forward-looking statements involve risks, uncertainties and assumptions, and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, including, without limitation, the COVID-19 pandemic and government-imposed measures to control its spread; risk associated with execution of our strategic operating plans in the near-term and long-term; our extremely competitive industry; risks related to the long-term nature of our fleet order book; volatility in fuel prices and availability of fuel; increased maintenance costs associated with fleet age; costs associated with salaries, wages and benefits; risks associated with doing business internationally; our reliance on high daily aircraft utilization; our dependence on the New York metropolitan market; risks associated with extended interruptions or disruptions in service at our focus cities; risks associated with airport expenses; risks associated with seasonality and weather; our reliance on a limited number of suppliers; risks related to new or increased tariffs imposed on commercial aircraft and related parts imported from outside the United States; the outcome of legal proceedings with respect to our Northeast Alliance with American Airlines Group Inc. and our planned wind-down of the Northeast Alliance; the occurrence of any event, change or other circumstances that could give rise to the right of JetBlue or Spirit Airlines Inc. (“Spirit”) or both of them to terminate the Merger Agreement; failure to obtain certain governmental approvals necessary to consummate the merger with Spirit (the “Merger”); the outcome of the lawsuit filed by the Department of Justice and certain state Attorneys General against us and Spirit related to the Merger; risks associated with failure to consummate the Merger in a timely manner or at all; risks associated with the pendency of the Merger and related business disruptions; indebtedness following consummation of the Merger and associated impacts on business flexibility, borrowing costs and credit ratings; the possibility that JetBlue may be unable to achieve expected synergies and operating efficiencies within the expected timeframes or at all; challenges associated with successful integration of Spirit's operations; expenses related to the Merger and integration of Spirit; the potential for loss of management personnel and other key crewmembers as a result of the Merger; risks associated with effective management of the combined company following the Merger; risks associated with JetBlue being bound by all obligations and liabilities of the combined company following consummation of the Merger; risks associated with the integration of JetBlue and Spirit workforce, including with respect to negotiation of labor agreements and labor costs; the impact of the Merger on JetBlue’s earnings per share; risks associated with cybersecurity and privacy, including information security breaches; heightened regulatory requirements concerning data security compliance; risks associated with reliance on, and potential failure of, automated systems to operate our business; our inability to attract and retain qualified crewmembers; our being subject to potential unionization, work stoppages, slowdowns or increased labor costs; reputational and business risk from an accident or incident involving our aircraft; risks associated with damage to our reputation and the JetBlue brand name; our significant amount of fixed obligations and the ability to service such obligations; our substantial indebtedness and impact on our ability to meet future financing needs; financial risks associated with credit card processors; restrictions as a result of our participation in governmental support programs under the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan Act; risks associated with seeking short-term additional financing liquidity; failure to realize the full value of intangible or long-lived assets, causing us to record impairments; risks associated with disease outbreaks or environmental disasters affecting travel behavior; compliance with future environmental regulations; the impacts of federal budget constraints or federally imposed furloughs; impact of global climate change and legal, regulatory or market response to such change; changes in government regulations in our industry; acts of war or terrorism; changes in global economic conditions or an economic downturn leading to a continuing or accelerated decrease in demand for air travel; and risks associated with the implementation of 5G wireless technology near airports that we operate in. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs, and assumptions upon which we base our expectations may change
prior to the end of each quarter or year. Any outlook or forecasts in this document have been prepared without taking into account or consideration of the Merger with Spirit.
Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. You should understand that many important factors, in addition to those discussed or incorporated by reference in this Report, could cause our results to differ materially from those expressed in the forward-looking statements. Further information concerning these and other factors is contained in JetBlue's filings with the U.S. Securities and Exchange Commission (the “SEC”), including but not limited to in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). In light of these risks and uncertainties, the forward-looking events discussed in this Report might not occur. Our forward-looking statements speak only as of the date of this Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.
Where You Can Find Other Information
Our website is www.jetblue.com. Information contained on our website is not part of this Report. Information we furnish or file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. Our SEC filings, including exhibits filed therewith, are also available at the SEC’s website at www.sec.gov.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except per share data)
| | | | | | | | | | | | | June 30, 2023 | | December 31, 2022 |
| | June 30, 2022 | | December 31, 2021 | | (unaudited) | | |
| ASSETS | ASSETS | | | | ASSETS | |
| CURRENT ASSETS | CURRENT ASSETS | | CURRENT ASSETS | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,611 | | | $ | 2,018 | | Cash and cash equivalents | $ | 1,462 | | | $ | 1,042 | |
| Investment securities | Investment securities | 873 | | | 824 | | Investment securities | 205 | | | 350 | |
| Receivables, less allowance (2022-$3; 2021-$3) | 291 | | | 207 | | |
| Inventories, less allowance (2022-$26; 2021-$24) | 73 | | | 74 | | |
| Receivables, less allowance (2023-$2; 2022-$4) | | Receivables, less allowance (2023-$2; 2022-$4) | 309 | | | 317 | |
| Inventories, less allowance (2023-$32; 2022-$29) | | Inventories, less allowance (2023-$32; 2022-$29) | 89 | | | 87 | |
| Prepaid expenses and other | Prepaid expenses and other | 146 | | | 124 | | Prepaid expenses and other | 165 | | | 120 | |
| Total current assets | Total current assets | 2,994 | | | 3,247 | | Total current assets | 2,230 | | | 1,916 | |
| PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT | | | PROPERTY AND EQUIPMENT | | |
| Flight equipment | Flight equipment | 11,390 | | | 11,161 | | Flight equipment | 12,169 | | | 11,727 | |
| Predelivery deposits for flight equipment | Predelivery deposits for flight equipment | 369 | | | 337 | | Predelivery deposits for flight equipment | 385 | | | 415 | |
| Total flight equipment and predelivery deposits, gross | Total flight equipment and predelivery deposits, gross | 11,759 | | | 11,498 | | Total flight equipment and predelivery deposits, gross | 12,554 | | | 12,142 | |
| Less accumulated depreciation | Less accumulated depreciation | 3,430 | | | 3,227 | | Less accumulated depreciation | 3,798 | | | 3,578 | |
| Total flight equipment and predelivery deposits, net | Total flight equipment and predelivery deposits, net | 8,329 | | | 8,271 | | Total flight equipment and predelivery deposits, net | 8,756 | | | 8,564 | |
| Other property and equipment | Other property and equipment | 1,274 | | | 1,205 | | Other property and equipment | 1,303 | | | 1,314 | |
| Less accumulated depreciation | Less accumulated depreciation | 699 | | | 662 | | Less accumulated depreciation | 767 | | | 731 | |
| Total other property and equipment, net | Total other property and equipment, net | 575 | | | 543 | | Total other property and equipment, net | 536 | | | 583 | |
| Total property and equipment, net | Total property and equipment, net | 8,904 | | | 8,814 | | Total property and equipment, net | 9,292 | | | 9,147 | |
| OPERATING LEASE ASSETS | OPERATING LEASE ASSETS | 739 | | | 729 | | OPERATING LEASE ASSETS | 621 | | | 660 | |
| OTHER ASSETS | OTHER ASSETS | | | OTHER ASSETS | | |
| Investment securities | Investment securities | 120 | | | 39 | | Investment securities | 169 | | | 172 | |
| Restricted cash | Restricted cash | 79 | | | 59 | | Restricted cash | 148 | | | 146 | |
| Intangible assets, less accumulated amortization (2022-$430; 2021-$405) | 269 | | | 284 | | |
| Intangible assets, less accumulated amortization (2023-$485; 2022-$455) | | Intangible assets, less accumulated amortization (2023-$485; 2022-$455) | 333 | | | 298 | |
| Other | Other | 438 | | | 470 | | Other | 688 | | | 706 | |
| Total other assets | Total other assets | 906 | | | 852 | | Total other assets | 1,338 | | | 1,322 | |
| TOTAL ASSETS | TOTAL ASSETS | $ | 13,543 | | | $ | 13,642 | | TOTAL ASSETS | $ | 13,481 | | | $ | 13,045 | |
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See accompanying notes to condensed consolidated financial statements.
35
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except per share data)
| | | | | | | | | | | | | June 30, 2023 | | December 31, 2022 |
| | June 30, 2022 | | December 31, 2021 | | (unaudited) | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY | | LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| CURRENT LIABILITIES | CURRENT LIABILITIES | | CURRENT LIABILITIES | |
| Accounts payable | Accounts payable | $ | 585 | | | $ | 499 | | Accounts payable | $ | 699 | | | $ | 532 | |
| Air traffic liability | Air traffic liability | 1,984 | | | 1,618 | | Air traffic liability | 1,751 | | | 1,581 | |
| Accrued salaries, wages and benefits | Accrued salaries, wages and benefits | 489 | | | 480 | | Accrued salaries, wages and benefits | 530 | | | 498 | |
| Other accrued liabilities | Other accrued liabilities | 465 | | | 359 | | Other accrued liabilities | 526 | | | 486 | |
| Current operating lease liabilities | Current operating lease liabilities | 114 | | | 106 | | Current operating lease liabilities | 113 | | | 97 | |
| Current maturities of long-term debt and finance lease obligations | Current maturities of long-term debt and finance lease obligations | 428 | | | 355 | | Current maturities of long-term debt and finance lease obligations | 271 | | | 554 | |
| Total current liabilities | Total current liabilities | 4,065 | | | 3,417 | | Total current liabilities | 3,890 | | | 3,748 | |
| LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | 3,394 | | | 3,651 | | LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | 3,486 | | | 3,093 | |
| LONG-TERM OPERATING LEASE LIABILITIES | LONG-TERM OPERATING LEASE LIABILITIES | 699 | | | 690 | | LONG-TERM OPERATING LEASE LIABILITIES | 578 | | | 639 | |
| DEFERRED TAXES AND OTHER LIABILITIES | DEFERRED TAXES AND OTHER LIABILITIES | | | | DEFERRED TAXES AND OTHER LIABILITIES | | | |
| Deferred income taxes | Deferred income taxes | 742 | | | 843 | | Deferred income taxes | 774 | | | 770 | |
| Air traffic liability - non-current | Air traffic liability - non-current | 667 | | | 640 | | Air traffic liability - non-current | 726 | | | 738 | |
| Other | Other | 530 | | | 552 | | Other | 473 | | | 494 | |
| Total deferred taxes and other liabilities | Total deferred taxes and other liabilities | 1,939 | | | 2,035 | | Total deferred taxes and other liabilities | 1,973 | | | 2,002 | |
| COMMITMENTS AND CONTINGENCIES (Note 6) | COMMITMENTS AND CONTINGENCIES (Note 6) | 0 | | 0 | COMMITMENTS AND CONTINGENCIES (Note 6) | |
| STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY | | | | STOCKHOLDERS’ EQUITY | | | |
| Preferred stock, $0.01 par value; 25 shares authorized, none issued | Preferred stock, $0.01 par value; 25 shares authorized, none issued | — | | | — | | Preferred stock, $0.01 par value; 25 shares authorized, none issued | — | | | — | |
| Common stock, $0.01 par value; 900 shares authorized, 482 and 478 shares issued and 324 and 320 shares outstanding at June 30, 2022 and December 31, 2021, respectively | 5 | | | 5 | | |
| Treasury stock, at cost; 158 and 158 shares at June 30, 2022 and December 31, 2021, respectively | (1,995) | | | (1,989) | | |
| Common stock, $0.01 par value; 900 shares authorized, 492 and 486 shares issued and 333 and 327 shares outstanding at June 30, 2023 and December 31, 2022, respectively | | Common stock, $0.01 par value; 900 shares authorized, 492 and 486 shares issued and 333 and 327 shares outstanding at June 30, 2023 and December 31, 2022, respectively | 5 | | | 5 | |
| Treasury stock, at cost; 159 shares at June 30, 2023 and December 31, 2022 | | Treasury stock, at cost; 159 shares at June 30, 2023 and December 31, 2022 | (1,998) | | | (1,995) | |
| Additional paid-in capital | Additional paid-in capital | 3,095 | | | 3,047 | | Additional paid-in capital | 3,183 | | | 3,129 | |
| Retained earnings | Retained earnings | 2,343 | | | 2,786 | | Retained earnings | 2,370 | | | 2,424 | |
| Accumulated other comprehensive income (loss) | (2) | | | — | | |
| Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (6) | | | — | |
| Total stockholders’ equity | Total stockholders’ equity | 3,446 | | | 3,849 | | Total stockholders’ equity | 3,554 | | | 3,563 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 13,543 | | | $ | 13,642 | | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 13,481 | | | $ | 13,045 | |
See accompanying notes to condensed consolidated financial statements.
46
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| OPERATING REVENUES | | | | | | | |
| Passenger | $ | 2,302 | | | $ | 1,388 | | | $ | 3,904 | | | $ | 2,058 | |
| Other | 143 | | | 111 | | | 277 | | | 174 | |
| Total operating revenues | 2,445 | | | 1,499 | | | 4,181 | | | 2,232 | |
| OPERATING EXPENSES | | | | | | | |
| Aircraft fuel and related taxes | 910 | | | 336 | | | 1,481 | | | 530 | |
| Salaries, wages and benefits | 695 | | | 577 | | | 1,383 | | | 1,098 | |
| Landing fees and other rents | 149 | | | 174 | | | 281 | | | 289 | |
| Depreciation and amortization | 145 | | | 133 | | | 288 | | | 258 | |
| Aircraft rent | 27 | | | 26 | | | 53 | | | 50 | |
| Sales and marketing | 78 | | | 47 | | | 135 | | | 70 | |
| Maintenance, materials and repairs | 162 | | | 164 | | | 313 | | | 268 | |
| Other operating expenses | 348 | | | 261 | | | 683 | | | 471 | |
| Special items | 44 | | | (366) | | | 44 | | | (655) | |
| Total operating expenses | 2,558 | | | 1,352 | | | 4,661 | | | 2,379 | |
| OPERATING (LOSS) INCOME | (113) | | | 147 | | | (480) | | | (147) | |
| OTHER EXPENSE | | | | | | | |
| Interest expense | (40) | | | (54) | | | (77) | | | (112) | |
| Interest income | 8 | | | 4 | | | 12 | | | 8 | |
| Gain (loss) on investments, net | (5) | | | — | | | (4) | | | 3 | |
| Other | (1) | | | (40) | | | — | | | (42) | |
| Total other expense | (38) | | | (90) | | | (69) | | | (143) | |
| (LOSS) INCOME BEFORE INCOME TAXES | (151) | | | 57 | | | (549) | | | (290) | |
| Income tax (benefit) | 37 | | | (7) | | | (106) | | | (107) | |
| NET (LOSS) INCOME | $ | (188) | | | $ | 64 | | | $ | (443) | | | $ | (183) | |
| | | | | | | |
| (LOSS) EARNINGS PER COMMON SHARE: | | | | | | | |
| Basic | $ | (0.58) | | | $ | 0.20 | | | $ | (1.38) | | | $ | (0.58) | |
| Diluted | $ | (0.58) | | | $ | 0.20 | | | $ | (1.38) | | | $ | (0.58) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| OPERATING REVENUES | | | | | | | |
| Passenger | $ | 2,460 | | | $ | 2,302 | | | $ | 4,641 | | | $ | 3,904 | |
| Other | 150 | | | 143 | | | 296 | | | 277 | |
| Total operating revenues | 2,610 | | | 2,445 | | | 4,937 | | | 4,181 | |
| OPERATING EXPENSES | | | | | | | |
| Aircraft fuel and related taxes | 599 | | | 910 | | | 1,365 | | | 1,481 | |
| Salaries, wages and benefits | 772 | | | 695 | | | 1,514 | | | 1,383 | |
| Landing fees and other rents | 163 | | | 149 | | | 323 | | | 281 | |
| Depreciation and amortization | 155 | | | 145 | | | 306 | | | 288 | |
| Aircraft rent | 34 | | | 27 | | | 66 | | | 53 | |
| Sales and marketing | 82 | | | 78 | | | 157 | | | 135 | |
| Maintenance, materials and repairs | 170 | | | 162 | | | 345 | | | 313 | |
| Other operating expenses | 376 | | | 348 | | | 732 | | | 683 | |
| Special items | 24 | | | 44 | | | 136 | | | 44 | |
| Total operating expenses | 2,375 | | | 2,558 | | | 4,944 | | | 4,661 | |
| OPERATING INCOME (LOSS) | 235 | | | (113) | | | (7) | | | (480) | |
| OTHER INCOME (EXPENSE) | | | | | | | |
| Interest expense | (47) | | | (40) | | | (93) | | | (77) | |
| Interest income | 23 | | | 8 | | | 40 | | | 12 | |
| Gain (loss) on investments, net | 4 | | | (5) | | | 7 | | | (4) | |
| Other | 1 | | | (1) | | | 3 | | | — | |
| Total other expense | (19) | | | (38) | | | (43) | | | (69) | |
| INCOME (LOSS) BEFORE INCOME TAXES | 216 | | | (151) | | | (50) | | | (549) | |
| Income tax benefit (expense) | (78) | | | (37) | | | (4) | | | 106 | |
| NET INCOME (LOSS) | $ | 138 | | | $ | (188) | | | $ | (54) | | | $ | (443) | |
| | | | | | | |
| EARNINGS (LOSS) PER COMMON SHARE: | | | | | | | |
| Basic | $ | 0.41 | | | $ | (0.58) | | | $ | (0.16) | | | $ | (1.38) | |
| Diluted | $ | 0.41 | | | $ | (0.58) | | | $ | (0.16) | | | $ | (1.38) | |
See accompanying notes to condensed consolidated financial statements.
57
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in millions)
| | | | | | | | | | | |
| Three Months Ended June 30, |
| 2022 | | 2021 |
| NET (LOSS) INCOME | $ | (188) | | | $ | 64 | |
| Changes in fair value of available-for-sale securities, net of reclassifications into earnings, net of taxes of $0 in each 2022 and 2021. | (1) | | | — | |
| Total other comprehensive (loss) | (1) | | | — | |
| COMPREHENSIVE (LOSS) INCOME | $ | (189) | | | $ | 64 | |
| | | | | | | | | | | |
| Three Months Ended June 30, |
| 2023 | | 2022 |
| NET INCOME (LOSS) | $ | 138 | | | $ | (188) | |
| Changes in fair value of available-for-sale securities and derivative instruments, net of reclassifications into earnings, net of taxes of $(1) and $0 in 2023 and 2022, respectively. | (1) | | | (1) | |
| Total other comprehensive loss | (1) | | | (1) | |
| COMPREHENSIVE INCOME (LOSS) | $ | 137 | | | $ | (189) | |
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| NET (LOSS) | $ | (443) | | | $ | (183) | |
| Changes in fair value of available-for-sale securities, net of reclassifications into earnings, net of taxes of $0 in each 2022 and 2021. | (2) | | | — | |
| Total other comprehensive (loss) | (2) | | | — | |
| COMPREHENSIVE (LOSS) | $ | (445) | | | $ | (183) | |
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 |
| NET LOSS | $ | (54) | | | $ | (443) | |
| Changes in fair value of available-for-sale securities and derivative instruments, net of reclassifications into earnings, net of taxes of $(2) and $0 in 2023 and 2022, respectively. | (6) | | | (2) | |
| Total other comprehensive loss | (6) | | | (2) | |
| COMPREHENSIVE LOSS | $ | (60) | | | $ | (445) | |
See accompanying notes to condensed consolidated financial statements.
68
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
| | | Six Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| CASH FLOWS FROM OPERATING ACTIVITIES | CASH FLOWS FROM OPERATING ACTIVITIES | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net loss | Net loss | $ | (443) | | | $ | (183) | | Net loss | $ | (54) | | | $ | (443) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | Adjustments to reconcile net loss to net cash provided by operating activities: | | Adjustments to reconcile net loss to net cash provided by operating activities: | |
| Deferred income taxes | Deferred income taxes | (101) | | | (93) | | Deferred income taxes | 4 | | | (101) | |
| Depreciation | Depreciation | 262 | | | 238 | | Depreciation | 276 | | | 262 | |
| Amortization | Amortization | 26 | | | 20 | | Amortization | 30 | | | 26 | |
| Impairment of long-lived asset | Impairment of long-lived asset | 5 | | | — | | Impairment of long-lived asset | — | | | 5 | |
| Stock-based compensation | Stock-based compensation | 18 | | | 17 | | Stock-based compensation | 22 | | | 18 | |
| Changes in certain operating assets and liabilities | Changes in certain operating assets and liabilities | 537 | | | 1,439 | | Changes in certain operating assets and liabilities | 386 | | | 537 | |
| Deferred federal payroll support program grants | — | | | 185 | | |
| | Other, net | Other, net | (5) | | | 35 | | Other, net | (1) | | | (5) | |
| Net cash provided by operating activities | Net cash provided by operating activities | 299 | | | 1,658 | | Net cash provided by operating activities | 663 | | | 299 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | CASH FLOWS FROM INVESTING ACTIVITIES | | | CASH FLOWS FROM INVESTING ACTIVITIES | | |
| Capital expenditures | Capital expenditures | (274) | | | (524) | | Capital expenditures | (439) | | | (274) | |
| Predelivery deposits for flight equipment | Predelivery deposits for flight equipment | (65) | | | (16) | | Predelivery deposits for flight equipment | (18) | | | (65) | |
| | Purchase of held to maturity investments | (85) | | | — | | |
| Purchase of held-to-maturity investments | | Purchase of held-to-maturity investments | (37) | | | (85) | |
| Purchase of available-for-sale securities | Purchase of available-for-sale securities | (461) | | | (520) | | Purchase of available-for-sale securities | (155) | | | (461) | |
| Proceeds from the sale/maturity of held to maturity investments | 2 | | | — | | |
| Proceeds from the sale/maturity of held-to-maturity investments | | Proceeds from the sale/maturity of held-to-maturity investments | 7 | | | 2 | |
| Proceeds from the sale of available-for-sale securities | Proceeds from the sale of available-for-sale securities | 405 | | | 340 | | Proceeds from the sale of available-for-sale securities | 333 | | | 405 | |
| | Payment for Spirit Airlines acquisition | | Payment for Spirit Airlines acquisition | (66) | | | — | |
| Other, net | Other, net | (7) | | | (2) | | Other, net | — | | | (7) | |
| Net cash used in investing activities | Net cash used in investing activities | (485) | | | (722) | | Net cash used in investing activities | (375) | | | (485) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | CASH FLOWS FROM FINANCING ACTIVITIES | | | CASH FLOWS FROM FINANCING ACTIVITIES | | |
| Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | — | | | 1,010 | | Proceeds from issuance of long-term debt | 78 | | | — | |
| | Proceeds from sale-leaseback transactions | | Proceeds from sale-leaseback transactions | 228 | | | — | |
| Proceeds from issuance of common stock | | Proceeds from issuance of common stock | 31 | | | 29 | |
| | Proceeds from issuance of common stock | 29 | | | 22 | | |
| Proceeds from issuance of stock warrants | — | | | 14 | | |
| Repayment of long-term debt and finance lease obligations | Repayment of long-term debt and finance lease obligations | (189) | | | (1,481) | | Repayment of long-term debt and finance lease obligations | (200) | | | (189) | |
| | Acquisition of treasury stock | Acquisition of treasury stock | (6) | | | (7) | | Acquisition of treasury stock | (3) | | | (6) | |
| Other, net | Other, net | (35) | | | (1) | | Other, net | — | | | (35) | |
| Net cash used in financing activities | (201) | | | (443) | | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | 134 | | | (201) | |
| INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (387) | | | 493 | | INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 422 | | | (387) | |
| Cash, cash equivalents and restricted cash at beginning of period | Cash, cash equivalents and restricted cash at beginning of period | 2,077 | | | 1,969 | | Cash, cash equivalents and restricted cash at beginning of period | 1,188 | | | 2,077 | |
Cash, cash equivalents and restricted cash at end of period(1) | Cash, cash equivalents and restricted cash at end of period(1) | $ | 1,690 | | | $ | 2,462 | | Cash, cash equivalents and restricted cash at end of period (1) | $ | 1,610 | | | $ | 1,690 | |
| | SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION | | SUPPLEMENTAL CASH FLOW INFORMATION | |
| Cash payments for interest | Cash payments for interest | $ | 60 | | | $ | 97 | | Cash payments for interest | $ | (32) | | | $ | (60) | |
| Cash payments for income taxes (net of refunds) | (49) | | | — | | |
| Cash proceeds from income tax refunds (net of payments) | | Cash proceeds from income tax refunds (net of payments) | 52 | | | 49 | |
| | NON-CASH TRANSACTIONS | NON-CASH TRANSACTIONS | | NON-CASH TRANSACTIONS | |
| Operating lease assets obtained in exchange for operating lease liabilities | $ | 60 | | | $ | — | | |
| Operating lease assets obtained under operating leases | | Operating lease assets obtained under operating leases | $ | 14 | | | $ | 60 | |
| (1) Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets: | (1) Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets: | (1) Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets: |
| | | June 30, 2022 | | June 30, 2021 | | June 30, 2023 | | June 30, 2022 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,611 | | | $ | 2,409 | | Cash and cash equivalents | $ | 1,462 | | | $ | 1,611 | |
| Restricted cash | 79 | | | 53 | | |
Restricted cash (2) | | Restricted cash (2) | 148 | | | 79 | |
| Total cash, cash equivalents and restricted cash | Total cash, cash equivalents and restricted cash | $ | 1,690 | | | $ | 2,462 | | Total cash, cash equivalents and restricted cash | $ | 1,610 | | | $ | 1,690 | |
(2) Restricted cash primarily consists of funds held in escrow for estimated workers' compensation obligations and other letters of credit.
See accompanying notes to condensed consolidated financial statements.
