RISK FACTORS

         An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

         Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Risks Related to JetBlue

         Recent terrorist attacks seriously harmed our business and may harm our business in the future.

        The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry and us as well. The primary effects experienced by the airline industry included:

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substantial loss of revenue and flight disruption costs caused by the grounding of all commercial air traffic in or headed to the U.S. by the Federal Aviation Administration, or FAA, for about three days after the terrorist attacks;



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increased security and insurance costs;



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increased concerns about future terrorist attacks;



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airport shutdowns and flight cancellations and delays due to security breaches and perceived safety threats; and



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significantly reduced passenger traffic and yields due to the subsequent dramatic drop in demand for air travel.

        In recent months, industry-wide demand for air travel has increased but has not yet returned to pre-September levels. Most U.S. airlines have significantly reduced their flight schedules and furloughed employees. As a result, the airline industry suffered unprecedented financial losses in 2001.

        Our passenger traffic and yields also declined severely once flights were permitted to resume. Since that time, however, we have experienced significantly lower revenues and have incurred higher costs than we originally anticipated. Given the magnitude and unprecedented nature of the September terrorist attacks, it is uncertain what the long-term impact of these events will be on the airline industry in general and on JetBlue in particular. Factors that could affect our operating results and financial condition in the future include:

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Continued weakness in the demand for air travel resulting in lower fares;



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Increased costs and possible flight delays or cancellations associated with new government security mandates and our own security-related measures;



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Increased costs of aviation insurance;



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Uncertainty about the extent to which war risk coverage or other insurance will be available; and



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Reinstatement of flights that our competitors eliminated after September 11th.

        Additional terrorist attacks, the fear of such attacks or increased hostilities could further negatively impact the airline industry and us, and result in decreased passenger traffic and yields and increased costs. For a more detailed discussion, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments."

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         Because we have a limited operating history, it is difficult to evaluate an investment in our common stock.

        We were incorporated in August 1998 and began flight operations in February 2000. It is difficult to evaluate our future prospects and an investment in our common stock because of our limited operating history. Our prospects are uncertain and must be considered in light of the risks, uncertainties and difficulties frequently encountered by companies in the early stage of operations. Historically, there has been a high failure rate among start-up airlines. Our future performance will depend upon a number of factors, including our ability to:

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implement our growth strategy;



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provide high quality, reliable customer service at low prices;



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choose new markets successfully;



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maintain adequate control of our expenses;



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attract, retain and motivate qualified personnel;



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react to customer and market demands; and



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maintain the safety and security of our operations.

        We cannot assure you that we will successfully address any of these factors, and our failure to do so could harm our business.

         Our failure to successfully implement our growth strategy could harm our business.

        Our growth strategy involves increasing the frequency of flights to markets we currently serve, expanding the number of markets served and increasing flight connection opportunities. Achieving our growth strategy is critical in order for our business to achieve economies of scale and to sustain or increase our profitability. Increasing the number of markets we serve depends on our ability to access suitable airports located in our targeted geographic markets in a manner that is consistent with our cost strategy. We will also need to obtain additional gates at some of our existing destinations. Any condition that would deny, limit or delay our access to airports we seek to serve in the future will constrain our ability to grow. Opening new markets requires us to commit a substantial amount of resources, even before the new services commence. Expansion will also require additional skilled personnel, equipment and facilities. An inability to hire and retain skilled personnel or to secure the required equipment and facilities efficiently and cost-effectively may affect our ability to achieve our growth strategy. We cannot assure you that we will be able to successfully expand our existing markets or establish new markets, and our failure to do so could harm our business.

        Expansion of our markets and services may also strain our existing management resources and operational, financial and management information systems to the point that they may no longer be adequate to support our operations, requiring us to make significant expenditures in these areas. We expect that we will need to develop further financial, operational and management controls, reporting systems and procedures to accommodate future growth. We cannot assure you that we will be able to develop these controls, systems or procedures on a timely basis, and the failure to do so could harm our business.

         We have a significant amount of fixed obligations and we will incur significantly more fixed obligations which could hurt our ability to meet our strategic goals.

        As of December 31, 2001, our debt accounted for 67.7% of our total capitalization. As of December 31, 2001, maturities of our long-term debt were $55.0 million in 2002, $30.0 million in 2003, $22.8 million in 2004, $23.8 million in 2005, $22.0 million in 2006 and an aggregate of $192.0 million for the years thereafter. All of our long-term and short-term debt has floating interest rates. In addition to long-term debt, we have a significant amount of other fixed obligations under operating leases related to

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our aircraft, airport terminal space, other airport facilities and office space. As of December 31, 2001, future minimum lease payments under noncancelable operating leases with initial or remaining terms in excess of one year were approximately $45.4 million in 2002, $44.8 million in 2003, $44.7 million in 2004, $43.3 million in 2005 and $41.8 million in 2006 and an aggregate of $281.8 million for the years thereafter. Four of these aircraft leases have variable-rate rent payments. As of December 31, 2001, we had commitments of approximately $2.3 billion to purchase 61 additional aircraft over the next six years, including estimated amounts for contractual price escalations. We will incur additional debt and other fixed obligations as we take delivery of new aircraft and other equipment and continue to expand into new markets.

