JETBLUE AIRWAYS CORP

Historically, our cost structure has allowed us to price fares lower than many of our competitors. Our cost advantage relative to some of our competitors was due to, among other factors, high aircraft utilization, new and efficient aircraft, relatively low distribution costs, and a productive workforce. Because our network initiatives and growth plans require a low cost platform, we strive to stay focused on our competitive costs, operational excellence, and efficiency improvements. Due to post-pandemic labor shortages and subsequent collective bargaining agreement renewals, labor costs across the industry have increased significantly.

Route Structure

JetBlue's point-to-point system is designed to optimize costs as well as accommodate customers' preference for nonstop itineraries. A vast majority of our operations are centered in the heavily populated Northeast corridor of the U.S., which includes the New York and Boston metropolitan areas. This airspace is some of the world's most congested and drives certain operational constraints. The majority of our flights touch at least one of our six focus cities:

(1)Reflects JetBlue's seat share in each focus city compared to the industry as a whole.

(2)Includes JFK, Newark, LaGuardia, and New York's Westchester County Airport.

Our peak levels of traffic over the course of the typical year vary by route. Generally speaking, many of our areas of operations in the Northeast experience ATC delays and weather-related disruptions resulting in increased costs associated with de-icing aircraft, canceling flights, and accommodating displaced customers. Many of our Florida and Caribbean routes experience bad weather conditions in the summer and fall due to thunderstorms and hurricanes. As we enter new markets we could be subject to additional seasonal variations along with competitive responses by other airlines.

Fleet Structure

Our fleet consists of the following aircraft types and configurations as shown in the table below as of December 31, 2023:

(1) Includes aircraft that have been temporarily removed from service, but are expected to return to operation in the future.

(2) Embraer E190 includes seven permanently parked aircraft owned by the Company and six parked aircraft awaiting lease return.

The reliability of our fleet is essential to ensuring our operations run efficiently and we are continually working with our aircraft and engine manufacturers to enhance our performance. Any reliability or performance issues affecting our aircraft or engines may adversely impact our operations and financial condition. Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for information related to current engine issues impacting our business.

Fleet Maintenance

Consistent with our core value of safety, our Federal Aviation Administration (“FAA”) approved maintenance programs are administered by our technical operations department. We use qualified maintenance personnel who receive comprehensive training. We maintain our aircraft and associated maintenance records in accordance with, if not exceeding, FAA regulations.

Fleet maintenance work is divided into three categories: line maintenance, heavy maintenance, and component maintenance.

The bulk of our line maintenance is handled by JetBlue technicians and inspectors. It consists of service checks, interior maintenance, weekly checks, phased “A” checks and “B” checks, along with periodic diagnostics, routine repairs, and non-routine component replacements.

Heavy maintenance checks, or base maintenance, consist of a series of more complex maintenance, modification, and inspection tasks taking from one to six weeks to complete and are typically performed once every 24-36 months. All of our aircraft heavy maintenance work is performed by third party FAA-certified repair stations and are subject to direct oversight by JetBlue personnel. We outsource heavy maintenance as the costs are lower than if we were to perform the tasks internally.

Component maintenance on equipment such as engines, auxiliary power units, landing gears, pumps, and avionic computers are all performed by a number of different FAA-certified repair stations that are surveilled and approved by JetBlue. We have fixed price agreements for the repair, overhaul, modification, and logistics of our Airbus aircraft engines. We have flight hour agreements for our Embraer E190, Airbus A220, and Airbus A321neo aircraft engines. Many of our maintenance service agreements are based on a fixed cost per flight hour. These fixed costs vary based upon the age of the aircraft and other operating factors impacting the related component. Required maintenance not otherwise covered by these agreements is performed on a time and materials basis. All other maintenance activities are sub-contracted to qualified maintenance, repair, and overhaul facilities.

Aircraft Fuel

Aircraft fuel continues to be one of our largest expenses. Price has been extremely volatile due to global economic and geopolitical factors which we can neither control nor accurately predict. Our 2023 fuel consumption increased by 6.5% compared to 2022 due to higher capacity in 2023, and our average price per gallon decreased 17.9% compared to 2022. Our historical fuel consumption and costs for the years ended December 31 were:

(1)Total cost and average price per gallon each include related fuel taxes as well as effective fuel hedging gains and losses.

We attempt to protect ourselves against the volatility of fuel prices by entering into a variety of derivative instruments with underlyings of jet fuel, crude, and heating oil. In 2023, we effectively hedged a portion of exposure to price spikes by utilizing call spread options with an underlying of jet fuel.

Financial Health

We strive for continued revenue growth and execution on our structural cost program to return to long-term profitability. We remain focused on maintaining a healthy liquidity balance, ending the year with $1.7 billion of cash and cash equivalents, short term investments and long-term marketable securities.

The net book value of our assets pledged, or committed to be pledged, as security under various financing arrangements increased by $900 million from $6.2 billion at December 31, 2022 to $7.1 billion at December 31, 2023.

JetBlue Ventures

JetBlue Technology Ventures, LLC, (“JetBlue Ventures” or “JBV”) is a wholly owned subsidiary of JetBlue. JBV invests in and partners with early-stage startups with goals of improving the travel, hospitality, and transportation industries.

The investment focus of JBV is as follows:

•Seamless Customer Journey: Solutions that brighten the journey and enable a seamless travel experience throughout every part of the customer's trip.

•Reimagining the Accommodation Experience: Evolutions in hospitality, including alternative accommodations, and the underlying products and services that power the industry.

•Next-Generation Aviation Operations and Enterprise Tech: Innovations that enhance safety, improve operations, and drive enterprise-wide efficiencies.

•Innovation in Loyalty, Distribution, and Revenue: Technologies that personalize and diversify commerce, simplify payments, and improve revenue opportunities.

•Sustainable Travel: Advanced methods of measuring and reducing emissions, improved environmental protections, and game-changing transportation powered by alternative propulsion systems.

JetBlue Travel Products

JetBlue Travel Products, LLC (“JBTP”), a wholly owned JetBlue subsidiary, encompasses the JetBlue Vacations® brand, offering integrated travel packages including hotel, cruise, and non-air travel products like insurance, car rentals, and activities. Headquartered in Fort Lauderdale, JBTP aims to enhance JetBlue's vision of inspiring humanity by providing comprehensive travel experiences.

JetBlue Vacations® allows customers to combine JetBlue flights with hotels and cruises, offering savings, exclusive benefits like early boarding, free inflight drinks, and flexible payment options.

In 2021, JBTP launched Paisly TM by JetBlue®, a travel website for booking individual travel components, with expanded access to all travelers in 2023.

A key partnership extension in 2022 with Allianz Partners USA enables JetBlue customers to safeguard their travel plans with comprehensive travel insurance, covering both flights and vacation packages.