79
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, in millions)
| | | | | Common Stock Issued
Shares Amount | | Treasury Stock Shares Amount | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Loss | | Total |
| Balance at March 31, 2023 | | Balance at March 31, 2023 | | 487 | | | $ | 5 | | | 159 | | | $ | (1,998) | | | $ | 3,139 | | | $ | 2,232 | | | $ | (5) | | | $ | 3,373 | |
| Net income | | Net income | | — | | | — | | | — | | | — | | | — | | | 138 | | | — | | | 138 | |
| Other comprehensive loss | | Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
| Vesting of restricted stock units | | Vesting of restricted stock units | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Stock compensation expense | | Stock compensation expense | | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | 12 | |
| Stock issued under crewmember stock purchase plan | | Stock issued under crewmember stock purchase plan | | 5 | | | — | | | — | | | — | | | 32 | | | — | | | — | | | 32 | |
| Balance at June 30, 2023 | | Balance at June 30, 2023 | | 492 | | | $ | 5 | | | 159 | | | $ | (1,998) | | | $ | 3,183 | | | $ | 2,370 | | | $ | (6) | | | $ | 3,554 | |
| | | | Common
Shares | | Common
Stock | | Treasury
Shares | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Loss | | Total | | Common Stock Issued
Shares Amount | | Treasury Stock Shares Amount | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Loss | | Total |
| Balance at March 31, 2022 | Balance at March 31, 2022 | | 479 | | | $ | 5 | | | 158 | | | $ | (1,995) | | | $ | 3,058 | | | $ | 2,531 | | | $ | (1) | | | $ | 3,598 | | Balance at March 31, 2022 | | 479 | | | $ | 5 | | | 158 | | | $ | (1,995) | | | $ | 3,058 | | | $ | 2,531 | | | $ | (1) | | | $ | 3,598 | |
| Net loss | Net loss | | — | | | — | | | — | | | — | | | — | | | (188) | | | — | | | (188) | | Net loss | | — | | | — | | | — | | | — | | | — | | | (188) | | | — | | | (188) | |
| Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | | Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
| Vesting of restricted stock units | Vesting of restricted stock units | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Vesting of restricted stock units | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Stock compensation expense | Stock compensation expense | | — | | | — | | | — | | | — | | | 7 | | | — | | | — | | | 7 | | Stock compensation expense | | — | | | — | | | — | | | — | | | 7 | | | — | | | — | | | 7 | |
| Stock issued under crewmember stock purchase plan | Stock issued under crewmember stock purchase plan | | 3 | | | — | | | — | | | — | | | 30 | | | — | | | — | | | 30 | | Stock issued under crewmember stock purchase plan | | 3 | | | — | | | — | | | — | | | 30 | | | — | | | — | | | 30 | |
| Balance at June 30, 2022 | Balance at June 30, 2022 | | 482 | | | $ | 5 | | | 158 | | | $ | (1,995) | | | $ | 3,095 | | | $ | 2,343 | | | $ | (2) | | | $ | 3,446 | | Balance at June 30, 2022 | | 482 | | | $ | 5 | | | 158 | | | $ | (1,995) | | | $ | 3,095 | | | $ | 2,343 | | | $ | (2) | | | $ | 3,446 | |
| | | Common
Shares | | Common
Stock | | Treasury
Shares | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Income | | Total | | | | | |
| Balance at March 31, 2021 | | 475 | | | $ | 5 | | | 158 | | | $ | (1,987) | | | $ | 2,975 | | | $ | 2,721 | | | $ | — | | | $ | 3,714 | | |
| Net income | | — | | | — | | | — | | | — | | | — | | | 64 | | | — | | | 64 | | |
| | | Common Stock Issued
Shares Amount | | Treasury Stock Shares Amount | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | | 486 | | | $ | 5 | | | 159 | | | $ | (1,995) | | | $ | 3,129 | | | $ | 2,424 | | | $ | — | | | $ | 3,563 | |
| Net loss | | Net loss | | — | | | — | | | — | | | — | | | — | | | (54) | | | — | | | (54) | |
| Other comprehensive loss | | Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | (6) | | | (6) | |
| Vesting of restricted stock units | Vesting of restricted stock units | | — | | | — | | | — | | | (2) | | | — | | | — | | | — | | | (2) | | Vesting of restricted stock units | | 1 | | | — | | | — | | | (3) | | | — | | | — | | | — | | | (3) | |
| Stock compensation expense | Stock compensation expense | | — | | | — | | | — | | | — | | | 9 | | | — | | | — | | | 9 | | Stock compensation expense | | — | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | |
| Stock issued under crewmember stock purchase plan | Stock issued under crewmember stock purchase plan | | 1 | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | | Stock issued under crewmember stock purchase plan | | 5 | | | — | | | — | | | — | | | 32 | | | — | | | — | | | 32 | |
| Warrants issued under federal support programs | | — | | | — | | | — | | | — | | | 6 | | | — | | | — | | | 6 | | |
| Balance at June 30, 2021 | | 476 | | | $ | 5 | | | 158 | | | $ | (1,989) | | | $ | 3,012 | | | $ | 2,785 | | | $ | — | | | $ | 3,813 | | |
| Balance at June 30, 2023 | | Balance at June 30, 2023 | | 492 | | | $ | 5 | | | 159 | | | $ | (1,998) | | | $ | 3,183 | | | $ | 2,370 | | | $ | (6) | | | $ | 3,554 | |
| | | | Common
Shares | | Common
Stock | | Treasury
Shares | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Common Stock Issued
Shares Amount | | Treasury Stock Shares Amount | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| Balance at December 31, 2021 | Balance at December 31, 2021 | | 478 | | | $ | 5 | | | 158 | | | $ | (1,989) | | | $ | 3,047 | | | $ | 2,786 | | | $ | — | | | $ | 3,849 | | Balance at December 31, 2021 | | 478 | | | $ | 5 | | | 158 | | | $ | (1,989) | | | $ | 3,047 | | | $ | 2,786 | | | $ | — | | | $ | 3,849 | |
| Net loss | Net loss | | — | | | — | | | — | | | — | | | — | | | (443) | | | — | | | (443) | | Net loss | | — | | | — | | | — | | | — | | | — | | | (443) | | | — | | | (443) | |
| Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | (2) | | Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | (2) | |
| Vesting of restricted stock units | Vesting of restricted stock units | | 1 | | | — | | | — | | | (6) | | | — | | | — | | | — | | | (6) | | Vesting of restricted stock units | | 1 | | | — | | | — | | | (6) | | | — | | | — | | | — | | | (6) | |
| Stock compensation expense | Stock compensation expense | | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | | Stock compensation expense | | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | |
| Stock issued under crewmember stock purchase plan | Stock issued under crewmember stock purchase plan | | 3 | | | — | | | — | | | — | | | 30 | | | — | | | — | | | 30 | | Stock issued under crewmember stock purchase plan | | 3 | | | — | | | — | | | — | | | 30 | | | — | | | — | | | 30 | |
| Balance at June 30, 2022 | Balance at June 30, 2022 | | 482 | | | $ | 5 | | | 158 | | | $ | (1,995) | | | $ | 3,095 | | | $ | 2,343 | | | $ | (2) | | | $ | 3,446 | | Balance at June 30, 2022 | | 482 | | | $ | 5 | | | 158 | | | $ | (1,995) | | | $ | 3,095 | | | $ | 2,343 | | | $ | (2) | | | $ | 3,446 | |
| | Common
Shares | | Common
Stock | | Treasury
Shares | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained
Earnings | | Accumulated Other Comprehensive Income | | Total | |
| Balance at December 31, 2020 | | 474 | | | $ | 5 | | | 158 | | | $ | (1,981) | | | $ | 2,959 | | | $ | 2,968 | | | $ | — | | | $ | 3,951 | | |
| Net loss | | — | | | — | | | — | | | — | | | — | | | (183) | | | — | | | (183) | | |
| | Vesting of restricted stock units | | 1 | | | — | | | — | | | (8) | | | — | | | — | | | — | | | (8) | | |
| Stock compensation expense | | — | | | — | | | — | | | — | | | 17 | | | — | | | — | | | 17 | | |
| Stock issued under crewmember stock purchase plan | | 1 | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | | |
| Warrants issued under federal support programs | | — | | | — | | | — | | | — | | | 14 | | | 14 | | |
| Balance at June 30, 2021 | | 476 | | | $ | 5 | | | 158 | | | $ | (1,989) | | | $ | 3,012 | | | $ | 2,785 | | | $ | — | | | $ | 3,813 | | |
|
See accompanying notes to condensed consolidated financial statements.
810
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1—1 - Summary of Significant Accounting Policies
Basis of Presentation
JetBlue Airways Corporation or JetBlue,(“JetBlue”) provides air transportation services across the United States, the Caribbean, Latin America, Canada, and the United Kingdom.Kingdom and France. 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 lineline-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 20212022 audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, or our 20212022 (“2022 Form 10-K.10-K”).
These condensed consolidated financial statements are unaudited and have been prepared by us followingin accordance with the rules and regulations of the U.S. Securities and Exchange Commission or the SEC.(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,(“GAAP”) have been condensed or omitted as permitted by such rules and regulations; however, we believe that the disclosures included herein are adequate to make the information presented not misleading.
Due to the ongoing 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, held-to-maturity investment securities, and equity investment securities. When sold, we use a specific identification method to determine the cost of the securities.
Available-for-sale investment securities. Our available-for-sale investment securities include investments such as time deposits, commercial paper, and convertible debt securities.
The fair values of these instruments are based on observable inputs in non-active markets, which are therefore classified as Level 2 in the fair value hierarchy. We did not record any material gains or losses on these securities during the three and six months ended June 30, 2022 or 2021. Refer to Note 7 to our condensed consolidated financial statements for an explanation of the fair value hierarchy structure.
Held-to-maturity investment securities. Our held-to-maturity investment securities consist of investment-grade interest bearing instruments, such as corporate bonds and U.S. Treasury notes, which are stated at amortized cost. We do not intend to sell these investment securities and the contractual maturities are not greater than 24 months. Those with maturities of less than twelve months are included in short-term investments on our consolidated balance sheets. Those with remaining maturities in excess of twelve months are included in long-term investments on our consolidated balance sheets. We did not record any material gains or losses on these securities during the three and six months ended June 30, 2022 or 2021.
Equity investment securities. Our equity investment securities include investments in common stocks of publicly traded companies which are stated at fair value. We recognized a net unrealized loss of $8 million on these securities during the six months ended June 30, 2022. No gains or losses were recorded during the same period in 2021.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The aggregate carrying values of our short-term and long-term investment securities consisted of the following at June 30, 2022 and December 31, 2021 (in millions):
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Available-for-sale investment securities | | | |
| Time deposits | $ | 795 | | | $ | 790 | |
| Debt securities | 10 | | | 8 | |
| Commercial Paper | 51 | | | 2 | |
| Total available-for-sale investment securities | 856 | | | 800 | |
| Held-to-maturity investment securities | | | |
| Corporate bonds | 120 | | | 37 | |
| Total held-to-maturity investment securities | 120 | | | 37 | |
| Equity investment securities | | | |
| Common stock of publicly traded companies | 17 | | | 26 | |
| Total equity investment securities | 17 | | | 26 | |
| Total investment securities | $ | 993 | | | $ | 863 | |
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 Topic 321, Investments - Equity Securities of the Financial Accounting Standards Board Accounting Standards Codification, or the FASB Codification, 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 $77 million and $72 million as of June 30, 2022 and December 31, 2021, respectively. We did not record any material gains or losses on these investments during the three and six months ended June 30, 2022 and 2021.
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 as of June 30, 2022 and December 31, 2021.
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 Codification. The carrying amount of our equity method investments was $40 million and $32 million as of June 30, 2022 and December 31, 2021, respectively, and is included within other assets on our consolidated balance sheets. In June 2022, we recognized a gain of $2 million on one of our equity method investments related to its issuance of additional shares upon the closing of a subsequent financing round.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 2—2 - Revenue Recognition
The Company categorizes the revenues received from contracts with its customers by revenue source as we believe it best depicts the nature, amount, timing, and uncertainty of our revenue and cash flow. The following table provides the revenues recognized by revenue source for the three and six months ended June 30, 20222023 and 20212022 (in millions):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| Passenger revenue | Passenger revenue | | | | | | | | Passenger revenue | | | | | | | |
| Passenger travel | Passenger travel | $ | 2,162 | | | $ | 1,322 | | | $ | 3,651 | | | $ | 1,945 | | Passenger travel | $ | 2,289 | | | $ | 2,162 | | | $ | 4,315 | | | $ | 3,651 | |
| Loyalty revenue - air transportation | Loyalty revenue - air transportation | 140 | | | 66 | | | 253 | | | 113 | | Loyalty revenue - air transportation | 171 | | | 140 | | | 326 | | | 253 | |
| Other revenue | Other revenue | | Other revenue | |
| Loyalty revenue | Loyalty revenue | 95 | | | 81 | | | 184 | | | 126 | | Loyalty revenue | 104 | | | 95 | | | 204 | | | 184 | |
| Other revenue | Other revenue | 48 | | | 30 | | | 93 | | | 48 | | Other revenue | 46 | | | 48 | | | 92 | | | 93 | |
| Total revenue | Total revenue | $ | 2,445 | | | $ | 1,499 | | | $ | 4,181 | | | $ | 2,232 | | Total revenue | $ | 2,610 | | | $ | 2,445 | | | $ | 4,937 | | | $ | 4,181 | |
TrueBlue® is our customer loyalty program designed to reward and recognize our customers. TrueBlue® points earned from ticket purchases are presented as a reduction to Passenger travel within Passengerpassenger revenue. Amounts presented in Loyalty revenue - air transportation represent the revenue recognized when TrueBlue® points have been redeemed and the travel has occurred. Loyalty revenue within Otherother revenue is primarily comprised of the non-air transportation elements of the sales of our TrueBlue® points.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Contract Liabilities
Our contract liabilities primarily consist of ticket sales for which transportation has not yet been provided, unused credits available to customers, and outstanding loyalty points available for redemption (in millions):
| | | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| Air traffic liability - passenger travel | Air traffic liability - passenger travel | $ | 1,690 | | | $ | 1,323 | | Air traffic liability - passenger travel | $ | 1,451 | | | $ | 1,291 | |
| Air traffic liability - loyalty program (air transportation) | Air traffic liability - loyalty program (air transportation) | 927 | | | 891 | | Air traffic liability - loyalty program (air transportation) | 990 | | | 1,000 | |
Deferred revenue(1) | Deferred revenue(1) | 571 | | | 613 | | Deferred revenue (1) | 511 | | | 530 | |
| Total | Total | 3,188 | | | 2,827 | | Total | $ | 2,952 | | | $ | 2,821 | |
(1) Deferred revenue is included within other accrued liabilities and other liabilities on our consolidated balance sheets.
During the six months ended June 30, 20222023 and 2021,2022, we recognized passenger revenue of $973 million$1.1 billion and $371$973 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.
TrueBlue® points are combined ininto 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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The table below presents the activity of the current and non-current air traffic liability for our loyalty program, and includes points earned and sold to participating companies for the six months ended June 30, 20222023 and 20212022 (in millions):
| | | | | |
| Balance at December 31, 2022 | $ | 1,000 | |
TrueBlue® points redeemed | (327) | |
TrueBlue® points earned and sold | 317 | |
| Balance at June 30, 2023 | $ | 990 | |
| |
| Balance at December 31, 2021 | $ | 891 | |
TrueBlue® points redeemed | (253) | |
TrueBlue® points earned and sold | 289 | |
| Balance at June 30, 2022 | $ | 927 | |
| |
Balance at December 31, 2020 | $ | 733 | |
TrueBlue® points redeemed
| (113) | |
TrueBlue® points earned and sold
| 186 | |
Balance at June 30, 2021 | $ | 806 | |
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 3—3 - Long-term Debt, Short-term Borrowings and Finance Lease Obligations
During the six months ended June 30, 2022,2023, we made principal payments of $189$200 million on our outstanding debt and finance lease obligations.
WeAt June 30, 2023, we had pledged aircraft, engines, other equipment, and facilities with a net book value of $6.5$6.2 billion at June 30, 2022 as security under various financing arrangements.
At June 30, 2022,2023, scheduled maturities of our long-term debt and finance lease obligations were $163 million for the remainder of 2022, $557 million in 2023, $332 million in 2024, $192 million in 2025, $929 million in 2026, and $1.6 billion thereafter.as follows (in millions):
| | | | | |
| Year | Total |
| Remainder of 2023 | $ | 134 | |
| 2024 | 251 | |
| 2025 | 220 | |
| 2026 | 959 | |
| 2027 | 207 | |
| 2028 and thereafter | 1,986 | |
| Total | $ | 3,757 | |
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 June 30, 20222023 and December 31, 20212022 were as follows (in millions):
| | | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| | Carrying Value | | Estimated Fair Value(1) | | Carrying Value | | Estimated Fair Value(1) | | Carrying Value | | Estimated Fair Value (1) | | Carrying Value | | Estimated Fair Value (1) |
| Public Debt | Public Debt | | | | | | | | Public Debt | | | | | | | |
| Fixed rate special facility bonds, due through 2036 | Fixed rate special facility bonds, due through 2036 | $ | 42 | | | $ | 43 | | | $ | 42 | | | $ | 45 | | Fixed rate special facility bonds, due through 2036 | $ | 42 | | | $ | 43 | | | $ | 42 | | | $ | 43 | |
| Fixed rate enhanced equipment notes: | Fixed rate enhanced equipment notes: | | Fixed rate enhanced equipment notes: | |
| 2019-1 Series AA, due through 2032 | 2019-1 Series AA, due through 2032 | 518 | | | 352 | | | 532 | | | 442 | | 2019-1 Series AA, due through 2032 | 490 | | | 352 | | | 504 | | | 345 | |
| 2019-1 Series A, due through 2028 | 2019-1 Series A, due through 2028 | 162 | | | 128 | | | 166 | | | 150 | | 2019-1 Series A, due through 2028 | 153 | | | 126 | | | 157 | | | 124 | |
| 2019-1 Series B, due through 2027 | 2019-1 Series B, due through 2027 | 88 | | | 98 | | | 94 | | | 121 | | 2019-1 Series B, due through 2027 | 76 | | | 81 | | | 82 | | | 87 | |
| 2020-1 Series A, due through 2032 | 2020-1 Series A, due through 2032 | 566 | | | 490 | | | 587 | | | 634 | | 2020-1 Series A, due through 2032 | 527 | | | 455 | | | 546 | | | 457 | |
| 2020-1 Series B, due through 2028 | 2020-1 Series B, due through 2028 | 144 | | | 159 | | | 153 | | | 199 | | 2020-1 Series B, due through 2028 | 126 | | | 134 | | | 135 | | | 142 | |
| Non-Public Debt | Non-Public Debt | | Non-Public Debt | |
| Fixed rate enhanced equipment notes, due through 2023 | Fixed rate enhanced equipment notes, due through 2023 | 67 | | | 65 | | | 88 | | | 88 | | Fixed rate enhanced equipment notes, due through 2023 | — | | | — | | | 61 | | | 60 | |
| Fixed rate equipment notes, due through 2028 | Fixed rate equipment notes, due through 2028 | 539 | | | 458 | | | 620 | | | 706 | | Fixed rate equipment notes, due through 2028 | 381 | | | 320 | | | 447 | | | 422 | |
| Floating rate equipment notes, due through 2028 | 78 | | | 69 | | | 103 | | | 99 | | |
| 2020 sale-leaseback transactions, due through 2024 | 344 | | | 342 | | | 347 | | | 374 | | |
Floating rate equipment notes, due through 2030 (2) | | Floating rate equipment notes, due through 2030 (2) | 120 | | | 100 | | | 56 | | | 49 | |
| Sale-leaseback transactions, due through 2035 | | Sale-leaseback transactions, due through 2035 | 565 | | | 419 | | | 341 | | | 329 | |
| Unsecured CARES Act Payroll Support Program loan, due through 2030 | Unsecured CARES Act Payroll Support Program loan, due through 2030 | 259 | | | 156 | | | 259 | | | 219 | | Unsecured CARES Act Payroll Support Program loan, due through 2030 | 259 | | | 130 | | | 259 | | | 126 | |
| Unsecured Consolidated Appropriations Act Payroll Support Program Extension loan, due through 2031 | Unsecured Consolidated Appropriations Act Payroll Support Program Extension loan, due through 2031 | 144 | | | 85 | | | 144 | | | 121 | | Unsecured Consolidated Appropriations Act Payroll Support Program Extension loan, due through 2031 | 144 | | | 70 | | | 144 | | | 68 | |
| Unsecured American Rescue Plan Act of 2021 Payroll Support loan, due through 2031 | Unsecured American Rescue Plan Act of 2021 Payroll Support loan, due through 2031 | 132 | | | 78 | | | 132 | | | 111 | | Unsecured American Rescue Plan Act of 2021 Payroll Support loan, due through 2031 | 132 | | | 65 | | | 132 | | | 62 | |
| 0.50% convertible senior notes due 2026 | 737 | | | 578 | | | 736 | | | 673 | | |
| Convertible senior notes due 2026 | | Convertible senior notes due 2026 | 741 | | | 560 | | | 739 | | | 534 | |
Total(2)(3) | Total(2)(3) | $ | 3,820 | | | $ | 3,101 | | | $ | 4,003 | | | $ | 3,982 | | Total(2)(3) | $ | 3,756 | | | $ | 2,855 | | | $ | 3,645 | | | $ | 2,848 | |
(1) The estimated fair values of our publicly held long-term debt are classified as Level 2 in the fair value hierarchy. The fair valuevalues of our non-public debt wasare 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. Refer to Note 7 to our condensed consolidated financial statements for an explanation of the fair value hierarchy structure.
(2) Floating rate debt is equal to Secured Overnight Financing Rate (“SOFR”), plus an applicable margin.
(3)Total excludes finance lease obligations of $21 million and $3$2 million at June 30, 20222023 and December 31, 2021,2022, respectively.
We have financed certain aircraft with Enhanced Equipment Trust Certificates or EETCs.(“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,(“VIE”), as defined in Topic 810, Consolidation of the FASBFinancial Accounting Standards Board (“FASB”) 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 worthinesscreditworthiness 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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2022 $3.5 Billion Senior Secured Bridge FacilityEquipment Notes
On May 16, 2022, we, along with our direct wholly-owned subsidiary, Sundown Acquisition Corp., commenced a tender offerIn the second quarter of 2023, JetBlue entered into an agreement to purchase all of the outstanding shares of common stock, par value $0.0001 per share, of Spirit Airlines, Inc. ("Spirit") at $30.00 per share, upon the terms and subject to the conditions set forth in the Offer to Purchase (the “Offer to Purchase”) and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the “Offer”), which were included as exhibits to the Tender Offer Statement on Schedule TO filed with the SEC on May 16, 2022.In connection with the Offer, on May 23, 2022, we executed a commitment letter with Goldman Sachs Bank USA, Bank of America, N.A. and BofA Securities, Inc.finance certain aircraft for a senior secured bridge facility in an aggregate principal amount of up to $3.5 billion, which was amended$78 million, bearing interest at a floating rate of SOFR plus a margin. Debt incurred under the agreement matures in 2030, with principal and restated on June 11, 2022 to include other lenders that have committed tointerest payable quarterly in arrears.
2023 Sale-Leaseback Transactions
During the facility (BNP Paribas; Credit Suisse AG, New York Branch; Credit Suisse Loan Funding LLC; Credit Agricole Corporate and Investment Bank; Natixis, New York Branch; Sumitomo Mitsui Banking Corporation; and MUFG Bank, Ltd.). The Offer was terminated concurrently with the entry into the Merger Agreement (as defined below).
In connection with the entry into the Merger Agreement, JetBlue entered into a second amended and restated commitment letter (the "Commitment Letter"), dated July 28, 2022, with Goldman Sachs Bank USA; BofA Securities, Inc.; Bank of America, N.A.; BNP Paribas; Credit Suisse AG, New York Branch; Credit Suisse Loan Funding LLC; Credit Agricole Corporate and Investment Bank; Natixis, New York Branch; Sumitomo Mitsui Banking Corporation; and MUFG Bank, Ltd. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties have committed to provide a senior secured bridge facility in an aggregate principal amount of up to $3.5 billion to finance the acquisition of Spirit.
As part of the Commitment Letter, we have agreed to pledge, as part of any financing to be provided, certain specified collateral including aircraft and spare engines, rights to certain landing and takeoff slots at Gatwick Airport, John F. Kennedy International Airport, LaGuardia Airport, and Ronald Reagan Washington National Airport; as well as certain assets that comprise the JetBlue brand; and certain rights in the TrueBlue customer loyalty program. As of and for the periodssix months ended June 30, 2022 we did not have a balance outstanding or any borrowings under this facility.
Federal Payroll Support Programs
As a result of the adverse economic impact of COVID-19, we have received assistance under various payroll support programs provided by the federal government.
CARES Act — Payroll Support Program
On March 27, 2020, U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). Under the CARES Act, assistance was made available to the aviation industry in the form of direct payroll support (the "Payroll Support Program") and secured loans (the "Loan Program").
On April 23, 2020,2023, we entered into a Payroll Support Program Agreement (the "PSP Agreement") under the CARES Act with the United States Department$228 million of the Treasury ("Treasury") governing our participation in the Payroll Support Program. Under the Payroll Support Program, Treasury provided us with a total of approximately $963 million (the "Payroll Support Payments") consisting of $704 million in grants and $259 million in unsecured term loans.sale-leaseback transactions. These transactions did not qualify as sales for accounting purposes. The loans have a 10-year term and bear interest on the principal amount outstanding at an annual rate of 1.00% until April 23, 2025, and the applicable 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. As part of the agreement, JetBlue issued to Treasury warrants to acquire more than 2.7 million shares of our common stock under the program at an exercise price of $9.50 per share.
Consolidated Appropriations Act – Payroll Support Program 2
On January 15, 2021, we entered into a Payroll Support Program Extension Agreement (the "PSP Extension Agreement") with Treasury governing our participation in the federal payroll support program for passenger air carriers under the United States Consolidated Appropriations Act, 2021 (the “Payroll Support Program 2"). Treasury provided us with a total of approximately $580 million (the "Payroll Support 2 Payments") under the program, consisting of $436 million in grants and $144 million in unsecured term loans. The loans have a 10-year term and bear interest on the principal amount outstanding at an annual rate of 1.00% until January 15, 2026, and the applicable SOFR plus 2.00% thereafter until January 15, 2031. In consideration for the Payroll Support 2 Payments, we issued warrants to purchase approximately 1.0 million shares of our common stock to Treasury at an exercise price of $14.43 per share.
American Rescue Plan Act – Payroll Support Program 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On May 6, 2021, we entered into a Payroll Support 3 Agreement (the "PSP3 Agreement") with Treasury governing our participation in the federal payroll support program for passenger air carriers under Section 7301 of the American Rescue Plan Act of 2021 (the "Payroll Support Program 3"). Treasury provided us with a total of approximately $541 million (the "Payroll Support 3 Payments") under the program, consisting of $409 million in grants and $132 million in unsecured term loans. The loans have a 10-year term and bear interest on the principal amount outstanding at an annual rate of 1.00% until May 6, 2026, and the applicable SOFR plus 2.00% thereafter until May 6, 2031. In consideration for the Payroll Support 3 Payments, we issued warrants to purchase approximately 0.7 million shares of our common stock to Treasury at an exercise price of $19.90 per share.
The warrantsassets associated with each of the payroll support programs described above will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at our option, in whole or in part at any time.
The carrying values relating to the payroll support grants were recorded within other accrued liabilities and were recognized as a contra-expense within special itemsthese transactions remain on our consolidated statements of operations asbalance sheets within property and equipment and the funds were utilized. The relative fair value ofrelated liabilities under the warrants were recorded within additional paid-in capital and reduced the total carrying value of the grants. Proceeds from the payroll support grants and from the issuance of payroll support warrants werelease are classified within operating activitiesdebt and finance leases obligations. These transactions are treated as cash from financing activities respectively, on our condensed consolidated statements of cash flows. Our funding from all payroll support grants has been fully utilized as of September 30, 2021.
The carrying values relating to the unsecured payroll support loans were recorded within long-term debt and finance lease obligations on our consolidated balance sheets. The proceeds from the loans were classified as financing activities on our condensed consolidated statement of cash flows.
CARES Act – Secured Loan Program
Under the CARES Act Loan Program, JetBlue had the ability to borrow up to a total of approximately $1.9 billion from Treasury. We entered into a loan and guarantee agreement (the "Loan Agreement") with Treasury and made an initial drawing of $115 million under the CARES Act Loan Program on September 29, 2020. In connection with this initial drawing, we entered into a warrant agreement with Treasury, pursuant to which we issued to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share. The warrants will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at our option, in whole or in part at any time.
On September 15, 2021, the Company repaid the full amount of outstanding borrowings under the Loan Agreement, which, together with accrued interest and fees, totaled approximately $118 million. As of June 30, 2022, we did not have a balance outstanding and all obligations under the Loan Agreement, including all pledges of collateral, were terminated in full.
0.50% Convertible Senior Notes due 2026
In March 2021, we completed a private offering for $750 million of 0.50% convertible notes due 2026. The notes are general unsecured senior obligations and will rank equal in right of payment with all of our existing and future senior unsecured indebtedness and senior in right of payment to our existing and future subordinated debt. The notes will effectively rank junior in right of payment to any of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all of our indebtedness and other liabilities. The net proceeds from this offering were approximately $734 million.
Holders of the notes may convert them into shares of our common stock prior to January 1, 2026 only under certain circumstances (such as upon the satisfaction of the sale price condition, the satisfaction of the trading price condition, notice of redemption, or specified corporate events) and thereafter at any time at a rate of 38.5802 shares of common stock per $1,000 principal amount of notes, which corresponds to an initial conversion price of approximately $25.92 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events, including, but not limited to, the issuance of certain stock dividends on common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets, cash dividends and certain issuer tender or exchange offers.
Upon conversion, the notes will be settled in cash up to the aggregate principal amount of the notes to be converted and, at our election, in shares of our common stock, cash or a combination of cash and shares of our common stock in respect of the remainder, if any, of our conversion obligation.
We are not required to periodically redeem or retire the notes. We may, at our option, redeem any of the notes for cash at a redemption price of 100% of their principal amount, plus accrued and unpaid interest at any time on or after April 1, 2024 if
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide a notice of redemption to the holders.
We evaluated the conversion feature of this note offering for embedded derivatives in accordance with Topic 815, Derivatives and Hedging of the FASB Codification, and the substantial premium model in accordance with ASC 470, Debt of the FASB Codification. Based on our assessment, separate accounting for the conversion feature of this note offering is not required.
Interest expense recognized during the six months ended June 30, 2022 was $4 million and included $2 million in amortization of debt issuance costs.During the six months ended June 30, 2021, interest expense recorded was $2 million and included $1 million in amortization of debt issuance costs.
Floating Rate Term Loan Credit Facility
On June 17, 2020, we entered into a $750 million term loan credit facility with Barclays Bank PLC, as administrative agent (the "Term Loan"). The loans thereunder bore 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 were secured on a senior basis by airport takeoff and landing slots at LaGuardia Airport, John F. Kennedy International Airport, and Reagan National Airport and the right to use certain intellectual property assets comprising the JetBlue brand.
On June 17, 2021, the Company voluntarily repaid a portion of its outstanding borrowings under the Term Loan. On June 30, 2021, the Company repaid the full remaining amount of outstanding borrowings under the Term Loan, which, together with its repayment of June 17, 2021, totaled approximately $722 million, plus accrued interest and associated fees. As a result of this debt repayment, we recognized debt extinguishment expenses of $40 millionduring the six months ended June 30, 2021. These expenses are included within other expense on our consolidated statements of operations.
Short-term Borrowings
Citibank Line of Credit
We have a revolvingOn October 21, 2022, JetBlue entered into the $600 million Second Amended and Restated Credit and Guaranty Agreement with(the “Second Amended and Restated Facility”), amending and restating the Company's existing $550 million credit facility. The Second Amended and Restated Facility is among JetBlue, Citibank N.A., as the administrative agent, and the lenders party thereto. The Second Amended and Restated Facility modifies the existing credit facility to, among other things, (i) increase the lending commitments by $50 million, for up to $550 million. The termtotal lending commitments of $600 million, and (ii) establish the facility runs through August 2023.maturity date for the $600 million in lending commitments as October 21, 2024. Borrowings under the CreditSecond Amended and Guaranty AgreementRestated Facility bear interest at a variable rate equal to LIBOR,based on SOFR, plus a margin.margin of 2.00% per annum, or another rate (at JetBlue's election) based on certain market interest rates, plus a margin of 1.00% per annum, in each case with a floor of 0%. The CreditSecond Amended and Guaranty AgreementRestated Facility is secured by spare parts, aircraft, simulators, and certain other assets.assets as permitted thereunder. The CreditSecond Amended and Guaranty AgreementRestated 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 periods ended June 30, 20222023 and December 31, 2021,2022, we did not have a balance outstanding or any borrowings under this line of credit.
