UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2002
or
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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
(State or other jurisdiction of incorporation or organization) |
87-0617894
(I.R.S. Employer Identification No.) |
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80-02 Kew Gardens Road, Kew Gardens, New York (Address of principal executive offices) |
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11415 (Zip Code) |
(718) 286-7902
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 ý No o
As of June 30, 2002, there were 42,045,404 shares of the Registrant's Common Stock, par value $0.01, outstanding.
JetBlue Airways Corporation
FORM 10-Q
PART I. FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements |
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Condensed Balance Sheets June 30, 2002 and December 31, 2001 |
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2 |
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Condensed Statements of Income Three and Six Months Ended June 30, 2002 and 2001 |
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3 |
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Condensed Statements of Cash Flows Six Months Ended June 30, 2002 and 2001 |
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4 |
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Notes to Condensed Financial Statements |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
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PART II. OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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Item 2. |
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Changes in Securities and Use of Proceeds |
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Item 5. |
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Other Information |
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Item 6. |
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Exhibits and Reports on Form 8-K |
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SIGNATURE |
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EXHIBIT INDEX |
1
JETBLUE AIRWAYS CORPORATION
(In thousands, except share data)
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June 30,
2002 |
December 31,
2001 |
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(unaudited)
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ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 269,325 | $ | 117,522 | ||||||
Short-term investments | 11,397 | | ||||||||
Receivables, less allowance | 16,795 | 20,791 | ||||||||
Inventories, less allowance | 4,060 | 2,210 | ||||||||
Prepaid expenses and other | 8,002 | 3,742 | ||||||||
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Total current assets | 309,579 | 144,265 | ||||||||
PROPERTY AND EQUIPMENT | ||||||||||
Flight equipment | 564,095 | 364,681 | ||||||||
Predelivery deposits for flight equipment | 140,729 | 125,010 | ||||||||
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704,824 | 489,691 | |||||||||
Less accumulated depreciation | 16,820 | 9,523 | ||||||||
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688,004 | 480,168 | |||||||||
Other property and equipment | 37,438 | 29,023 | ||||||||
Less accumulated depreciation | 6,915 | 4,313 | ||||||||
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30,523 | 24,710 | |||||||||
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Total property and equipment | 718,527 | 504,878 | ||||||||
OTHER ASSETS | 30,337 | 24,630 | ||||||||
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TOTAL ASSETS | $ | 1,058,443 | $ | 673,773 | ||||||
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LIABILITIES AND COMMON STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 26,436 | $ | 24,549 | ||||||
Air traffic liability | 75,074 | 51,566 | ||||||||
Accrued salaries, wages and benefits | 21,746 | 18,265 | ||||||||
Other accrued liabilities | 12,323 | 15,980 | ||||||||
Short-term borrowings | 23,922 | 28,781 | ||||||||
Current maturities of long-term debt | 51,928 | 54,985 | ||||||||
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Total current liabilities | 211,429 | 194,126 | ||||||||
LONG-TERM DEBT | 437,203 | 290,665 | ||||||||
DEFERRED CREDITS AND OTHER LIABILITIES | 32,520 | 10,708 | ||||||||
CONVERTIBLE REDEEMABLE PREFERRED STOCK | | 210,441 | ||||||||
COMMON STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||
Common stock, 42,045,404 and 4,363,967 shares issued and outstanding in 2002 and 2001, respectively | 420 | 44 | ||||||||
Additional paid-in capital | 399,033 | 3,889 | ||||||||
Accumulated deficit | (11,526 | ) | (33,117 | ) | ||||||
Unearned compensation | (10,636 | ) | (2,983 | ) | ||||||
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Total common stockholders' equity (deficit) | 377,291 | (32,167 | ) | |||||||
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TOTAL LIABILITIES AND COMMON STOCKHOLDERS' EQUITY (DEFICIT) | $ | 1,058,443 | $ | 673,773 | ||||||
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See accompanying notes to condensed financial statements.
2
JETBLUE AIRWAYS CORPORATION
STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2002
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2001
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2002
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2001
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OPERATING REVENUES | |||||||||||||||
Passenger | $ | 144,295 | $ | 76,156 | $ | 273,386 | $ | 138,117 | |||||||
Other | 5,008 | 2,242 | 9,286 | 4,131 | |||||||||||
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Total operating revenues | 149,303 | 78,398 | 282,672 | 142,248 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Salaries, wages and benefits | 37,622 | 18,863 | 71,183 | 34,780 | |||||||||||
Aircraft fuel | 16,983 | 10,530 | 29,967 | 19,062 | |||||||||||
Aircraft rent | 10,298 | 8,127 | 19,789 | 13,737 | |||||||||||
Sales and marketing | 11,785 | 6,408 | 21,635 | 12,099 | |||||||||||
Landing fees and other rents | 9,681 | 6,494 | 19,620 | 12,233 | |||||||||||
Depreciation and amortization | 5,695 | 2,281 | 10,407 | 4,411 | |||||||||||
Maintenance materials and repairs | 1,506 | 803 | 3,411 | 1,497 | |||||||||||
Other operating expenses | 28,026 | 13,854 | 55,575 | 25,853 | |||||||||||
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Total operating expenses | 121,596 | 67,360 | 231,587 | 123,672 | |||||||||||
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OPERATING INCOME | 27,707 | 11,038 | 51,085 | 18,576 | |||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||
Interest expense | (4,725 | ) | (3,376 | ) | (8,912 | ) | (7,003 | ) | |||||||
Capitalized interest | 1,435 | 2,420 | 2,732 | 4,483 | |||||||||||
Interest income and other | 617 | 579 | 2,419 | 1,354 | |||||||||||
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Total other income (expense) | (2,673 | ) | (377 | ) | (3,761 | ) | (1,166 | ) | |||||||
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INCOME BEFORE INCOME TAXES | 25,034 | 10,661 | 47,324 | 17,410 | |||||||||||
Income tax expense | 10,448 | | 19,734 | | |||||||||||
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NET INCOME | 14,586 | 10,661 | 27,590 | 17,410 | |||||||||||
Preferred stock dividends | (944 | ) | (4,020 | ) | (5,955 | ) | (7,944 | ) | |||||||
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NET INCOME APPLICABLE TO COMMON STOCKHOLDERS | $ | 13,642 | $ | 6,641 | $ | 21,635 | $ | 9,466 | |||||||
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EARNINGS PER COMMON SHARE: | |||||||||||||||
Basic | $ | 0.40 | $ | 3.36 | $ | 1.18 | $ | 4.80 | |||||||
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Diluted | $ | 0.33 | $ | 0.33 | $ | 0.67 | $ | 0.54 | |||||||
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See accompanying notes to condensed financial statements.
3
JETBLUE AIRWAYS CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
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Six Months Ended June 30,
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2002
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2001
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CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income | $ | 27,590 | $ | 17,410 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 10,407 | 4,411 | |||||||||
Deferred income taxes | 19,734 | | |||||||||
Changes in certain operating assets and liabilities | 22,653 | 2,717 | |||||||||
Other, net | 5,367 | 2,154 | |||||||||
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Net cash provided by operating activities | 85,751 | 26,692 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
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Capital expenditures | (200,391 | ) | (20,299 | ) | |||||||
Predelivery deposits for flight equipment, net | (64,635 | ) | (33,253 | ) | |||||||
Purchases of short-term investments | (11,362 | ) | | ||||||||
Increase in security deposits | (2,636 | ) | (4,133 | ) | |||||||
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Net cash used in investing activities | (279,024 | ) | (57,685 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from issuance of common stock | 167,989 | 15 | |||||||||
Proceeds from issuance of long-term debt | 178,000 | 12,000 | |||||||||
Proceeds from issuance of convertible redeemable preferred stock | 377 | 176 | |||||||||
Proceeds from short-term borrowings | 10,840 | 11,026 | |||||||||
Proceeds from aircraft sale and leaseback transactions | 38,500 | | |||||||||
Repayment of long-term debt | (34,519 | ) | (9,580 | ) | |||||||
Repayment of short-term borrowings | (15,699 | ) | | ||||||||
Other, net | (412 | ) | (212 | ) | |||||||
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Net cash provided by financing activities | 345,076 | 13,425 | |||||||||
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
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151,803 |
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(17,568 |
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Cash and cash equivalents at beginning of period | 117,522 | 34,403 | |||||||||
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Cash and cash equivalents at end of period | $ | 269,325 | $ | 16,835 | |||||||
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See accompanying notes to condensed financial statements.