        Our high level of debt and other fixed obligations could:

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limit our ability to obtain additional financing to support capital expansion plans and for working capital and other purposes;



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divert substantial cash flow from our operations and expansion plans in order to service our fixed obligations;



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require us to incur significantly more interest or rent expense than we currently do since all of our debt has floating interest rates and four of our aircraft leases have variable-rate rent;



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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and



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place us at a possible competitive disadvantage compared to less leveraged competitors and competitors that have better access to capital resources.

        Our ability to make scheduled payments on our debt and other fixed obligations will depend upon our future operating performance and cash flow, which in turn will depend upon prevailing economic and political conditions and financial, competitive, regulatory, business and other factors, many of which are beyond our control. We cannot assure you that we will be able to generate sufficient cash flow from our operations to pay our debt and other fixed obligations as they become due, and our failure to do so could harm our business. If we are unable to make payments on our debt and other fixed obligations, we could be forced to renegotiate those obligations or obtain additional equity or debt financing. To the extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our growth strategy. We cannot assure you that our renegotiation efforts would be successful or timely or that we could refinance our obligations on acceptable terms, if at all.

         Our lack of an established line of credit or borrowing facility makes us highly dependent upon our operating cash flows.

        We have no lines of credit, other than a short-term borrowing facility for certain aircraft predelivery deposits, and rely primarily on operating cash flows to provide working capital. Unless we secure a line of credit, borrowing facility or equity financing, we will be dependent upon our operating cash flows to fund our operations and to make scheduled payments on our debt and other fixed obligations. If we fail to generate sufficient funds from operations to meet these cash requirements or are unable to secure a line of credit, other borrowing facility or equity financing, we could default on our debt and other fixed obligations. Our inability to meet our obligations as they become due would materially restrict our ability to grow and seriously harm our business and financial results.

         Any inability to obtain financing for additional aircraft could harm our growth strategy.

        We typically finance our aircraft through either mortgage debt or lease financing. As of March 31, 2002, we had firm orders to purchase 58 aircraft from Airbus through 2007 and options and purchase rights to acquire 49 additional aircraft. We have arranged financing for only two of these aircraft. Although we believe that debt and/or lease financing should be available for the remaining 56 firm aircraft deliveries, we

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cannot assure you that we will be able to secure such financing on terms attractive to us or at all. While these financings may or may not result in an increase in liabilities on our balance sheet, our fixed costs will increase significantly regardless of the financing method ultimately chosen. To the extent we cannot secure such financing on acceptable terms or at all, we may be required to modify our aircraft acquisition plans or to incur higher than anticipated financing costs.

         We are subject to the risks of having a sole supplier for our aircraft, engines and in-flight entertainment system.

        One of the key elements of our business strategy is to operate only one type of aircraft equipped with one type of engine. Operating a fleet of identical aircraft with identical engines leads to cost savings because maintenance issues are simplified, spare parts inventory requirements are reduced, scheduling is more efficient and training costs are lowered. Operating just one type of aircraft also allows our employees to become highly knowledgeable about the airframe and engine, thereby increasing their efficiency and productivity.

        After extensive research, we chose the Airbus A320 because of its reliability, advanced technology and wide cabin space and the IAE International Aero Engines V2527-A5 engine for its reliability and fuel efficiency. As of March 31, 2002, we had an operating fleet of 24 Airbus A320 aircraft equipped with V2527-A5 engines and orders with Airbus Industrie and IAE for an additional 58 A320 aircraft and eight V2527-A5 spare engines to be delivered over the next six years. A number of factors could limit or preclude our ability to obtain the A320 aircraft from Airbus or the V2527-A5 engines from IAE, including:

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Airbus or IAE could refuse, or may not be financially able, to perform their obligations under our purchase agreements; and



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either of them could experience a fire, strike or other event that affects their ability to completely or timely fulfill their contractual obligations.

        If either Airbus or IAE were unable to perform its contractual obligations, we would have to find another supplier for our aircraft or engines. Boeing is the only other manufacturer from whom we could purchase alternate aircraft. If we had to purchase aircraft from Boeing, we could lose the benefits described above and we cannot assure you that any replacement aircraft would have the same operating advantages as the Airbus A320. In addition, we cannot assure you that we could purchase engines that would be as reliable and efficient as the V2527-A5, or that we could purchase aircraft or engines in the same time frame as currently expected or at comparable prices. We would incur substantial transition costs, including costs associated with retraining our employees and replacing our manuals. Our operations could also be harmed by the failure or inability of Airbus or IAE to provide sufficient parts or related support services on a timely basis.

        In addition, one of the unique features of our fleet is that every seat in each of our aircraft is equipped with free LiveTV, a direct 24-channel satellite TV service. All of the equipment for LiveTV on our aircraft is owned and provided by LiveTV LLC. We do not know of any other company that could provide us with the type of service provided by LiveTV. If LiveTV were to stop supplying us with its satellite TV service or equipment for any reason, we could lose one of the unique services that differentiates us from our competitors, and we might have to incur significant costs to procure the equipment and service of an alternate in-flight entertainment service provider.

         Our maintenance costs will increase as our fleet ages.

        Because the average age of our aircraft is about 12 months, our aircraft require less maintenance now than they will in the future. We also currently incur lower maintenance expenses because most of the parts on our aircraft are under multi-year warranties. Our maintenance costs will increase, both on an absolute basis and as a percentage of our operating expenses, as our fleet ages and these warranties expire. Although we cannot accurately predict how much our maintenance costs will increase in the future, we expect that they will increase significantly.