Morgan Stanley Line of Credit
We have a revolving line of credit with Morgan Stanley for up to approximately $200 million. This line of credit is secured by a portion of our investment securities held by Morgan Stanley and the amount available to us under this line of credit may vary accordingly. This line of credit bears interest at a floating rate based upon LIBOR, plus a margin. As of and for the periods ended June 30, 20222023 and December 31, 2021,2022, we did not have a balance outstanding or any borrowings under this line of credit.
2022 $3.5 Billion Senior Secured Bridge Facility
In connection with the entry into the Merger Agreement, as defined in Note 12, JetBlue entered into a Second Amended and Restated Commitment Letter (the “Commitment Letter”), dated July 28, 2022, with Goldman Sachs Bank USA; BofA Securities, Inc.; Bank of America, N.A.; BNP Paribas; Credit Suisse AG, New York Branch; Credit Suisse Loan Funding LLC; Credit Agricole Corporate and Investment Bank; Natixis, New York Branch; Sumitomo Mitsui Banking Corporation; and MUFG Bank, Ltd. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties have committed to provide a senior secured bridge facility in an aggregate principal amount of up to $3.5 billion to finance the acquisition of Spirit Airlines, Inc. (“Spirit”). As of and for the periods ended June 30, 2023 and December 31, 2022, we did not have a balance outstanding or any borrowings under this facility.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 4—4 - Earnings (Loss) Earnings Per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) income by the weighted average number of shares outstanding during the period. Diluted earnings (loss) per share is calculated similarly but includes potential dilution from restricted stock units, the crewmember purchases made under the Company's crewmember Stock Purchase Plan,stock purchase plan, convertible notes, warrants issued under various federal payroll support programs, and any other potentially dilutive instruments using the treasury stock and if-converted methods. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share amounts were 1.5 million for the three months ended June 30, 2022. There were no anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share amounts for the three months ended June 30, 2023. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings (loss) per share amounts were 1.5 million for the three months ended June 30, 2021.2022. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings (loss) per share amounts were 2.21.7 million and 3.62.2 million for the six months ended June 30, 20222023 and June 30, 2021,2022, respectively.
The following table shows how we computed basic and diluted earnings (loss) per common share for the three and six months ended June 30, 20222023 and 20212022 (dollars and share data in millions):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| Net (loss) income | $ | (188) | | | $ | 64 | | | $ | (443) | | | $ | (183) | | |
| Net income (loss) | | Net income (loss) | $ | 138 | | | $ | (188) | | | $ | (54) | | | $ | (443) | |
| | Weighted average basic shares | Weighted average basic shares | 323.1 | | | 317.7 | | | 321.9 | | | 317.0 | | Weighted average basic shares | 331.9 | | | 323.1 | | | 330.0 | | | 321.9 | |
| Effect of dilutive securities | Effect of dilutive securities | — | | | 3.8 | | | — | | | — | | Effect of dilutive securities | 1.7 | | | — | | | — | | | — | |
| Weighted average diluted shares | Weighted average diluted shares | 323.1 | | | 321.5 | | | 321.9 | | | 317.0 | | Weighted average diluted shares | $ | 333.6 | | | 323.1 | | | $ | 330.0 | | | 321.9 | |
| | (Loss) earnings per common share | | |
| Earnings (loss) per common share | | Earnings (loss) per common share | |
| Basic | Basic | $ | (0.58) | | | $ | 0.20 | | | $ | (1.38) | | | $ | (0.58) | | Basic | $ | 0.41 | | | $ | (0.58) | | | $ | (0.16) | | | $ | (1.38) | |
| Diluted | Diluted | $ | (0.58) | | | $ | 0.20 | | | $ | (1.38) | | | $ | (0.58) | | Diluted | $ | 0.41 | | | $ | (0.58) | | | $ | (0.16) | | | $ | (1.38) | |
Note 5—5 - Crewmember Retirement Plan
We sponsor a retirement savings 401(k) defined contribution plan or the Plan,(the “Plan”), covering all of our crewmembers, where we match 100% of our crewmember contributions up to 5% of their eligible wages. The contributions vest over three years and are measured from a crewmember's hire date. Crewmembers are immediately vested in their voluntary contributions.
Another component of the Plan is a Company discretionary contribution of 5% of eligible non-management crewmember compensation, which we refer to as Retirement Plus. Retirement Plus contributions vest over three years and are measured from athe non-management crewmember's hire date.
Certain Federal Aviation Administration or FAA, licensed(“FAA”)-licensed crewmembers receive an additional contribution of 3% of eligible compensation, which we refer to as Retirement Advantage.
Our pilots receive a non-elective Company contribution of 16% of eligible pilot compensation per the terms of the finalized collective bargaining agreement between JetBlue and the Air Line Pilots Association ("ALPA"(“ALPA”), in lieu of the above 401(k) Company matching contribution, Retirement Plus, and Retirement Advantage contributions. The Company's non-elective contribution of 16% of eligible pilot compensation vests after three years of service.
Our non-management crewmembers are eligible to receive profit sharing, calculated as 10% of adjusted pre-tax income before profit sharing and special items up to a pre-tax margin of 18% with the result reduced by Retirement Plus contributions and the equivalent of Retirement Plus contributions for pilots. If JetBlue's resulting pre-tax margin exceeds 18%, non-management crewmembers will receive 20% profit sharing on amounts above an 18% pre-tax margin.
Total 401(k) company match, contributions, Retirement Plus, Retirement Advantage, pilot retirement contribution, and profit sharing expensed for the three months ended June 30, 2023 and 2022 was $72 million and $63 million, respectively and for the six months ended June 30, 2023 and 2022 was $138 million and 2021 was $125 million, and $100 million, respectively.
Note 6—Commitments and Contingencies
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6 - Commitments and Contingencies
Flight Equipment Commitments
As of June 30, 2022, 2023, our firm aircraft orders consisted of 64 Airbus A321neo aircraft and 89 Airbus A220 aircraft, scheduled for delivery through 2027. Committedcommitted expenditures for these aircraft and related flight equipment, including estimated amounts for contractual price escalations and predelivery deposits, asis set forth in the table below (in millions):
| | | | | |
Flight equipment commitments (1) | |
| Year | Total |
Remainder of 2023 (2) | $ | 1,270 | |
| 2024 | 2,189 |
| 2025 | 1,701 |
| 2026 | 1,334 |
| 2027 | 987 |
| |
| Total | $ | 7,481 | |
(1) The timing of these commitments is based on our contractual agreements and may be subject to change based on modifications to contractual agreements or changes in the delivery schedules.
(2) Refer to the note in the flight equipment delivery table below for our 2023 capacity planning assumptions.
As of June 30, 2022 is approximately $571 million for2023, our firm aircraft orders included the remainder of 2022, $1.6 billion in 2023, $2.0 billion in 2024, $1.7 billion in 2025, $1.4 billion in 2026, and $1.0 billion thereafter.following aircraft:
| | | | | | | | | | | | | | | | | |
Flight equipment deliveries (1) | | | | | |
| Year | Airbus A321neo | | Airbus A220 | | Total |
Remainder of 2023 (2) | 9 | | | 15 | | | 24 | |
| 2024 | 13 | | | 30 | | | 43 | |
| 2025 | 11 | | | 24 | | | 35 | |
| 2026 | 12 | | | 14 | | | 26 | |
| 2027 | 14 | | | — | | | 14 | |
| | | | | |
Total (3) | 59 | | | 83 | | | 142 | |
(1) The amount of committed expendituresaircraft orders stated above represents the current delivery schedule set forth in our Airbus order book as of June 30, 2022. In February 2022, we received notice from2023.
(2) Due to Airbus of anticipated delivery delays, for the A220 aircraft. We expect aour full-year 2023 capacity planning assumes delivery of a maximum11 A220, four A321neo, and four A321neo LR aircraft, of 9 A220 aircraft in 2022 as a result of the delays.which six have been delivered through June 30, 2023.
(3) In October 2019, the Office of the U.S. Trade Representative announced a 10% tariff on new commercial aircraft and related parts imported from certain European Union member states, which include aircraft and other partsaddition, we are already contractually obligatedhave options to purchase including those noted above. The U.S. Trade Representative increased the tariff to 15% effective March 2020. In March 2021, the U.S. Trade Representative announced a four-month suspension of the tariff that was followed by an announcement in June 2021 that the suspension will be extended for five years. We continue to work with our business partners, including Airbus, to evaluate the potential financial and operational impact of these announcements on our future aircraft deliveries, including after the suspension is lifted. The imposition of this or any tariff could substantially increase the cost of new aircraft and parts.additional 20 A220-300 aircraft.
Other Commitments and Contingencies
We utilize several credit card processors to process our ticket sales. Our agreements with these processors do not contain covenants, but do generally allow the processor to withhold cash reserves to protect the processor from potential liability for tickets purchased, but not yet used for travel. While we currently do not have any collateral requirements related to our credit card processors, we may be required to issue collateral to our credit card processors, or other key business partners, in the future.
As of June 30, 2022,2023, we had approximately $41$52 million in assets serving as collateral for letters of credit relating to a certain number of our leases. These are included in restricted cash andleases, which will expire at the end of the related lease terms. We also had a $65 million letter of credit relating to our 5% ownership in JFK Millennium Partner LLC (“JMP”), a private entity that will finance, develop, and operate John F. Kennedy International Airport (“JFK”) Terminal 6. The letters of credit are included in restricted cash on the consolidated balance sheets. Additionally, we had approximately $34$29 million in assets pledged related to our workers' compensation insurance policies and other business partner agreements, which will expire according to the terms of the related policies or agreements.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Except for our pilots and inflight crewmembers who are represented by the Air Line Pilots Association ("ALPA"(“ALPA”) and the Transport Workers Union of America ("TWU"(“TWU”), respectively, our other frontline crewmembers do not have third party representation.
Air Line Pilots Association
In April 2021, ALPA, on behalf of the JetBlue pilot group, filed a grievance relating to the Northeast Alliance Agreement ("NEA"(“NEA”), an expanded codeshare and marketing alliance between JetBlue and American Airlines, Inc. ("American"(“American”) at 4 Northeastfour northeast airports. ALPA claims that in entering the NEA, JetBlue violated certain scope clauses as contained in the pilots’ ALPA collective bargaining agreement. The matter proceeded to arbitration pursuant to the grievance procedure contained in the collective bargaining agreement, which concluded in September 2021, and in January 2022, the parties submitted final, written briefs to the System Board of Adjustment. Shortly after submission of the briefs, the parties agreed to enter into non-binding mediation with the assistance of the arbitrator with a temporary hold on a System Board decision. As a result of the mediation process, the parties agreed to certain changes to the collective bargaining agreement. The agreement was ratified by the JetBlue pilot group in April 2022,2022.
In January 2023, JetBlue pilots approved a two-year contract extension effective March 1, 2023, which included a one-timeratification payment and associated payroll taxesadjustments to paid-time-off accruals resulting from pay rate increases of $32 million, paid and$95 million. This was recorded as an expense within special items in the secondfirst quarter of 2023.
International Association of Machinists and Aerospace Workers
In September 2022, the International Association of Machinists and Aerospace Workers filed for an election to unionize our ground operations crewmembers. In February 2023, our crewmembers voted to maintain our direct relationship rather than to unionize.
We enter into individual employment agreements with each of our non-unionized FAA-licensed crewmembers, which include dispatchers, technicians, and inspectors, as well as air traffic controllers. Each employment agreement is for a 3% baseterm of five years and automatically renews for an additional five years unless either the crewmember or we elect not to renew it by giving at least 90 days' notice before the end of the relevant term. Pursuant to these agreements, these crewmembers can only be terminated for cause. In the event of a downturn in our business that would require a reduction in work hours, we are obligated to pay increase effective May 1, 2022.these crewmembers a guaranteed level of income and to continue their benefits if they do not obtain other aviation employment.
Legal Matters
Occasionally, we are involved in various claims, lawsuits, regulatory examinations, investigations and other legal matters involving suppliers, crewmembers, customers, and governmental agencies, arising, for the most part, in the ordinary course of business. The outcome of litigation and other legal matters is always uncertain. The Company believes it has valid defenses to the legal matters currently pending against it, is defending itself vigorously, and has recorded accruals determined in accordance with GAAP, where appropriate. In making a determination regarding accruals, using available information, we evaluate the likelihood of an unfavorable outcome in legal or regulatory proceedings to which we are a party and record a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. These subjective
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
determinations are based on the status of such legal or regulatory proceedings, the merits of our defenses, and consultation with legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates. It is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to our consolidated results of operations, liquidity, or financial condition.
To date, none of these types of litigation matters, most of which are typically covered by insurance, has had a material impact on our operations or financial condition. We have insured and continue to insure against most of these types of claims. A judgment on any claim not covered by, or in excess of, our insurance coverage could materially adversely affect our consolidated results of operations, liquidity, or financial condition.
In July 2020, JetBlue and American entered into the NEA which was designed to optimize our respective networks at JFK, LaGuardia, Newark, and Boston. Following review and agreement by the Department of Transportation (“DOT”), JetBlue and American began implementing the NEA in July 2021. On September 21, 2021, the United States Department of Justice, ("DOJ"), along with the Attorneys General of each of the States of Arizona, California, and Florida, the Commonwealths of Massachusetts, Pennsylvania, and Virginia,six states and the Districtdistrict of Columbia filed suit against JetBlue and American seeking to enjoin the NEA, alleging that it violates Section 1 of the Sherman Act. The court issued a lawsuitdecision on May 19, 2023, permanently enjoining the NEA. On July 5, 2023, we announced that we do not plan to appeal the court’s determination that the NEA cannot continue as currently crafted, and instead had initiated a wind down of the NEA. On July 14, 2023, JetBlue and American announced that beginning on July 21, 2023, JetBlue customers will no longer be able to book new codeshare bookings on American and vice versa. On July 28, 2023, the court issued its Final Judgement and Order Entering Permanent
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Injunction (“Final Injunction”). The Final Injunction is effective August 18, 2023 and sets forth, among other things, provisions for the prompt and certain termination of the NEA, including applicable dates for the termination of JetBlue and American Airlines' revenue-sharing arrangements and procedures governing the termination of any remaining slot-sharing agreements. Pursuant to the Final Injunction, JetBlue and American Airlines may not enter into any new alliance, partnership, joint venture, or other agreement with each other, if such agreement provides for revenue sharing, or for coordination of routes or capacity, in a manner substantially similar to the NEA for a period of ten years following the effectiveness of the Final Injunction. The wind down of the NEA could result in a disruption to our business, require us to incur additional costs and ultimately have an adverse impact on our business, financial condition and results of operations.
In December 2022 and February 2023, four putative class actions lawsuits were filed in the United States District Court for the Eastern District of New York and the United States District Court for the District of Massachusetts, (the "Court") againstrespectively, alleging that the NEA violates Sections 1 and 2 of the Sherman Act. Among other things, plaintiffs seek monetary damages on behalf of a putative class of direct purchasers of airline tickets from JetBlue and American Airlines allegingand, depending on the specific case, other airlines on flights to or from four airports (JFK, LaGuardia Airport, Newark Liberty International Airport, and Boston Logan International Airport) from July 16, 2020 through the present. Plaintiffs in these actions also seek to enjoin the NEA. JetBlue believes these lawsuits are without merit and that the North East Alliance (“NEA”) violates Section 1 ofequitable claims have been rendered moot following the Sherman Act, and asking that the carriers be permanently enjoined from implementing the NEA.
Also on September 21, 2021, the Department of Transportation ("DOT") published a Clarification Notice relating to the agreement that had been reached between the DOT, JetBlue, and American in January 2021, at the conclusion of the DOT’s reviewcommencement of the NEA (the "DOT Agreement"). The DOT Clarification Notice stated, among other things, thatwind down. We will continue to work through the DOT Agreement remains in force during the pendency of the DOJ action against the NEA and, while the DOT retains independent statutory authoritylegal process to prohibit unfair methods of competition in air transportation, the DOT intendsachieve a wind down plan designed to defer to DOJ to resolve the antitrust concerns that the DOJ has identified with respect to the NEA. The DOT simultaneously published a Notice Staying Proceeding in relation to a complaint by Spirit regarding the NEA, pending resolution of the DOJ action described above.
In November 2021, JetBlue and American filed a motion to dismiss the DOJ's lawsuit and on June 9, 2022, the Court denied the motion to dismiss finding that the DOJ met the low pleading threshold needed to survive the motion to dismiss, but also stating that the Court takes no position as to whether DOJ will ultimately prevail on its claims. The trial is scheduled to begin in September 2022.protect consumers. Given the nature of this case,these cases, we are unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter.
We are also subject to a number of legal proceedings initiated by individual consumers, the Department of Justice and Attorneys General in six states and the District of Columbia alleging that our pending acquisition of Spirit violates Section 7 of the Clayton Act. For more information, see Note 12.
Note 7—7 - Fair Value
Under Topic 820, Fair Value Measurement of the FASB Accounting Standards Codification, (the “Codification”) disclosures are required about how fair value is determined for assets and liabilities and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs as follows:
Level 1 - observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - quoted prices in active markets for similar assets and liabilities, and other inputs that are observable directly or indirectly for the asset or liability; or
Level 3 - unobservable inputs for the asset or liability, such as discounted cash flow models or valuations.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following is a listing of our assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy as of June 30, 20222023 and December 31, 20212022 (in millions):
| | | June 30, 2022 | | June 30, 2023 |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | Assets | | | | | | | | Assets | | | | | | | |
| Cash equivalents | Cash equivalents | $ | 1,139 | | | $ | — | | | $ | — | | | $ | 1,139 | | Cash equivalents | $ | 645 | | | $ | — | | | $ | — | | | $ | 645 | |
| Available-for-sale investment securities | Available-for-sale investment securities | — | | | 856 | | | — | | | 856 | | Available-for-sale investment securities | — | | | 154 | | | 13 | | | 167 | |
| Equity investment securities | 17 | | | $ | — | | | — | | | 17 | | |
| Aircraft fuel derivatives | | Aircraft fuel derivatives | — | | | 3 | | | — | | | 3 | |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| | | December 31, 2021 | | December 31, 2022 |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | Assets | | | | | | | | Assets | | | | | | | |
| Cash equivalents | Cash equivalents | $ | 1,515 | | | $ | — | | | $ | — | | | $ | 1,515 | | Cash equivalents | $ | 665 | | | $ | — | | | $ | — | | | $ | 665 | |
| Available-for-sale investment securities | Available-for-sale investment securities | — | | | 800 | | | — | | | 800 | | Available-for-sale investment securities | — | | | 324 | | | 13 | | | 337 | |
| Equity investment securities | Equity investment securities | 26 | | | — | | | — | | | 26 | | Equity investment securities | 8 | | | — | | | — | | | 8 | |
| Aircraft fuel derivatives | | Aircraft fuel derivatives | — | | | 3 | | | — | | | 3 | |
Refer to Note 3 to our condensed consolidated financial statements for fair value information related to our outstanding debt obligations as of June 30, 20222023 and December 31, 2021.2022.
Cash equivalents
Our cash equivalents include money market securities and time deposits, which are readily convertible into cash, have maturities of three months or less when purchased, and are considered to be highly liquid and easily tradable. The money market securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy.
Available-for-sale investment securities
Our available-for-sale investment securities include investments such as time deposits, commercial paper and convertible debt securities. The fair values of remaining instrumentstime deposits and commercial paper are based on observable inputs in non-active markets, which are therefore classified as Level 2 in the hierarchy.
Available-for-sale investment securities
Our available-for-sale investment securities include investments such as time deposits and convertible debt securities. The fair values of these instrumentsconvertible debt securities are based on observableunobservable inputs in non-active markets, whichand are therefore classified as Level 23 in the hierarchy. We did not record any material gains or losses on these securities during the three and six months ended June 30, 2022 and 2021.
Equity investment securities
Our equity investment securities include investments in common stocks of publicly traded companies. The fair values of these instruments are classified as Level 1 in the hierarchy as they are based on unadjusted quoted prices in active markets for identical assets. We recognized a net unrealized lossdid not have any material equity investment securities as of $6 million and $8 million on these securities during the three and six months ended June 30, 2022, respectively. No gains2023.
Our wholly-owned subsidiary, JetBlue Technology Ventures, LLC (“JBV”), has equity investments in emerging companies that do not have readily determinable fair values. In accordance with Topic 321, Investments - Equity Securities of the FASB Codification, 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 losses were recorded duringsimilar investments of the same periods in 2021.issuer.
Aircraft fuel derivatives
Our aircraft fuel derivatives include call spread options which are not traded on public exchanges. Their fair values are determined using a market approach based on inputs that are readily available from public markets for commodities and energy trading activities; therefore, they are classified as Level 2 inputs. The data inputs are combined into qualitative models and processes to generate forward curves and volatility related to the specific terms of the underlying hedge contracts.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 8—Accumulated Other Comprehensive Income (Loss)Held-to-maturity investment securities
Comprehensive income (loss) includes changesOur held-to-maturity investment securities consist of corporate bonds, which are stated at amortized cost. If the corporate bonds were measured at fair value, they would be classified as Level 2 in the fair value hierarchy, based on quoted prices in active markets for similar securities.
We do not intend to sell these investment securities. Those securities that will mature in twelve months or less are included in short-term investments on our consolidated balance sheets. Those securities with remaining maturities greater than twelve months are included in long-term investments on our consolidated balance sheets.
The carrying value and estimated fair value of our available-for-sale securities. A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes for the three months ended June 30, 2022 and 2021 isheld-to-maturity investment securities, were as follows (in millions):
| | | | | |
| Available-for-sale securities(1)
|
Balance of accumulated income (loss), at March 31, 2022 | $ | (1) | |
Reclassifications into earnings, net of taxes of $0 | — | |
Change in fair value, net of taxes of $0 | (1) | |
Balance of accumulated income (loss), at June 30, 2022 | $ | (2) | |
| |
Balance of accumulated income (loss), at March 31, 2021 | $ | — | |
Reclassifications into earnings, net of taxes $0 | — | |
Change in fair value, net of taxes of $0 | — | |
Balance of accumulated income (loss), at June 30, 2021 | $ | — | |
| | | | | | | | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| Carrying Value | Fair Value | | Carrying Value | Fair Value |
| Held-to-maturity investment securities | $ | 207 | | $ | 200 | | | $ | 177 | | $ | 170 | |
A rollforward
Note 8 - Investments
Investments in Debt Securities
Investments in debt 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 amountssecurities. Refer to Note 7 for an explanation of the fair value hierarchy structure.
Available-for-sale investment securities. We did not record any material gains or losses on these securities during the three and six months ended June 30, 2023 and 2022.
Held-to-maturity investment securities. We did not record any material gains or losses on held-to-maturity investment securities during the three and six months ended June 30, 2023 and 2022.
The aggregate carrying values of our short-term and long-term debt investment securities consisted of the following at June 30, 2023 and December 31, 2022 (in millions):
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| Available-for-sale investment securities | | | |
| Time deposits | $ | 150 | | | $ | 285 | |
| Commercial paper | 4 | | | 39 | |
| Debt securities | 13 | | | 13 | |
| Total available-for-sale investment securities | 167 | | | 337 | |
| Held-to-maturity investment securities | | | |
| Corporate bonds | 207 | | | 177 | |
| Total held-to-maturity investment securities | 207 | | | 177 | |
| Total investments in debt securities | $ | 374 | | | $ | 514 | |
Investments in Equity Securities
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 Codification. The carrying amount of our equity method investments was $39 million and $38 million as of June 30, 2023 and December 31, 2022, respectively, and is included within other assets on our consolidated balance sheets. We did not record any material gains or losses on these investments during the three and six months ended June 30, 2023. We recognized a gain of $2 million on one of our equity method investments related to its issuance of additional shares upon the closing of a subsequent financing round in accumulated other comprehensive income (loss), netgain on investments on our consolidated statement of taxes foroperations during the six months ended June 30, 2022 and 20212022. Our share of our equity method investees’ financial results is as follows (in millions):
| | | | | |
| Available-for-sale securitiesincluded in other income on our consolidated statement of operations.(1)
|
Balance of accumulated income (loss), at December 31, 2021 | $ | — | |
Reclassifications into earnings, net of taxes of $0 | — | |
Change in fair value, net of taxes of $0 | (2) | |
Balance of accumulated income (loss), at June 30, 2022 | $ | (2) | |
| |
Balance of accumulated income (loss), at December 31, 2020 | $ | — | |
Reclassifications into earnings, net of taxes $0 | — | |
Change in fair value, net of taxes of $0 | — | |
Balance of accumulated income (loss), at June 30, 2021 | $ | — | |
(1) Reclassified to interest income.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
We partnered with JMP to finance, develop, and operate JFK Terminal 6. In exchange of this partnership, we committed a letter of credit as discussed further in Note 9—Special Items6. We exercise significant influence over this transaction, which is accounted for under the equity method.
The following isOther Investments
Our equity investment securities include investments in common stocks of publicly traded companies which are stated at fair value. We had an immaterial carrying amount of equity investment securities as of June 30, 2023 and a listingcarrying amount of special items presented$8 million as of December 31, 2022 recorded within investment securities in the current asset section of our consolidated balance sheet. We recognized a net realized gain of $4 million and $6 million on our equity investment securities primarily related to the sale of one of our equity investments in other income on our consolidated statementsstatement of operations forduring the three and six months ended June 30, 2023, respectively. We recognized an unrealized loss of $6 million and $8 million in other income on our consolidated statement of operations during the three and six months ended June 30, 2022, and 2021 (in millions):respectively.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Special Items | | | | | | | |
Federal payroll support grant recognition(1) | $ | — | | | $ | (357) | | | $ | — | | | $ | (644) | |
CARES Act employee retention credit(2) | — | | | (9) | | | — | | | (11) | |
Fleet Impairment (3) | 5 | | | — | | | 5 | | | — | |
Air Lines Pilot Association ratification bonus (4) | 32 | | | — | | | 32 | | | — | |
Spirit Airlines, Inc. proposal expenses (5) | 7 | | | — | | | 7 | | | — | |
| Total | $ | 44 | | | $ | (366) | | | $ | 44 | | | $ | (655) | |
(1) As discussedJBV has equity investments in Note 3emerging companies which do not have readily determinable fair values. In accordance with Topic 321, Investments - Equity Securities of the FASB Codification, we account for these investments using a measurement alternative that allows entities to our condensed consolidated financial statements, we received assistancemeasure these investments at cost, less any impairment, adjusted for changes from observable price changes in orderly transactions for identifiable or similar investments of the form of grants and unsecured loans under various federal payroll support programs in 2020 and 2021. Funds under these federal payroll support programs were to be used exclusively for the continuation of payment of crewmember wages, salaries and benefits.same issuer. The carrying valuesamount of the payroll support grants (after consideration of the warrants we issued) were recordedthese investments, which is included within other liabilities and were recognized as contra-expenses within special itemsassets on our consolidated statements of operations as the funds were utilized. We utilized $357balance sheet, was $90 million and $644$83 million as of payroll support grants forJune 30, 2023 and December 31, 2022, respectively. We did not record any material gains or losses on these investments during the three and six months ended June 30, 2021, respectively. Our payroll support grants were fully utilized2023 or 2022.
We have an approximate 10% ownership interest in the TWA Flight Center Hotel at JFK, which is also accounted for under the measurement alternative described above, and is recorded in the other assets section of the consolidated balance sheet. The carrying amount of this investment was $14 million as of SeptemberJune 30, 2021.2023 and December 31, 2022.
(2) The Employee Retention Credit ("ERC")
Note 9 - Financial Derivative Instruments and Risk Management
As part of our risk management techniques, we periodically purchase over the counter energy derivative instruments to manage our exposure to the effect of changes in the price of aircraft fuel. Prices for the underlying commodities have historically been highly correlated to aircraft fuel, making derivatives of them effective at providing short-term protection against sharp increases in average fuel prices. We do not hold or issue any derivative financial instruments for trading purposes.
Aircraft Fuel Derivatives
We attempt to obtain cash flow hedge accounting treatment for each fuel derivative that we enter into. This treatment is provided for under the CARES Act is a refundable tax credit which encourages businesses to keep employees on the payroll during the COVID-19 pandemic. Eligible employers can qualify for up to $5,000 of credit for each employee based on qualified wages paid after March 12, 2020Derivatives and before January 1, 2021. The Internal Revenue Service ("IRS") subsequently issued Notice 2021-23 and Notice 2021-49 which collectively extended the ERC eligibility to cover qualified wages paid after December 31, 2020 and before January 1, 2022. Qualified wages are the wages paid to an employee for the time that the employee is not providing services due to an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. Our policy is to recognize the ERC when it is filed with the Internal Revenue Service. We recognized $9 million and $11 million of ERC as a contra-expense within special items on our consolidated statements of operations for the three and six months ended June 30, 2021, respectively.
(3) Under Topic 320 - HedgingProperty, Plant, and Equipment topic of the FASB Codification, wewhich allows for gains and losses on the effective portion of qualifying hedges to be deferred until the underlying planned aircraft fuel consumption occurs, rather than recognizing the gains and losses on these instruments into earnings during each period they are required to assess long-lived assets for impairment when eventsoutstanding. The effective portion of realized fuel hedging derivative gains and circumstances indicate thatlosses is recognized in aircraft fuel expense in the assets may be impaired. An impairment of long-lived assets existsperiod during which the underlying fuel is consumed.