4
JETBLUE AIRWAYS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1Basis of Presentation
These condensed financial statements are unaudited and have been prepared by us following the rules and regulations of the United States Securities and Exchange Commission and, in our opinion, reflect all adjustments, consisting of normal recurring items which 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 have been condensed or omitted as permitted by such rules and regulations; however, we believe that the disclosures are adequate to make the information presented not misleading. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for the entire year. These condensed financial statements and related notes should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2001, which were included as part of the Company's registration statement on Form S-1 (Registration No. 333-82576), as declared effective by the Securities and Exchange Commission on April 11, 2002 and in its final prospectus filed on April 12, 2002.
Note 2Income Taxes
Income tax expense is based on estimated annual effective tax rates, which differ from the federal statutory rate of 35% primarily due to state income taxes, nondeductible expenses and stock option compensation, and for the three and six months ended June 30, 2001, the reduction of the deferred tax asset valuation allowance.
During 2001, we recognized the benefit from the future use of operating loss carryforwards and other deferred tax assets because our evaluation of all the available evidence in assessing the realizability of the tax benefits of such deferred tax assets indicated that it is more likely than not that such deferred tax assets would be realized.
Note 3Long-term Debt
During the six months ended June 30, 2002, we issued $178 million in floating rate equipment notes due through 2014 which adjust quarterly and semi-annually based on the London Interbank Offered Rate. At June 30, 2002, the weighted average interest rate of our long-term debt was 3.93%, and maturities are $31.5 million for the remainder of 2002, $38.0 million in 2003, $34.0 million in 2004, $35.6 million in 2005, $34.4 million in 2006 and $33.8 million in 2007. Non-cash predelivery financing obtained in connection with the acquisition of new aircraft was zero and $18.1 million for the six months ended June 30, 2002 and 2001, respectively.
Note 4Comprehensive Income
Comprehensive income for the three and six months ended June 30, 2002 and 2001 consisted solely of our net income as there were no other comprehensive income (loss) components.
Note 5Employee Retirement Plan
Company contributions expensed under our 401(k) defined contribution and profit sharing plan for the three months ended June 30, 2002 and 2001 totaled $5.0 million and $2.1 million, respectively. For the six months ended June 30, 2002 and 2001, contributions expensed under the plan totaled $9.4 million and $3.7 million, respectively.
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Note 6Earnings Per Share
The following table shows how we computed basic and diluted earnings per common share:
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2002
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2001
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2002
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2001
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(In thousands, except share data)
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Numerator: | |||||||||||||
Net income applicable to common stockholders for basic earnings per share | $ | 13,642 | $ | 6,641 | $ | 21,635 | $ | 9,466 | |||||
Effect of dilutive securities: | |||||||||||||
Preferred stock dividends | 944 | 4,020 | 5,955 | 7,944 | |||||||||
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Net income applicable to common stockholders after assumed conversions for diluted earnings per share | $ | 14,586 | $ | 10,661 | $ | 27,590 | $ | 17,410 | |||||
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Denominator: | |||||||||||||
Weighted-average shares outstanding for basic earnings per share | 33,787,947 | 1,976,502 | 18,385,092 | 1,974,131 | |||||||||
Effect of dilutive securities: | |||||||||||||
Convertible preferred stock | 5,396,442 | 26,638,676 | 17,974,474 | 26,638,676 | |||||||||
Unvested common stock | 1,574,719 | 2,369,100 | 1,572,472 | 2,369,100 | |||||||||
Employee stock options | 3,576,814 | 1,817,206 | 3,412,111 | 1,526,608 | |||||||||
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Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share | 44,335,922 | 32,801,484 | 41,344,149 | 32,508,515 | |||||||||
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Note 7Commitments
At June 30, 2002, our firm aircraft orders consist of 57 Airbus A320 aircraft scheduled for delivery through 2007. Committed expenditures for these aircraft and related equipment, including estimated amounts for contractual price escalations and predelivery deposits, will be approximately $325 million for the remainder of 2002, $510 million in 2003, $505 million in 2004, $440 million in 2005, $200 million in 2006 and $190 million in 2007. In addition, we have options to purchase 28 additional aircraft scheduled for delivery from 2004 through 2009. Financing has been arranged for all of the remaining nine 2002 deliveries and the first five of the 13 deliveries scheduled for 2003.
Note 8Initial Public Offering
On April 17, 2002, we raised $182.2 million from an initial public offering of 6,746,667 shares of our common stock at a price to the public of $27.00 per share, all of which shares were issued and sold by us. Upon the closing of the initial public offering, all issued and outstanding shares of Series A Preferred Stock and Series B Preferred Stock were converted into 30,692,125 shares of common stock. The net proceeds received by the Company upon the consummation of such offering were $169.4 million, after deducting underwriting discounts and commissions. Pending specific application, they were invested in short-term, investment-grade, interest-bearing instruments. Total offering expenses were $2.0 million.
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In conjunction with the initial public offering of our common stock, the authorized shares of our capital stock were increased to 500,000,000 shares of common stock and 25,000,000 shares of preferred stock. In addition, the stockholder rights plan, our employee stock purchase plan and the 2002 Stock Incentive Plan all became effective. See Note 15 to the financial statements included in our final prospectus filed with the Securities and Exchange Commission on April 12, 2002 for additional information.
Note 9Stock Options
Certain options granted during 2001 and 2002 have exercise prices that are less than their deemed market value. Unearned compensation expense associated with these transactions is being amortized over the vesting periods of five or seven years and will be $926,000 for the remainder of 2002, $1,853,000 per year in 2003 through 2005, $1,784,000 in 2006, $1,251,000 in 2007 and $1,114,000 in 2008. Amortization of such deferred compensation amounted to $463,100 and zero during the three months ended June 30, 2002 and 2001, respectively. For the six months ended June 30, 2002 and 2001, amortization of deferred compensation was $838,700 and zero, respectively.
Note 10Financial Instruments and Risk Management
We include gains and losses from changes in the value of our crude oil option contracts in interest income and other. Losses of $443,700 for the three months ended June 30, 2002 and gains of $857,800 for the six months ended June 30, 2002 have been recorded. These gains could reverse in future months as the contracts expire. As of June 30, 2002, we had hedged approximately 35 percent of our remaining 2002 fuel needs.
The Company determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. The $11.4 million in short-term investments purchased during the second quarter of 2002 are classified as held-to-maturity securities and are stated at amortized cost.
Note 11Loyalty Program
Our customer loyalty program, "TrueBlue" was launched in June 2002. We record a liability for the estimated incremental cost of providing free travel awards as points are earned.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Three Months Ended June 30, 2002 and 2001
Our net income for the three months ended June 30, 2002 increased to $14.6 million from $10.7 million for the three months ended June 30, 2001. We had operating income of $27.7 million for the second quarter of 2002 compared to operating income of $11.0 million in 2001. Diluted earnings per share was $0.33 for the second quarter of both 2002 and 2001. For the three months ended June 30, 2001, our effective tax rate was zero due to the reduction of our deferred tax asset valuation allowance compared to 41.7% in 2002. Additionally, the second quarter 2002 earnings per share reflects an increase in the number of weighted average shares outstanding compared to 2001 as a result of our capital raising efforts, including our initial public offering in April 2002.
Our operating margin for the three months ended June 30, 2002 was a record 18.6% compared to 14.1% for the same period in 2001. Our second quarter operating margin was better than expected primarily due to stronger passengers loads and higher than anticipated demand in the new markets we initiated during the quarter which included twice-daily non-stop service from Dulles International Airport to both Long Beach and Oakland, California and three daily round-trip flights from at New York's John F. Kennedy International Airport, or JFK, to San Juan, Puerto Rico.
Operating Revenues. Operating revenues increased 90.4%, or $70.9 million, primarily due to an increase in passenger revenues. Increased passengers resulting from a 59.3% increase in departures and a 4.3 point increase in load factor, or $85.4 million, partially offset by a 10.7% decrease in yield, or $17.3 million, drove the increase in passenger revenue of $68.1 million for the three months ended June 30, 2002. Other revenue increased 123%, or $2.8 million, primarily due to increased change fees of $1.4 million resulting from more passengers.
Operating Expenses. Operating expenses increased 80.5%, or $54.2 million, due to an average of 11.5 additional aircraft, which provided us with higher capacity. Operating capacity increased 101% to 1.93 billion available seat miles and an increase in transcontinental flights over 2001 resulted in a 26.2 percent increase in average stage length.
