JETBLUE AIRWAYS CORP

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

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

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

GHG emission standards

In January 2021, the USEPA promulgated a final rule implementing the 2017 ICAO aircraft engine GHG emission standards, which will apply to larger business and commercial jet aircraft with either new design types (not previously certified by the FAA) or existing design types that are in production as of January 1, 2028. Pursuant to the Clean Air Act, the FAA issued a final rule in February 2024 to implement these standards, introducing new fuel efficiency certification regulations. These regulations became effective in April 2024 and apply to airplanes manufactured after January 1, 2028, as well as to uncertified large business and commercial jet aircrafts.

Sustainable Aviation Fuel Tax Credit & Clean Fuel Production Credit

One of the various programs within the Inflation Reduction Act of 2022 (the "IRA") was the creation of a tax credit for SAF. The SAF credit applies to a qualified fuel mixture containing sustainable aviation fuel for certain sales or uses in calendar years 2023 and 2024. The credit provides for a $1.25 credit for each gallon of SAF in a qualified mixture, which must have a minimum reduction of 50% in lifecycle greenhouse gas emissions. Additionally, there is a supplemental credit of one cent for each percent that the reduction exceeds 50%, for a total credit range of $1.25 to $1.75 per gallon. Though this credit (40B SAF Tax Credit) has been a meaningful development to stimulate the production of SAF, making it more affordable and widely available, the tax credit will only be available through the end of 2024. In 2025, the IRA 40B will be replaced by the Clean Fuel Production Credit (45Z), which will apply to qualifying transportation fuel produced between 2025 and 2027. Beginning January 1, 2025, the Treasury Department will offer tax credits for the production and sale of low emission transportation fuels, including SAF. The tax credit amount is $0.20 per gallon for non-aviation fuel and $0.35 per gallon for SAF. For facilities that satisfy the prevailing wage and apprenticeship requirements, the credit amount is $1.00 per gallon for non-aviation fuel and $1.75 per gallon for SAF. For any taxable year, the IRA 45Z is equal to the applicable credit amount per gallon multiplied by the fuel's carbon dioxide emissions factor. We believe tax credits like 40B and 45Z are an important step in helping the U.S. airline industry reach its goal of achieving net-zero carbon emissions by 2050, as well as our own goal of net zero emissions by 2040. Given the new administration in 2025, we expect some uncertainty around the specifics of these tax credits (requirements, longevity, disbursement, etc.) looking forward.

SAF Mandates

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

In October 2023, the European Commission reached an agreement on the ReFuelEU Aviation initiative. Included in this mandate is supplying a minimum share of SAF at all EU airports – starting at 2% by 2025, 6% by 2030 and 20% by 2035, up to 70% by 2050. Of these amounts, 1.2% in 2030, and 5% in 2035 must be power to liquid ("PtL") or E-Fuels, increasing to 35% by 2050. This agreement is a step towards the implementation of the "Fit for 55" legislative package to reduce greenhouse gas emissions by at least 55% by 2030. We can also expect a SAF mandate in the UK starting January 1, 2025, structured similarly to the EU mandate, with a slightly different timescale, ramp-up of SAF volumes, and non-compliance structure. Additionally, France defined its SAF roadmap in 2019, which includes SAF consumption objectives of 2% by 2025, 5% by 2030 and 50% in 2050. Though the obligated party is the fuel provider, JetBlue has worked with its fuel partners throughout Europe & the UK to proactively plan for SAF requirements. JetBlue has similarly worked alongside our partner airlines to preemptively understand reporting requirements and expectations of the various airlines.

California Climate Disclosure Laws

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

EU Emissions Trading Scheme

Following the EU's adoption of the Emissions Trading System ("ETS") in 2009, a policy to regulate GHG emissions with subsequent emissions allowances, exemptions have been extended to airlines with flights originating or landing outside of the European Economic Area ("EEA") through 2026. In future years, however, the European Commission may decide to integrate all extra-EU flights into the EU ETS which may result in an adverse effect to our business, including to the extent we must navigate conflicting legal requirements such as pursuant to the US's EU ETS Prohibition Act.

Other Related Risks

We investigate means of mitigating climate risk exposure from a physical and transitional risk perspective. Physical risks include, the number of extreme weather events, such as hurricanes, typhoons, wildfires, and rainstorms, which are generally expected to increase in frequency and severity as our climate warms. Occurrences of these extreme weather events may result in flight cancellations, delays, and diversions, impacting our operations and thus adversely affecting our financial results and conditions. Additionally, as stakeholders across our industry are increasingly developing new expectations, behaviors, regulations and technologies that are changing the way we do business, we are evaluating the way our operations will potentially be impacted from financial and operational challenges as we, and our partners, transition into a low-carbon system. However, risks may manifest in ways that we have not foreseen or are otherwise not able to wholly mitigate.