Ineffectiveness occurs, in certain circumstances, when the sum ofchange in the estimated undiscounted future cash flows expected to be generated directly by the assets are less than the booktotal fair value of the assets. Our long-lived assets include both ownedderivative instrument differs from the change in the value of our expected future cash outlays for the purchase of aircraft fuel. If a hedge does not qualify for hedge accounting, the periodic changes in its fair value are also recognized in interest income and leased properties whichother. When aircraft fuel is consumed and the related derivative contract settles, any gain or loss previously recorded in other comprehensive income is recognized in aircraft fuel expense. All cash flows related to our fuel hedging derivatives are classified as property and equipment, and operating lease assetscash flows.
Our current approach to fuel hedging is to enter into hedges on a discretionary basis. We view our consolidated balance sheets, respectively.
To determine if impairment exists in our fleet, we grouped our aircraft by fleet-type and estimated their future cash flows based on projectionshedge portfolio as a form of capacity, aircraft age, and maintenance conditions. Based on the assessment, we determined the future cash flows from the operation our Embraer E190 fleet were lower than the carrying value. For those aircraft, including the ones that are under operating lease, and related spare parts in our Embraer E190 fleet, we recorded impairment losses of $5 million for the six months ended June 30, 2022. These losses represent the difference between the book value of these assets and their fair value. In determining fair value, we obtained third party valuations for our Embraer E190 fleet, which considered the effects of the current market environment, age of the assets, and marketability. For our owned Embraer E190 aircraft and related spare parts, we made adjustmentsinsurance to the valuations to reflecthelp mitigate the impact of their current maintenance conditions to determine fair value. Our estimateprice volatility and protect us against severe spikes in oil prices, when possible.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The fair valuefollowing table illustrates the approximate hedged percentages of our Embraer E190 aircraft under operating leaseprojected fuel usage by quarter as of June 30, 2023 related to our outstanding fuel hedging contracts that were designated as cash flow hedges for accounting purposes.
| | | | | | | | | | | |
| | Aircraft fuel call option spread agreements | |
| Third Quarter 2023 | | 30 | % | |
| Fourth Quarter 2023 | | 30 | % | |
The table below reflects quantitative information related to our derivative instruments and related parts was based onwhere these amounts are recorded in our financial statements (dollar amounts in millions):
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Fuel Derivatives | | | | |
| Asset fair value recorded in prepaid expense and other current assets | | 3 | | 3 |
| Longest remaining term (months) | | 3 | | 3 |
| Hedged volume (barrels, in thousands) | | 3,240 | | | 450 |
| Estimated amount of existing losses expected to be reclassified into earnings in the next 12 months | | $ | 6 | | | $ | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2023 | | 2022 | | 2023 | | 2022 | |
| Fuel Derivatives | | | | | | | | | |
| Hedge effectiveness loss recognized in aircraft fuel expense | | $ | (4) | | | $ | — | | | $ | (3) | | | $ | — | | |
| Hedge losses on derivatives recognized in comprehensive income | | $ | (6) | | | $ | — | | | $ | (11) | | | $ | — | | |
| Percentage of actual consumption economically hedged | | 30 | % | | — | % | | 20 | % | | — | % | |
Any outstanding derivative instrument exposes us to credit loss in connection with our fuel contracts in the present valueevent of current market lease rates utilizing a market discount rate fornonperformance by the remaining termcounterparties to our agreements, but we do not expect that any of each lease. Sinceour counterparties will fail to meet their obligations. The amount of such credit exposure is generally the fair value of our Embraer E190 fleet was determined using unobservable inputs, itoutstanding contracts for which we are in a receivable position. To manage credit risks we select counterparties based on credit assessments, limit our overall exposure to any single counterparty, and monitor the market position with each counterparty. Some of our agreements require cash deposits from either JetBlue or our counterparty if market risk exposure exceeds a specified threshold amount.
We have master netting arrangements with our counterparties allowing us the right of offset to mitigate credit risk in derivative transactions. The financial derivative instrument agreements we have with our counterparties may require us to fund all, or a portion of, outstanding loss positions related to these contracts prior to their scheduled maturities. The amount of collateral posted, if any, is classified as Level 3 inperiodically adjusted based on the fair value hierarchy. We evaluatedof the remaining fleet typeshedge contracts. Our policy is to offset the liabilities represented by these contracts with any cash collateral paid to the counterparties.
There were no offsetting derivative instruments as of June 30, 2023 and determined the future cash flowsDecember 31, 2022.
Note 10 - Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) includes changes in fair value of our Airbus A320aircraft fuel derivatives which qualify for hedge accounting and Airbus A321 fleets exceeded their carrying valueunrealized loss on available-for-sale securities. A roll-forward of the amounts included in accumulated other comprehensive income (loss), net of taxes for the three months ended June 30, 2023 and 2022 is as of Junefollows (in millions):
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| | | | | | | | | | | | | | | | | |
| Aircraft fuel derivatives | | Available-for-sale securities | | Total |
| Balance of accumulated loss, at March 31, 2023 | $ | (4) | | | $ | (1) | | | $ | (5) | |
Reclassifications into earnings, net of taxes of $1 (1) | 3 | | | — | | | 3 | |
| Change in fair value, net of taxes of $(2) | (4) | | | — | | | (4) | |
| Balance of accumulated loss, at June 30, 2023 | $ | (5) | | | $ | (1) | | | $ | (6) | |
| | | | | |
| Balance of accumulated loss, at March 31, 2022 | $ | — | | | $ | (1) | | | $ | (1) | |
Reclassifications into earnings, net of taxes $0 (1) | — | | | — | | | — | |
| Change in fair value, net of taxes of $0 | — | | | (1) | | | (1) | |
| Balance of accumulated loss, at June 30, 2022 | $ | — | | | $ | (2) | | | $ | (2) | |
| | | | | |
(1) Reclassified to aircraft fuel expense.A roll-forward of the amounts included in accumulated other comprehensive income (loss), net of taxes for the six months ended June 30, 2022.2023 and 2022 is as follows (in millions):
| | | | | | | | | | | | | | | | | |
| Aircraft fuel derivatives | | Available-for-sale securities | | Total |
| Balance of accumulated income (loss), at December 31, 2022 | $ | 1 | | | $ | (1) | | | $ | — | |
Reclassifications into earnings, net of taxes of $1 (1) | 2 | | | — | | | 2 | |
| Change in fair value, net of taxes of $(3) | (8) | | | — | | | (8) | |
| Balance of accumulated loss, at June 30, 2023 | $ | (5) | | | $ | (1) | | | $ | (6) | |
| | | | | |
| Balance of accumulated income (loss), at December 31, 2021 | $ | — | | | $ | — | | | $ | — | |
Reclassifications into earnings, net of taxes $0 (1) | — | | | — | | | — | |
| Change in fair value, net of taxes of $0 | — | | | (2) | | | (2) | |
| Balance of accumulated income (loss), at June 30, 2022 | $ | — | | | $ | (2) | | | $ | (2) | |
(1)We did not record any impairment loss Reclassified to aircraft fuel expense.
Note 11 - Special Items
The following is a listing of special items presented on our long-lived assetsconsolidated statements of operations for the three and six months ended June 30, 2021.2023 and 2022 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Special Items | | | | | | | |
Spirit acquisition costs (1) | $ | 24 | | | $ | 7 | | | $ | 41 | | | $ | 7 | |
Embraer E190 fleet transition (2) | — | | | 5 | | | — | | | 5 | |
Union contract costs (3) | — | | | 32 | | | 95 | | | 32 | |
| Total | $ | 24 | | | $ | 44 | | | $ | 136 | | | $ | 44 | |
(1) Spirit acquisition costs primarily relate to consulting, professional and legal fees.
(4)(2) Fleet impairment charges relate to losses on certain Embraer E190 aircraft and spare parts as a result of our fleet
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
transition.
(3) As discussed in Note 6, union contract costs relate to our condensed consolidated financial statements, we paid $32 million for an ALPA ratification bonuspayments and the associated payroll taxes during the three months ending June 30, 2022.
(5) As discussed in Note 10adjustments to our condensed consolidated financial statements, we incurred and paid $7 million for various expenses related to our proposed acquisition of Spirit during the three months ended June 30, 2022.paid-time-off accruals resulting from pay rate increases.
Note 10—Subsequent Event
12 - Entry intoMerger Agreement with Spirit
OnAs previously disclosed, on July 28, 2022, JetBlue entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Spirit Airlines, Inc., a Delaware corporation (“Spirit”), and Sundown Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of JetBlue (“Merger Sub”), pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving corporation (the “Merger”).
As a result of the Merger, each existing share (“Share”) of Spirit’s common stock, par value $0.0001 per share, will be converted at the effective time of the Merger into the right to receive an amount in cash per Share, without interest, equal to (a) $33.50 minus (b) (i) to the extent paid, an amount in cash equal to $2.50 per Share and (ii) the lesser of (A) $1.15 and (B) the product of (1) $0.10 multiplied by (2) the number of Additional Prepayments (as defined below) paid prior to the date of the closing of the Merger (the “Closing Date”) (such amount in subclause (B), the “Aggregate Additional Prepayment Amount”).
Subject to the receipt of Spirit stockholder approval, onOn or prior to the last business day of each calendar month commencing after December 31, 2022, until the earlier of (a) the Closing Date and (b) the termination of the Merger Agreement in accordance with its terms, JetBlue will pay or cause to be paid to the holders of record of outstanding Shares as of a date not more than five business days prior to the last business day of such month, an amount in cash equal to $0.10 per Share (such amount, the “Additional Prepayment Amount,” each such monthly payment, an “Additional Prepayment”).
The Closing is subject to the satisfaction or waiver of certain closing conditions, including, among other things: (a)things, the receipt of Spirit stockholder approval; (b)approval, which was obtained on October 19, 2022, the receipt of applicable regulatory approvals, including approvals from the U.S. Federal Communications Commission (the “FCC”), U.S. Federal Aviation Administration (the “FAA”) and the U.S. Department of Transportation (the “DOT”); (c) the expiration or early termination of the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and approval under certain foreign antitrust laws; (d) the absence of any law or order prohibiting the consummation of the transactions; and (e) the absence of any material adverse effect on Spirit (as defined in the Merger Agreement).
Spirit, JetBlue, and Merger Sub each make certain customary representations, warranties and covenants, as applicable, in the Merger Agreement.
The Merger Agreement, also contains certain provisions relating to efforts to obtain regulatory approval of the Merger, including to provide that JetBlue and Spirit, in connection with obtainingany necessary approval of a governmental entity (including under the HSR Act), will use their respective reasonable best efforts to take, or cause to be taken, all appropriate actions to obtain such approvals, including, to contest, defend and appeal any proceeding brought by a governmental entity challenging or seeking to prohibit the consummation of the Merger, provided that JetBlue shall not be required to take any divestiture actions) if such action would or would reasonably be expected to result in a material adverse effect on JetBlue and its subsidiaries (including Spirit and its subsidiaries) after giving effect to the transactions contemplated by the Merger Agreement taken as a whole, and in no event shall JetBlue be required to agree to any such divestiture action that, in JetBlue’s discretion, would be reasonably likely to materially and adversely affect the anticipated benefits of the parties to the Northeast Alliance Agreement between JetBlue and American Airlines, Inc., dated as of July 15, 2020, and the agreements contemplated thereby. Any such divestiture action may be conditioned upon the closing of the Merger.
The Merger Agreement contains certain customary termination rights for JetBlue and Spirit including, without limitation, a right for either party to terminate if the Merger is not consummated on or before July 28, 2023, which, may be extended to January 28, 2024 and to July 24, 2024 in certain circumstances (such date, as extended,cases, will result in the “Outside Date”) if needed to obtain
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
the required regulatory approvals. Upon the termination of the Merger Agreement under specified circumstances, Spirit will be required to pay JetBlue a breakup fee of $94.2 million. The Merger Agreement also provides the methodology by which certain expenses of JetBlue will be borne by Spirit. In addition, upon the termination of the Merger Agreementfees by JetBlue because of a material, uncured breach by Spirit of the Merger Agreement, Spirit will be required to pay JetBlue an amount equal to the sum of all amounts paid by JetBlue to the Spirit stockholders prior to the date of such termination.
In the event that the Merger Agreement is terminated due to either (a) a governmental entity issuing an order or taking any other action permanently enjoining or otherwise prohibiting the Merger under U.S. federal competition laws, or (b) the Merger having not occurred by the Outside Date solely to the extent that the closing condition requiring (i) the waiting period applicable to the consummation of the Merger under the HSR Act (and any customary timing agreement with any governmental entity to toll, stay, or extend any such waiting period, or to delay or not to consummate the Merger contemplated by the Merger Agreement entered into in connection therewith) to have expired or been terminated or (ii) that no governmental entity has issued an order or taken any other action (whether temporary, preliminary or permanent) enjoining or otherwise prohibiting the Merger under U.S. federal competition laws, and that no law shall be in effect making the Merger illegal or preventing the consummation of the Merger under U.S. federal competition laws, in either case, has not been satisfied at a time when all other closing conditions to JetBlue’s obligations to consummate the Merger have been satisfied (or are capable of being satisfied if the closing were to occur on such date of termination), then (i) solely to the extent that the Remaining Parent Regulatory Fee (as defined in the Merger Agreement) is greater than zero, (A) JetBlue will pay directly to the stockholders of Spirit, as of a record date that is five business days following the date of such termination an amount per Share in cash equal to the Remaining Regulatory Fee Per Share Amount (as defined in the Merger Agreement) and (B) JetBlue will pay to Spirit an amount equal to the Remaining Regulatory Fee Award Amount, in each case, on the second business day following such record date, and (ii) JetBlue will pay Spirit a fee in the amount of $70,000,000 (the “Additional Parent Regulatory Fee”) within two business days following the date of such termination; provided, however, that neither the Remaining Parent Regulatory Fee nor the Additional Parent Regulatory Fee will be payable by JetBlue pursuant to the terms of the Merger Agreement under specified circumstances.
Refer to Note 3 to our condensed consolidated financial statements for further detail of the $3.5 billion Senior Secured Bridge Facility issued to fund the purchase of Spirit.
PriorOn November 3, 2022, 25 individual consumers filed suit in the U.S. District Court for the Northern District of California against JetBlue and Spirit seeking to enjoin the Merger, alleging that it violates Section 7 of the Clayton Act (the “Private Merger Lawsuit”). The lawsuit also seeks to enjoin the NEA. On March 7, 2023, the U.S. Department of Justice, along with the Attorneys General of two states and the District of Columbia filed suit in the U.S. District Court for the District of Massachusetts against JetBlue and Spirit, alleging that the Merger violates Section 7 of the Clayton Act (the “Government Merger Lawsuit”). On March 29, 2023, the Private Merger Lawsuit was transferred to the executionU.S. District Court for the District of Massachusetts. On March 31, 2023, the Attorneys General of four additional states joined the Government Merger Lawsuit. The court set a trial date of October 16, 2023 for the Government Merger Lawsuit. The Private Merger Lawsuit does not yet have a trial date. An adverse ruling in either lawsuit could adversely impact our ability to achieve the intended benefits of the Merger Agreement, Spirit terminated the Agreement and Plancould have an adverse impact on our business, financial condition, and results of Merger (the “Frontier Merger Agreement”), dated as of February 5, 2022, by and among Frontier Group Holdings, Inc., Top Gun Acquisition Corp., and Spirit, in accordance with its terms.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part 1, Item 2 of this Report should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Report and our audited consolidated financial statements and related notes included in our 2022 Form 10-K. 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” of our 2022 Form 10-K and in Part II, Item 1A “Risk Factors” and other parts of this Report.
OVERVIEW
Second Quarter 20222023 Results
Our operating results in the second quarter of 20212023 results were characterized by robust demand for air travel and 2020 were adversely impactedcontinued revenue growth. Despite a challenging operating environment, marked by the COVID-19 pandemic. As a result, comparisons ofAir Traffic Control and weather-related disruptions, we executed on our year-over-year performance are inflated and would not necessarily be indicative of our future operating results. In certain cases, we have also provided comparisons of our second quarter 2022 results to our second quarter 2019 results (or year-over-three), which are better reflective of pre-pandemic operations, allowing for a better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery.cost outlook.
•Second quarter 2023 system capacity increased by 20.2% year-over-year and increased by 2.3% versus5.8% compared to the second quarter of 2019.2022.
•RevenueRecord revenue for the second quarter of 20222023. Revenue increased by 63.1%6.7%, or $946$165 million, year-over-year to $2.4 billion. Compared$2.6 billion compared to the second quarter of 2019, revenue 2022increased by 16.1%, or $340 million.
•Operating revenue per available seat mile ("RASM") for the second quarter of 2022 increased by 35.7% year-over-year to 14.90 cents. This compares to an increase of 13.5% year-over-three.
•Operating expense for the second quarter of 2022 increased by 89.2% to $2.6 billion. Compared to the second quarter of 2019, operating expense increased by 37.8%, or $702 million..
•Operating expense per available seat mile ("CASM"(“CASM”) for the second quarter of 2022 increased2023 decreased by 57.4%12.2% year-over-year to 15.59 cents. This compares13.68 cents compared to an increase of 34.7% from the second quarter of 2019.2022.
•Our operating expense for the second quarter of 2022, 2021,2023 and 20192022 included the effects of special items. Excluding fuel and related taxes, special items, as well asand operating expenses related to our non-airline businesses, our operating expense(1) increased by 16.0%9.2% to $1.6$1.7 billion year-over-year. This compares to an increase of 17.1% compared to the second quarter of 2019. Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for details of the special items.
•Excluding fuel and related taxes, special items, as well asand operating expenses related to our non-airline businesses, our cost per available seat mile ("(“CASM ex-fuel"ex-fuel”)(1) decreasedincreased by (3.5)%3.2% to 9.6910.00 cents in the second quarter of 20222023 compared to the second quarter of 20212022.
•Our reported (loss) diluted earnings per share for the second quarter of 2022, 2021, and 2019 were2023 was $0.41. This compares to a loss per share of $(0.58), $0.20, and $0.59, respectively. for the second quarter of 2022. Excluding special items, mark-to-market and certain gains and losses on our investments, our adjusted earnings (loss) earnings per share(1) for the second quarter of 2023 and 2022 was $(0.47). Excluding special items, our adjusted (loss) diluted earnings per share(1) for the second quarter of 2021$0.45 and 2019 were $(0.65) and $0.60,$(0.47), respectively.
Recent Developments
Network
We added twofurther expanded our presence in the transatlantic market with service from JFK to Paris, France in June 2023.
We announced three new destinations to our network in the second quarter of 2022:2023:
| | | | | | | | |
| Destination | | Service CommencedCommencement |
Vancouver, CanadaAmsterdam | | June 9, 2022Summer 2023 |
Asheville, North CarolinaSt. Kitts and Nevis | | June 16, 2022Fall 2023 |
| Belize City | | Winter 2023 |
Following the success of our inaugural transatlantic service between New York's John F. Kennedy International Airport and London, which began in August 2021, we began service to London from Boston Logan International Airport ("Boston") on August 4, 2022.
In June 2022, we received permanent slots at London Heathrow Airport for flights starting October 29, 2022, which will help secure our long-term future at the iconic global hub. Permanent slots allow us to retain our presence and visibility at the busiest airport in the United Kingdom as we continue to grow our base of transatlantic travelers.
Customer Experience
In June 2022,May 2023, we announcedlaunched a new enhancementsTrueBlue® loyalty program, offering members more value and inventorynew opportunities to Paisly by JetBlue ("Paisly"), a travel website that leverages smart technologyearn perks. New features include:
•Earn Tiles to provide individually tailored offersBuild Your Mosaic, Your Way: Tiles are the new way for TrueBlue® members to our customers based on their itinerary. We believe thattrack progress toward Mosaic status while unlocking valuable perks along the way.
(1) Refer to our ''Regulation“Regulation G Reconciliation of Non-GAAP Financial Measures"Measures” at the end of this section for more information on this non-GAAP measure.
25
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
through Paisley we will add breadth to our product offerings, learn more about our customers' preferences, and contribute to future earnings growth. New and improved features on Paisly include:
•24/7 Customer SupportMore Perks for More Customers: : Paisly has introduced around-the-clock support, which will allow PaislyThe New TrueBlue® gives customers the ability to experience even faster response times (less than five minutes) and get answerschoose the rewards that are most valuable to their travel questions.them.
•Proactive SupportTake Mosaic to the Next Level: : Paisly’s helpful humans willThe new and expanded Mosaic now call Paisly customers in the event their flight changes or cancelscontains four levels, each offering Mosaic Signature Perks to check in with them on how they would like to modify their stay, car, or activity reservation to better match their updated flights.enjoy.
•We expect that these new value enhancements will strengthen customer engagement with the New Activities: Paisly has added new inventory and is offering thousands of activities to add to customers’ trips (including wine tours, watersports, skydiving, and art classes). In addition, customers can earn TrueBlue® points on purchases of activities.
•Increased Inventory of Stays: Paisly now offers exclusive deals on over 4,000 hotel properties and vacation rentals, giving customers more options to choose from when booking their next stay, and even more opportunities to earn Mosaic qualifying points on hotels and activities.
•Refreshed Look and Feel: Paisly's new website has a brand-new look and feel to make it even easier for customers to browse and book exclusive trip deals.
Environmental, Social, and Governance ("ESG")
We remain focused on continuing to lead in ESG initiatives. Our efforts include:
•We announced our commitment to work with the Science Based Targets initiative to set an interim emissions intensity target for our airline operations, in support of our broader commitment to net zero by 2040.
•In April 2022, we announced the execution of an offtake agreement with Aemetis for 125 million gallons of blended sustainable aviation fuel ("SAF") expected to be delivered to JetBlue over 10 years beginning in 2025.
•In April 2022, JetBlue Technology Ventures ("JTV"), our wholly owned subsidiary, announced its investment as a limited partner in TPG Rise Climate, the climate investing strategy of TPG's global impact investing platform TPG Rise, further continuing its commitment to creating a more sustainable travel industry.
•In June 2022, JetBlue began the office "Safe Spaces" certification process with The Stonewall Inn Gives Back Initiative ("SIGBI"). SIGBI leverages the historic significance of the New York City LGBTQ+ landmark to help other communities that don't have the same LGBTQ+ resources or support. As an original SIGBI donor, we are proud to be named the launch airline partner for the organization's Safe Spaces certification program, which identifies travel companies, entertainment venues, food and beverage locations, stores, businesses and other public venues to serve as a Safe Space for members of the LGBTQ+ community.loyalty program.
Outlook for 20222023
We are pleased with the momentum we have seen in demand and revenue trends which accelerated throughout the second quarter. We expect unit revenue for the third quarter of 20222023 to increasedecrease between 19%(8.0%) to 23%(4.0%) compared to the same period in 2019.2022. Full year 2023 revenue is expected to increase 6.0% to 9.0% compared to 2022. For the third quarter and full year of 2022,2023, we expect capacity to decrease in a rangeincrease between 0%5.5% to 3%8.5% compared to the same period in 2019. We believe the sequential step-down in capacity in the third quarter is consistent with the revised capacity plan we announced in April and will set us up for success in the third quarter. Full year 2022 capacity is expected to increase between 0% to 3% compared to 2019. Our original expectation for full year 2022 capacity was an increase of between 11% to 15% versus 2019.2022.
Operating expenses per available seat mile, excluding fuel and related taxes, other non-airline operating expenses, and special items ("We expect CASM Ex-Fuel")Ex-Fuel (1) for the third quarter of 2022 is expected2023 to increase between 15%2.5% to 17%5.5%. This increase is primarily attributed to the following factors:sequential step-down in capacity, timing of maintenance events, and continued operational investments. We expect full year 20222023 CASM Ex-Fuel to increase between 11%1.5% to 14%4.5% compared to 2019 and to return to profitability in the second half of 2022.
(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.
26
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 20222023 vs. 20212022
Overview
We reported a net lossincome of $(188)138 million, operating lossincome of $(113)235 million and an operating margin of (4.6)%9.0% for the three months ended June 30, 2022.2023. This compares to a net incomeloss of $64$188 million, an operating incomeloss of $147$113 million and an operating margin of 9.8%(4.6)% for the three months ended June 30, 2021. Loss2022. Earnings per share was $(0.58)0.41 for the second quarter of 20222023 compared to $0.20 of earningsa $0.58 loss per diluted share for the same period in 2021.2022.
Our reported results for the three months ended June 30, 2023 included the effects of special items and certain gains and losses on our investments. Adjusting for these items, our adjusted net income (1) was $152 million, adjusted operating income (1) was $259 million, adjusted operating margin (1) was 9.9%, and adjusted earnings per share (1) was $0.45 for the three months ended June 30, 2023.
Our reported results for the three months ended June 30, 2022 included the effects of special items and certain gains and losses on our investments.items. Adjusting for these special items(1),our adjusted net loss(1) was $153 million, adjusted operating loss (1) was $(153) million, adjusted operating loss(1) was $(69)$69 million, adjusted operating margin(1)was (2.8)%, and adjusted loss per share(1)was $(0.47) million$0.47 for the three months ended June 30, 2022.
Our reported results for the three months ended June 30, 2021 included the effects of special items. Adjusting for these special items(1),our adjusted net loss(1) was $206 million, adjusted operating loss(1) was $219 million, adjusted operating margin(1) was (14.6)%, and adjusted loss per share was $(0.65) million for the three months ended June 30, 2021.
On-time performance, as defined by the Department of Transportation, or DOT, is arrival within 14 minutes of scheduled arrival time. In the second quarter of 2022,2023, our systemwide on-time performance was 63.2%67.4% compared to 73.8%63.2% for the same
period in 2021.2022. Our completion factor decreasedincreased by (3.6)%2.2% points to 95.6%97.8% in the second quarter of 20222023 from 99.2%95.6% in the same period in 2021.2022.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Revenues
| | (Revenues in millions; percent changes based on unrounded numbers) | (Revenues in millions; percent changes based on unrounded numbers) | Three Months Ended June 30, | | Year-over-Year Change | (Revenues in millions; percent changes based on unrounded numbers) | Three Months Ended June 30, | | Year-over-Year Change |
| 2022 | | 2021 | | $ | | % | 2023 | | 2022 | | $ | | % |
| Passenger revenue | Passenger revenue | $ | 2,302 | | | $ | 1,388 | | | $ | 914 | | | 65.8 | % | | Passenger revenue | $ | 2,460 | | | $ | 2,302 | | | $ | 158 | | | 6.9 | % | |
| Other revenue | Other revenue | 143 | | | 111 | | | 32 | | | 29.6 | | | Other revenue | 150 | | | 143 | | | 7 | | | 4.8 | % | |
| Total operating revenues | Total operating revenues | $ | 2,445 | | | $ | 1,499 | | | $ | 946 | | | 63.1 | % | | Total operating revenues | $ | 2,610 | | | $ | 2,445 | | | $ | 165 | | | 6.7 | % | |
| | Average Fare | Average Fare | $ | 221.38 | | | $ | 174.90 | | | $ | 46.48 | | | 26.6 | % | | Average Fare | $ | 219.47 | | | $ | 221.38 | | | $ | (1.91) | | | (0.9) | % | |
| Yield per passenger mile (cents) | Yield per passenger mile (cents) | 16.48 | | | 12.82 | | | 3.66 | | | 28.5 | | | Yield per passenger mile (cents) | 16.62 | | | 16.48 | | | 0.14 | | | 0.8 | | |
| Passenger revenue per ASM (cents) | Passenger revenue per ASM (cents) | 14.03 | | | 10.18 | | | 3.85 | | | 37.9 | | | Passenger revenue per ASM (cents) | 14.17 | | | 14.03 | | | 0.14 | | | 1.0 | | |
| Operating revenue per ASM (cents) | Operating revenue per ASM (cents) | 14.90 | | | 10.99 | | | 3.91 | | | 35.7 | | | Operating revenue per ASM (cents) | 15.04 | | | 14.90 | | | 0.14 | | | 0.9 | | |
| Average stage length (miles) | Average stage length (miles) | 1,233 | | | 1,279 | | | (46) | | | (3.6) | | | Average stage length (miles) | 1,218 | | | 1,233 | | | (15) | | | (1.2) | | |
| Revenue passengers (thousands) | Revenue passengers (thousands) | 10,396 | | | 7,938 | | | 2,458 | | | 31.0 | | | Revenue passengers (thousands) | 11,207 | | | 10,396 | | | 811 | | | 7.8 | | |
| Revenue passenger miles (millions) | Revenue passenger miles (millions) | 13,967 | | | 10,804 | | | 3,163 | | | 29.3 | | | Revenue passenger miles (millions) | 14,798 | | | 13,967 | | | 831 | | | 5.9 | | |
| Available Seat Miles (ASMs) (millions) | Available Seat Miles (ASMs) (millions) | 16,405 | | | 13,645 | | | 2,760 | | | 20.2 | | | Available Seat Miles (ASMs) (millions) | 17,353 | | | 16,405 | | | 948 | | | 5.8 | | |
| Load Factor | Load Factor | 85.1 | % | | 79.2 | % | | 5.9 | | pts. | Load Factor | 85.3 | % | | 85.1 | % | | 0.2 | | pts. |
Passenger revenue is our primary source of revenue, which includes seat revenue and baggage fees, as well as revenue from our ancillary product offerings such as Even More® Space. The increase in passenger revenue of $914158 million, or 65.8%6.9%, for the three months ended June 30, 20222023 compared to the same period in 2021,2022, was primarily driven by the return indue to robust demand for travel as we continueair travel. ASMs increased 5.8% in the second quarter of 2023 compared to recover from the COVID-19 pandemic.2022 period. Revenue passengers increased to 10.411.2 million for the three months ended June 30, 20222023 from 7.910.4 million for the same period in 2021.2022.
(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.