Operating expenses per available seat mile decreased 10.3% to 6.29 cents. In detail, operating costs per available seat mile were:
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Three Months Ended
June 30, |
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Percent
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2002
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2001
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Operating expenses: | |||||||||
Salaries, wages and benefits | 1.95 | 1.96 | (.3) | % | |||||
Aircraft fuel | .88 | 1.10 | (19.8 | ) | |||||
Aircraft rent | .53 | .85 | (37.0 | ) | |||||
Sales and marketing | .61 | .67 | (8.6 | ) | |||||
Landing fees and other rents | .50 | .67 | (27.4 | ) | |||||
Depreciation and amortization | .29 | .24 | 19.9 | ||||||
Maintenance materials and repairs | .08 | .08 | | ||||||
Other operating expenses | 1.45 | 1.44 | .6 | ||||||
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Total operating expenses | 6.29 | 7.01 | (10.3) | % | |||||
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Salaries, wages and benefits increased 99.4%, or $18.8 million, due to an increase in average full-time equivalent employees of 83.2%, higher wage rates and a $2.5 million higher provision for our
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profit sharing plan in 2002 compared to 2001. Cost per available seat mile decreased .3% as a result of higher capacity.
Aircraft fuel expense increased 61.3%, or $6.5 million, due to 12.0 million more gallons of aircraft fuel consumed resulting in $10.0 million of additional fuel expense offset by a 17.2% decrease in average fuel cost per gallon, or $3.5 million. Cost per available seat mile decreased 19.8% primarily due to the decrease in average fuel cost per gallon.
Aircraft rent increased 26.7%, or $2.2 million, primarily due to having three more average aircraft under operating leases during the three months ended June 30, 2002 compared to 2001. Cost per available seat mile decreased 37.0% due to a lower percentage of the aircraft fleet being leased.
Sales and marketing expense increased 83.9%, or $5.4 million, due to increased advertising and higher credit card fees resulting from increased passenger revenues. On a cost per available seat mile basis, sales and marketing expense decreased 8.6% due to the increase in available seat miles and lower commissions due to elimination of travel agency commissions in April 2002. We booked the majority of our reservations through a combination of our website (61.3% in 2002) and our own reservation agents (35.0% in 2002).
Landing fees and other rents increased 49.1%, or $3.2 million, due to a 59.3% increase in departures. Cost per available seat mile decreased 27.4% due to higher capacity and an increase in average stage length.
Depreciation and amortization increased 150%, or $3.4 million, due to eight more average aircraft owned in the three months ended June 30, 2002 compared to 2001 and higher levels of aircraft spare parts. Cost per available seat mile increased 19.9% due to a higher percentage of the aircraft fleet being owned.
Maintenance materials and repairs increased 87.5%, or $.7 million, due to 11.5 more average aircraft in 2002 compared to 2001. The cost per available seat mile was unchanged due to higher capacity offset by the completion of three airframe checks in 2002 compared to one in 2001.
Other operating expenses increased 102.3%, or $14.2 million. Higher variable costs associated with increased capacity and number of passengers served, along with increased insurance costs as a result of the September 2001 terrorist attacks and operating costs for Terminal 6 at JFK, which we now lease directly from the Port Authority of New York and New Jersey, or PANYNJ, were the primary reasons for the increase. Cost per available seat mile only increased .6%.
Other Income (Expense). Interest expense increased 40%, or $1.3 million, due to the debt financing of eight additional aircraft and increased borrowings related to predelivery deposits on aircraft resulting in $2.2 million of additional interest expense, offset by lower interest rates resulting in $.9 million less interest expense. Capitalized interest decreased 40.7%, or $1.0 million, primarily due to lower interest rates. During 2001, we implemented a fuel hedging program under which we entered into crude oil option contracts that partially protect us against significant increases in fuel prices. Hedging activities resulted in a $443,700 loss for the three months ended June 30, 2002 due to the reversal of unrealized gains, which was offset by higher interest income.
Six Months Ended June 30, 2002 and 2001
Our net income for the six months ended June 30, 2002 increased to $27.6 million from $17.4 million for the six months ended June 30, 2001. We had operating income of $51.1 million and an operating margin of 18.1% for the first six months of 2002 compared to operating income of $18.6 million and an operating margin of 13.1% in 2001. Diluted earnings per share was $0.67 and $0.54 for the six months ended June 30, 2002 and 2001, respectively. For the six months ended June 30,
9
2001, our effective tax rate was zero due to the reduction of our deferred tax asset valuation allowance compared to 41.7% for 2002.
Operating Revenues. Operating revenues increased 98.7%, or $140.4 million, primarily due to an increase in passenger revenues. Increased passengers resulting from a 68.1% increase in departures and a 2.5 point increase in load factor, or $158 million, partially offset by a 7.7% decrease in yield, or $22.7 million, drove the increase in passenger revenue of $135.3 million for the six months ended June 30, 2002. Other revenue increased 125%, or $5.2 million, primarily due to increased change fees of $2.8 million resulting from more passengers and concession sales from Terminal 6 at JFK of $.8 million.
Operating Expenses. Operating expenses increased 87.3%, or $107.9 million, due to an average of 11.6 additional aircraft, which provided us with higher capacity. Operating capacity increased 108% to 3.55 billion available seat miles due to scheduled capacity increases and an increase in transcontinental flights over 2001 partially offset by 1.1% lower aircraft utilization.
Operating expenses per available seat mile decreased 9.9% to 6.53 cents. In detail, operating costs per available seat mile were:
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Six Months Ended
June 30, |
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Percent
Change |
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2002
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2001
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Operating expenses: | |||||||||
Salaries, wages and benefits | 2.01 | 2.04 | (1.5) | % | |||||
Aircraft fuel | .84 | 1.12 | (24.4 | ) | |||||
Aircraft rent | .56 | .80 | (30.7 | ) | |||||
Sales and marketing | .61 | .71 | (14.0 | ) | |||||
Landing fees and other rents | .55 | .72 | (24.2 | ) | |||||
Depreciation and amortization | .29 | .26 | 13.5 | ||||||
Maintenance materials and repairs | .10 | .09 | 9.7 | ||||||
Other operating expenses | 1.57 | 1.51 | 4.1 | ||||||
|
|
||||||||
Total operating expenses | 6.53 | 7.25 | (9.9) | % | |||||
|
|
Salaries, wages and benefits increased 105%, or $36.4 million, due to an increase in average full-time equivalent employees of 87.8%, higher wage rates and a $5.1 million higher provision for our profit sharing plan in 2002 compared to 2001. Cost per available seat mile decreased 1.5% as a result of higher capacity.
Aircraft fuel expense increased 57.2%, or $10.9 million, due to 23.0 million more gallons of aircraft fuel consumed resulting in $19.4 million of additional fuel expense offset by a 22.2% decrease in average fuel cost per gallon, or $8.5 million. Cost per available seat mile decreased 24.4% primarily due to the decrease in average fuel cost per gallon.
Aircraft rent increased 44.1%, or $6.1 million, primarily due to having four more average aircraft under operating leases during the six months ended June 30, 2002 compared to 2001. Cost per available seat mile decreased 30.7% due to a lower percentage of the aircraft fleet being leased.
Sales and marketing expense increased 78.8%, or $9.5 million, due to increased advertising and higher credit card fees resulting from increased passenger revenues. On a cost per available seat mile basis, sales and marketing expense decreased 14.0% due to the increase in available seat miles. We booked the majority of our reservations through a combination of our website (58.3% in 2002) and our
10
own reservation agents (37.0% in 2002). On April 24, 2002, we announced the elimination of travel agency commissions which will reduce our sales and marketing expense in the future.
Landing fees and other rents increased 60.4%, or $7.4 million, due to a 68.1% increase in departures. Cost per available seat mile decreased 24.2% due to higher capacity and an increase in average stage length.
Depreciation and amortization increased 136%, or $6.0 million, due to seven more average aircraft owned in the six months ended June 30, 2002 compared to 2001 and higher levels of aircraft spare parts. Cost per available seat mile increased 13.5%, and is anticipated to further increase in 2002 as six of our nine remaining aircraft deliveries for 2002 will be owned and financed.
Maintenance materials and repairs increased 128%, or $1.9 million, due to 11.6 more average aircraft and more scheduled airframe checks in 2002 compared to 2001. The cost per available seat mile increased 9.7% due to the completion of six airframe checks in the six months ended June 30, 2002 compared to one in the six months ended June 30, 2001.