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         Our business is heavily dependent on the New York market and a reduction in demand of air travel in this market would harm our business.

        Our growth has focused and, at least in the near-term, will continue to focus, on adding flights to and from our primary base of operations at John F. Kennedy International Airport, or JFK, in New York City. As of February 28, 2002, out of a total of 108 daily flights, 104 of our flights had JFK as either their destination or origin. As a result, we remain highly dependent upon the New York market. Our business would be harmed by any circumstances causing a reduction in demand for air transportation in the New York metropolitan area, such as adverse changes in local economic conditions, negative public perception of the city, significant price increases linked to increases in airport access costs and fees imposed on passengers or the impact of past or future terrorist attacks.

         If we fail to use certain airport slots and slot exemptions, we may be required to forfeit these slots and the deposits we paid to hold them.

        The Department of Transportation, or DOT, granted us 75 daily takeoff and landing slot exemptions at JFK in 1999. A slot is an authorization to take off or land at a designated airport within a specified time period. Unlike a slot, our exemption from slot authorization requirements may not be sold, leased, rented or pledged. These slot exemptions phase in at the rate of up to 25 daily slots per year over three years ending in February 2003. If we fail to use a slot exemption, such slot exemption could be subject to forfeiture. Since JFK is our principal base of operations, our failure to maintain our slot exemptions at JFK could harm our business.

        In May 2001, the City of Long Beach granted us the 27 remaining available daily non-commuter departure slots at Long Beach Municipal Airport. We paid a security deposit of $10,000 on each slot. We must pay an additional $5,000 for each unused slot for each 90-day period after November 28, 2001 or those unused slots will be forfeited. We currently only use three slots and must use all of the slots by June 2003 or the unused slots and the deposits associated with them will be forfeited. Until such time as we use slots that were allocated to us, our slots remain available for other carriers to use on a temporary basis. American Airlines recently requested four permanent slots from the City of Long Beach to initiate new service to both New York City and Chicago. In its request to the City of Long Beach, American indicated it would not accept slots for a temporary period of time pending the slots being called up for use by the slot holder of record, as the governing regulations permit. American indicated that, in its opinion, such regulations are contrary to federal law. If American is not satisfied with the actions of the City of Long Beach with respect to slot allocations, American may pursue legal action. The laws of the City of Long Beach, under which we obtained and hold our 27 slots, guarantee our access to all 27 slots so long as we continue our timely quarterly payments on slots that are unused through May 2003. Although we believe that we will be able to maintain our unused slots until May 2003, we cannot predict the outcome of any such legal action aimed at overturning the slot laws of the City of Long Beach. In addition, in early April 2002, Alaska Airlines formally requested three slots, beginning in September, for proposed flights between Long Beach and Seattle. Other airlines may make similar requests. We cannot assure you that we will be successful in the Long Beach market or that we will be able to use all of our slots before June 2003.

         We may face increased competition at JFK which could harm our business.

        Our primary base of operations is JFK, an airport that has traditionally attracted considerably less attention from our competitors for domestic flight activity than either LaGuardia Airport or Newark International Airport because of an industry perception that JFK is primarily an international airport and that the commuting distance from Manhattan to JFK is too far, as compared to LaGuardia or Newark, to attract domestic travelers. We disagreed with this perception of JFK and invested a significant amount of time and resources requesting the DOT to grant us exemptions from the slot restrictions at JFK. As a result of our efforts, the DOT granted us 75 daily slot exemptions at JFK in 1999.

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        We believe that the operational efficiencies associated with conducting our principal base of operations from JFK rather than LaGuardia or Newark have contributed to our profitability. As a result of our positive experience at JFK, it is possible that our competitors will follow our strategy. Airlines already established at JFK could redeploy their existing presence with a greater emphasis on low-fare domestic travel. Other airlines that do not currently have a presence at JFK could try to gain a presence at JFK by seeking slot exemptions from the DOT as we did or purchasing or leasing slots from other airlines. In addition, airlines using fewer than 20 slots or providing regional jet service to small and medium, non-hub airports could easily obtain slot exemptions from the DOT, since such airlines are expressly exempted under the federal rule creating slot restrictions. The requirement to obtain slots or slot exemptions at JFK will expire in 2007, further opening the door to potential competition. In addition, gates have recently become more available at JFK, which could create more opportunities for our competitors to increase or establish their presence at JFK. An increase in the amount of direct competition we face at JFK, Newark or LaGuardia or an increase in congestion and delays at JFK could harm our business.

         We may be unable to renew or replace our permit at JFK, our principal base of operations.

        We currently operate from Terminal 6 at JFK under a one-year permit from the Port Authority of New York and New Jersey. Our permit could be terminated at any time upon 30 days' notice and alternate gate space may not be available on favorable terms, or at all. Although we are in the process of negotiating a three-year lease agreement with the Port Authority, we cannot assure you that we will be able to enter into a lease agreement on acceptable terms, or at all. Since JFK is our principal base of operations, our inability to maintain an adequate number of gates by entering into a new lease with the Port Authority would harm our business.

         Our business could be harmed if we lose the services of our key personnel.

        Our business depends upon the efforts of our Chief Executive Officer, David Neeleman, our President and Chief Operating Officer, David Barger, and a small number of management and operating personnel. We maintain key-man life insurance on Mr. Neeleman, which may not be sufficient to cover the costs of recruiting and hiring a replacement chief executive officer, much less the loss of his services. We may have difficulty replacing management or other key personnel who leave and, therefore, the loss of the services of any of these individuals could harm our business.