27
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
In detail, our operating costs per available seat mile, or ASM, were as follows:
| | (in millions; per ASM data in cents; percent changes based on unrounded numbers) | (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Three Months Ended June 30, | | Year-over-Year Change | | Cents per ASM | (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Three Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | % Change | 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | % Change |
| Aircraft fuel and related taxes | Aircraft fuel and related taxes | $ | 910 | | | $ | 336 | | | $ | 574 | | | 170.7 | % | | 5.55 | | | 2.46 | | | 125.2 | % | Aircraft fuel and related taxes | $ | 599 | | | $ | 910 | | | $ | (311) | | | (34.2) | % | | 3.45 | | | 5.55 | | | (37.8) | % |
| Salaries, wages and benefits | Salaries, wages and benefits | 695 | | | 577 | | | 118 | | | 20.4 | | | 4.23 | | | 4.23 | | | 0.2 | | Salaries, wages and benefits | 772 | | | 695 | | | 77 | | | 11.2 | | | 4.44 | | | 4.23 | | | 5.1 | |
| Landing fees and other rents | Landing fees and other rents | 149 | | | 174 | | | (25) | | | (14.4) | | | 0.91 | | | 1.27 | | | (28.8) | | Landing fees and other rents | 163 | | | 149 | | | 14 | | | 9.4 | | | 0.94 | | | 0.91 | | | 3.5 | |
| Depreciation and amortization | Depreciation and amortization | 145 | | | 133 | | | 12 | | | 8.4 | | | 0.88 | | | 0.98 | | | (9.8) | | Depreciation and amortization | 155 | | | 145 | | | 10 | | | 7.2 | | | 0.89 | | | 0.88 | | | 1.3 | |
| Aircraft rent | Aircraft rent | 27 | | | 26 | | | 1 | | | 5.0 | | | 0.17 | | | 0.19 | | | (12.7) | | Aircraft rent | 34 | | | 27 | | | 7 | | | 25.6 | | | 0.20 | | | 0.17 | | | 18.7 | |
| Sales and marketing | Sales and marketing | 78 | | | 47 | | | 31 | | | 65.1 | | | 0.48 | | | 0.35 | | | 37.4 | | Sales and marketing | 82 | | | 78 | | | 4 | | | 4.1 | | | 0.47 | | | 0.48 | | | (1.6) | |
| Maintenance, materials and repairs | 162 | | | 164 | | | (2) | | | (1.3) | | | 0.98 | | | 1.20 | | | (17.9) | | |
| Maintenance, materials, and repairs | | Maintenance, materials, and repairs | 170 | | | 162 | | | 8 | | | 5.0 | | | 0.98 | | | 0.98 | | | (0.8) | |
| Other operating expenses | Other operating expenses | 348 | | | 261 | | | 87 | | | 33.6 | | | 2.12 | | | 1.91 | | | 11.1 | | Other operating expenses | 376 | | | 348 | | | 28 | | | 7.9 | | | 2.17 | | | 2.12 | | | 2.0 | |
| Special items | Special items | 44 | | | (366) | | | 410 | | | (112.1) | | | 0.27 | | | (2.68) | | | (110.0) | | Special items | 24 | | | 44 | | | (20) | | | (45.6) | | | 0.14 | | | 0.27 | | | (48.6) | |
| Total operating expenses | Total operating expenses | $ | 2,558 | | | $ | 1,352 | | | $ | 1,206 | | | 89.2 | % | | 15.59 | | | 9.91 | | | 57.4 | % | Total operating expenses | $ | 2,375 | | | $ | 2,558 | | | $ | (183) | | | (7.2) | % | | 13.68 | | | 15.59 | | | (12.2) | % |
| Total operating expenses excluding special items(1) | Total operating expenses excluding special items(1) | $ | 2,514 | | | $ | 1,718 | | | $ | 796 | | | 46.3 | % | | 15.32 | | | 12.59 | | | 21.7 | % | Total operating expenses excluding special items (1) | $ | 2,351 | | | $ | 2,514 | | | $ | (163) | | | (6.5) | % | | 13.54 | | | 15.32 | | | (11.6) | % |
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes increaseddecreased by $574311 million, or 34.2%, for the three months ended June 30, 20222023 compared to the same period in 2021.2022. The average fuel price for the three months ended June 30, 2022 increaseddecreased by 121.6%37.9% to $4.24$2.63 per gallon. Our fuel consumption for this periodThis increaseddecrease was partially offset by 22.2%a 6.1%, or 3913 million gallons, increase in fuel consumption due to the increase in capacity as demand for travel returned.higher capacity.
Salaries, Wages and Benefits
Salaries, wages and benefits increased $118$77 million, or 20.4%11.2%, for the three months ended June 30, 20222023 compared to the same period in 2021.2022, driven by higher wage rates. The wage rate increase was driven primarily by higher total hours worked by our crewmembers as we align our workforce with the increased demand for travel and the need for premium and incentive pay to support our operation. As of June 30, 2022, we have approximately 24,000 crewmembers compared to approximately 20,000 crewmembers at June 30, 2021. The average number of full-time equivalent crewmembers increased by 28.9% compareddue to the same periodnew pilot union contract effective March 1, 2023, which included an initial pay rate increase of 14% as discussed in 2021.Note 6. Non-pilot crewmember wage rates also contributed to the increase.
Landing Fees and Other Rents
Landing fees and other rents decreased $25increased $14 million, or (14.4)%9.4%, for the three months ended June 30, 20222023 compared to the same period in 2021 primar2022, ilyprimarily due to a decrease in rates offset by an6.7% increase in departures.departures and rate increases at certain blue cities.
Depreciation and Amortization
Depreciation and amortization increased $12$10 million, or 8.4%7.2%, for the three months ended June 30, 20222023 compared to the same period in 2021 2022. This increase was primarily driven by 11 aircraft and 19 spare engine deliveries since the additionsecond quarter of 2022.
Aircraft Rent
Aircraft rent 12increased $7 million, or 25.6% new aircraft that were placed into service since, in the three months ended June 30, 2021. The average number2023 compared to the same period in 2022 as a result of lease return compensation cost and incremental engine leases.
Maintenance, Materials, and Repairs
Maintenance materials and repairs increased $8 million, or 5.0%, in the three months ended June 30, 2023 compared to the same period in 2022, primarily driven by timing of heavy maintenance visits, aging of our fleet and increased flying.
Other Operating Expenses
Other operating aircraft 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.
Other operating expenses increased $28 million, or 7.9%, for the three months ended June 30, 2023 compared to the same period in 2022, primarily driven by 5.3% duringan increase in demand. Our ASM increased 5.8% year-over-year.
Special Items
For the three months ended June 30, 2023, special items included the following:
•$24 million relating to Spirit acquisition costs.
For the three months ended June 30, 2022, special items included the following:
•$32 million relating to union contract costs;
•$7 million relating to Spirit acquisition; and
•$5 million relating to an impairment on our Embraer E190 fleet.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 2023 vs. 2022
Overview
We reported a net loss of $54 million, an operating loss of $7 million and an operating margin of (0.1)% for the six months ended June 30, 2023. This compares to a net loss of $443 million, an operating loss of $480 million and an operating margin of (11.5)% for the six months ended June 30, 2022. Loss per share was $0.16 for the six months ended June 30, 2023 compared to a loss per share of $1.38 for the same period in 2022.
Our reported results for the six months ended June 30, 2023 included the effects of special items and certain gains and losses on investments. Adjusted for these items, our adjusted net income (1) was $29 million, adjusted operating income (1) was $129 million, adjusted operating margin (1) was 2.6%, and adjusted earnings per share (1) was $0.10 for the six months ended June 30, 2023.
Our reported results for the six months ended June 30, 2022 included the effects of special items. Adjusting for these special items, our adjusted net loss (1) was $408 million, adjusted operating loss (1) was $436 million, adjusted operating margin(1) was (10.4)%, and adjusted loss per share (1) was $1.27 for the six months ended June 30, 2022.
Operating Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Revenues in millions; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change |
| 2023 | | 2022 | | $ | | % |
| Passenger revenue | $ | 4,641 | | | $ | 3,904 | | | $ | 737 | | | 18.9 | % | |
| Other revenue | 296 | | | 277 | | | 19 | | | 7.0 | | |
| Total operating revenues | $ | 4,937 | | | $ | 4,181 | | | $ | 756 | | | 18.1 | % | |
| | | | | | | | |
| Average Fare | $ | 216.90 | | | $ | 210.20 | | | $ | 6.70 | | | 3.2 | % | |
| Yield per passenger mile (cents) | 16.47 | | | 15.68 | | | 0.79 | | | 5.0 | | |
| Passenger revenue per ASM (cents) | 13.60 | | | 12.28 | | | 1.32 | | | 10.7 | | |
| Operating revenue per ASM (cents) | 14.47 | | | 13.15 | | | 1.32 | | | 10.0 | | |
| Average stage length (miles) | 1,208 | | | 1,232 | | | (24) | | | (1.9) | | |
| Revenue passengers (thousands) | 21,398 | | | 18,573 | | | 2,825 | | | 15.2 | | |
| Revenue passenger miles (millions) | 28,173 | | | 24,893 | | | 3,280 | | | 13.2 | | |
| Available Seat Miles (ASMs) (millions) | 34,122 | | | 31,788 | | | 2,334 | | | 7.3 | | |
| Load Factor | 82.6 | % | | 78.3 | % | | | | 4.3 | | pts. |
Passenger revenue is our primary source of revenue, which includes seat revenue and baggage fees, as well as revenue from our ancillary product offerings such as Even More® Space. The increase in passenger revenue of $737 million, or 18.9%, for the six months ended June 30, 2023 compared to the same period in 2021.2022 was primarily due to robust demand for air travel. ASMs increased 7.3% year-over-year and passenger revenue per ASM increased 10.7%. Revenue passengers increased by 15.2% to 21.4 million for the six months ended June 30, 2023 from 18.6 million for the same period in 2022.
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, airport concessions and advertising revenue. The year-over-year increase in other revenue of $19 million, or 7.0%, was principally driven by an increase in marketing revenue associated with our TrueBlue® program due to higher customer spend and acquisitions.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
In detail, our operating costs per ASM, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | % Change |
| Aircraft fuel and related taxes | $ | 1,365 | | | $ | 1,481 | | | $ | (116) | | | (7.9) | % | | 4.00 | | | 4.66 | | | (14.2) | % |
| Salaries, wages and benefits | 1,514 | | | 1,383 | | | 131 | | | 9.5 | | | 4.43 | | | 4.34 | | | 2.0 | |
| Landing fees and other rents | 323 | | | 281 | | | 42 | | | 14.9 | | | 0.95 | | | 0.88 | | | 7.1 | |
| Depreciation and amortization | 306 | | | 288 | | | 18 | | | 6.4 | | | 0.90 | | | 0.91 | | | (0.9) | |
| Aircraft rent | 66 | | | 53 | | | 13 | | | 25.0 | | | 0.19 | | | 0.17 | | | 16.5 | |
| Sales and marketing | 157 | | | 135 | | | 22 | | | 16.2 | | | 0.46 | | | 0.42 | | | 8.3 | |
| Maintenance, materials and repairs | 345 | | | 313 | | | 32 | | | 9.9 | | | 1.01 | | | 0.99 | | | 2.4 | |
| Other operating expenses | 732 | | | 683 | | | 49 | | | 7.4 | | | 2.15 | | | 2.15 | | | 0.1 | |
| Special items | 136 | | | 44 | | | 92 | | | NM (2) | | 0.40 | | | 0.14 | | | NM |
| Total operating expenses | $ | 4,944 | | | $ | 4,661 | | | $ | 283 | | | 6.1 | % | | 14.49 | | | 14.66 | | | (1.2) | % |
| | | | | | | | | | | | | |
Total operating expenses excluding special items (1) | $ | 4,808 | | | $ | 4,617 | | | $ | 191 | | | 4.2 | % | | 14.09 | | | 14.52 | | | (3.0) | % |
(2) Not meaningful or greater than 100% change.
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes decreased by $116 million, or 7.9%, for the six months ended June 30, 2023 compared to the same period in 2022. The average fuel price for the six months ended June 30, 2023 decreased by 15.1% to $3.06 per gallon. The decrease in fuel price was partially offset by a 8.5%, or 35 million gallons, increase in fuel consumption due to higher capacity.
Salaries, Wages and Benefits
Salaries, wages and benefits increased by $131 million, or 9.5%, for the six months ended June 30, 2023 compared to the same period in 2022, driven by a mix of wage rate increases and more full-time equivalent (“FTE”) crew members. The wage rate increases were primarily due to the new pilot union contract effective March 1, 2023, which includes an initial pay rate increase of 14%. Non-pilot crew member wage rates also contributed to the increase. The average number of FTEs increased by 4.3% compared to the same period in 2022.
Landing Fees and Other Rents
Landing fees and other rents increased by $42 million, or 14.9%, for the six months ended June 30, 2023 compared to the same period in 2022, primarily due to a 9.1% increase in departures and rate increases at certain blue cities.
Depreciation and Amortization
Depreciation and amortization increased by $18 million, or 6.4%, for the six months ended June 30, 2023 compared to the same period in 2022. This increase was primarily driven by 11 aircraft and 19 spare engine deliveries since the second quarter of 2022.
Aircraft Rent
Aircraft rent increased $13 million, or 25.0%, in the six months ended June 30, compared to the same period in 2022 as a result of lease return compensation cost and incremental engine leases.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales and MarketingOperating Expenses
Sales and marketing increased $31 million, or 65.1%, for the three months ended June 30, 2022 compared to the same period in 2021 principally driven by higher credit card fees and computer reservation system charges, which are directly related to the return in demandIn detail, our operating costs per ASM, were as we continue to recover from the COVID-19 pandemic. Revenue passengers increased by 2.5 million, or 31.0%, during the three months ended June 30, 2022 as compared to the same period in 2021.follows:
Maintenance Materials and Repairs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Three Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | % Change |
| Aircraft fuel and related taxes | $ | 599 | | | $ | 910 | | | $ | (311) | | | (34.2) | % | | 3.45 | | | 5.55 | | | (37.8) | % |
| Salaries, wages and benefits | 772 | | | 695 | | | 77 | | | 11.2 | | | 4.44 | | | 4.23 | | | 5.1 | |
| Landing fees and other rents | 163 | | | 149 | | | 14 | | | 9.4 | | | 0.94 | | | 0.91 | | | 3.5 | |
| Depreciation and amortization | 155 | | | 145 | | | 10 | | | 7.2 | | | 0.89 | | | 0.88 | | | 1.3 | |
| Aircraft rent | 34 | | | 27 | | | 7 | | | 25.6 | | | 0.20 | | | 0.17 | | | 18.7 | |
| Sales and marketing | 82 | | | 78 | | | 4 | | | 4.1 | | | 0.47 | | | 0.48 | | | (1.6) | |
| Maintenance, materials, and repairs | 170 | | | 162 | | | 8 | | | 5.0 | | | 0.98 | | | 0.98 | | | (0.8) | |
| Other operating expenses | 376 | | | 348 | | | 28 | | | 7.9 | | | 2.17 | | | 2.12 | | | 2.0 | |
| Special items | 24 | | | 44 | | | (20) | | | (45.6) | | | 0.14 | | | 0.27 | | | (48.6) | |
| Total operating expenses | $ | 2,375 | | | $ | 2,558 | | | $ | (183) | | | (7.2) | % | | 13.68 | | | 15.59 | | | (12.2) | % |
| | | | | | | | | | | | | |
Total operating expenses excluding special items (1) | $ | 2,351 | | | $ | 2,514 | | | $ | (163) | | | (6.5) | % | | 13.54 | | | 15.32 | | | (11.6) | % |
(1) Refer to our ''Regulation“Regulation G Reconciliation of Non-GAAP Financial Measures"Measures” at the end of this section for more information on this non-GAAP measure.
28
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Maintenance materialsAircraft Fuel and repairsRelated Taxes
Aircraft fuel and related taxes decreased $2 by $311 million, or (1.3)%34.2%, for the three months ended June 30, 20222023 compared to the same period in 2021, 2022. The average fuel price decreased by 37.9% to $2.63 per gallon. This decrease was partially offset by a 6.1%, or 13 million gallons, increase in fuel consumption due to higher capacity.
Salaries, Wages and Benefits
Salaries, wages and benefits increased $77 million, or 11.2%, for the three months ended June 30, 2023 compared to the same period in 2022, 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% as discussed in Note 6. Non-pilot crewmember wage rates also contributed to the increase.
Landing Fees and Other Rents
Landing fees and other rents increased $14 million, or 9.4%, for the three months ended June 30, 2023 compared to the same period in 2022, primarily due to a 6.7% increase in departures and rate increases at certain blue cities.
Depreciation and Amortization
Depreciation and amortization increased $10 million, or 7.2%, for the three months ended June 30, 2023 compared to the same period in 2022. This increase was primarily driven by 11 aircraft and 19 spare engine deliveries since the second quarter of 2022.
Aircraft Rent
Aircraft rent increased $7 million, or 25.6%, in the three months ended June 30, 2023 compared to the same period in 2022 as a result of lease return compensation cost and incremental engine leases.
Maintenance, Materials, and Repairs
Maintenance materials and repairs increased $8 million, or 5.0%, in the three months ended June 30, 2023 compared to the same period in 2022, primarily driven by timing of engine maintenance, offset by an increase in heavy maintenance visits, aging of our fleet and power by the hour based maintenance driven by the increase in aircraft utilization.increased flying.
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 janitorialcatering services), insurance, personnel expenses, professional and legal fees, onboard supplies, shop and office supplies, bad debts, communication costs, and taxes other than payroll and fuel taxes.
Other operating expenses increased $87$28 million, or 33.6%7.9%, for the three months ended June 30, 20222023 compared to the same period in 2021 as we ramped up the level of our operations2022, primarily driven by an increase in response to the return in demand for air travel.demand. Our ASM increased 5.8% year-over-year.
Special Items
For the three months ended June 30, 2023, special items included the following:
•$24 million relating to Spirit acquisition costs.
For the three months ended June 30, 2022, special items included:included the following:
•$32 million relating to an ALPA ratification bonus and associated payroll taxes;union contract costs;
•$7 million relating to our takeover bid for Spirit;Spirit acquisition; and
•$5 million relating to an impairment on our Embraer E190 fleet;
Special items for the three months ended June 30, 2021 included the following:
•Contra-expense of $357 million which represents the amount of federal payroll support grants utilized during the period; and
•Contra-expense of $9 million related to the recognition of Employee Retention Credits provided by the CARES Act.
Six Months Ended June 30, 2022 vs. 2021
Overview
We reported a net loss of $443 million, an operating loss of $480 million and an operating margin of (11.5)% for the six months ended June 30, 2022. This compares to a net loss of $183 million, an operating loss of $147 million and an operating margin of (6.6)% for the six months ended June 30, 2021. Loss per share was $(1.38) for the six months ended June 30, 2022 compared to $(0.58) for the same period in 2021.
Our reported results for the six months ended June 30, 2022 included the effects of special items and certain gains and losses on investments. Adjusted for these items, our adjusted net loss(1) was $408 million, adjusted operating loss(1) was $436 million, adjusted operating margin(1) was (10.4)%, and adjusted loss per share(1) was $(1.27) for the six months ended June 30, 2022.
Our reported results for the six months ended June 30, 2021 included the effects of special items. Adjusting for these special items, our adjusted net loss(1) was $665 million, adjusted operating loss(1) was $802 million, adjusted operating margin(1) was (35.9)%, and adjusted loss per share(1) was $(2.10) for the six months ended June 30, 2021.fleet.
(1) Refer to our ''Regulation“Regulation G Reconciliation of Non-GAAP Financial Measures"Measures” at the end of this section for more information on this non-GAAP measure.
29
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 2023 vs. 2022
Overview
We reported a net loss of $54 million, an operating loss of $7 million and an operating margin of (0.1)% for the six months ended June 30, 2023. This compares to a net loss of $443 million, an operating loss of $480 million and an operating margin of (11.5)% for the six months ended June 30, 2022. Loss per share was $0.16 for the six months ended June 30, 2023 compared to a loss per share of $1.38 for the same period in 2022.
Our reported results for the six months ended June 30, 2023 included the effects of special items and certain gains and losses on investments. Adjusted for these items, our adjusted net income (1) was $29 million, adjusted operating income (1) was $129 million, adjusted operating margin (1) was 2.6%, and adjusted earnings per share (1) was $0.10 for the six months ended June 30, 2023.
Our reported results for the six months ended June 30, 2022 included the effects of special items. Adjusting for these special items, our adjusted net loss (1) was $408 million, adjusted operating loss (1) was $436 million, adjusted operating margin(1) was (10.4)%, and adjusted loss per share (1) was $1.27 for the six months ended June 30, 2022.
Operating Revenues
| | (Revenues in millions; percent changes based on unrounded numbers) | (Revenues in millions; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change | (Revenues in millions; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change |
| 2022 | | 2021 | | $ | | % | 2023 | | 2022 | | $ | | % |
| Passenger revenue | Passenger revenue | $ | 3,904 | | | $ | 2,058 | | | $ | 1,846 | | | 89.7 | % | | Passenger revenue | $ | 4,641 | | | $ | 3,904 | | | $ | 737 | | | 18.9 | % | |
| Other revenue | Other revenue | 277 | | | 174 | | | 103 | | | 59.2 | | | Other revenue | 296 | | | 277 | | | 19 | | | 7.0 | | |
| Total operating revenues | Total operating revenues | $ | 4,181 | | | $ | 2,232 | | | $ | 1,949 | | | 87.4 | % | | Total operating revenues | $ | 4,937 | | | $ | 4,181 | | | $ | 756 | | | 18.1 | % | |
| | Average Fare | Average Fare | $ | 210.20 | | | $ | 165.93 | | | $ | 44.27 | | | 26.7 | % | | Average Fare | $ | 216.90 | | | $ | 210.20 | | | $ | 6.70 | | | 3.2 | % | |
| Yield per passenger mile (cents) | Yield per passenger mile (cents) | 15.68 | | | 12.39 | | | 3.29 | | | 26.6 | | | Yield per passenger mile (cents) | 16.47 | | | 15.68 | | | 0.79 | | | 5.0 | | |
| Passenger revenue per ASM (cents) | Passenger revenue per ASM (cents) | 12.28 | | | 9.05 | | | 3.23 | | | 35.7 | | | Passenger revenue per ASM (cents) | 13.60 | | | 12.28 | | | 1.32 | | | 10.7 | | |
| Operating revenue per ASM (cents) | Operating revenue per ASM (cents) | 13.15 | | | 9.82 | | | 3.33 | | | 34.0 | | | Operating revenue per ASM (cents) | 14.47 | | | 13.15 | | | 1.32 | | | 10.0 | | |
| Average stage length (miles) | Average stage length (miles) | 1,232 | | | 1,278 | | | (46) | | | (3.6) | | | Average stage length (miles) | 1,208 | | | 1,232 | | | (24) | | | (1.9) | | |
| Revenue passengers (thousands) | Revenue passengers (thousands) | 18,573 | | | 12,401 | | | 6,172 | | | 49.8 | | | Revenue passengers (thousands) | 21,398 | | | 18,573 | | | 2,825 | | | 15.2 | | |
| Revenue passenger miles (millions) | Revenue passenger miles (millions) | 24,893 | | | 16,611 | | | 8,282 | | | 49.9 | | | Revenue passenger miles (millions) | 28,173 | | | 24,893 | | | 3,280 | | | 13.2 | | |
| Available Seat Miles (ASMs) (millions) | Available Seat Miles (ASMs) (millions) | 31,788 | | | 22,734 | | | 9,054 | | | 39.8 | | | Available Seat Miles (ASMs) (millions) | 34,122 | | | 31,788 | | | 2,334 | | | 7.3 | | |
| Load Factor | Load Factor | 78.3 | % | | 73.1 | % | | 5.2 | | pts. | Load Factor | 82.6 | % | | 78.3 | % | | 4.3 | | pts. |
Passenger revenue is our primary source of revenue, which includes seat revenue and baggage fees, as well as revenue from our ancillary product offerings such as Even More® Space. The increase in passenger revenue of $1.8 billion,$737 million, or 89.7%18.9%, for the six months ended June 30, 20222023 compared to the same period in 2021,2022 was primarily driven by the return indue to robust demand for travelair travel. ASMs increased 7.3% year-over-year and a 26.7% increase in fare, as we continue to recover from the COVID-19 pandemic.passenger revenue per ASM increased 10.7%. Revenue passengers increased by 49.8%15.2% to 18.621.4 million for the six months ended June 30, 20222023 from 12.418.6 million for the same period in 2021.2022.
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, airport concessions and advertising revenue. The year-over-year increase in other revenue of $19 million, or 7.0%, was principally driven by an increase in marketing revenue associated with our TrueBlue® program due to higher customer spend and acquisitions.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
In detail, our operating costs per ASM, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | % Change |
| Aircraft fuel and related taxes | $ | 1,365 | | | $ | 1,481 | | | $ | (116) | | | (7.9) | % | | 4.00 | | | 4.66 | | | (14.2) | % |
| Salaries, wages and benefits | 1,514 | | | 1,383 | | | 131 | | | 9.5 | | | 4.43 | | | 4.34 | | | 2.0 | |
| Landing fees and other rents | 323 | | | 281 | | | 42 | | | 14.9 | | | 0.95 | | | 0.88 | | | 7.1 | |
| Depreciation and amortization | 306 | | | 288 | | | 18 | | | 6.4 | | | 0.90 | | | 0.91 | | | (0.9) | |
| Aircraft rent | 66 | | | 53 | | | 13 | | | 25.0 | | | 0.19 | | | 0.17 | | | 16.5 | |
| Sales and marketing | 157 | | | 135 | | | 22 | | | 16.2 | | | 0.46 | | | 0.42 | | | 8.3 | |
| Maintenance, materials and repairs | 345 | | | 313 | | | 32 | | | 9.9 | | | 1.01 | | | 0.99 | | | 2.4 | |
| Other operating expenses | 732 | | | 683 | | | 49 | | | 7.4 | | | 2.15 | | | 2.15 | | | 0.1 | |
| Special items | 136 | | | 44 | | | 92 | | | NM (2) | | 0.40 | | | 0.14 | | | NM |
| Total operating expenses | $ | 4,944 | | | $ | 4,661 | | | $ | 283 | | | 6.1 | % | | 14.49 | | | 14.66 | | | (1.2) | % |
| | | | | | | | | | | | | |
Total operating expenses excluding special items (1) | $ | 4,808 | | | $ | 4,617 | | | $ | 191 | | | 4.2 | % | | 14.09 | | | 14.52 | | | (3.0) | % |
(2) Not meaningful or greater than 100% change.
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes decreased by $116 million, or 7.9%, for the six months ended June 30, 2023 compared to the same period in 2022. The average fuel price for the six months ended June 30, 2023 decreased by 15.1% to $3.06 per gallon. The decrease in fuel price was partially offset by a 8.5%, or 35 million gallons, increase in fuel consumption due to higher capacity.
Salaries, Wages and Benefits
Salaries, wages and benefits increased by $131 million, or 9.5%, for the six months ended June 30, 2023 compared to the same period in 2022, driven by a mix of wage rate increases and more full-time equivalent (“FTE”) crew members. The wage rate increases were primarily due to the new pilot union contract effective March 1, 2023, which includes an initial pay rate increase of 14%. Non-pilot crew member wage rates also contributed to the increase. The average number of FTEs increased by 4.3% compared to the same period in 2022.
Landing Fees and Other Rents
Landing fees and other rents increased by $42 million, or 14.9%, for the six months ended June 30, 2023 compared to the same period in 2022, primarily due to a 9.1% increase in departures and rate increases at certain blue cities.
Depreciation and Amortization
Depreciation and amortization increased by $18 million, or 6.4%, for the six months ended June 30, 2023 compared to the same period in 2022. This increase was primarily driven by 11 aircraft and 19 spare engine deliveries since the second quarter of 2022.