Other operating expenses increased 115%, or $29.7 million. Higher variable costs associated with increased capacity and number of passengers served, along with increased insurance as a result of the September 2001 terrorist attacks and operating costs for Terminal 6 at JFK, which we now lease directly from PANYNJ, were the primary reasons for the increase. Cost per available seat mile increased 4.1%.
Other Income (Expense). Interest expense increased 27.3%, or $1.9 million, due to the debt financing of 10 additional aircraft and increased borrowings related to predelivery deposits on aircraft resulting in $3.7 million of additional interest expense, offset by lower interest rates resulting in $1.8 million less interest expense. Capitalized interest decreased 39.1%, or $1.8 million, primarily due to lower interest rates. During 2001, we implemented a fuel hedging program under which we entered into crude oil option contracts that partially protect us against significant increases in fuel prices. Hedging activities resulted in an $857,800 gain for the six months ended June 30, 2002, which could reverse in future months as the contracts expire.
11
The following table sets forth our operating statistics for the three and six months ended June 30, 2002 and 2001:
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Percent
Change |
Percent
Change |
|||||||||||||||
|
2002
|
2001
|
2002
|
2001
|
|||||||||||||
Revenue passengers | 1,332,906 | 753,937 | 76.8 | 2,513,823 | 1,398,356 | 79.8 | |||||||||||
Revenue passenger miles (000) | 1,625,536 | 766,350 | 112.1 | 2,929,811 | 1,366,693 | 114.4 | |||||||||||
Available seat miles (000) | 1,932,113 | 960,744 | 101.1 | 3,546,783 | 1,706,596 | 107.8 | |||||||||||
Load factor | 84.1 | % | 79.8 | % | 4.3 | pts. | 82.6 | % | 80.1 | % | 2.5 | pts. | |||||
Breakeven load factor | 70.9 | % | 70.6 | % | 0.3 | pts. | 70.0 | % | 71.7 | % | (1.7) | pts. | |||||
Aircraft utilization (hours per day) | 13.3 | 13.2 | 1.0 | 13.0 | 13.2 | (1.1 | ) | ||||||||||
Average fare | $ | 108.26 | $ | 101.01 | 7.2 | $ | 108.75 | $ | 98.77 | 10.1 | |||||||
Yield per passenger mile (cents) | 8.88 | 9.94 | (10.7 | ) | 9.33 | 10.11 | (7.7 | ) | |||||||||
Passenger revenue per available seat mile (cents) | 7.47 | 7.93 | (5.8 | ) | 7.71 | 8.09 | (4.7 | ) | |||||||||
Operating revenue per available seat mile (cents) | 7.73 | 8.16 | (5.3 | ) | 7.97 | 8.34 | (4.4 | ) | |||||||||
Operating expense per available seat mile (cents) | 6.29 | 7.01 | (10.3 | ) | 6.53 | 7.25 | (9.9 | ) | |||||||||
Departures | 10,090 | 6,332 | 59.3 | 19,529 | 11,615 | 68.1 | |||||||||||
Average stage length (miles) | 1,182 | 937 | 26.2 | 1,121 | 907 | 23.6 | |||||||||||
Average number of operating aircraft during period | 24.6 | 13.1 | 87.8 | 23.4 | 11.8 | 98.3 | |||||||||||
Average fuel cost per gallon (cents) | 68.92 | 83.24 | (17.2 | ) | 65.75 | 84.47 | (22.2 | ) | |||||||||
Fuel gallons consumed (000) | 24,641 | 12,649 | 94.8 | 45,575 | 22,566 | 102.0 | |||||||||||
Percent of sales through
jetblue.com during period |
61.3 | % | 39.4 | % | 21.9 | pts. | 58.3 | % | 38.5 | % | 19.8 | pts. | |||||
Full-time equivalent employees
at period end |
2,864 | 1,587 | 80.5 |
Liquidity and Capital Resources
At June 30, 2002, we had cash and cash equivalents of $269.3 million, compared to $16.8 million at June 30, 2001. Cash flows from operating activities were $85.8 million for the six months ended June 30, 2002 compared to $26.7 million for the six months ended June 30, 2001. The increase in operating cash flows was primarily due to the growth of our business. In addition, as a result of our meeting certain financial targets, the amount of cash withheld by our credit card processor was reduced to zero during the second quarter of 2002. We rely primarily on operating cash flows to provide working capital. We presently have no lines of credit other than a short-term borrowing facility for certain aircraft predelivery deposits.
Investing activities. Investing activities for the six months ended June 30, 2002 consisted of the acquisition of six Airbus A320 aircraft and one spare engine, predelivery deposits for ordered aircraft, the purchase of held-to-maturity investments, security deposits for facilities, facilities improvements, ground equipment purchases, and spare parts purchases, aggregating $279 million.
Investing activities for the six months ended June 30, 2001 consisted of predelivery deposits for ordered aircraft and spare engines, security deposits for leased aircraft, facilities improvements, ground equipment purchases and spare parts purchases.
12
Financing activities. Financing activities for the six months ended June 30, 2002 consisted of (i) the incurrence of $178 million of 10- to 12- year floating rate equipment notes issued to various European banks secured by five aircraft and a 5-year floating rate equipment note secured by a spare engine, (ii) the sale and leaseback over 18 years of one aircraft for $38.5 million financed by a Japanese institution, (iii) the repayment of debt of $34.5 million, and (iv) the completion on April 17, 2002 of our initial public offering of 6,746,667 shares of our common stock for net proceeds of $167.4 million. We invested the net proceeds in short-term, investment-grade, interest bearing instruments, pending their use to fund working capital and capital expenditures, including capital expenditures related to the purchase of aircraft. As of October 9, 2002, approximately 33 million shares of our common stock will be freely tradable subject to the restrictions of Rule 144 as the lock-up agreements expire with the underwriters of our initial public offering.
Financing activities for the six months ended June 30, 2001 consisted of the issuance of a $12.0 million 5-year floating rate equipment note secured by two spare engines, short-term borrowings and the repayment of long-term debt.
Commitments. At June 30, 2002, maturities of long-term debt were $31.5 million for the remainder of 2002, $38.0 million in 2003, $34.0 million in 2004, $35.6 million in 2005, $34.4 million in 2006 and $33.8 million in 2007. In addition, at June 30, 2002, we were in compliance with the covenants of all of our debt and lease agreements.
At June 30, 2002, our firm aircraft orders consist of 57 Airbus A320 aircraft scheduled for delivery as follows: nine during the remaining six months of 2002, 13 in 2003, 13 in 2004, 12 in 2005 and five each year in 2006 and 2007. Committed expenditures for these aircraft, including estimated amounts for contractual price escalations and predelivery deposits, will be $325 million for the remainder of 2002, $510 million in 2003, $505 million in 2004, $440 million in 2005, $200 million in 2006 and $190 million in 2007. In addition, we have options to acquire 28 additional aircraft through 2009. Financing has been arranged for all of the remaining nine aircraft deliveries in 2002 and the first five deliveries scheduled for 2003, of which seven will be financed under mortgages and seven will be financed under operating leases. Although we believe that debt and/or lease financing should be available for our remaining aircraft deliveries, we cannot assure you that we will be able to secure financing on terms attractive to us, if at all, which may require us to modify our aircraft acquisition plans.
We operated a fleet of 26 Airbus A320 aircraft, of which 13 are owned and 13 are leased under operating leases as of June 30, 2002. We had also taken delivery of one owned aircraft in June that began scheduled service in July 2002. The average age of the fleet was 15 months.
In June 2002, the PANYNJ approved a long-term lease through November 2006 with us for use of Terminal 6 and the adjoining ramp area at JFK. As a result of the lease, landing fees and other rents will increase $4.8 million per year and we continue to be responsible for the operating and maintenance costs of the terminal.
We also have $11.8 million of restricted cash pledged under standby letters of credit related to leases which expire at the end of the related lease terms.
Other Information
Stabilization Act. On June 25, 2002, we received $1.98 million as the third installment of compensation under the Air Transportation Safety and System Stabilization Act, or the Stabilization Act. Based on the DOT's review of our final application which was submitted on May 15, 2002, we expect that we will receive the remaining compensation by September 30, 2002 that we had recorded as a receivable. We have not reflected any change in compensation under the Stabilization Act due to the uncertainties regarding the Department of Transportation's, or DOT's, final interpretation under the Act.