         Our results of operations will fluctuate.

        We expect our quarterly operating results to fluctuate in the future based on a variety of factors, including:

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the timing and success of our growth plans as we increase flights in existing markets and enter new markets;



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changes in fuel, security and insurance costs;



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increases in personnel, marketing, aircraft ownership and other operating expenses to support our anticipated growth; and



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the timing and amount of maintenance expenditures.

        In addition, seasonal variations in traffic, various expenditures and weather affect our operating results from quarter to quarter. The highest levels of traffic and revenue on our routes to and from Florida are generally realized from October through April and on our western routes during the summer. Given our high proportion of fixed costs, this seasonality affects our profitability from quarter to quarter. Many of our areas of operations in the Northeast experience bad weather conditions in the winter, causing increased costs associated with deicing aircraft, cancelled flights and accommodating displaced passengers. Our Florida routes experience bad weather conditions in the summer and fall due to thunderstorms and hurricanes. Due to our geographic area of operations, we are more susceptible to adverse weather

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conditions along the East Coast than some of our competitors which may be better able to spread weather-related risks over larger route systems. As we enter new markets, we could be subject to additional seasonal variations.

        Due to the factors described above, quarter-to-quarter comparisons of our operating results may not be good indicators of our future performance. In addition, it is possible that in any future quarter our operating results could be below the expectations of investors and any published reports or analyses regarding JetBlue. In that event, the price of our common stock could decline, perhaps substantially.

         We rely on maintaining a high daily aircraft utilization rate to keep our costs low, which makes us especially vulnerable to delays.

        One of the key elements of our business strategy is to maintain a high daily aircraft utilization rate, which is the amount of time that our aircraft spend in the air carrying passengers. High daily aircraft utilization allows us to generate more revenue from our aircraft and is achieved in part by reducing turnaround times at airports so we can fly more hours on average in a day. Aircraft utilization is reduced by delays resulting from the following factors, most of which are beyond our control:

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security requirements;



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customer processing and baggage handling;



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air traffic and airport congestion;



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adverse weather conditions;



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unavailability of crews;



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acts of third parties upon which we rely, such as for fueling and ground handling; and



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maintenance and technical issues.

        In addition, the expansion of our business to include new destinations and more frequent flights on current routes could increase the risk of delays, to the extent the expansion increases our exposure to congested airports or air traffic. Delays could reduce our daily aircraft utilization and, in turn, limit our ability to achieve and maintain profitability as well as damage our reputation.

        Furthermore, high aircraft utilization increases the risk that once an aircraft falls behind schedule during the day, it could remain behind schedule during the remainder of that day and potentially into the next day, which can result in disruption in operating performance leading to passenger dissatisfaction related to delayed or cancelled flights and missed connections.

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         The only aircraft we operate is the Airbus A320 equipped with IAE V2527-A5 engines, and any problems with this aircraft or the V2527-A5 engine, whether real or perceived, could significantly harm our business.

        All of our aircraft are Airbus A320s equipped with V2527-A5 engines. Our dependence on this single type of aircraft and engine for all of our flights makes us particularly vulnerable to any problems that might be associated with the Airbus A320 or the IAE V2527-A5 engine. Our business would be significantly harmed if a design defect or mechanical problem with the Airbus A320 or the IAE V2527-A5 engine were discovered causing our aircraft to be grounded while any such defect or problem is being corrected, assuming it could be corrected at all. The FAA could also suspend or restrict the use of our aircraft in the event of any actual or perceived mechanical or design problems while it conducts its own investigation. Our business would also be significantly harmed if the public avoids flying our aircraft due to an adverse perception of the Airbus A320 or the IAE V2527-A5 engine because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving an Airbus A320.

         Due to our limited fleet size, if an aircraft becomes unavailable, we may suffer greater damage to our service, reputation and profitability than airlines with larger fleets.

        As of March 31, 2002, we operated a fleet of 24 aircraft. Given the limited number of aircraft we operate, if an aircraft becomes unavailable due to unscheduled maintenance, repairs or other reasons, we could suffer greater adverse financial and reputational impacts than other larger airlines if flights are delayed or cancelled due to the absence of replacement aircraft.

         Our inability to obtain approval to operate more aircraft from the FAA and the DOT would materially restrict our growth.

        We must obtain the approval of the FAA and the DOT to operate aircraft domestically. We currently have approval from the FAA and the DOT to operate 40 aircraft through May 2003. Our growth plans contemplate operating considerably more than 40 aircraft. As we grow towards our 40 aircraft restriction, we will need to submit an application to the DOT for authorization to increase the size of our fleet beyond 40 aircraft. This application will be based on a demonstration of our financial and managerial fitness and safety compliance for expanded operations. We cannot assure you that such authorization will be granted to us. The failure of the FAA and the DOT to grant us approval to operate additional aircraft would materially restrict our ability to grow and to increase revenues and cash flow.

         We rely heavily on automated systems to operate our business and any failure of these systems could harm our business.

        We depend on automated systems to operate our business, including our computerized airline reservation system, our telecommunication systems, our website and other automated systems. Unlike most other airlines, which issue traditional paper tickets to some or all of their passengers, we issue only electronic tickets. Our website and reservation system must be able to accommodate a high volume of traffic and deliver important flight information. Substantial or repeated website, reservations system or telecommunication systems failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline. Any disruption in these systems could result in the loss of important data, increase our expenses and generally harm our business.