Aircraft Rent
Aircraft rent increased $13 million, or 25.0%, in the six months ended June 30, compared to the same period in 2022 as a result of lease return compensation cost and incremental engine leases.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
In detail, our operating costs per available seat mile, or ASM, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | % Change |
| Aircraft fuel and related taxes | $ | 1,481 | | | $ | 530 | | | $ | 951 | | | 179.6 | % | | 4.66 | | | 2.33 | | | 100.0 | % |
| Salaries, wages and benefits | 1,383 | | | 1,098 | | | 285 | | | 25.9 | | | 4.34 | | | 4.83 | | | (10.0) | |
| Landing fees and other rents | 281 | | | 289 | | | (8) | | | (2.8) | | | 0.88 | | | 1.27 | | | (30.5) | |
| Depreciation and amortization | 288 | | | 258 | | | 30 | | | 11.6 | | | 0.91 | | | 1.13 | | | (20.2) | |
| Aircraft rent | 53 | | | 50 | | | 3 | | | 4.6 | | | 0.17 | | | 0.22 | | | (25.2) | |
| Sales and marketing | 135 | | | 70 | | | 65 | | | 93.4 | | | 0.42 | | | 0.31 | | | 38.3 | |
| Maintenance, materials and repairs | 313 | | | 268 | | | 45 | | | 17.0 | | | 0.99 | | | 1.18 | | | (16.3) | |
| Other operating expenses | 683 | | | 471 | | | 212 | | | 45.0 | | | 2.15 | | | 2.07 | | | 3.7 | |
| Special items | 44 | | | (655) | | | 699 | | | 106.8 | | | 0.14 | | | (2.88) | | | 104.8 | |
| Total operating expenses | $ | 4,661 | | | $ | 2,379 | | | $ | 2,282 | | | 95.9 | % | | 14.66 | | | 10.46 | | | 40.1 | % |
| | | | | | | | | | | | | |
Total operating expenses excluding special items(1) | $ | 4,617 | | | $ | 3,034 | | | $ | 1,583 | | | 52.2 | % | | 14.52 | | | 13.34 | | | 8.8 | % |
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes increased by $951 million, or 179.6%, for the six months ended June 30, 2022 compared to the same period in 2021. The average fuel price for the six months ended June 30, 2022 increased by 95.7% to $3.60 per gallon. Our fuel consumption increased by 42.8%, or 123 million gallons, due to the increase in capacity as demand for travel returned. Scheduled departures increased to 161,848 flights, or 45.4%, for the six months ended June 30, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Three Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | % Change |
| Aircraft fuel and related taxes | $ | 599 | | | $ | 910 | | | $ | (311) | | | (34.2) | % | | 3.45 | | | 5.55 | | | (37.8) | % |
| Salaries, wages and benefits | 772 | | | 695 | | | 77 | | | 11.2 | | | 4.44 | | | 4.23 | | | 5.1 | |
| Landing fees and other rents | 163 | | | 149 | | | 14 | | | 9.4 | | | 0.94 | | | 0.91 | | | 3.5 | |
| Depreciation and amortization | 155 | | | 145 | | | 10 | | | 7.2 | | | 0.89 | | | 0.88 | | | 1.3 | |
| Aircraft rent | 34 | | | 27 | | | 7 | | | 25.6 | | | 0.20 | | | 0.17 | | | 18.7 | |
| Sales and marketing | 82 | | | 78 | | | 4 | | | 4.1 | | | 0.47 | | | 0.48 | | | (1.6) | |
| Maintenance, materials, and repairs | 170 | | | 162 | | | 8 | | | 5.0 | | | 0.98 | | | 0.98 | | | (0.8) | |
| Other operating expenses | 376 | | | 348 | | | 28 | | | 7.9 | | | 2.17 | | | 2.12 | | | 2.0 | |
| Special items | 24 | | | 44 | | | (20) | | | (45.6) | | | 0.14 | | | 0.27 | | | (48.6) | |
| Total operating expenses | $ | 2,375 | | | $ | 2,558 | | | $ | (183) | | | (7.2) | % | | 13.68 | | | 15.59 | | | (12.2) | % |
| | | | | | | | | | | | | |
Total operating expenses excluding special items (1) | $ | 2,351 | | | $ | 2,514 | | | $ | (163) | | | (6.5) | % | | 13.54 | | | 15.32 | | | (11.6) | % |
(1) Refer to our ''Regulation“Regulation G Reconciliation of Non-GAAP Financial Measures"Measures” at the end of this section for more information on this non-GAAP measure.
30
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes decreased by $311 million, or 34.2%, for the three months ended June 30, 2023 compared to the same period in 2022. The average fuel price decreased by 37.9% to $2.63 per gallon. This decrease was partially offset by a 6.1%, or 13 million gallons, increase in fuel consumption due to higher capacity.
Salaries, Wages and Benefits
Salaries, wages and benefits increased $77 million, or 11.2%, for the three months ended June 30, 2023 compared to the same period in 2022, 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% as discussed in Note 6. Non-pilot crewmember wage rates also contributed to the increase.
Landing Fees and Other Rents
Landing fees and other rents increased $14 million, or 9.4%, for the three months ended June 30, 2023 compared to the same period in 2022, primarily due to a 6.7% increase in departures and rate increases at certain blue cities.
Depreciation and Amortization
Depreciation and amortization increased $10 million, or 7.2%, for the three months ended June 30, 2023 compared to the same period in 2022. This increase was primarily driven by 11 aircraft and 19 spare engine deliveries since the second quarter of 2022.
Aircraft Rent
Aircraft rent increased $7 million, or 25.6%, in the three months ended June 30, 2023 compared to the same period in 2022 as a result of lease return compensation cost and incremental engine leases.
Maintenance, Materials, and Repairs
Maintenance materials and repairs increased $8 million, or 5.0%, in the three months ended June 30, 2023 compared to the same period in 2022, primarily driven by timing of heavy maintenance visits, aging of our fleet and increased flying.
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.
Other operating expenses increased $28 million, or 7.9%, for the three months ended June 30, 2023 compared to the same period in 2022, primarily driven by an increase in demand. Our ASM increased 5.8% year-over-year.
Special Items
For the three months ended June 30, 2023, special items included the following:
•$24 million relating to Spirit acquisition costs.
For the three months ended June 30, 2022, special items included the following:
•$32 million relating to union contract costs;
•$7 million relating to Spirit acquisition; and
•$5 million relating to an impairment on our Embraer E190 fleet.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 2023 vs. 2022
Overview
We reported a net loss of $54 million, an operating loss of $7 million and an operating margin of (0.1)% for the six months ended June 30, 2023. This compares to a net loss of $443 million, an operating loss of $480 million and an operating margin of (11.5)% for the six months ended June 30, 2022. Loss per share was $0.16 for the six months ended June 30, 2023 compared to a loss per share of $1.38 for the same period in 2022.
Our reported results for the six months ended June 30, 2023 included the effects of special items and certain gains and losses on investments. Adjusted for these items, our adjusted net income (1) was $29 million, adjusted operating income (1) was $129 million, adjusted operating margin (1) was 2.6%, and adjusted earnings per share (1) was $0.10 for the six months ended June 30, 2023.
Our reported results for the six months ended June 30, 2022 included the effects of special items. Adjusting for these special items, our adjusted net loss (1) was $408 million, adjusted operating loss (1) was $436 million, adjusted operating margin(1) was (10.4)%, and adjusted loss per share (1) was $1.27 for the six months ended June 30, 2022.
Operating Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Revenues in millions; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change |
| 2023 | | 2022 | | $ | | % |
| Passenger revenue | $ | 4,641 | | | $ | 3,904 | | | $ | 737 | | | 18.9 | % | |
| Other revenue | 296 | | | 277 | | | 19 | | | 7.0 | | |
| Total operating revenues | $ | 4,937 | | | $ | 4,181 | | | $ | 756 | | | 18.1 | % | |
| | | | | | | | |
| Average Fare | $ | 216.90 | | | $ | 210.20 | | | $ | 6.70 | | | 3.2 | % | |
| Yield per passenger mile (cents) | 16.47 | | | 15.68 | | | 0.79 | | | 5.0 | | |
| Passenger revenue per ASM (cents) | 13.60 | | | 12.28 | | | 1.32 | | | 10.7 | | |
| Operating revenue per ASM (cents) | 14.47 | | | 13.15 | | | 1.32 | | | 10.0 | | |
| Average stage length (miles) | 1,208 | | | 1,232 | | | (24) | | | (1.9) | | |
| Revenue passengers (thousands) | 21,398 | | | 18,573 | | | 2,825 | | | 15.2 | | |
| Revenue passenger miles (millions) | 28,173 | | | 24,893 | | | 3,280 | | | 13.2 | | |
| Available Seat Miles (ASMs) (millions) | 34,122 | | | 31,788 | | | 2,334 | | | 7.3 | | |
| Load Factor | 82.6 | % | | 78.3 | % | | | | 4.3 | | pts. |
Passenger revenue is our primary source of revenue, which includes seat revenue and baggage fees, as well as revenue from our ancillary product offerings such as Even More® Space. The increase in passenger revenue of $737 million, or 18.9%, for the six months ended June 30, 2023 compared to the same period in 2022 was primarily due to robust demand for air travel. ASMs increased 7.3% year-over-year and passenger revenue per ASM increased 10.7%. Revenue passengers increased by 15.2% to 21.4 million for the six months ended June 30, 2023 from 18.6 million for the same period in 2022.
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, airport concessions and advertising revenue. The year-over-year increase in other revenue of $19 million, or 7.0%, was principally driven by an increase in marketing revenue associated with our TrueBlue® program due to higher customer spend and acquisitions.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
In detail, our operating costs per ASM, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions; per ASM data in cents; percent changes based on unrounded numbers) | Six Months Ended June 30, | | Year-over-Year Change | | Cents per ASM |
| 2023 | | 2022 | | $ | | % | | 2023 | | 2022 | | % Change |
| Aircraft fuel and related taxes | $ | 1,365 | | | $ | 1,481 | | | $ | (116) | | | (7.9) | % | | 4.00 | | | 4.66 | | | (14.2) | % |
| Salaries, wages and benefits | 1,514 | | | 1,383 | | | 131 | | | 9.5 | | | 4.43 | | | 4.34 | | | 2.0 | |
| Landing fees and other rents | 323 | | | 281 | | | 42 | | | 14.9 | | | 0.95 | | | 0.88 | | | 7.1 | |
| Depreciation and amortization | 306 | | | 288 | | | 18 | | | 6.4 | | | 0.90 | | | 0.91 | | | (0.9) | |
| Aircraft rent | 66 | | | 53 | | | 13 | | | 25.0 | | | 0.19 | | | 0.17 | | | 16.5 | |
| Sales and marketing | 157 | | | 135 | | | 22 | | | 16.2 | | | 0.46 | | | 0.42 | | | 8.3 | |
| Maintenance, materials and repairs | 345 | | | 313 | | | 32 | | | 9.9 | | | 1.01 | | | 0.99 | | | 2.4 | |
| Other operating expenses | 732 | | | 683 | | | 49 | | | 7.4 | | | 2.15 | | | 2.15 | | | 0.1 | |
| Special items | 136 | | | 44 | | | 92 | | | NM (2) | | 0.40 | | | 0.14 | | | NM |
| Total operating expenses | $ | 4,944 | | | $ | 4,661 | | | $ | 283 | | | 6.1 | % | | 14.49 | | | 14.66 | | | (1.2) | % |
| | | | | | | | | | | | | |
Total operating expenses excluding special items (1) | $ | 4,808 | | | $ | 4,617 | | | $ | 191 | | | 4.2 | % | | 14.09 | | | 14.52 | | | (3.0) | % |
(2) Not meaningful or greater than 100% change.
Aircraft Fuel and Related Taxes
Aircraft fuel and related taxes decreased by $116 million, or 7.9%, for the six months ended June 30, 2023 compared to the same period in 2022. The average fuel price for the six months ended June 30, 2023 decreased by 15.1% to $3.06 per gallon. The decrease in fuel price was partially offset by a 8.5%, or 35 million gallons, increase in fuel consumption due to higher capacity.
Salaries, Wages and Benefits
Salaries, wages and benefits increased by $285$131 million, or 25.9%9.5%, for the six months ended June 30, 20222023 compared to the same period in 2021.2022, driven by a mix of wage rate increases and more full-time equivalent (“FTE”) crew members. The wage rate increases were primarily due to the new pilot union contract effective March 1, 2023, which includes an initial pay rate increase was driven primarilyof 14%. Non-pilot crew member wage rates also contributed to the increase. The average number of FTEs increased by higher total hours worked by our crewmembers as we align our workforce with the increased demand for travel and the need for premium and incentive pay to support our operation. As of June 30, 2022, we have approximately 24,000 crewmembers4.3% compared to approximately 20,000 crewmembers at June 30, 2021.the same period in 2022.
Landing Fees and Other Rents
Landing fees and other rents decreasedincreased by $8$42 million, or 2.8%14.9%, for the six months ended June 30, 20222023 compared to the same period in 20212022, primarily due to a decrease in rates offset by an9.1% increase in departures.departures and rate increases at certain blue cities.
Depreciation and Amortization
Depreciation and amortization increased by $30$18 million, or 11.6%6.4%, for the six months ended June 30, 20222023 compared to the same period in 2021.2022. This increase was primarily attributed todriven by 11 aircraft and 19 spare engine deliveries since the additionsecond quarter of 12 new aircraft that were placed into service since June 30, 2021. The average number of aircraft increased by 5.4% during the six months ended June 30, 2022 as compared to the same period in 2021.2022.
Aircraft Rent
Aircraft rent increased $3$13 million, or 4.6%25.0%, forin the six months ended June 30, 2022 compared to the same period in 2021.2022 as a result of lease return compensation cost and incremental engine leases.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales and Marketing
Sales and marketing increased $65$22 million, or 93.4%16.2%, for the six months ended June 30, 20222023 compared to the same period in 2021 driven by2022, due to higher credit card fees and computer reservation system charges, which are directly related todriven by the increase in demand increases as we continue to recover from the COVID-19 pandemic.for air travel. Revenue passengers for the six months ended June 30, 20222023 increased by 6.22.8 million, or 49.8%15.2%, year-over-year.
Maintenance Materials and Repairs
Maintenance materials and repairs increased $45$32 million, or 17.0%9.9%, for the six months ended June 30, 20222023 compared to the same period in 2021,2022, primarily driven by a large increase in power by the hour basedtiming of heavy maintenance associated with an increase in aircraft utilization.visits, aging of our fleet and increased flying.
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 janitorialcatering services), insurance, personnel expenses, professional and legal fees, onboard supplies, shop and office supplies, bad debts, communication costs, and taxes other than payroll and fuel taxes.
Other operating expenses increased $212$49 million, or 45.0%7.4%, for the six months ended June 30, 20222023 compared to the same period in 2021 as we ramped up the level of our operations2022, primarily driven by an increase in response to the return in demand for air travel.demand. ASMs increased 7.3% year-over-year.
Special Items
Special items forFor the six months ended June 30, 2023, special items included the following:
•$95 million relating to union contract costs; and
•$41 million relating to Spirit acquisition costs.
For the six months ended June 30, 2022, special items included the following:
•$32 million relating to an ALPA ratification bonus and associated payroll taxes;union contract costs;
•$7 million relating to our takeover bid for Spirit;Spirit acquisition costs; and
•$5 million relating to an impairment on our Embraer E190 fleet;fleet.
For the six months ended June 30, 2021, special items included:
•Contra-expense of $644 million, which represents the amount of federal payroll support grants utilized during the period; and
•Contra-expense of $11 million related to the recognition of Employee Retention Credits provided by the CARES Act.
Operational Statistics
(1) Refer to our ''Regulation“Regulation G Reconciliation of Non-GAAP Financial Measures"Measures” at the end of this section for more information on this non-GAAP measure.
31
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operational Statistics
The following table sets forth our operating statistics for the three and six months ended June 30, 20222023 and 2021:2022:
| | | Three Months Ended June 30, | | Year-over-Year Change | Six Months Ended June 30, | | Year-over-Year Change | | Three Months Ended June 30, | | Year-over-Year Change | Six Months Ended June 30, | | Year-over-Year Change |
| (percent changes based on unrounded numbers) | (percent changes based on unrounded numbers) | 2022 | | 2021 | | % | 2022 | | 2021 | | % | (percent changes based on unrounded numbers) | 2023 | | 2022 | | % | 2023 | | 2022 | | % |
| Operational Statistics | Operational Statistics | | | | | | | | | | Operational Statistics | | | | | | | | | |
| Revenue passengers (thousands) | Revenue passengers (thousands) | 10,396 | | | 7,938 | | | 31.0 | | | 18,573 | | | 12,401 | | | 49.8 | | | Revenue passengers (thousands) | 11,207 | | | 10,396 | | | 7.8 | | | 21,398 | | | 18,573 | | | 15.2 | | |
| Revenue passenger miles (RPMs) (millions) | Revenue passenger miles (RPMs) (millions) | 13,967 | | | 10,804 | | | 29.3 | | | 24,893 | | | 16,611 | | | 49.9 | | | Revenue passenger miles (RPMs) (millions) | 14,798 | | | 13,967 | | | 5.9 | | | 28,173 | | | 24,893 | | | 13.2 | | |
| Available seat miles (ASMs) (millions) | Available seat miles (ASMs) (millions) | 16,405 | | | 13,645 | | | 20.2 | | | 31,788 | | | 22,734 | | | 39.8 | | | Available seat miles (ASMs) (millions) | 17,353 | | | 16,405 | | | 5.8 | | | 34,122 | | | 31,788 | | | 7.3 | | |
| Load factor | Load factor | 85.1 | % | | 79.2 | % | | 5.9 | | pts | 78.3 | % | | 73.1 | % | | 5.2 | | pts | Load factor | 85.3 | % | | 85.1 | % | | 0.2 | | pts | 82.6 | % | | 78.3 | % | | 4.3 | | pts |
| Aircraft utilization (hours per day) | Aircraft utilization (hours per day) | 10.4 | | | 8.8 | | | 18.2 | | | 10.2 | | | 7.4 | | | 37.8 | | | Aircraft utilization (hours per day) | 11.3 | | | 10.4 | | | 8.7 | | | 11.2 | | | 10.2 | | | 9.8 | | |
| | Average fare | Average fare | $ | 221.38 | | | $ | 174.90 | | | 26.6 | | | $ | 210.20 | | | $ | 165.93 | | | 26.7 | | | Average fare | $ | 219.47 | | | $ | 221.38 | | | (0.9) | | | $ | 216.90 | | | $ | 210.20 | | | 3.2 | | |
| Yield per passenger mile (cents) | Yield per passenger mile (cents) | 16.48 | | | 12.82 | | | 28.5 | | | 15.68 | | | 12.39 | | | 26.6 | | | Yield per passenger mile (cents) | 16.62 | | | 16.48 | | | 0.8 | | | 16.47 | | | 15.68 | | | 5.0 | | |
| Passenger revenue per ASM (cents) | Passenger revenue per ASM (cents) | 14.03 | | | 10.18 | | | 37.9 | | | 12.28 | | | 9.05 | | | 35.7 | | | Passenger revenue per ASM (cents) | 14.17 | | | 14.03 | | | 1.0 | | | 13.60 | | | 12.28 | | | 10.7 | | |
| Operating revenue per ASM (cents) | Operating revenue per ASM (cents) | 14.90 | | | 10.99 | | | 35.7 | | | 13.15 | | | 9.82 | | | 34.0 | | | Operating revenue per ASM (cents) | 15.04 | | | 14.90 | | | 0.9 | | | 14.47 | | | 13.15 | | | 10.0 | | |
| Operating expense per ASM (cents) | Operating expense per ASM (cents) | 15.59 | | | 9.91 | | | 57.4 | | | 14.66 | | | 10.46 | | | 40.1 | | | Operating expense per ASM (cents) | 13.68 | | | 15.59 | | | (12.2) | | | 14.49 | | | 14.66 | | | (1.2) | | |
Operating expense per ASM, excluding fuel(1) | Operating expense per ASM, excluding fuel(1) | 9.69 | | | 10.05 | | | (3.5) | | | 9.77 | | | 10.92 | | | (10.5) | | | Operating expense per ASM, excluding fuel (1) | 10.00 | | | 9.69 | | | 3.2 | | | 9.99 | | | 9.77 | | | 2.2 | | |
| | Departures | Departures | 83,455 | | | 67,253 | | | 24.1 | | | 161,848 | | | 111,302 | | | 45.4 | | | Departures | 89,036 | | | 83,455 | | | 6.7 | | | 176,517 | | | 161,848 | | | 9.1 | | |
| Average stage length (miles) | Average stage length (miles) | 1,233 | | | 1,279 | | | (3.6) | | | 1,232 | | | 1,278 | | | (3.6) | | | Average stage length (miles) | 1,218 | | | 1,233 | | | (1.2) | | | 1,208 | | | 1,232 | | | (1.9) | | |
| Average number of operating aircraft during period | Average number of operating aircraft during period | 283.2 | | | 269.0 | | | 5.3 | | | 282.6 | | | 268.0 | | | 5.4 | | | Average number of operating aircraft during period | 282 | | | 283 | | | (0.6) | | | 284 | | | 283 | | | 0.4 | | |
| Average fuel cost per gallon, including fuel taxes | Average fuel cost per gallon, including fuel taxes | $ | 4.24 | | | $ | 1.91 | | | 121.6 | | | $ | 3.60 | | | $ | 1.84 | | | 95.7 | | | Average fuel cost per gallon, including fuel taxes | $ | 2.63 | | | $ | 4.24 | | | (37.9) | | | $ | 3.06 | | | $ | 3.60 | | | (15.1) | | |
| Fuel gallons consumed (millions) | Fuel gallons consumed (millions) | 215 | | | 176 | | | 22.2 | | | 411 | | | 288 | | | 42.8 | | | Fuel gallons consumed (millions) | 228 | | | 215 | | | 6.1 | | | 446 | | | 411 | | | 8.5 | | |
| Average number of full-time equivalent crewmembers | Average number of full-time equivalent crewmembers | | 19,868 | | | 15,416 | | | Average number of full-time equivalent crewmembers | 20,921 | | | 20,249 | | | 3.3 | % | | 20,729 | | | 19,868 | | | 4.3 | % | |
We expect our operating results to significantly fluctuate from quarter-to-quarter in the future due to the uncertainties related to economic conditions, costas a result of aircraft fuel, recovery from the COVID-19 pandemic, and various other factors, many of which are outside of our control. For example, air traffic controller shortages in the northeast have recently caused disruptions in the industry and forced us to cut back our summer capacity plans to help protect our operations. Even with the flight cutbacks, we experienced and continue to expect challenges in the operating environment this summer. 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.
Operational challenges have had an impact on our business in the second quarter of 2023. These challenges include disruptions in our supply chains and those of our business partners, leading to aircraft delivery delays and negatively impacting the ability to source spare parts and complete maintenance on a timely basis. Additionally, reliability challenges with some of our aircraft engines using new technology have led to grounded aircraft events. These challenges have resulted - and are expected to continue to result - in flight delays and cancellations.
(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.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED BALANCE SHEET ANALYSIS
The following is a discussion of the significant changes in certain balance sheet data between June 30, 2022,2023, and December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | | |
| Selected Balance Sheet Data: | June 30, 2022 | | December 31, 2021 | | $ Change | | % Change |
| ASSETS | | | | | | | |
| Cash and cash equivalents | 1,611 | | | 2,018 | | | (407) | | | (20.2) | % |
| Investment securities | 873 | | | 824 | | | 49 | | | 6.1 | % |
| Receivables, less allowance (2022-$3; 2021-$3) | 291 | | | 207 | | | 84 | | | 40.3 | % |
| Flight equipment | 11,390 | | | 11,161 | | | 229 | | | 2.1 | % |
| LIABILITIES | | | | | | | |
| Air traffic liability | 1,984 | | | 1,618 | | | 366 | | | 22.6 | % |
| Other accrued liabilities | 465 | | | 359 | | | 106 | | | 29.9 | % |
| LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | 3,394 | | | 3,651 | | | (257) | | | (7.0) | % |
(1)2022 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.(in millions):
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| | | | | | | | | | | | | | | | | | | | | | | |
| (percent changes based on unrounded numbers) | | | | | | | |
| Selected Balance Sheet Data: | June 30, 2023 | | December 31, 2022 | | $ Change | | % Change |
| ASSETS | | | | | | | |
| Cash and cash equivalents | 1,462 | | | 1,042 | | | 420 | | | 40.3 | % |
| Investment securities | 205 | | | 350 | | | (145) | | | (41.4) | % |
| Inventories, less allowance (2023-$32; 2022-$29) | 89 | | | 87 | | | 2 | | | 2.5 | % |
| Prepaid expenses and other | 165 | | | 120 | | | 45 | | | 37.5 | % |
| LIABILITIES | | | | | | | |
| Accounts payable | 699 | | | 532 | | | 167 | | | 31.5 | % |
| Air traffic liability | 1,751 | | | 1,581 | | | 170 | | | 10.7 | % |
| Other accrued liabilities | 526 | | | 486 | | | 40 | | | 8.1 | % |
Cash and cash equivalents
Cash and cash equivalents decreasedincreased by $(407)$420 million, or (20.2)%,40.3%. Refer to $1.6 billion asAnalysis of June 30, 2022. Notable outflows during the six months ended June 30, 2022 include: $339 million in capital expenditures inclusive of predelivery depositsCash Flows below for flight equipment, $140 million of net purchases in investment securities, and $189 million in repayment of long-term debt and finance lease obligations. These outflows were partially offset by net cash provided by operating activities of $299 million.additional information.
Investment securities
Investment securities increaseddecreased by $49$145 million, or 6.1%41.4%, primarily driven by the net purchasesmaturities of our commercial paper and time deposits which had maturities between threethat were outstanding at December 31, 2022.
Prepaid expense and twelve months at June 30, 2022.other
Receivables, less allowance
Receivables Prepaid expense and other increased by $84$45 million, or 37.5%, primarily driven by an increase in credit card receivablesprepaid insurance and other goods and services.
Accounts payable
Accounts payable increased by $167 million, or 31.5%, primarily due to an increase in sales.
Flight equipment
Flight equipment increased by $229 million, or 2.1%, principally driven by aircraft capital expenditures made in the first halftiming of 2022. Additional information related to our aircraft capital expenditures are provided within our discussion of investing activities under the "Liquidity and Capital Resources" section below.business partner payments.
Air traffic liability
Air traffic liability increased by $366$170 million, or 22.6%10.7%, driven by the improvements instrengthening of demand as customers began to gain confidence to travel in the midst of the COVID-19 pandemic and resume booking travel further in advance. The cash collected from customers for future travel is recorded on our balance sheet until the point in time that the customer travels.air travel.
Other accrued liabilities
Other accrued liabilities increased by $106$40 million, or 29.9%8.1%, primarily asdue to vacation packages with JetBlue Travel Products and the timing of passenger tax remittances to governmental authorities. Passenger taxes are collected from customers when tickets are sold and remitted to the government authorities at a result of anlater date. The increase in passenger tax liabilities.
Long-term debt and finance lease obligationsliability correlates to the increase in demand for travel.
Long-term debt and finance lease obligations decreased by $257 million, or (7.0)%, mainly due to regularly scheduled principal payments made in the first half of 2022.
LIQUIDITY AND CAPITAL RESOURCES
The airline business is capital intensive. Our ability to successfully execute our growth plans is largely dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business depends on maintaining sufficient liquidity. We believe we have adequate resources from a combination of cash and cash equivalents, investment securities on hand, and available lines of credit. Additionally, our unencumbered assets could be an additional source of liquidity, if necessary.
At June 30, 2023, we had unrestricted cash, cash equivalents, short-term investments, and long-term marketable securities of approximately $1.8 billion, which we believe will be sufficient to satisfy our liquidity needs for the next twelve months, and
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
we expect to meet our long-term liquidity needs with our projected cash from operations, available lines of credit and debt financing.
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.
At June 30, 2022, we had cash, cash equivalents, and short-term investments of approximately $2.5 billion.
Analysis of Cash Flows
Operating Activities
We rely primarily on operating cash flows to provide working capital for current and future operations. Cash flows from operating activities were $299$663 million and $1.7 billion$299 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. HigherLower losses, principally driven by higher operating expenses, along with a significant reduction in air traffic liabilityrevenues, contributed to the decreaseincrease in operating cash flows.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Investing Activities
During the six months ended June 30, 2023, capital expenditures related to our purchase of flight equipment included $249 million related to the purchase of aircraft and spare engines, $102 million in work-in-progress relating to flight equipment and $24 million for spare part purchases. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $64 million. Investing activities for the current year period also included $148 million in net proceeds from investment securities, $66 million in payments for acquisition of Spirit, and $18 million in predelivery deposits.
During the six months ended June 30, 2022, capital expenditures related to our purchase of flight equipment included $90 million related to the purchase of three Airbus A220 aircraft and spare engines, $29 million for spare part purchases, $99 million in work-in-progress relating to flight equipment, and $65 million for flight equipment deposits. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $56 million. Investing activities also included the net purchase of investment securities of $139 million.
DuringFinancing Activities
Financing activities for the six months ended June 30, 2021, capital expenditures2023 primarily consisted of proceeds from sale leaseback transactions of $228 million, issuance of $78 million in equipment notes to finance certain aircraft and issuance of common stock of $31 million related to our crewmember stock purchase of flight equipment included $340 million related to the purchase of seven Airbus A321neo aircraft and spare engines, $59 million related to the purchase of two A220 aircraft and spare engines, $57plan. These proceeds were partially offset by $200 million in work-in-progress relating to flight equipment, $27 million for spare part purchases,payments on our outstanding debt and $16 million for flight equipment deposits. Other property and equipment capital expenditures also included ground equipment purchases and facilities improvements for $41 million. Investing activities also included the net proceeds from investment securities of $340 million.finance lease obligations.
Financing Activities
Financing activities for the six months ended June 30, 2022 primarily consisted of the following:
•pPrincipalrincipal payments of $189 million on our outstanding debt and finance lease obligations.
•Enterinobligations and entering into a commitment letter for a Senior Secured Bridge Facility of up to $3.5 billion to finance the potential acquisition of Spirit.
Financing activities for the six months ended June 30, 2021 primarily consisted of the following:
•Net proceeds of $734 million from the issuance of our 0.50% Convertible Senior Notes due 2026; and
•Net proceeds of $276 million and $14 million from the issuances of unsecured term loans and warrants, respectively, in connection with the Payroll Support Program 2 and Payroll Support Program 3
•These proceeds were more than offset by principal payments of $1.5 billion on our outstanding debt and finance lease obligations, $550 million of which were associated with the payoff of our revolving Credit and Guaranty Agreement.
Working Capital
We had a working capital deficit of $1.1$1.7 billion at June 30, 20222023 compared to $170 million$1.8 billion at December 31, 2021.2022. Our working capital deficit decreased by $901$172 million due to several factors, including an overall increase in our air traffic liability which was attributed to the increasecash and cash equivalents and a decrease in customer bookings primarily driven by the return in demand for travel.current maturities of long-term debt.