13
Aviation Insurance. As part of the Stabilization Act, the U.S. government has provided excess war risk coverage to the airline industry with a third party liability policy to cover losses to persons other than employees or passengers generally for renewable 60-day periods, currently in effect until August 17, 2002. We cannot predict whether the government will continue to renew this insurance or how much our premiums would increase if alternative insurance carriers were to provide this coverage.
Outlook. We expect our capacity to be up approximately 95 to 97 percent in the third quarter of 2002 compared to third quarter of 2001 and up approximately 77 to 79 percent in the fourth quarter of 2002 compared to the same period in 2001. Average stage length is projected at 1,223 and 1,100 for the third and fourth quarter of 2002, respectively. Our forecasted weighted average shares outstanding for diluted earnings per share are 45.6 million for the third quarter, 45.9 million for the fourth quarter and 43.6 million for year-to-date 2002.
Forward-Looking Information. This report contains forward-looking statements relating to future events and our future performance including, without limitation, statements regarding financial forecasts or projections, our expectations, beliefs, intentions or future strategies that are signified by the words "expects", "anticipates", "intends", "believes" or similar language. Our actual results and the timing of certain events could differ materially from those expressed in the forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date of this report. It is routine for our internal projections and expectations to change as the year or each quarter in the year progress, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change, we may not inform you if they do. Our policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter.
You should understand that many important factors, in addition to those discussed in this report, could cause our results to differ materially from those expressed in the forward-looking statements. These factors include, without limitation, the continually changing airline industry and regulatory environment following the recent terrorist attacks and threats, future terrorist attacks or fear of such attacks, our limited operating history, our ability to implement our growth strategy, our fixed obligations, our ability to implement our growth strategy, our ability to establish lines of credit or obtain financing from third parties, our dependence on the New York market, our ability to renew or replace gate leases, our competitive environment, problems with our aircraft, economic and other conditions in the markets in which we operate, our reliance on third parties and sole suppliers, governmental regulation, our reliance on one type of aircraft and on automated systems, increases in maintenance costs, fuel prices, insurance premiums and purchase prices of aircraft, the loss of key personnel and potential problems with our workforce including work stoppages and seasonal fluctuations in our operating results.
Additional information concerning these and other factors which could cause differences between forward-looking statements and future actual results is contained in Item 3. Risk Factors contained in our final prospectus filed with the Securities and Exchange Commission on April 12, 2002.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in market risk from the information provided in Item 11h. Quantitative and Qualitative Disclosures About Market Risk in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our final prospectus filed with the Securities and Exchange Commission on April 12, 2002. See Note 10 to the unaudited condensed financial statements for additional information.
14
In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. We believe that the outcome of the proceedings to which we are currently a party will not have a material adverse effect on our financial position, results of operations or cash flows.
Item 2. Changes in Securities and Use of Proceeds.
(d) On April 17, 2002, we consummated the initial public offering of 6,746,667 shares of our common stock, $0.01 par value. The shares of common stock sold in the offering were registered under the Securities Act of 1933, as amended on a Registration Statement (Registration No. 333-82576) that was declared effective by the Securities and Exchange Commission on April 11, 2002. The net proceeds to us from the offering were $167.4 million after deducting discounts and commissions paid to the underwriters and other expenses incurred in connection with the offering. From April 17, 2002 to June 30, 2002, we invested such net offering proceeds in short-term, investment-grade, interest-bearing instruments.
Director Resignation
On April 30, 2002, David Ferguson resigned from our board of directors. Mr. Ferguson was also the Chairman of the audit committee. Mr. Ferguson's resignation was not due to any disagreement with us on any matter relating to our operations, policies or practices. Neal Moszkowski and Joel Peterson continue to serve on the audit committee and Mr. Moszkowski is the new Chairman of the audit committee. Pursuant to our request, the Listing Qualifications of The Nasdaq National Market, Inc. granted us a grace period until August 12, 2002, to comply with the National Association of Securities Dealer's Marketplace Rules 4350(c) and 4350(d)(2) which require us to have at least three independent directors on our audit committee. We are currently evaluating eligible candidates to fill the vacancy on our audit committee created by Mr. Ferguson's resignation.
Customer Loyalty Program
On June 18, 2002, we announced, "TrueBlue", our customer loyalty program. Under TrueBlue, customers that participate in the program earn points for each one-way flight with us. The number of points awarded per flight depends on the length of the flight and points are automatically doubled when flights are booked via our website through December 31, 2002. TrueBlue program participants are awarded a free round-trip flight upon accumulating 100 points. Customers who wish to participate in the TrueBlue program may visit our website at www.jetblue.com to enroll.
Attached hereto and incorporated by reference in its entirety as Exhibit 99.1 is a copy of the press release, dated June 18, 2002, announcing the TrueBlue customer loyalty program.
15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number |
Description
|
|
---|---|---|
10.1 |
|
Amendment No. 12 to Airbus A320 Purchase Agreement, dated as of April 20, 1999, between AVSA, S.A.R.L. and JetBlue Airways Corporation, dated April 19, 2002. |
10.2 |
|
Side Letter No. 10 to V2500 General Terms of Sale between IAE International Aero Engines AG and NewAir Corporation, dated April 25, 2002. |
99.1 |
|
Press Release, dated June 18, 2002, issued by JetBlue Airways Corporation. |
(b) The Company filed no reports on Form 8-K during the quarter ended June 30, 2002.
16
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: July 30, 2002 |
|
By: |
|
/s/ HOLLY L. NELSON Vice President and Controller (principal accounting officer) |
17
Exhibit
Number |
Exhibit
|
|
---|---|---|
10.1 |
|
Amendment No. 12 to Airbus A320 Purchase Agreement, dated as of April 20, 1999, between AVSA, S.A.R.L. and JetBlue Airways Corporation, dated April 19, 2002. |
10.2 |
|
Side Letter No. 10 to V2500 General Terms of Sale between IAE International Aero Engines AG and New Air Corporation, dated April 25, 2002. |
99.1 |
|
Press Release, dated June 18, 2002, issued by JetBlue Airways Corporation. |
18
[AVSA Letterhead]
Amendment No. 12
to the A320 Purchase Agreement
Dated as of April 20, 1999
between
AVSA, S.A.R.L.
and
JetBlue Airways Corporation
This Amendment No. 12 (hereinafter referred to as the "Amendment") is entered into as of April 19, 2002, between AVSA, S.A.R.L., a société a responsibilité limitée organized and existing under the laws of the Republic of France, having its registered office located at 2, Rond-Point Maurice Bellonte, 31700 Blagnac, France (hereinafter referred to as the "Seller"), and JetBlue Airways Corporation, a corporation organized and existing under the laws of the State of Delaware, United States of America, having its principal corporate offices located 80-02 Kew Gardens Road, 6th Floor, Kew Gardens, New York, 11415 USA (hereinafter referred to as the "Buyer").
WHEREAS, the Buyer and the Seller entered into an A320 Purchase Agreement, dated as of April 20, 1999, relating to the sale by the Seller and the purchase by the Buyer of certain Airbus A320-200 aircraft (the "Aircraft"), which, together with all Exhibits, Appendixes and Letter Agreements attached thereto and as amended by Amendment No. 1, dated as of September 30, 1999, Amendment No. 2, dated as of March 13, 2000, Amendment No. 3, dated as of Match 29, 2000, Amendment No. 4, dated as of September 29, 2000, Amendment No. 5 dated as of November 7, 2000, Amendment No. 6 dated as of November 20, 2000, Amendment No. 7 dated as of January 29, 2001, Amendment No. 8 dated as of May 3, 2001, Amendment No. 9 dated as of July 18, 2001, Amendment No. 10 dated as of November 16, 2001, and Amendment No. 11 dated as of December 31, 2001 and executed January 9, 2002, is hereinafter called the "Agreement."
WHEREAS, by way of Amendment No. 11, the parties, inter alia, agreed that the *** and
WHEREAS, the Buyer wishes to exercise two (2) of the Amendment No, 11 Additional Options and to advance the delivery positions of the corresponding Aircraft (designated Aircraft Nos. 101 and 102) from 2009 to December, 2002 and May 2003, and
WHEREAS, the Buyer wishes to ***, and
WHEREAS, the Buyer wishes to ***, and
WHEREAS, the Seller is willing to accommodate the Buyer with respect to the foregoing under the terms and conditions set forth herein,
NOW, THEREFORE, IT IS AGREED AS FOLLOWS
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined herein will have the meanings assigned to them in the Agreement. The terms "herein," "hereof" and "hereunder" and words of similar import refer to this Amendment.