         If we are unable to attract and retain qualified personnel at reasonable costs or fail to maintain our company culture, our business will be harmed.

        Our business is labor intensive, with labor costs representing 28.9% of our operating expenses for the year ended December 31, 2001. We expect salaries, wages and benefits to increase on a gross basis and these costs could increase as a percentage of our overall costs, which could harm our business. Our expansion plans will require us to hire, train and retain a significant number of new employees in the future. From time to time, the airline industry has experienced a shortage of personnel licensed by the FAA, especially pilots and mechanics. We compete against the major U.S. airlines for labor in these highly skilled positions. Many of the major U.S. airlines offer wage and benefit packages that exceed our wage and benefit packages. As a result, in the future, we may have to significantly increase wages and benefits in order to attract and retain qualified personnel or risk considerable employee turnover. If we are unable to

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hire, train and retain qualified employees at a reasonable cost, we may be unable to complete our expansion plans and our business could be harmed.

        In addition, as we hire more people and grow, we believe it may be increasingly challenging to continue to hire people who will maintain our company culture. One of our principal competitive strengths is our service-oriented company culture that emphasizes friendly, helpful, team-oriented and customer-focused employees. Our company culture is important to providing high quality customer service and having a highly productive workforce that helps keep our costs low. As we grow, we may be unable to identify, hire or retain enough people who meet the above criteria, and our company culture could otherwise be adversely affected by our growing operations and geographic diversity. If we fail to maintain the strength of our company culture, our competitive ability and business may be harmed.

         Our employment agreements with our FAA-licensed personnel provide that we can only terminate these employees for cause and, as a result, it may be difficult to reduce our labor costs during an economic downturn, which could harm our business.

        Our employment agreements with our FAA-licensed personnel, including pilots, technicians and dispatchers, provide that these employees can only be terminated for cause. Each employment agreement is for a term of five years and automatically renews for an additional five-year term unless either the employee or we elect not to renew it by giving notice at least 90 days before the end of the initial term. In the event of a downturn in our business, we are obligated to pay these employees a significant portion of their employment income and to continue the benefits of these employees if they do not obtain other aviation employment. As a result, it may be difficult for us to reduce our labor costs during an economic downturn, and our inability to do so could harm our business.

         We rely on third parties to provide our customers and us with facilities and services that are integral to our business and can be withdrawn on short notice.

        We have entered into agreements with third-party contractors, including other airlines, to provide certain facilities and services required for our operations, such as aircraft maintenance, ground handling, baggage services and ticket counter space. We will likely need to enter into similar agreements in any new markets we decide to enter. All of these agreements are subject to termination upon short notice. The loss or expiration of these contracts or any inability to renew them or negotiate contracts with other providers at comparable rates could harm our business. Our reliance upon others to provide essential services on our behalf also gives us less control over costs, and the efficiency, timeliness and quality of contract services.

         We incurred an operating loss for the year ended December 31, 2000 and may incur operating losses in the future.

        We began flight operations in February 2000, and incurred a substantial loss through the year ended December 31, 2000. Although we achieved profitability in 2001, we cannot assure you that we will be profitable in the future and our failure to do so could harm our business.

         If we fail to comply with financial covenants, some of our financing agreements may be terminated.

        Under the debt agreements related to two of our aircraft, we are required to comply with two specific financial covenants. The first requires that our tangible net worth be at least 12% of our total assets. The second requires that for each quarter, our EBITDA for the prior four quarters must be at least twice our interest expense for those four quarters. In addition, under lease agreements for six of our aircraft, we could be declared to be in default under these agreements if we fail to maintain a total net worth of $20 million plus fifty percent of: (i) our annual cumulative net income since February 1, 2000 on a consolidated basis; (ii) the cumulative equity contributions from our shareholders since February 1, 2000; and (iii) the net proceeds from the sale of preferred stock, in each case for the period from February 1, 2000 through and including the date of any determination under the relevant default provisions of the lease agreements. We cannot assure you that we will be able to comply with these covenants or provisions or that these requirements will not limit our ability to finance our future operations or capital needs. Our inability to comply with the required financial maintenance covenants or provisions could result in default under these financing agreements and would result in a cross default under our other financing

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agreements. In the event of any such default and our inability to obtain a waiver of the default, all amounts outstanding under the agreements could be declared to be immediately due and payable. If we did not have sufficient available cash to pay all amounts that become due and payable, we would have to seek additional debt or equity financing, which may not be available on acceptable terms, or at all. If such financing were not available, we would have to sell assets in order to obtain the funds required to make accelerated payments or risk our aircraft becoming subject to repossession, which could harm our business.

         Our lack of a marketing alliance could harm our business and competitive ability and our implementation of a frequent flyer program could adversely affect our financial results.

        Many airlines have marketing alliances with other airlines, under which they market and advertise their status as marketing alliance partners. Among other things, they share the use of two-letter flight designator codes to identify their flights and fares in the computerized reservation systems and permit reciprocity in their frequent flyer programs. We are not a member of any marketing alliance. Our lack of a marketing alliance could harm our business and competitive ability. We intend to implement a frequent flyer program in 2002. While this program is designed to increase customer loyalty, our financial results could be harmed if it is not managed properly.

We may be subject to unionization, work stoppages, slowdowns or increased labor costs.