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 which may be available to us. We expect to generate positive working capital through our operations.operating cash flow. However, we cannot predict what the effect on our business might be from future developments related to the recovery of the COVID-19 pandemic and its impact on the economy and consumer behavior, the extremely competitive environment in which we operate, or from events beyond our control, such as volatile fuel prices, economic conditions, weather-related disruptions, airport infrastructure challenges, the spread of infectious diseases, the impact of other airline bankruptcies, restructurings or consolidations, U.S. 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.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Contractual Obligations
Our material cash requirements for known contractual and other obligations atas of June 30, 2022 include2023 includes the following (in billions)millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments due in |
| Total | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter |
Debt and finance lease obligations(1) | $ | 4.5 | | | $ | 0.2 | | | $ | 0.7 | | | $ | 0.4 | | | $ | 0.3 | | | $ | 1.0 | | | $ | 1.9 | |
| Operating lease obligations | 1.0 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.1 | | | 0.5 | |
Flight equipment purchase obligations(2) | 8.3 | | | 0.6 | | | 1.6 | | | 2.0 | | | 1.7 | | | 1.4 | | | 1.0 | |
Other obligations(3) | 2.5 | | | 0.2 | | | 0.4 | | | 0.4 | | | 0.4 | | | 0.4 | | | 0.7 | |
| Total | $ | 16.3 | | | $ | 1.1 | | | $ | 2.8 | | | $ | 2.9 | | | $ | 2.5 | | | $ | 2.9 | | | $ | 4.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | Remainder of 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | Total |
Debt and finance lease obligations (1) | | $ | 197 | | | $ | 367 | | | $ | 325 | | | $ | 1,057 | | | $ | 295 | | | $ | 2,226 | | | $ | 4,467 | |
| Operating lease obligations | | 80 | | | 147 | | | 105 | | | 84 | | | 84 | | | 438 | | | 938 | |
Flight equipment purchase obligations (2) | | 1,270 | | | 2,189 | | | 1,701 | | | 1,334 | | | 987 | | | — | | | 7,481 | |
Other obligations (3) | | 260 | | | 405 | | | 441 | | | 451 | | | 471 | | | 40 | | | 2,068 | |
| Total | | $ | 1,807 | | | $ | 3,108 | | | $ | 2,572 | | | $ | 2,926 | | | $ | 1,837 | | | $ | 2,704 | | | $ | 14,954 | |
The amounts stated above do not include additional obligations incurred as a result of financing activities executed after June 30, 2022.2023.
(1) Includes actual interest and estimated interest for floating-rate debtdebt. Estimated floating rate is equal to Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based on June 30, 20222023 rates.
(2) Amounts represent obligations based on the current delivery schedule set forth in our Airbus order book as of June 30, 2022.2023. Refer to Note 6 to ourcondensed consolidated financial statements included in Part I, Item 1 of this Report for additional information on our 2023 capacity planning assumptions.
(3) Amounts primarily include non-cancelable commitments for the purchase of goodsflight equipment maintenance, construction and services.information technology.
As of June 30, 2022, we believe2023, we are in material compliance with the covenants of our debt and lease agreements. We have approximately $4152 million of restricted cash pledged under standby letters of credit related to certain leases that will expire at the end of the related lease terms.
As of June 30, 2022, we operated a2023, our fleet of 130 Airbus A320 aircraft, 63 Airbus A321 aircraft,consisted of: | | | | | | | | |
| Aircraft Type | | Aircraft Count |
| Airbus | | |
| A320 | | 130 | |
| A321 | | 63 | |
| A321neo | | 19 | |
| A321LR | | 7 | |
| A220 | | 17 | |
| Embraer | | |
| E190 | | 55 |
| Total | | 291 |
18 Airbus A321neo aircraft, 11 Airbus A220 aircraft, and 60 Embraer E190 aircraft. Of our fleet, 217223 are owned by us, 68 are leased under operating leases, and none are leased under finance leases. Our owned aircraft include aircraft associated with sale-leaseback transactions that did not qualify as sales for accounting purposes. As of June 30, 2022,2023, the average age of our operating fleet was 1212.6 years.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our aircraft order book as of June 30, 20222023 is as follows:follows (1):
| | Year | Year | Airbus A321neo | | Airbus A220 | | Total | Year | Airbus A321neo | | Airbus A220 | | Total |
| 2022 | 3 | | 7 | | 10 | |
| 2023 | 11 | | 21 | | 32 | |
| Remainder of 2023 | | Remainder of 2023 | 9 | | 15 | | 24 |
| 2024 | 2024 | 13 | | 27 | | 40 | 2024 | 13 | | 30 | | 43 |
| 2025 | 2025 | 11 | | 20 | | 31 | 2025 | 11 | | 24 | | 35 |
| 2026 | 2026 | 12 | | 14 | | 26 | 2026 | 12 | | 14 | | 26 |
| 2027 | 2027 | 14 | | — | | 14 | 2027 | 14 | | — | | 14 |
| | Total | Total | 64 | | 89 | | 153 | Total | 59 | | 83 | | 142 |
In February 2022, we received notice from Airbus of anticipated delivery delays for the A220 aircraft. The table above represents the current delivery schedule set forth in our Airbus(1) Our aircraft order book asis subject to change based on modifications to the contractual agreements or changes in the delivery schedules. Refer to Note 6 to ourcondensed consolidated financial statements included in Part I, Item 1 of June 30, 2022. However, due to delays, we expect a delivery of a maximum of nine Airbus A220 aircraft in 2022.this Report for additional information on our 2023 capacity planning assumptions.
Expenditures for our aircraft and spare engines include estimated amounts for contractual price escalations and predelivery deposits. We expect to meet our predelivery deposit requirements for our aircraft by paying cash or by using short-term borrowing facilities for deposits required 6six to 24 months prior to delivery. Any predelivery deposits paid by the issuance of notes are fully repaid at the time of delivery of the related aircraft.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
35
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Depending on market conditions, we anticipate payingusing a mix of cash and debt financing for aircraft scheduled for delivery in cash for all scheduled aircraft deliveries in 2022.2023. For deliveries after 2022,2023, although we believe debt and/or lease financing should be available to us, we cannot give any assurance that we will be able to secure financing on attractive terms, if at all. While these financings may or may not result in an increase in liabilities on our balance sheet, we expect our fixed costs to increase regardless of the financing method ultimately chosen. To the extent we cannot secure financing on terms we deem attractive, we may be required to pay in cash, further modify our aircraft acquisition plans, or incur higher than anticipated financing costs.
In October 2019, the Office of the U.S. Trade Representative announced a 10% tariff on new commercial aircraft and related parts imported from certain European Union member states, which include aircraft and other parts we are already contractually obligated to purchase, including those noted above. The U.S. Trade Representative increased the tariff to 15% effective March 2020. In March 2021, the U.S. Trade Representative announced a four-month suspension of the tariff that was followed by an announcement in June 2021 that the suspension will be extended for five years. We continue to work with our business partners, including Airbus, to evaluate the potential financial and operational impact of these announcements on our future aircraft deliveries, including after the suspension is lifted. The imposition of this or any tariff could substantially increase the cost of new aircraft and parts.
Off-Balance Sheet Arrangements
Although someThere have been no material changes to off-balance sheet arrangements from the information provided in Item 7. Management's Discussion and Analysis of our aircraft lease arrangements are with variable interest entities, as defined by Topic 810, ConsolidationsFinancial Condition and Results of the FASB Codification, none of them require consolidationOperations - Off Balance Sheet Arrangements included in our condensed consolidated financial statements. Our decision to finance these aircraft through operating leases rather than through debt was based on an analysis of the cash flows and tax consequences of each financing alternative and a consideration of liquidity implications. We are responsible for all maintenance, insurance and other costs associated with operating these aircraft; however, we have not made any residual value or other guarantees to our lessors.
We have determined that we hold a variable interest in, but are not the primary beneficiary of, certain pass-through trusts. The beneficiaries of these pass-through trusts are the purchasers of equipment notes issued by us to finance the acquisition of aircraft. They maintain liquidity facilities whereby a third party agrees to make payments sufficient to pay up to 18 months of interest on the applicable certificates if a payment default occurs.
We have also made certain guarantees and indemnities to other unrelated parties that are not reflected on our balance sheet, which we believe will not have a significant impact on our results of operations, financial condition or cash flows. We have no other off-balance sheet arrangements.2022 Form 10-K.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates included in our 20212022 Form 10-K.
Forward-Looking Information
This Report (or otherwise made by JetBlue or on JetBlue’s behalf) contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which represent our management’s beliefs and assumptions concerning future events. These statements are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. When used in this document and in documents incorporated herein by reference, the words “expects,” “plans,” “intends,” “anticipates,” “indicates,” “remains,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” “seeks,” “goals,” “targets” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed, or assured. Forward-looking statements involve risks, uncertainties and assumptions, and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, including, without limitation, the COVID-19 pandemic including new and existing variants, and the outbreak of any other disease or similar public health threat that affects travel demand or behavior; restrictions on our business related to the financing we accepted under various federal government support programs such as the Coronavirus Aid, Relief, and Economic Security Act, the Consolidated Appropriations Act, and the American Rescue Plan Act; our significant fixed obligations and substantial indebtedness; risk associated with execution of our strategic operating plans in the near-term and long-term; the recording of a
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
36
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
material impairment loss of tangible or intangible assets; our extremely competitive industry; volatility in financial and credit markets which could affect our ability to obtain debt and/or lease financing or to raise funds through debt or equity issuances; volatility in fuel prices, maintenance costs and interest rates; our reliance on high daily aircraft utilization; our ability to implement our growth strategy; our ability to attract and retain qualified personnel and maintain our culture as we grow; our reliance on a limited number of suppliers, including for aircraft, aircraft engines and parts and vulnerability to delays by those suppliers; our dependence on the New York and Boston metropolitan markets and the effect of increased congestion in these markets; our reliance on automated systems and technology; the outcome of the lawsuit filed by the Department of Justice and certain state Attorneys General against us related to our Northeast Alliance entered into with American Airlines, our being subject to potential unionization, work stoppages, slowdowns or increased labor costs; our presence in some international emerging markets that may experience political or economic instability or may subject us to legal risk; reputational and business risk from information security breaches or cyber-attacks; changes in or additional domestic or foreign government regulation, including new or increased tariffs; changes in our industry due to other airlines' financial condition; acts of war or terrorism; global economic conditions or an economic downturn leading to a continuing or accelerated decrease in demand for air travel; adverse weather conditions or natural disasters; external geopolitical events and conditions; the occurrence of any event, change or other circumstances that could give rise to the right of JetBlue or Spirit or both of them to terminate the Merger Agreement; failure to obtain applicable regulatory or Spirit stockholder approval in a timely manner or otherwise and the potential financial consequences thereof; failure to satisfy other closing conditions to the proposed transactions with Spirit; failure of the parties to consummate the proposed transaction; JetBlue’s ability to finance the proposed transaction with Spirit and the indebtedness JetBlue expects to incur in connection with the proposed transaction; the possibility that JetBlue may be unable to achieve expected synergies and operating efficiencies within the expected timeframes or at all and to successfully integrate Spirit’s operations with those of JetBlue; the possibility that such integration may be more difficult, time-consuming or costly than expected or that operating costs and business disruption (including, without limitation, disruptions in relationships with employees, customers or suppliers) may be greater than expected in connection with the proposed transaction with Spirit; failure to realize anticipated benefits of the combined operations; demand for the combined company’s services; the growth, change and competitive landscape of the markets in which the combined company participates; expected seasonality trends; diversion of managements’ attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction with Spirit; risks related to investor and rating agency perceptions of each of the parties and their respective business, operations, financial condition and the industry in which they operate; risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction with Spirit; and ongoing and increase in costs related to IT network security. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs, and assumptions upon which we base our expectations may change prior to the end of each quarter or year. Any outlook or forecasts in this document have been prepared without taking into account or consideration the proposed transaction with Spirit.
Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. You should understand that many important factors, in addition to those discussed or incorporated by reference in this Report, could cause our results to differ materially from those expressed in the forward-looking statements. In light of these risks and uncertainties, the forward-looking events discussed in this Report might not occur. Our forward-looking statements speak only as of the date of this Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.
Where You Can Find Other Information
Our website is www.jetblue.com. Information contained on our website is not part of this Report. Information we furnish or file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. Our SEC filings, including exhibits filed therewith, are also available at the SEC’s website at www.sec.gov.
(1) Refer to our ''Regulation G Reconciliation of Non-GAAP Financial Measures" at the end of this section for more information on this non-GAAP measure.
37
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REGULATION G RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
We usereport our financial results in accordance with GAAP; however, we present certain non-GAAP financial measures in this report.Report. Non-GAAP financial measures are financial measures that are derived from the condensed consolidated financial statements, but that are not presented in accordance with generally accepted accounting principles in the United States, or GAAP. We believepresent 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 performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. The information below provides an explanation of each non-GAAP financial measure presented in this Report and shows a reconciliation of each such non-GAAP financial measures used in this filingmeasure to theits most directly comparable GAAP financial measures.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 excluding fuel and related taxes, other non-airline operating expenses, and special items ("ex-fuel (“CASM Ex-Fuel"ex-fuel”)
Operating expensesExpense per available seat mile, or 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 Technology 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.
In 2022, We believe the impact of these special items include an ALPA ratification bonusdistorts our overall trends and associated payroll taxes, an impairment onthat our E-190 fleet,metrics are more comparable with the presentation of our results excluding such impact.
For the three months ended June 30, 2023, special items included Spirit acquisition costs. For the six months ended June 30, 2023, special items included union contract costs and expenses relating to the proposed Spirit acquisition.acquisition 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.
Special items for 2019 include one-time costs related to the Embraer E1902022 included fleet transition as well as one-time costs, related to the implementation of our pilots' collective bargaining agreement.union contract costs and Spirit acquisition costs.
We believe that Operating Expenses ex-fuel and CASM ex-fuel isare useful for investors because it providesthey 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, oras 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.businesses and special items. We believe thisthese non-GAAP measure ismeasures are more indicative of our ability to manage airline costs and isare more comparable to measures reported by other major airlines.
20222023 vs. 20212022
| NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL | NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL | NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| ($ in millions; per ASM data in cents) | ($ in millions; per ASM data in cents) | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | ($ in millions; per ASM data in cents) | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM |
| Total operating expenses | Total operating expenses | $ | 2,558 | | | $ | 15.59 | | | $ | 1,352 | | | $ | 9.91 | | | $ | 4,661 | | | $ | 14.66 | | | $ | 2,379 | | | $ | 10.46 | | Total operating expenses | $ | 2,375 | | | $ | 13.68 | | | $ | 2,558 | | | $ | 15.59 | | | $ | 4,944 | | | $ | 14.49 | | | $ | 4,661 | | | $ | 14.66 | |
| Less: | Less: | | Less: | |
| Aircraft fuel and related taxes | Aircraft fuel and related taxes | 910 | | | 5.55 | | | 336 | | | 2.46 | | | 1,481 | | | 4.66 | | | 530 | | | 2.33 | | Aircraft fuel and related taxes | 599 | | | 3.45 | | | 910 | | | 5.55 | | | 1,365 | | | 4.00 | | | 1,481 | | | 4.66 | |
| Other non-airline expenses | Other non-airline expenses | 14 | | | 0.08 | | | 11 | | | 0.08 | | | 29 | | | 0.09 | | | 20 | | | 0.09 | | Other non-airline expenses | 16 | | | 0.09 | | | 14 | | | 0.08 | | | 33 | | | 0.10 | | | 29 | | | 0.09 | |
| Special items | Special items | 44 | | | 0.27 | | | (366) | | | (2.68) | | | 44 | | | 0.14 | | | (655) | | | (2.88) | | Special items | 24 | | | 0.14 | | | 44 | | | 0.27 | | | 136 | | | 0.40 | | | 44 | | | 0.14 | |
| Operating expenses, excluding fuel | Operating expenses, excluding fuel | $ | 1,590 | | | $ | 9.69 | | | $ | 1,371 | | | $ | 10.05 | | | $ | 3,107 | | | $ | 9.77 | | | $ | 2,484 | | | $ | 10.92 | | Operating expenses, excluding fuel | $ | 1,736 | | | $ | 10.00 | | | $ | 1,590 | | | $ | 9.69 | | | $ | 3,410 | | | $ | 9.99 | | | $ | 3,107 | | | $ | 9.77 | |
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2022 vs. 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NON-GAAP FINANCIAL MEASURE
RECONCILIATION OF OPERATING EXPENSE PER ASM, EXCLUDING FUEL |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2019 | | 2022 | | 2019 |
| ($ in millions; per ASM data in cents) | $ | | per ASM | | $ | | per ASM | | $ | | per ASM | | $ | | per ASM |
| Total operating expenses | $ | 2,558 | | | $ | 15.59 | | | $ | 1,855 | | | $ | 11.58 | | | $ | 4,661 | | | $ | 14.66 | | | $ | 3,652 | | | $ | 11.60 | |
| Less: | | | | | | | | | | | | | | | |
| Aircraft fuel and related taxes | 910 | | | 5.55 | | | 484 | | | 3.02 | | | 1,481 | | | 4.66 | | | 921 | | | 2.93 | |
| Other non-airline expenses | 14 | | | 0.08 | | | 12 | | | 0.09 | | | 29 | | | 0.09 | | | 23 | | | 0.07 | |
| Special items | 44 | | | 0.27 | | | 2 | | | 0.01 | | | 44 | | | 0.14 | | | 14 | | | 0.04 | |
| Operating expenses, excluding fuel | $ | 1,590 | | | $ | 9.69 | | | $ | 1,357 | | | $ | 8.46 | | | $ | 3,107 | | | $ | 9.77 | | | $ | 2,694 | | | $ | 8.56 | |
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 have not yet occurred andreflected in the CASM ex-fuel guidance cannot be reasonably predicted. 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. Accordingly,For the same reasons, we are unable to address the probable significance of the unavailable information, which could have a reconciliation to CASM is not available without unreasonable effort.potentially unpredictable and potentially significant impact on our future GAAP financial results.
Operating Expense, Adjusted Operating Margin, Income (Loss) Income before Taxes, Adjusted Pre-tax Margin, Net Income (Loss) Income and Earnings (Loss) Earnings 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 were deemed special items.
In 2022,For the three months ended June 30, 2023, special items include an ALPA ratification bonusincluded Spirit acquisition costs. For the six months ended June 30, 2023, special items included union contract costs and associated payroll taxes, an impairment on our E-190 fleet, and expenses relating to the proposed Spirit acquisition.acquisition 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.
Special items for 2019 include one-time costs related to the Embraer E1902022 included fleet transition as well as one-time costs, related to the implementation ofunion contract costs and Spirit acquisition costs.
Certain gains and losses on our pilots' collective bargaining agreement.equity investments were also excluded from our 2023 and 2022 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.items for the periods presented.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2023 vs. 2022 | | | | | | | | | | | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURE |
| RECONCILIATION OF OPERATING EXPENSE, OPERATING INCOME (LOSS), ADJUSTED OPERATING MARGIN, PRE-TAX INCOME (LOSS), ADJUSTED PRE-TAX MARGIN, NET INCOME (LOSS), EARNINGS (LOSS) PER SHARE, EXCLUDING SPECIAL ITEMS AND GAIN (LOSS) ON EQUITY INVESTMENTS |
| | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Total operating revenues | $ | 2,610 | | | $ | 2,445 | | | $ | 4,937 | | | $ | 4,181 | |
| | | | | | | |
| RECONCILIATION OF OPERATING EXPENSE | | | | | | | |
| Total operating expenses | $ | 2,375 | | | $ | 2,558 | | | $ | 4,944 | | | $ | 4,661 | |
| Less: Special items | 24 | | | 44 | | | 136 | | | 44 | |
| Total operating expenses excluding special items | $ | 2,351 | | | $ | 2,514 | | | $ | 4,808 | | | $ | 4,617 | |
| | | | | | | |
| RECONCILIATION OF OPERATING INCOME (LOSS) | | | | | | |
| Operating income (loss) | $ | 235 | | | $ | (113) | | | $ | (7) | | | $ | (480) | |
| Add back: Special items | 24 | | | 44 | | | 136 | | | 44 | |
| Operating income (loss) excluding special items | $ | 259 | | | $ | (69) | | | $ | 129 | | | $ | (436) | |
| | | | | | | |
| RECONCILIATION OF ADJUSTED OPERATING MARGIN | | | | | | |
| Operating margin | 9.0 | % | | (4.6) | % | | (0.1) | % | | (11.5) | % |
| | | | | | | |
| Operating income (loss) excluding special items | $ | 259 | | | $ | (69) | | | $ | 129 | | | $ | (436) | |
| Total operating revenues | 2,610 | | | 2,445 | | | 4,937 | | | 4,181 | |
| Adjusted operating margin | 9.9 | % | | (2.8) | % | | 2.6 | % | | (10.4) | % |
| | | | | | | |
| RECONCILIATION OF PRE-TAX INCOME (LOSS) | | | | | | |
| Income (loss) before income taxes | $ | 216 | | | $ | (151) | | | $ | (50) | | | $ | (549) | |
| Add back: Special items | 24 | | | 44 | | | 136 | | | 44 | |
| Less: Net gain (loss) on investments | 4 | | | (5) | | | 7 | | | (4) | |
| Income (loss) before income taxes excluding special items and net gain (loss) on investments | $ | 236 | | | $ | (102) | | | $ | 79 | | | $ | (501) | |
| | | | | | | |
| RECONCILIATION OF ADJUSTED PRE-TAX MARGIN | | | | | | |
| Pre-tax margin | 8.3 | % | | (6.2) | % | | (1.0) | % | | (13.1) | % |
| | | | | | | |
| Income (loss) before income taxes excluding special items and net gain (loss) on investments | $ | 236 | | | $ | (102) | | | $ | 79 | | | $ | (501) | |
| Total operating revenues | 2,610 | | | 2,445 | | | 4,937 | | | 4,181 | |
| Adjusted pre-tax margin | 9.1 | % | | (4.2) | % | | 1.6 | % | | (12.0) | % |
| | | | | | | |
| RECONCILIATION OF NET INCOME (LOSS) | | | | | | |
| Net income (loss) | $ | 138 | | | $ | (188) | | | $ | (54) | | | $ | (443) | |
| Add back: Special items | 24 | | | 44 | | | 136 | | | 44 | |
| Less: Income tax benefit related to special items | 7 | | | 12 | | | 48 | | | 12 | |
| Less: Net gain (loss) on investments | 4 | | | (5) | | | 7 | | | (4) | |
| Less: Income tax (expense) benefit related to net gain (loss) on investments | (1) | | | 2 | | | (2) | | | 1 | |
| Net income (loss) excluding special items and net gain (loss) on investments | $ | 152 | | | $ | (153) | | | $ | 29 | | | $ | (408) | |
|
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2022 vs. 2021
| | | | | | | | | | | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURE |
| RECONCILIATION OF OPERATING EXPENSE, (LOSS) INCOME BEFORE TAXES, NET (LOSS) INCOME AND (LOSS) EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS AND NET GAIN (LOSS) ON INVESTMENTS |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions, except per share amounts) | 2022 | | 2021 | | 2022 | | 2021 |
| Total operating revenues | $ | 2,445 | | | $ | 1,499 | | | $ | 4,181 | | | $ | 2,232 | |
| | | | | | | |
| Total operating expenses | $ | 2,558 | | | $ | 1,352 | | | $ | 4,661 | | | $ | 2,379 | |
| Less: Special items | 44 | | | (366) | | | 44 | | | (655) | |
| Total operating expenses excluding special items | $ | 2,514 | | | $ | 1,718 | | | $ | 4,617 | | | $ | 3,034 | |
| | | | | | | |
| Operating (loss) income | $ | (113) | | | $ | 147 | | | $ | (480) | | | $ | (147) | |
| Add back: Special items | 44 | | | (366) | | | 44 | | | (655) | |
| Operating loss excluding special items | $ | (69) | | | $ | (219) | | | $ | (436) | | | $ | (802) | |
| | | | | | | |
| Operating margin excluding special items | (2.8) | % | | (14.6) | % | | (10.4) | % | | (35.9) | % |
| | | | | | | |
| (Loss) income before income taxes | $ | (151) | | | $ | 57 | | | $ | (549) | | | $ | (290) | |
| Add back: Special items | 44 | | | (366) | | | 44 | | | (655) | |
| Less: Net gain (loss) on investments | (5) | | | — | | | (4) | | | — | |
| (Loss) income before income taxes excluding special items and net gain (loss) on investments | $ | (102) | | | $ | (309) | | | $ | (501) | | | $ | (945) | |
| | | | | | | |
| Pre-tax margin excluding special items | (4.2) | % | | (20.6) | % | | (12.0) | % | | (42.3) | % |
| | | | | | | |
| Net (loss) income | $ | (188) | | | $ | 64 | | | $ | (443) | | | $ | (183) | |
| Add back: Special items | 44 | | | (366) | | | 44 | | | (655) | |
| Less: Income tax (expense) benefit related to special items | 12 | | | (96) | | | 12 | | | (173) | |
| Less: Net gain (loss) on investments | (5) | | | — | | | (4) | | | — | |
| Less: Income tax (expense) benefit related to net gain (loss) on investments | 2 | | | — | | | 1 | | | — | |
| Net (loss) income excluding special items and net gain (loss) on investments | $ | (153) | | | $ | (206) | | | $ | (408) | | | $ | (665) | |
| | | | | | | |
| Earnings Per Common Share: | | | | | | | |
| Basic | $ | (0.58) | | | $ | 0.20 | | | $ | (1.38) | | | $ | (0.58) | |
| Add back: Special items, net of tax | 0.10 | | | (0.85) | | | 0.10 | | | (1.52) | |
| Less: Net gain (loss) on investments, net of tax | (0.01) | | | — | | | (0.01) | | | — | |
| Basic excluding special items and net gain (loss) on investments | $ | (0.47) | | | $ | (0.65) | | | $ | (1.27) | | | $ | (2.10) | |
| | | | | | | |
| Diluted | $ | (0.58) | | | $ | 0.20 | | | $ | (1.38) | | | $ | (0.58) | |
| Add back: Special items, net of tax | 0.10 | | | (0.85) | | | 0.10 | | | (1.52) | |
| Less: Net gain (loss) on investments, net of tax | (0.01) | | | — | | | (0.01) | | | — | |
| Diluted excluding special items and net gain (loss) on investments | $ | (0.47) | | | $ | (0.65) | | | $ | (1.27) | | | $ | (2.10) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURE |
| RECONCILIATION OF OPERATING EXPENSE, OPERATING INCOME (LOSS), ADJUSTED OPERATING MARGIN, PRE-TAX INCOME (LOSS), ADJUSTED PRE-TAX MARGIN, NET INCOME (LOSS), EARNINGS (LOSS) PER SHARE , EXCLUDING SPECIAL ITEMS AND GAIN (LOSS) ON EQUITY INVESTMENTS (CONTINUED) |
| | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| CALCULATION OF EARNINGS (LOSS) PER SHARE | 2023 | | 2022 | | 2023 | | 2022 |
| Earnings (Loss) Per Common Share | | | | | | | |
| Basic | $ | 0.41 | | | $ | (0.58) | | | $ | (0.16) | | | $ | (1.38) | |
| Add back: Special items, net of tax | 0.05 | | | 0.10 | | | 0.27 | | | 0.10 | |
| Less: Net gain (loss) on investments, net of tax | 0.01 | | | (0.01) | | | 0.01 | | | (0.01) | |
| Basic excluding special items and net gain (loss) on investments | $ | 0.45 | | | $ | (0.47) | | | $ | 0.10 | | | $ | (1.27) | |
| | | | | | | |
| Diluted | $ | 0.41 | | | $ | (0.58) | | | $ | (0.16) | | | $ | (1.38) | |
| Add back: Special items, net of tax | 0.05 | | | 0.10 | | | 0.27 | | | 0.10 | |
| Less: Net gain (loss) on investments, net of tax | 0.01 | | | (0.01) | | | 0.01 | | | (0.01) | |
| Diluted excluding special items and net gain (loss) on investments | $ | 0.45 | | | $ | (0.47) | | | $ | 0.10 | | | $ | (1.27) | |
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2022 vs. 2019 | | | | | | | | | | | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURE |
| RECONCILIATION OF OPERATING EXPENSE, (LOSS) INCOME BEFORE TAXES, NET (LOSS) INCOME AND (LOSS) EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS AND NET GAIN (LOSS) ON INVESTMENTS |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions, except per share amounts) | 2022 | | 2019 | | 2022 | | 2019 |
| Total operating revenues | $ | 2,445 | | | $ | 2,105 | | | $ | 4,181 | | | $ | 3,977 | |
| | | | | | | |
| Total operating expenses | $ | 2,558 | | | $ | 1,855 | | | $ | 4,661 | | | $ | 3,652 | |
| Less: Special items | 44 | | | 2 | | | 44 | | | 14 | |
| Total operating expenses excluding special items | $ | 2,514 | | | $ | 1,853 | | | $ | 4,617 | | | $ | 3,638 | |
| | | | | | | |
| Operating (loss) income | $ | (113) | | | $ | 250 | | | $ | (480) | | | $ | 325 | |
| Add back: Special items | 44 | | | 2 | | | 44 | | | 14 | |
| Operating (loss) income excluding special items | $ | (69) | | | $ | 252 | | | $ | (436) | | | $ | 339 | |
| | | | | | | |
| Operating margin excluding special items | (2.8) | % | | 12.0 | % | | (10.4) | % | | 8.5 | % |
| | | | | | | |
| (Loss) income before income taxes | $ | (151) | | | $ | 236 | | | $ | (549) | | | $ | 294 | |
| Add back: Special items | 44 | | | 2 | | | 44 | | | 14 | |
| Less: Net gain (loss) on investments | (5) | | | — | | | (4) | | | — | |
| (Loss) income before income taxes excluding special items and net gain (loss) on investments | $ | (102) | | | $ | 238 | | | $ | (501) | | | $ | 308 | |
| | | | | | | |
| Pre-tax margin excluding special items | (4.2) | % | | 11.3 | % | | (12.0) | % | | 7.8 | % |
| | | | | | | |
| Net (loss) income | $ | (188) | | | $ | 179 | | | $ | (443) | | | $ | 221 | |
| Add back: Special items | 44 | | | 2 | | | 44 | | | 14 | |
| Less: Income tax (expense) benefit related to special items | 12 | | | 1 | | | 12 | | | 3 | |
| Less: Net gain (loss) on investments | (5) | | | — | | | (4) | | | |
| Less: Income tax (expense) benefit related to net gain (loss) on investments | 2 | | | — | | | 1 | | | — | |
| Net (loss) income excluding special items and net gain (loss) on investments | $ | (153) | | | $ | 180 | | | $ | (408) | | | $ | 232 | |
| | | | | | | |
| Earnings Per Common Share: | | | | | | | |
| Basic | $ | (0.58) | | | $ | 0.60 | | | $ | (1.38) | | | $ | 0.73 | |
| Add back: Special items, net of tax | 0.10 | | | — | | | 0.10 | | | 0.03 | |
| Less: Net gain (loss) on investments, net of tax | (0.01) | | | — | | | (0.01) | | | — | |
| Basic excluding special items and net gain (loss) on investments | $ | (0.47) | | | $ | 0.60 | | | $ | (1.27) | | | $ | 0.76 | |
| | | | | | | |
| Diluted | $ | (0.58) | | | $ | 0.59 | | | $ | (1.38) | | | $ | 0.73 | |
| Add back: Special items, net of tax | 0.10 | | | 0.01 | | | 0.10 | | | 0.03 | |
| Less: Net gain (loss) on investments, net of tax | (0.01) | | | — | | | (0.01) | | | — | |
| Diluted excluding special items and net gain (loss) on investments | $ | (0.47) | | | $ | 0.60 | | | $ | (1.27) | | | $ | 0.76 | |
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Free Cash Flow
The table below reconcilesWe define Free Cash Flow as net cash provided by operations determined in accordance with GAAP to Free Cash Flow, a non-GAAP financial measure. operating activities less capital expenditures and predelivery deposits for flight equipment.Management believes that Free Cash Flow is a relevant metric in measuring our financial strength and is useful to investors in assessing our ability to fund future capital commitments and other obligations. Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, our financial measures prepared in accordance with GAAP.
| | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURE |
| RECONCILIATION OF FREE CASH FLOW |
| | Six Months Ended June 30, |
| (in millions) | | 2022 | | 2021 |
| Net cash provided by operating activities | | $ | 299 | | | $ | 1,658 | |
| Less: Capital expenditures | | (274) | | | (524) | |
| Less: Predelivery deposits for flight equipment | | (65) | | | (16) | |
| Free Cash Flow | | $ | (40) | | | $ | 1,118 | |
| | | | | | | | | | | | | | |
| NON-GAAP FINANCIAL MEASURE |
| RECONCILIATION OF FREE CASH FLOW |
| | | | |
| | Six Months Ended June 30, |
| (in millions) | | 2023 | | 2022 |
| Net cash provided by operating activities | | $ | 663 | | | $ | 299 | |
| Less: Capital expenditures | | (439) | | | (274) | |
| Less: Predelivery deposits for flight equipment | | (18) | | | (65) | |
| Free Cash Flow | | $ | 206 | | | $ | (40) | |
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except as described below, there have been no material changes in market risks from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in our 20212022 Form 10-K.