2. OPTION EXERCISE
Pursuant to Paragraph 2.1 of Letter Agreement No. 4 to the Agreement the Buyer hereby exercises Amendment No. 11 Additional Options No. 101 (CaC Id No. 124 965) and No. 102 (CaC Id No. 124 966) to firmly purchase two (2) Aircraft, each referred to hereafter in the delivery schedule as an "Amendment No. 12 Exercised Option."
3. DELIVERY SCHEDULE
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
3.1.2 | The *** corresponding to Firm Aircraft No. 31 (CaC Id No. 41 220) ***. | |
3.1.3 |
|
The *** assigned to Amendment No. 11 Additional Options No. 103 (CaC Id No. 124 967) and No. 104 (CaC Id No. 124 968) ***. |
3.2 |
|
As a consequence of Paragraph 3.1 above, the Aircraft are renumbered chronologically and, the delivery schedule set forth in Clause 9.1.1 of the Agreement is hereby canceled and replaced by the following quoted provisions: |
CAC Id No.
|
Rank No.
|
Aircraft
|
Delivery
|
|||||
---|---|---|---|---|---|---|---|---|
41 199 | No. 1 | Firm Aircraft | *** | 2000 | ||||
41 200 | No. 2 | Firm Aircraft | *** | 2000 | ||||
41 203 | No. 3 | Firm Aircraft | *** | 2000 | ||||
41 201 | No. 4 | Firm Aircraft | *** | 2000 | ||||
41 202 | No. 5 | Firm Aircraft | *** | 2000 | ||||
41 204 | No. 6 | Firm Aircraft | *** | 2000 | ||||
41 205 |
|
No. 7 |
|
Firm Aircraft |
|
*** |
|
2001 |
41 206 | No. 8 | Firm Aircraft | *** | 2001 | ||||
41 210 | No. 9 | Firm Aircraft | *** | 2001 | ||||
41 207 | No. 10 | Firm Aircraft | *** | 2001 | ||||
41 208 | No. 11 | Firm Aircraft | *** | 2001 | ||||
41 209 | No. 12 | Firm Aircraft | *** | 2001 | ||||
41 228 | No. 13 | Firmly Ordered Option Aircraft | *** | 2001 | ||||
41 211 |
|
No. 14 |
|
Finn Aircraft |
|
*** |
|
2002 |
41 212 | No. 15 | Firm Aircraft | *** | 2002 | ||||
41 218 | No. 16 | Firm Aircraft | *** | 2002 | ||||
41 224 | No. 17 | Firmly Ordered Option Aircraft | *** | 2002 | ||||
41 227 | No. 18 | Firmly Ordered Option Aircraft | *** | 2002 | ||||
41 225 | No. 19 | Firmly Ordered Option Aircraft | *** | 2002 | ||||
41 213 | No. 20 | Firm Aircraft | *** | 2002 | ||||
41 214 | No. 21 | Firm Aircraft | *** | 2002 | ||||
41 234 | No. 22 | Amendment No. 11 Exercised Option | *** | 2002 | ||||
41 215 | No. 23 | Firm Aircraft | *** | 2002 | ||||
41 216 | No. 24 | Firm Aircraft | *** | 2002 | ||||
41 217 | No. 25 | Film Aircraft | *** | 2002 | ||||
124 965 | No. 26 | Amendment No. 12 Exercised Option | *** | 2002 | ||||
41 235 | No. 27 | Amendment No. 11 Exercised Option | *** | 2002 | ||||
41 220 | No. 28 | Firm Aircraft | *** | 2002 | ||||
41 219 |
|
No. 29 |
|
Firm Aircraft |
|
*** |
|
2003 |
41 236 | No. 30 | Amendment No. 11 Exercised Option | *** | 2003 | ||||
104 399 | No. 31 | New Firm A320 Aircraft | *** | 2003 |
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
2
41 237 | No. 32 | Amendment No. 11 Exercised Option | *** | 2003 | ||||
124 966 | No. 33 | Amendment No. 12 Exercised Option | *** | 2003 | ||||
41 221 | No. 34 | Firm Aircraft | *** | 2003 | ||||
41 238 | No. 35 | Amendment No. 11 Exercised Option | *** | 2003 | ||||
41 222 | No. 36 | Firm Aircraft | *** | 2003 | ||||
104 400 | No. 37 | New Firm A320 Aircraft | *** | 2003 | ||||
104 401 | No. 38 | New Firm A320 Aircraft | *** | 2003 | ||||
41 223 | No. 39 | Firm Aircraft | *** | 2003 | ||||
104 402 | No. 40 | New Firm A320 Aircraft | *** | 2003 | ||||
104 403 | No. 41 | New Firm A320 Aircraft | *** | 2003 | ||||
41 226 |
|
No. 42 |
|
Firmly Ordered Option Aircraft |
|
*** |
|
2004 |
111 579 | No. 43 | Amendment No. 11 Exercised Option | *** | 2004 | ||||
41 245 | No. 44 | Firmly Ordered Option Aircraft | *** | 2004 | ||||
41 246 | No. 45 | Firmly Ordered Option Aircraft | *** | 2004 | ||||
41 229 | No. 46 | Amendment No. 11 Exercised Option | *** | 2004 | ||||
41 247 | No. 47 | Firmly Ordered Option Aircraft | *** | 2004 | ||||
41 248 | No. 48 | Firmly Ordered Option Aircraft | *** | 2004 | ||||
104 404 | No. 49 | New Firm A320 Aircraft | *** | 2004 | ||||
104 405 | No. 50 | New Firm A320 Aircraft | *** | 2004 | ||||
41 230 | No. 51 | Amendment No. 11 Exercised Option | *** | 2004 | ||||
104 406 | No. 52 | New Firm A320 Aircraft | *** | 2004 | ||||
104 407 | No. 53 | Now Firm A320 Aircraft | *** | 2004 | ||||
104 408 | No. 54 | New Firm A320 Aircraft | *** | 2004 | ||||
104 409 |
|
No. 55 |
|
New Firm A320 Aircraft |
|
*** |
|
2005 |
41 232 | No. 56 | Amendment No. 11 Exercised Option | *** | 2005 | ||||
104 410 | No. 57 | New Firm A320 Aircraft | *** | 2005 | ||||
104 411 | No. 58 | New Firm A320 Aircraft | *** | 2005 | ||||
41 233 | No. 59 | Amendment No. 11 Exercised Option | *** | 2005 | ||||
104 412 | No. 60 | New Firm A320 Aircraft | *** | 2005 | ||||
104 413 | No. 61 | New Firm A320 Aircraft | *** | 2005 | ||||
104 414 | No. 62 | New Firm A320 Aircraft | *** | 2005 | ||||
104 415 | No. 63 | New Firm A320,Aircraft | *** | 2005 | ||||
104 416 | No. 64 | New Firm A320 Aircraft | *** | 2005 | ||||
104 417 | No. 65 | New Firm A320 Aircraft | *** | 2005 | ||||
104 418 | No. 66 | New Firm A320 Aircraft | *** | 2005 | ||||
104 419 |
|
No. 67 |
|
New Firm A320 Aircraft |
|
*** |
|
2006 |
104 420 | No. 68 | New Firm A320 Aircraft | *** | 2006 | ||||
104 421 | No. 69 | New Firm A320 Aircraft | *** | 2006 | ||||
104 422 | No. 70 | New Firm A320 Aircraft | *** | 2006 | ||||
104 423 | No. 71 | New Firm A320 Aircraft | *** | 2006 |
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
3
104 424 | No. 72 | New Firm A320 Aircraft | *** | 2007 | ||||
104 425 | No. 73 | New Firm A320 Aircraft | *** | 2007 | ||||
104 426 | No. 74 | New Firm A320 Aircraft | *** | 2007 | ||||
104 427 | No. 75 | New Firm A320 Aircraft | *** | 2007 | ||||
104 428 | No. 76 | New Firm A320 Aircraft | *** | 2007 | ||||
41 231 |
|
No. 77 |
|
Option Aircraft |
|
*** |
|
2004 |
124 967 | No. 78 | Amendment No. 11 Additional Option | *** | 2005 | ||||
124 968 | No. 79 | Amendment No. 11 Additional Option | *** | 2005 | ||||
124 959 |
|
No. 80 |
|
Amendment No. 11 Additional Option |
|
*** |
|
2006 |
124 960 | No. 81 | Amendment No. 11 Additional Option | *** | 2006 | ||||
124 961 | No. 82 | Amendment No. 11 Additional Option | *** | 2006 | ||||
124 962 | No. 83 | Amendment No. 11 Additional Option | *** | 2006 | ||||
124 963 | No. 84 | Amendment No. 11 Additional Option | *** | 2006 | ||||
41 239 | No. 85 | Option Aircraft | *** | 2006 | ||||
41 240 | No. 86 | Option Aircraft | *** | 2006 | ||||
41 241 | No. 87 | Option Aircraft | *** | 2007 | ||||
41 242 | No. 88 | Option Aircraft | *** | 2007 | ||||
41 243 | No. 89 | Option Aircraft | *** | 2007 | ||||
41 244 | No. 90 | Option Aircraft | *** | 2007 | ||||
69 719 | No. 91 | A320 Additional Option Aircraft | *** | 2007 | ||||
69 720 | No. 92 | A320 Additional Option Aircraft | *** | 2007 | ||||
69 721 | No. 93 | A320 Additional Option Aircraft | *** | 2007 | ||||
69 722 |
|
No. 94 |
|
A320 Additional Option Aircraft |
|
*** |
|
2008 |
69 723 | No. 95 | A320 Additional Option Aircraft | *** | 2008 | ||||
69 724 | No. 96 | A320 Additional Option Aircraft | *** | 2008 | ||||
69 725 | No. 97 | A320 Additional Option Aircraft | *** | 2008 | ||||
96 459 | No. 98 | A320 Additional Option Aircraft | *** | 2008 | ||||
104 439 | No. 99 | Incremental A320 Option Aircraft | *** | 2008 | ||||
104 440 | No. 100 | Incremental A320 Option Aircraft | *** | 2008 | ||||
104 441 | No. 101 | Incremental A320 Option Aircraft | *** | 2008 | ||||