        Unlike most airlines, we have a non-union workforce. If our employees unionize, it could result in demands that may increase our operating expenses and adversely affect our profitability. Each of our different employee groups could unionize at any time and require separate collective bargaining agreements. If any group of our employees were to unionize and we were unable to reach agreement on the terms of their collective bargaining agreement or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be disruptive to our operations and could harm our business.

         We may not be successful establishing Long Beach Municipal Airport as our West Coast base of operations.

        One of the elements of our growth strategy is to establish our West Coast base of operations at Long Beach Municipal Airport, which serves the Los Angeles area. We chose Long Beach Municipal Airport because it is an underutilized airport that serves a large metropolitan area. Long Beach Municipal Airport is another airport subject to slot restrictions, not because of federally mandated rules, but as a result of a 1995 court settlement allowing only 41 daily non-commuter departure slots at the airport. In order to establish our presence at Long Beach, we applied for, and were granted, the 27 remaining unused departure slots at Long Beach Municipal Airport in May 2001. We are in the process of investing $1.7 million in improvements at the Long Beach Municipal Airport, to improve roadways, parking, ticket counters, gate facilities, concessions and support space. The City of Long Beach is also investing in these improvements. To date, our operations at Long Beach consist of only three round trip flights per day to JFK, which began in August 2001. We plan to increase the number of flights per day and add non-stop service between Long Beach and other cities. However, in the past other airlines have tried to establish a presence at Long Beach and have failed. Many of the routes we intend to serve from Long Beach, including transcontinental flights, are the same routes currently served by several major U.S. airlines from other nearby Los Angeles area airports. In order to protect these routes and avoid losing market share to us, some of these competitors may substantially lower their fares. We cannot assure you that we will successfully establish our West Coast base of operations at Long Beach and our failure to do so could harm our business.

Our ability to use our federal net operating loss carryforwards in the future could be limited.

        As of December 31, 2001, we had federal net operating loss carryforwards of $53.8 million. Under Section 382 of the Internal Revenue Code of 1986, if a loss corporation has an "ownership change" within a designated testing period, its ability to use its federal net operating loss carryforwards is subject to certain limitations. We cannot assure you that our ability to use our federal net operating loss carryforwards will not be limited in the future.

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Risks Associated with the Airline Industry

         Changes in government regulation imposing additional requirements and restrictions on our operations could increase our operating costs and result in service delays and disruptions.

        Airlines are subject to extensive regulatory and legal requirements, both domestically and internationally, that involve significant compliance costs. In the last several years, Congress has passed laws, and the DOT and the FAA have issued regulations relating to the operation of airlines that have required significant expenditures. For example, on November 19, 2001, the President signed into law the Aviation and Transportation Security Act, or the Aviation Security Act. This law federalizes substantially all aspects of civil aviation security and requires among other things, the implementation of certain security measures by airlines and airports, such as the requirement that all passenger bags be screened for explosives. Funding for airline and airport security under the law is primarily provided by a new $2.50 per enplanement ticket tax, with authority granted to the TSA to impose additional fees on the air carriers if necessary to cover additional federal aviation security costs. Implementation of the requirements of the Aviation Security Act will result in increased costs for our passengers and us. We are continuing to assess the impact of the implementation of this new regulation on us. However, we cannot assure you at this time that the requirements and deadlines under the Aviation Security Act will be met.

        In addition to increased costs, the security measures required to be implemented under the Aviation Security Act as well as additional security measures issued by the FAA have resulted in a longer check-in process for passengers and caused delays and disruptions in airline service, which has led to customer frustration and reduced the demand for airline travel.

        Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising ticket prices, reducing revenue and increasing costs. We cannot assure you that these and other laws or regulations enacted in the future will not harm our business.

         The airline industry is characterized by low profit margins and high fixed costs, and we may be unable to compete effectively against other airlines with greater financial resources or lower operating costs.

        The airline industry is characterized generally by low profit margins and high fixed costs, primarily for personnel, aircraft fuel, debt service and rent. The expenses of an aircraft flight do not vary significantly with the number of passengers carried and, as a result, a relatively small change in the number of passengers or in pricing could have a disproportionate effect on an airline's operating and financial results. Accordingly, a minor shortfall in expected revenue levels could harm our business.

        In addition, the airline industry is highly competitive and is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats. We currently compete with other airlines on all of our routes. Many of these airlines are larger and have significantly greater financial resources and name recognition or lower operating costs than we do, or both. Some of these competitors have chosen to add service, reduce their fares or both, in some of our markets following our entry. We may, therefore, be unable to compete effectively against other airlines that introduce service or discounted fares in the markets that we serve.

        The airline industry also faces competition from ground transportation alternatives. Video teleconferencing and other methods of electronic communication may add a new dimension of competition to the industry as business travelers seek lower-cost substitutes for air travel.

Substantial consolidation in the airline industry could harm our business.

        In recent years, and particularly since its deregulation in 1978, the airline industry has undergone substantial consolidation, and it may undergo additional consolidation in the future. For example, in April 2001, American Airlines acquired the majority of Trans World Airlines' assets. Any consolidation or significant alliance activity within the airline industry could increase the size and resources of our competitors, which, in turn, could increase the risks of competition described above.

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Increases in fuel costs would harm our business.