Aircraft Fuel
Our results of operations are affected by changes in the price and availability of aircraft fuel. Market risk is estimated as a hypothetical 10% increase in the June 30, 20222023 cost per gallon of fuel. Based on projected fuel consumption for the next 12 months, including the impact of our hedging position, such an increase would result in an increase to aircraft fuel expense of approximately $347$216 million. As of June 30, 2022,2023, we had nothave hedged any of our projected fuel requirementapproximately 30% for the remainderthird quarter of 2022.2023 and approximately 30% for the fourth quarter of 2023.
Interest
Our earnings are affected by changes in interest rates due to the impact those changes have on interest expense from variable-rate debt instruments and on interest income generated from our cash and investment balances. The interest rate is fixed for $3.7$3.6 billion of our debt and finance lease obligations, with the remaining $100$120 million having floating interest rates. As of June 30, 2022,2023, if interest rates were on average 100 basis points higher in 2022,2023, our annual interest expense would increase by approximately $1 million. This amount is determined by considering the impact of the hypothetical change in interest rates on our variable rate debt.
If interest rates were to average 100 basis points lower in 20222023 than they were during 2021,2022, our interest income from cash and investment balances would decrease by approximately $1$3 million. This amount is determined by considering the impact of the hypothetical change in interest rates on the balances of our money market funds and short-term, interest-bearing investments for the trailing twelve monthtwelve-month period.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer or CEO,(“CEO”), and our Chief Financial Officer or CFO,(“CFO”), to allow timely decisions regarding required disclosure. Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2022.2023. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2022.2023.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our controls performed during the quarter ended June 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of our business, we are party to various legal proceedings and claims which we believe are incidental to the operation of our business. Refer to Note 6 to ourcondensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
ITEM 1A. RISK FACTORS
Part I, Item 1A "Risk Factors"“Risk Factors” of our 20212022 Form 10-K includes a discussion of our risk factors which are incorporated herein.factors. There have been no material changes from the risk factors associated with our business previously disclosed in our Form 10-K, other than the risk factorsas described below.
In orderJuly 2020, JetBlue and American entered into the NEA designed to completeoptimize our respective networks at JFK, LaGuardia, Newark, and Boston. Following review and agreement by the Merger,Department of Transportation, JetBlue and American began implementing the NEA in July 2021. On September 21, 2021, the United States Department of Justice, along with the Attorneys General of six states and the District of Columbia filed suit against JetBlue and American seeking to enjoin the NEA, alleging that it violates Section 1 of the Sherman Act. The court issued a decision on May 19, 2023, permanently enjoining the NEA. On July 5, 2023, we announced that we do not plan to appeal the court's determination that the NEA cannot continue as currently crafted, and Spirit must obtaininstead had initiated a wind down of the NEA. On July 14, 2023, JetBlue and American announced that beginning on July 21, 2023, JetBlue customers will no longer be able to book new codeshare bookings on American Airlines and vice versa. On July 28, 2023, the court issued its Final Judgement and Order Entering Permanent Injunction (“Final Injunction”). The Final Injunction is effective August 18, 2023 and sets forth, among other things, provisions for the prompt and certain governmental approvals,termination of the NEA, including applicable dates for the termination of JetBlue and American Airlines' revenue-sharing arrangements and procedures governing the termination of any remaining slot-sharing agreements. Pursuant to the Final Injunction, JetBlue and American Airlines may not enter into any new alliance, partnership, joint venture, or other agreement with each other, if such approvals are not grantedagreement provides for revenue sharing, or are granted with conditions, completionfor coordination of routes or capacity, in a manner substantially similar to the NEA for a period of ten years following the effectiveness of the Merger may be jeopardized or the anticipated benefitsFinal Injunction. The wind down of the MergerNEA could be reduced.
Although we and Spirit have agreed to use reasonable best efforts to make certain governmental filings and obtain the required governmental approvals, including from the FCC, the FAA and the DOT, as well as the expiration or termination of relevant waiting periods under the HSR Act, there can be no assurance that the relevant waiting periods will expire or be terminated or that the relevant approvals will be obtained. The governmental entities from which these approvals are required have broad discretion in administering the governing laws and regulations, and may take into account various facts and circumstances in their consideration of the Merger. These governmental entities may initiate proceedings seeking to prevent, or otherwise seek to prevent, the Merger. As a condition to approving the Merger, these governmental entities may impose conditions, terms, obligations or restrictions or require divestitures or place restrictions on the conduct of our business after completion of the Merger. As part of the Merger Agreement, we have agreed to take any such required divestiture actions in connection with the consummation of Merger, provided that we are not required to take any divestiture actions if such action would or would reasonably be expected to result in a materialdisruption of the business, require us to incur additional costs and ultimately have an adverse effectimpact on our business, financial condition and results of operations.
In December 2022 and February 2023, four putative class actions lawsuits were filed in the United States District Court for the Eastern District of New York and the United States District Court of the District of Massachusetts, respectively, alleging that the NEA violates Sections 1 and 2 of the Sherman Act. Among other things, plaintiffs seek monetary damages on behalf of a putative class of direct purchasers of airline tickets from JetBlue and its subsidiaries (including SpiritAmerican and, its subsidiaries) nordepending on the specific case, other airlines on flights to or from our four airports (JFK, LaGuardia Airport, Newark Liberty International Airport, and Boston Logan International Airport) from July 16, 2020 through the present. Plaintiffs in these actions also seek to enjoin the NEA. JetBlue believes these lawsuits are we required to take any action that, in our discretion, would be reasonably likely to materially and adversely affect the anticipated benefits of JetBlue's Northeast Alliance with American. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictionswithout merit and that such conditions, terms, obligations or restrictions will notthe equitable claims have been rendered moot following the effect of delaying or preventing completioncommencement of the MergerNEA wind down.
We are subject to the risks of having a limited number of suppliers for our aircraft, engines, and our Fly-Fi® product.
Our current dependence on five types of aircraft and engines for all of our flights makes us vulnerable to any significant problems associated with Pratt & Whitney Geared Turbofan Engines, or imposing additional material coststhe PW1133G-JM engine, on our A321neo fleet, International Aero Engines, or materially limiting the revenuesIAE V2533-A5 engine on our Airbus A321 fleet, International Aero Engines, or the IAE V2527-A5 engine on our Airbus A320 fleet, Pratt & Whitney Geared Turbofan Engines, or the PW1524G-3 engine, on our A220 fleet, and General Electric Engines, or the CF34-10 engine, on our Embraer E190 fleet. This could include, but is not limited to design defects, mechanical problems, contractual performance by the manufacturers, or adverse perception by the public which would result in customer avoidance or in actions by the FAA resulting in an inability to operate our aircraft. For example, we are subject to a removal of certain Pratt & Whitney engines for inspection, announced in July 2023, due to contaminated metal parts and the full impact of the combined company following the Merger,removal and any potential remediation steps on our operations cannot be determined at this time. Carriers operating a more diversified fleet are better positioned than we are to manage such events.
Our Fly-Fi® service uses technology and satellite access through our agreement with Thales Avionics, Inc., or otherwise adversely affecting, including to a material extent, our business, results of operations and financial condition after completionThales. An integral component of the Merger.Fly-Fi® system is the antenna, which is supplied to us by Thales. If we are requiredThales were to divest assets or businesses, there can be no assurance that we will be able to negotiate such divestitures expeditiously or on favorable terms or that the governmental entities will approve the terms of such divestitures. We can provide no assurance that these conditions, terms, obligations or restrictions will not result in the abandonment of the Merger.
Failure to complete the Merger in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our results of operations and financial condition.
The Merger cannot be completed until conditions to closing are satisfied or (if permissible under applicable law) waived. The Merger is subject to numerous closing conditions, including among other things receipt of Spirit stockholder approval and receipt of applicable regulatory approvals, including approvals from the FCC, the FAA and the DOT, the expiration or early termination of the statutory waiting period under the HSR Act and approval under certain foreign antitrust laws.
The process of satisfying such conditions, including seeking the necessary regulatory approvals, could delay the completion of the Merger for a significant period of time or prevent it from occurring. Further, there can be no assurance that the conditions to the closing of the Merger will be satisfied or waived or that the Merger will be completed.
If the Merger is not completed in a timely manner or at all, our ongoing business may be adversely affected as follows:
•we may experience negative reactions from the financial markets, including investors and rating agencies, and our stock price could decline to the extent that the current market price reflects an assumption that the Merger will be completed;
•we may experience negative reactions from employees, customers, suppliers or other third parties;
•we may be subject to litigation, which could result in significant costs and expenses;stop supplying us
•management’s focus may have been diverted from day-to-day business operations and pursuing other opportunities that could have been beneficial to us;
•in certain circumstances, if the Merger is not consummatedwith its antennas for antitrust reasons, JetBlue will pay Spirit a reverse break-up of $70 million and will pay the Spirit stockholders directly a reverse break-up fee of $400 million, less the aggregate amount of the prepayment of $2.50 per share in cash payable following Spirit stockholders’ approval of the transaction and a ticking fee of $0.10 per month starting in January 2023 through the earlier of the Closing Date or termination of the transaction; and
•our costs of pursuing the Merger may be higher than anticipated.
If the Merger is not consummated, there can be no assurance that these risks will not materialize and will not materially adversely affect our stock price, business, results of operations and financial condition.
The pendency of the proposed Merger may cause disruption in our business.
On July 28, 2022,any reason, we entered into a Merger Agreement with Spirit, pursuant to which we would acquire Spirit.
The preparation for the proposed Merger and the subsequent integration with Spirit’s business is expected to place a significant burden on our management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect our business, results of operations and financial condition.
While the Merger is pending, we intend to continue to grow our business which will entail the continued hiring of additional employees, including pilots and other skilled workers, presently in short supply in the airline industry. Any disruption [or perceived uncertainty] may make it more difficult for us to meet our employee retention and hiring goals which could materially impact our business, results of operations and financial condition.
The pendency of the proposed Merger could cause disruptions to our business or business relationships, which could have an adverse impact on our results of operations. Parties with which we have business relationships, including customers, employees, business partners or suppliers, unions, third-party service providers and third-party distribution channels, may be uncertain as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.
We will incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger, which we expect to continue as we seek regulatory and other approvals to complete the proposed Merger. We may also incur unanticipated costs in connection with our integration with Spirit’s business. The substantial majority of these costs will be non-recurring expenses relating to the Merger, and many of these costs are payable regardless of whether or not the Merger is consummated. We also could be subject to litigation related to the proposed Merger, which could prevent or delay the consummation of the Merger and result in significant costs and expenses.
Our indebtedness following completion of the Merger will be substantially greater than our indebtedness on a stand-alone basis and greater than the combined indebtedness of JetBlue and Spirit existing prior to the announcement of the transaction, which could adversely affect our business flexibility, and increase our borrowing costs. Downgrades in our credit ratings could adversely affect our business, cash flows, financial condition and operating results.
In order to complete the Merger, we expect to incur acquisition-related debt financing of up to $3.5 billion and we will also assume Spirits indebtedness outstanding at the closing. Our substantially increased indebtedness following completion of the Merger may impact, among other things, our flexibility to respond to changing business and economic conditions. In addition, the amount of cash required to service our increased indebtedness will be greater than the amount of cash flows required prior to the Merger. The increased indebtedness could also reduce funds available to engage in investments in our business development, capital expenditures and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels.
In addition, our credit ratings impact the cost and availability of our future borrowings, and, as a result, our cost of capital. Our ratings reflect each rating organization’s opinion of our financial strength, operating performance and ability to meet our debt obligations or, following completion of the Merger, those obligations of the combined company. Each ratings
organization reviews our ratings periodically, and there can be no assurance that our current ratings will be maintained in the future. The rating agencies have published reports which indicate that an increase in our consolidated leverage following the completion of the Merger may negatively impact our credit ratings. Further, if interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash flows.
We may also be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements. Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control. We cannot assure you that we will be able to obtain additional financing on terms acceptable to us or at all.
Although we expect that the Merger will result in synergies and other benefits to us, we may not realize those benefits because of required divestitures, difficulties related to integration and the achievement of such synergies and other challenges.
Until completion of the Merger, we and Spirit will operate independently, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of substantial benefits. Historically, the integration of separate airlines has proven to be more time consuming, costly and require more resources than initially expected. We expect we will be required to devote significant management attention and financial and other resources to integrating our two business practices, cultures and operations. If we are not able to successfully integrate our business with Spirit’s, the anticipated benefits and operational synergies of the Merger may take longer than expected to be realized or not be realized at all. In connection with the integration of our business with Spirit’s in a manner that permits us to achieve the synergies anticipated to result from the Merger we will need to address, among other things, the following issues:
•combining the companies’ separate operational, financial, reporting and internal control functions;
•maintaining existing or negotiating new agreements with unions, employees, suppliers, third-party service providers and third-party distribution channels, and avoiding delays in entering into new agreements with prospective employees, suppliers, third-party service providers and third-party distribution channels;
•integrating complex systems and technologies, including implementing an integrated customer reservations system, operating procedures, regulatory compliance programs, aircraft fleets, networks, and other assets in a manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;
•addressing possible differences in business backgrounds, corporate cultures and management philosophies;
•integrating the businesses’ corporate, administrative and information technology infrastructure, including coordinating geographically dispersed companies;
•diversion of the attention of management and other key employees;
•harmonizing the companies’ employee development, compensation and benefit programs and related policies, procedures and practices;
•integrating workforces and attracting and retaining key personnel while maintaining focus on providing consistent, high quality customer service and running an efficient operation;
•identifying and eliminating redundant and underperforming operations and assets in both companies;
•managing the expanded operations of a significantly larger and more complex company;
•coordinating sales, distribution and marketing efforts, including the rebranding initiatives related to the Spirit business;
•effecting potential actions that may be required in connection with obtaining regulatory approvals; and
•resolving potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Merger.
Even if the operations of our business and Spirit’s business are integrated successfully, the full expected benefits and synergies of the Merger may not be realized. There is risk that the expected benefits may not be achieved within the anticipated
time frame or at all. Additional unanticipated costs, which could be material, may also be incurred in the integration of our business and Spirit’s business. Further, it is possible that there could be loss of key JetBlue or Spirit employees, loss of customers, disruption of either or both of our or Spirit’s ongoing businesses or unexpected issues, higher than expected costs and an overall post-completion process that takes longer than originally anticipated. Additionally, the full benefits of the Merger may not be realized if the combined business does not perform as expected or demand for the combined company’s services does not meet our expectations. The risks currently facing each of our and Spirit’s business and the airline industry, including the ongoing impact of the COVID-19 pandemic and any possible resurgence in infection rates and the impact on airline travel, will also present additional challenges for us to successfully integrate our two companies.
We plan to submit to the FAA a transition plan for merging the day-to-day operations of JetBlue and Spirit under a single operating certificate. The issuance of a single operating certificate will occur when the FAA agrees that we have achieved a level of integration that can be safely managed under one certificate. The actual time required and cost incurred to receive this approval cannot be predicted and no actual integration may start until after closing. Any delay in the grant of such approval or increase in costs beyond those presently expected could have a material adverse effect on the completion date of our integration plan and receipt of the benefits expected from that plan. We face challenges in integrating our computer, communications and other technology systems. All of these factors could materially adversely affect our business, results of operations and financial condition.
We may face challenges in integrating our computer, communications and other technology systems.
Among the principal risks of integrating our and Spirit’s businesses and operations are the risks relating to integrating various computer, communications and other technology systems, including implementing an integrated customer reservations system, that will be necessary to operate JetBlue and Spirit as a single airline. The integration of these systems may be more disruptive and cost more than we may originally estimate. The implementation process to integrate these various systems will involve a number of risks that could adversely impact our business, results of operations and financial condition. The related implementation will be a complex and time-consuming project involving internal resources, substantial expenditures for implementation consultants, system hardware, software and implementation activities, as well as the transformation of business and financial processes.
As with any large project, there will be many factors that may materially affect the schedule, cost and execution of the integration of our computer, communications and other technology systems. These factors could include, among others: problems during the design, implementation and testing phases; systems delays and/or malfunctions; the risk that suppliers and contractors will not perform as required under their contracts; the diversion of management attention from daily operations to the project; reworks due to unanticipated changes in business processes; challenges in simultaneously activating new systems throughout our network; training employees in the operations of new systems; the risk of security breach or disruption; and other unexpected events beyond our control. We cannot assure you that our and Spirit’s security measures, change control procedures or disaster recovery plans will be adequate to prevent disruptions or delays. Disruptions in or changes to these systems could result in a disruption to our business and our operations and the loss of important data. Any of the foregoing could result in a material adverse effect on our business, results of operations and financial condition.
The combined company is expected to incur substantial expenses related to the Merger and the integration of JetBlue and Spirit.
The combined company is expected to incur substantial expenses in connection with the Merger and the integration of JetBlue and Spirit. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing, accounting and finance, sales, payroll, pricing, revenue management, reservations, maintenance, flight operations, marketing and benefits. While we and Spirit have assumed that a certain level of expenses would be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses likely will result in the combined company taking significant charges against earnings following the completion of the Merger, and the amount and timing of such charges are uncertain at present.
Uncertainties associated with the Merger may cause a loss of management personnel and other key employees which could adversely affect the future business and operations of the combined company.
We and Spirit are dependent on the experience and industry knowledge of our respective officers and other key employees to execute our respective business plans. The combined company’s success after the Merger will depend in part upon the ability of our and Spirit to retain key management personnel and other key employees. Current and prospective employees of JetBlue and Spirit may experience uncertainty about their roles within the combined company following the Merger, which may impair
the ability of both entities to attract, retain and motivate key management and other key personnel. Employee retention may be particularly challenging during the pendency of the Merger, as employees of JetBlue and Spirit may experience uncertainty about their future roles in the combined business.
Various Spirit officers and employees hold Spirit common shares, Spirit restricted stock units (“Spirit RSUs”) and Spirit performance stock units (“Spirit PSUs”), some of which are subject to accelerated vesting upon a change in control, and, if the Merger is completed, these officers and employees may be entitled to the cash consideration payable under the Merger Agreement in respect of such Spirit common shares, Spirit RSUs and Spirit PSUs. These payouts could also make retention of these officers and employees following the closing more difficult. Additionally, pursuant to employment agreements and/or other agreements or arrangements with Spirit, certain key employees of Spirit are entitled to receive severance payments upon a termination without cause and/or a resignation for “good reason” following completion of the Merger. Under these agreements, certain key employees of Spirit could resign from employment following specified circumstances set forth in the applicable agreement, including an adverse change in title, authority or responsibilities, compensation and benefits or primary office location, and receive significant severance payments.
Furthermore, if key employees of JetBlue or Spirit depart or are at risk of departing, we may have to incur significant costs (in addition to the retention program to be implemented by Spirit in connection with the Merger Agreement) in retaining such individuals or in identifying, hiring and retaining replacements and may lose significant expertise and talent, and our ability to realize the anticipated benefits of the Merger may be materially and adversely affected. Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of JetBlue and Spirit to the same extent that JetBlue and Spirit have previously been able to attract or retain their own employees.
The future results of the combined company will sufferprocure an alternate supplier. Additionally, if the combined company does not effectively manage its expanded operations followingsatellites Fly-Fi® uses were to become inoperable for any reason, we would have to incur significant costs to replace the Merger.
Following the Merger, the size of the business of the combined company will increase significantly beyond the current size of either our or Spirit’s business. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which will pose challenges for management, including those related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected synergies, operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the Merger.
Following the closing of the Merger, we will be bound by all of the obligations and liabilities of both companies.
Following the closing, we will become bound by all of the obligations and liabilities of JetBlue and Spirit. Neither we nor Spirit can predict the financial condition of JetBlue or Spirit at the time of that combination or our ability to satisfy the obligations and liabilities of the combined company.
The need to integrate the JetBlue and Spirit workforces following the Merger and negotiate joint labor agreements presents the potential for delay in achieving expected synergies, increased labor costs or labor disputes that could adversely affect the combined company’s operations.
The successful integration of JetBlue and Spirit and achievement of the anticipated benefits of the combination depend significantly on integrating employee groups and on maintaining productive employee relations. Failure to do so presents the potential for delays in achieving expected synergies of integration, increased labor costs and labor disputes that could adversely affect the combined company’s operations.
Spirit is a highly unionized company; JetBlue's two unionized groups are its Pilots and Inflight Crewmembers. The process for integrating labor groups in an airline merger is governed by a combination of the United States Railway Labor Act (“RLA”), the McCaskill-Bond Act, and where applicable, the existing provisions of each company’s collective bargaining agreements, and to a certain extent, union policy related to seniority integration. Pending operational integration, it is generally necessary to maintain a “fence” between employee groups, during which time the combined company will keep the employee groups separate and apply the terms of the existing collective bargaining agreements, unless other terms have been negotiated.
Under the RLA, the National Mediation Board (“NMB”) has exclusive authority to resolve representation disputes arising out of airline mergers. The disputes that the NMB has authority to resolve include (i) whether the merger has created a “single carrier” for representation purposes; (ii) designation of the appropriate “craft or class”—the RLA term for “bargaining unit”—for bargaining at the combined company on a system wide basis, an issue which typically arises from minor inconsistencies
over which positions are included within a particular craft or class at the two companies; and (iii) designation of the representative of each craft or class at the combined company.
In order to fully integrate the pre-merger represented employee groups, the combined company must negotiate a joint collective bargaining agreement covering each combined group. These negotiations can begin immediately where the same union represents employees of both companies within the craft or class in question, but otherwise will likely begin after a single post-merger representative has been certified by the NMB.
Prior to the completion of the Merger, there is a risk of litigation or arbitration by unions or individual employees that could delay or halt the Merger or result in monetary damages on the basis that the Merger either violates a provision of an existing collective bargaining agreement or an obligation under the RLA or other applicable law. The unions or individual employees might also pursue judicial or arbitral claims arising out of changes implemented as a result of the Merger. There is also a possibility that employees or unions could engage in unlawful job actions such as slow-downs, work-to-rule campaigns, sick-outs or other actions designed to disrupt our and Spirit’s normal operations, whether in opposition to the Merger or in an attempt to pressure the companies in collective bargaining negotiations. Although the RLA makes such actions unlawful until the parties have been lawfully released to self-help, and we and Spirit can seek injunctive relief against premature self-help, such actions can cause significant harm even if ultimately enjoined.
The Merger may not be accretive, and may be dilutive, to our earnings per share, which may negatively affect the market price of shares of our common stock.
We currently project that the Merger will result in a number of benefits, including enhanced competitive positioning and a platform from which to accelerate growth, and that it will be accretive to earnings per share in the first full year after the close of the transaction. This projection is based on preliminary estimates that may materially change. In addition, future events and conditions could decrease or delay the accretion that is currently projected or could result in dilution, including adverse changes in market conditions, additional transaction and integration-related costs and other factors such as the failure to realize some or all of the anticipated benefits of the Merger. Any dilution of, decrease in or delay of any accretion to, our earnings per share could cause the price of shares of our common stock to decline or grow at a reduced rate.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, AND USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
In accordance with the Payroll Support Program Agreement, the Payroll Support Program Extension Agreement, the Payroll Support 3 Agreement, and the Loan Agreement with Treasury, we are prohibited from making any share repurchases through September 30, 2022. We have suspended our share repurchase program as of March 31, 2020. The acquisition of treasury stock reflected on our condensed consolidated statement of cash flows for the six months ended June 30, 2022 and 2021 represents the return of shares to satisfy tax payments associated with crewmember stock compensation that vested during the respective periods.
In consideration for the Payroll Support 2 Payments, during the six months ended June 30, 2021, we issued warrants to purchase approximately $1.0 million shares of common stock to Treasury at an exercise price of $14.43 per share. In consideration for the Payroll Support 3 Payments, during the six months ended June 30, 2021, we issued warrants to purchase approximately $0.7 million shares of common stock to Treasury at an exercise price of $19.90 per share. See Note 3 to our condensed consolidated financial statements.None.
ITEM 5. OTHER INFORMATION
(a) None.
(b) None.
(c) During the three months ended June 30, 2023, no director or “officer”(as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
See accompanying Exhibit Index included after the signature page of this Report for a list of the exhibits filed or furnished with this Report.
EXHIBIT INDEX
| | | | | | | | |
| Exhibit Number | | Exhibit |
2.110.1 | | Agreement andAmendment to the Executive Change in Control Severance Plan, of Merger, dated July 28, 2022, by and among JetBlue Airways Corporation, Sundown Acquisition Corp., and Spirit Airlines, Inc.May 4, 2023.—incorporated by reference to Exhibit 2.110.1 to our Current Report on Form 8-K dated May 4, 2023 and filed on May 5, 2023 |
| 10.2* | | |
| 10.3* | | |
| 10.4 | | |
10.1† | | |
10.2† | | |
10.3† | | |
| 31.1* | | |
| 31.2* | | |
| 32** | | |
| 101.INS | | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | | XBRL Taxonomy Extension Schema Document |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| | |
| | |
† | | Compensatory plans in which the directors and executive officers of JetBlue participate. |
| * | | Filed herewith. |
| ** | | Furnished herewith. |
| | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | JETBLUE AIRWAYS CORPORATION |
| | | | | | (Registrant) |
| | | |
| Date: | | August 5, 20221, 2023 | | | | By: | | /s/ Al Spencer |
| | | | | | | | Al Spencer |
| | | | | | | | Vice President, Controller and |
| | | | | | | | (Principal Accounting OfficerOfficer) |