104 442 | No. 102 | Incremental A320 Option Aircraft | *** | 2008 | ||||
104 443 | No. 103 | Incremental A320 Option Aircraft | *** | 2008 | ||||
124 964 |
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No. 104 |
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Amendment No. 11 Additional Option |
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*** |
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2009 |
3.3 | The Seller will ***. |
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
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4 | PREDELIVERY PAYMENTS | |
4.1 |
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On signature of this Amendment, the Buyer will pay the Seller all Predelivery Payments as provided in the Agreement due as a result of the amendments set forth in Paragraph 3. |
4.2 |
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*** |
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*** |
5 |
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*** |
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In consideration of the Buyer's exercise of two (2) option aircraft, the Seller hereby agrees to provide the Buyer with a *** upon delivery of the Firmly Ordered Option Aircraft No. 18 (CaC Id No. 41 227) as well as upon delivery of the Firm Aircraft No. 28 (CaC Id No. 41 220). |
6 |
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*** |
7 |
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EFFECT OF THE AMENDMENT |
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The Agreement will be deemed amended to the extent herein provided, and, except as specifically amended hereby, will continue in full force and effect in accordance with its original terms. This Amendment supersedes any previous understandings, commitments, or representations whatsoever, whether oral or written, related to the subject matter of this Amendment. |
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Both parties agree that this Amendment will constitute an integral, nonseverable part of the Agreement and be governed by its provisions, except that if the Agreement and this Amendment have specific provisions that are inconsistent, the specific provisions contained in this Amendment will govern. |
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This Amendment will become effective upon execution thereof and receipt by the Seller of the Predelivery Payments referred to in Paragraph 4 above. |
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
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8 |
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CONFIDENTIALITY |
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This Amendment is subject to the confidentiality provisions set forth in Clause 22.5 of the Agreement. |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers or agents on the dates written below.
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AVSA, S.A.R.L. |
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By: |
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/s/ FRANÇOIS BESNIER François BESNIER |
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Its: |
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AVSA Chief Executive Officer |
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Date: |
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April 22, 2002 |
JETBLUE AIRWAYS CORPORATION |
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By: |
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/s/ TOM ANDERSON |
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Its: |
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Vice President |
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Date: |
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April 22, 2002 |
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INTERNATIONAL AERO ENGINES
400 MAIN STREET, M/S 121-10
EAST HARTFORD, CT 06108 USA
25 April 2002
JetBlue
Airways Corporation
19 Old Kings Highway South, Suite 23
Darien, Connecticut 06820
Attention: Vice President and Treasurer
Subject: |
Side letter No. 10 to the V2500 General Terms of Sale Agreement
between JetBlue Airways Corporation and IAE International Aero Engines AG dated May 4, 1999 |
Dear Tom:
We refer to the V2500 General Terms of Sale Agreement between JetBlue Airways Corporation ("JetBlue") and IAE International Aero Engines AG ("IAE") dated May 4, 1999 (the "Agreement"). Capitalized terms used herein which are not otherwise defined shall have the same meaning as those given to them in the Agreement.
This Side Letter No. 10 describes the addition of *** firm V2527-A5 powered A320 Aircraft to the Aircraft committed to by JetBlue under the Agreement prior to this Side Letter (the "*** Aircraft") and provides JetBlue with certain scheduling flexibility with regard to existing Aircraft (such *** Aircraft, together with the existing Aircraft, are hereinafter referred to in this Agreement as the "Aircraft").
1. Fleet Expansion Assistance for the *** Aircraft
a. IAE agrees to provide JetBlue a fleet expansion credit four each of the *** Aircraft, bearing Rank Numbers *** and *** in the delivery schedule attached as Exhibit B-1, as set forth in Section 2 of Side Letter No.9 to the Agreement, dated December 31, 2001. Such credit shall be provided to JetBlue in accordance with the terms and conditions set forth in the said Section of Side Letter No. 9 to the Agreement.
b. IAE also agrees to provide additional *** support to JetBlue with respect to *** Firm First Deal Aircraft, bearing Rank Numbers *** in the delivery schedule attached as Exhibit A-2 hereto (the "*** Third Deal Aircraft"). Such additional support shall be in the form of ***, as calculated pursuant to Section 3 of Side Letter No. 9 to the Agreement, except that such credit shall be *** of each *** Third Deal Aircraft ***, and provided, further, that such credits with respect to the aircraft bearing *** are subject to JetBlue having taken delivery of the aircraft bearing Rank Number ***.
IAE PROPRIETARY INFORMATION
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
1
2. Scheduling Flexibility
IAE agrees that with respect to the Aircraft ranked number ***, that such aircraft which was previously scheduled for delivery in *** (and bearing previous rank number ***) is now scheduled for delivery with Airbus in ***. IAE hereby agrees to amend the delivery schedule accordingly as set forth in the revised and amended Exhibit B-1 attached hereto.
Exhibits A-1, A-2 and B-1 to the Contract are removed in their entirety and replaced by new Exhibits A-1, A-2 and B-1 attached hereto.
Except as expressly amended by this Side Letter No. 10 all provisions of the Contract remain in full force and effect.
Very truly yours,
IAE International Aero Engines AG |
Agreed to and Accepted on behalf of:
JetBlue Airways Corporation |
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/s/ BRIAN H. PELAN Name |
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/s/ THOMAS ANDERSON Name |
Treasurer Title |
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Vice President Title |
April 25, 2002 Date |
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April 26, 2002 Date |
IAE PROPRIETARY INFORMATION
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
2
EXHIBIT A-1
FIRM AIRCRAFT ELIGIBLE FOR APPLICATION OF
***
As of April 2002
Rank No.