        Fuel costs constitute a significant portion of our total operating expenses (14.2% for the year ended December 31, 2001). Significant increases in fuel costs would harm our financial condition and results of operations. We estimate that for the year ended December 31, 2001, a one cent increase in the price per gallon of fuel expense would have increased our fuel expenses by $551,000.

        Historically, fuel costs have been subject to wide price fluctuations based on geopolitical issues and supply and demand. Fuel availability is also subject to periods of market surplus and shortage and is affected by demand for both home heating oil and gasoline. Because of the effect of these events on the price and availability of fuel, the cost and future availability of fuel cannot be predicted with any degree of certainty. In the event of a fuel supply shortage, higher fuel prices or the curtailment of scheduled service could result. Some of our competitors may have more leverage than we do in obtaining fuel. We cannot assure you that increases in the price of fuel can be offset by higher fares. In addition, although we implemented a fuel hedging program in 2001, under which we enter into crude oil option contracts to partially protect against significant increases in fuel prices, our fuel hedging program does not protect us against ordinary course price increases and is limited in fuel volume and duration. We cannot assure you that our fuel hedging program is sufficient to protect us against increases in the price of fuel due to inadequate fuel supplies or otherwise.

         Our insurance costs have increased substantially as a result of the September 11 ^th terrorist attacks, and further increases in insurance costs would harm our business.

        Following the September 11 ^th terrorist attacks, aviation insurers dramatically increased airline insurance premiums and significantly reduced the maximum amount of insurance coverage available to airlines for liability to persons other than passengers for claims resulting from acts of terrorism, war or similar events to $50 million per event and in the aggregate. We previously carried $1.5 billion in coverage per event in war risk coverage. In light of this development, under the Stabilization Act, the government has provided domestic airlines with excess war risk coverage above $50 million up to $3.0 billion per event. As a result of increased premiums, we estimate that our war risk insurance premiums will be $7 million higher in 2002 than originally planned. Our hull and liability rates were also increased resulting in an additional $3 million in premiums for 2002.

        Aviation insurers could increase their premiums even further in the event of additional terrorist attacks, hijackings, airline crashes or other events adversely affecting the airline industry. Furthermore, the excess war risk coverage provided by the government is currently scheduled to be in force until May 19, 2002. While the government may extend the deadline for when it will stop providing excess war risk coverage, we cannot assure you that any extension will occur, or if it does, how long the extension will last. It is expected that should the government stop providing excess war risk coverage to the airline industry, the premiums charged by aviation insurers for this coverage are expected to be substantially higher than the premiums currently charged by the government. Significant increases in insurance premiums would harm our financial condition and results of operations.

         Our reputation and financial results could be harmed in the event of an accident or incident involving our aircraft.

        An accident or incident involving one of our aircraft could involve repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service, and significant potential claims of injured passengers and others. We are required by the DOT to carry liability insurance. Although we believe we currently maintain liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate and we may be forced to bear substantial losses from an accident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our business and financial results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that we are less safe or reliable than other airlines, which would harm our business.

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         Airlines are often affected by factors beyond their control, including traffic congestion at airports, weather conditions and increased security measures, any of which could harm our operating results and financial condition.

        Like other airlines, we are subject to delays caused by factors beyond our control, including air traffic congestion at airports, adverse weather conditions and increased security measures. Delays frustrate passengers, reduce aircraft utilization and increase costs, all of which in turn affect profitability. During periods of fog, snow, rain, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic control problems and breaches in security could harm our operating results and financial condition.

         The airline industry tends to experience adverse financial results during general economic downturns.

        Since a substantial portion of airline travel, for both business and leisure, is discretionary, the industry tends to experience adverse financial results during general economic downturns. The airline industry has been experiencing a decline in traffic, particularly business traffic, due to slower general economic conditions. Soft economic conditions would continue to put pressure on the profitability of the industry and us. Any general reduction in airline passenger traffic may harm our business.

Risks Related to this Offering

         There has been no prior market for our common stock and our stock may experience extreme price and volume fluctuations.

        After this offering, an active trading market in our common stock might not develop or continue. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you or at all. The initial public offering price of our common stock will be determined through negotiations between the representatives of the underwriters and us and may not be representative of the price that will prevail after this offering.

         The market price of our common stock may be volatile, which could cause the value of your investment in JetBlue to decline.

        Any of the following factors could affect the market price of our common stock:

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general market, political and economic conditions;

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changes in earnings estimates and recommendations by financial analysts;

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our failure to meet financial analysts' performance expectations;

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changes in fuel prices;

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changes in market valuations of other airlines; and

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the expiration of the restricted periods on shares of our common stock that were outstanding prior to this offering.

        In addition, many of the risks described elsewhere in the "Risk Factors" section could materially and adversely affect our stock price. Prior to this offering, there has been no public market for our common stock. The stock markets have experienced price and volume volatility that has affected many companies' stock prices. Stock prices for many companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. Fluctuations such as these may affect the market price of our common stock.

         Other companies may have difficulty acquiring us, even if doing so would benefit our stockholders, due to provisions under our corporate charter, bylaws, option plans, stockholder rights agreement and some of our employment agreements, as well as Delaware law.

        Provisions in our amended and restated certificate of incorporation, our bylaws, our stockholder rights agreement and under Delaware law could make it more difficult for other companies to acquire us, even if doing so would benefit our stockholders. Our amended and restated certificate of incorporation and bylaws contain the following provisions, among others, which may inhibit an acquisition of our company by a third party:

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a staggered board of directors, where stockholders elect only a minority of the board each year;

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advance notification procedures for matters to be brought before stockholder meetings;

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a limitation on who may call stockholder meetings;

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a prohibition on stockholder action by written consent; and

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the ability of our board of directors to issue up to 25,000,000 shares of preferred stock without a stockholder vote.

        The issuance of stock under our stockholder rights agreement could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests. We are also subject to provisions of Delaware law that prohibit us from engaging in any business combination with any "interested stockholder," meaning generally that a stockholder who beneficially owns more than 15% of our stock cannot acquire us for a period of three years from the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by our board of directors. In addition, under United States laws and the regulations of the DOT, United States citizens must effectively control us. As a result, our president and at least two-thirds of our board of directors must be United States citizens and not more than 25% of our voting stock may be owned by non-U.S. citizens (although subject to DOT approval, the percent of foreign economic ownership may be as high as 49%). Any of these restrictions could have the effect of delaying or preventing a change in control. For a more complete discussion of these provisions of Delaware law, please see "Description of Capital Stock—Anti-Takeover Effects of Certain Provisions of Delaware Law and our Amended and Restated Certificate of Incorporation and Bylaws."

        Furthermore, our employment agreements with our pilots, technicians and dispatchers contain change of control provisions, which could discourage or prevent a change of control. In the event we are sold to or consolidate with another company, we must request that the successor company place these employees on a preferential hiring list. If such employees are not hired by the successor company, they will be entitled to a severance payment of up to one year's salary.

        In addition, all of our currently outstanding options under our 1999 Stock Option/Stock Issuance Plan have a special acceleration feature pursuant to which those options will vest in full in the event we are acquired. Our new 2002 Stock Incentive Plan, which will become effective upon the signing of the underwriting agreement for this offering, provides discretion to both our compensation committee and our special stock option committee to continue to grant stock options that will vest in full if we are acquired. The accelerated vesting of our employee stock options may prove to be a deterrent to a potential acquisition of us because the acquiring company may have to implement additional retention programs to assure the continued service of our employees, and the additional dilution which will result from the accelerated vesting of our outstanding employee stock options will likely reduce the amount which would otherwise be payable to our shareholders in an acquisition. For a more complete discussion of our plans, see "Management and Stock Ownership Information—Employee Benefit Plans."

         Our corporate charter and bylaws include provisions limiting voting by non-U.S. citizens.

        To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our certificate of incorporation and bylaws restrict voting of shares of our capital stock by non-U.S. citizens. The restrictions imposed by federal law currently require that no more than 25% of our stock be voted, directly or indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of the members of our board of directors be U.S. citizens. Our bylaws provide that no shares of our capital stock may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which we refer to as the foreign stock record. Our bylaws further provide that no shares of our capital stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. Registration on the foreign stock record is made in chronological order based on the date we receive a written request for registration. See "Business—Government Regulation—Foreign Ownership" and "Description of Capital Stock—Limited Voting by Foreign Owners." Two of our significant stockholders, Quantum Industrial Partners and Weston Presidio, have been deemed to be non-U.S. citizens and collectively will own more than 25% of our

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outstanding common stock after this offering. See "Management and Stock Ownership—Stock Ownership." These stockholders have agreed, so long as their combined ownership exceeds the 25% level, to register their respective pro rata portion of their aggregate shares on the foreign stock record in compliance with these foreign ownership restrictions. Other non-U.S. citizens will be able to own shares of our common stock, so long as their combined ownership does not constitute control of our company. However, so long as the combined holdings of Quantum Industrial Partners and Weston Presidio continue to exceed the 25% threshold, no other non-U.S. citizen will be able to register its shares of common stock on the foreign stock record and vote its shares.

Substantial sales of our common stock after this offering could cause our stock price to fall.

        Our outstanding shares of common stock are currently restricted from resale, but will be eligible to be sold into the market 180 days after the date of this prospectus or on such earlier date should any of our stockholders be released from the applicable lock-up agreement by Morgan Stanley or us. Sales of these shares into the market could cause the market price of our common stock to drop significantly, even if our business is doing well. Immediately following this offering, we will have outstanding 40,578,829 shares of common stock. Of these shares, the 5,500,000 shares of common stock sold in this offering will initially be freely tradable, without restriction, in the public market. After the lock-up agreements pertaining to this offering expire 180 days from the date of this prospectus, 35,078,829 shares of common stock will be eligible for sale in the public market at various times, subject, in some cases, to volume limitations under Rule 144 of the Securities Act of 1933, as amended. As restrictions on resale end, the market price of our common stock could drop significantly if the holders of these restricted shares sell them or the market perceives that they intend to sell them. For a more detailed description, please see "Shares Eligible for Future Sale."

        We cannot predict whether future sales of our common stock or the availability of our common stock for sale will adversely affect the market price for our common stock or our ability to raise capital by offering equity securities.

         You will suffer immediate and substantial dilution in the book value of your investment.

        The initial public offering price per share of our common stock is expected to exceed substantially the net tangible book value per share of the common stock immediately after this offering. Investors purchasing shares in this offering will suffer immediate dilution of $18.05 per share from their investment. In addition, to the extent that outstanding and future options to purchase our common stock are exercised, there will be substantial additional dilution. To the extent our employees purchase shares under our employee stock purchase plan, there will be further dilution. See "Dilution" and "Management and Stock Ownership Information—Employee Benefit Plans."