|
Aircraft
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Delivery
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---|---|---|---|---|
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2004 |
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
IAE PROPRIETARY INFORMATION
1
EXHIBIT A-2
FIRM AIRCRAFT ELIGIBLE FOR APPLICATION OF
***
As of April 2002
No. *** | Firm Aircraft | *** 2002 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 | ||
No. *** | Firm Aircraft | *** 2003 |
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
IAE PROPRIETARY INFORMATION
2
AIRCRAFT DELIVERY SCHEDULES
As of April 2002
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
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No. 44 | Firm Aircraft* | *** 2004 | ||
No. 45 | Firm Aircraft* | *** 2004 | ||
No. 46 | Firm Aircraft** | *** 2004 | ||
No. 47 | Firm Aircraft* | *** 2004 | ||
No. 48 | Firm Aircraft* | *** 2004 | ||
No. 49 | Firm Aircraft* | *** 2004 | ||
No. 50 | Firm Aircraft* | *** 2004 | ||
No. 51 | Firm Aircraft* | *** 2004 | ||
No. 52 | Firm Aircraft* | *** 2004 | ||
No. 53 | Firm Aircraft* | *** 2004 | ||
No. 54 | Firm Aircraft* | *** 2004 | ||
No. 55 | Firm Aircraft* | *** 2005 | ||
No. 56 | Firm Aircraft* | *** 2005 | ||
No. 57 | Firm Aircraft* | *** 2005 | ||
No. 58 | Firm Aircraft* | *** 2005 | ||
No. 59 | Firm Aircraft* | *** 2005 | ||
No. 60 | Firm Aircraft* | *** 2005 | ||
No. 61 | Firm Aircraft* | *** 2005 | ||
No. 62 | Firm Aircraft* | *** 2005 | ||
No. 63 | Firm Aircraft* | *** 2005 | ||
No. 64 | Firm Aircraft* | *** 2005 | ||
No. 65 | Firm Aircraft** | *** 2005 | ||
No. 66 | Firm Aircraft** | *** 2005 | ||
No. 67 | Firm Aircraft* | *** 2006 | ||
No. 68 | Firm Aircraft* | *** 2006 | ||
No. 69 | Firm Aircraft* | *** 2006 | ||
No. 70 | Firm Aircraft* | *** 2006 | ||
No. 71 | Firm Aircraft* | *** 2006 | ||
No. 72 | Firm Aircraft* | *** 2007 | ||
No. 73 | Firm Aircraft* | *** 2007 | ||
No. 74 | Firm Aircraft* | *** 2007 | ||
No. 75 | Firm Aircraft* | *** 2007 | ||
No. 76 | Firm Aircraft* | *** 2007 |
IAE PROPRIETARY INFORMATION
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
Option Aircraft
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No. 77 | Option Aircraft | *** 2004 | ||
No. 78 | Option Aircraft | *** 2005 | ||
No. 79 | Option Aircraft | *** 2005 | ||
No. 80 | Option Aircraft | *** 2006 | ||
No. 81 | Option Aircraft | *** 2006 | ||
No. 82 | Option Aircraft | *** 2006 | ||
No. 83 | Option Aircraft | *** 2006 | ||
No. 84 | Option Aircraft | *** 2006 | ||
No. 85 | Option Aircraft | *** 2006 | ||
No. 86 | Option Aircraft | *** 2006 | ||
No. 87 | Option Aircraft | *** 2007 | ||
No. 88 | Option Aircraft | *** 2007 | ||
No. 89 | Option Aircraft | *** 2007 | ||
No. 90 | Option Aircraft | *** 2007 | ||
No. 91 | Option Aircraft | *** 2007 | ||
No. 92 | Option Aircraft | *** 2007 | ||
No. 93 | Option Aircraft | *** 2007 | ||
No. 94 | Option Aircraft | *** 2008 | ||
No. 95 | Option Aircraft | *** 2008 | ||
No. 96 | Option Aircraft | *** 2008 | ||
No. 97 | Option Aircraft | *** 2008 | ||
No. 98 | Option Aircraft | *** 2008 | ||
No. 99 | Option Aircraft | *** 2008 | ||
No. 100 | Option Aircraft | *** 2008 | ||
No. 101 | Option Aircraft | *** 2008 | ||
No. 102 | Option Aircraft | *** 2008 | ||
No. 103 | Option Aircraft | *** 2008 | ||
No. 104 | Option Aircraft | *** 2009 |
Under the terms of its purchase agreement with Airbus for the Aircraft, JetBlue has the right to receive delivery positions for Purchase Right Aircraft (also referred to as Reserve Option Aircraft hereunder) equal to the number of Option Aircraft as to which JetBlue has exercised its option purchase rights. Airbus has granted JetBlue conversion rights for each of the *** Option Aircraft and Purchase Right Aircraft (also referred to as Reserve Option Aircraft hereunder) from A320 Aircraft to the A321-200 or A319 aircraft type on *** notice to Airbus. *** are specified for delivery of these Purchase Right Aircraft (also referred to as Reserve Option Aircraft hereunder). Such delivery dates will be determined at the time options are exercised by JetBlue.
Year
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Number
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Delivery Period
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1999 | 1 | (1) *** | ||
2000 | 3 | (1) ***, (1) ***, (1) *** | ||
2001 | 4 | (1) ***, (2) ***, (1) *** | ||
2003 | 1 | (1) *** | ||
TOTAL | 9 | All but the last of the leased aircraft have been delivered |
IAE PROPRIETARY INFORMATION
[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
JETBLUE THANKS THEIR "TRUE BLUE" CUSTOMERS
WITH NEW LOYALTY PROGRAM
Low-Fare Carrier's New Loyalty Program Offers Free Flights,
And Double Points When Booked at www.jetblue.com*
New York, NY (June 18, 2002) JetBlue Airways Corporation (Nasdaq: JBLU) today unveiled "TrueBlue," the low-fare carrier's first customer loyalty program. The new program, which rewards the airline's most frequent fliers, is managed online at www.jetblue.com and offers double points to customers who book flights through the airline's website.*
Unlike traditional frequent flier programs, TrueBlue members earn points instead of 'miles' for flights flown. The airline has classified each of its routes as short, medium or long-haul. Customers can earn points for each one-way trip: two points for a short flight; four points for a medium flight; and six points for a long flight. Points are automatically doubled when TrueBlue members book via www.jetblue.com , through December 31, 2002. A free roundtrip flight, anywhere JetBlue flies, is awarded once a customer reaches 100 points.
A roundtrip flight between LA/Long Beach and Washington, DC, for example, would earn 24 points if booked at www.jetblue.com . Or 100 points could be accumulated by seven roundtrip flights between New York City and Florida, also using the airline's website. When TrueBlue members have accumulated 100 points, they are immediately notified via e-mail that they've received a free roundtrip flight.
"In our 30 months of operation, JetBlue has already attracted an incredibly loyal customer base," said Tim Claydon, Vice President of Sales and Distribution for JetBlue. "And TrueBlue is our way of saying thanks to them. We think of it as a gratitude program which recognizes and rewards customers' business but also offers individual customers the opportunity to build a more personal relationship with JetBlue."
Customers will now be able to track their flight history with the airline and a new credit history feature will track customers' cancelled bookings, show account balances and assist in using the credits to book future flights online.
JetBlue is a low-fare, low-cost passenger airline, which provides high-quality customer service. Since launching operations in February 2000, the airline has served more than six million passengers with a fleet of 25 new Airbus A320 aircraft. JetBlue is scheduled to take delivery of another 11 new A320s by the end of 2002. All JetBlue aircraft are outfitted with roomy all-leather seats each equipped with free live satellite television, offering up to 24 channels of DIRECTV® Programming at every seat.**
From its base at New York City's John F. Kennedy International Airport, JetBlue flies to: Fort Lauderdale, Tampa, Orlando, Fort Myers and West Palm Beach, FL; Buffalo, Rochester and Syracuse, NY; Long Beach, Ontario and Oakland, CA; Burlington, VT; New Orleans, LA; Denver, CO; Salt Lake City, UT; San Juan, PR; and Seattle, WA. From Washington DC, the airline serves Fort Lauderdale, FL, and Long Beach and Oakland, CA.
Commencing September 6, from its west coast base at Long Beach, near Los Angeles, JetBlue plans to serve Oakland, in the San Francisco Bay area, with nine flights a day. In addition, from Long Beach beginning October 10, the airline plans to add six flights a day to Las Vegas, a daily flight to Salt Lake City and a fifth daily flight to JFK.
In February, JetBlue won Air Transport World magazine's 2002 "Market Development Award," for its successful first two years of service, and also was named Best Overall Airline by Onboard Services magazine. Last year, the airline ranked first in Conde Nast Traveler's 2001 Business Travel Awards, second in the Best Domestic Airline category in the magazine's 14th Annual Readers' Choice Awards, and number two Best Domestic Airline in the 2001 Zagat Airline Survey.
With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and a Saturday night stay is never required. The airline is offering $5 each way off all fares booked through its web site, www.jetblue.com, through July 31. For more information, schedules and fares, please visit www.jetblue.com or call JetBlue reservations at 1-800-JETBLUE (538-2583).
# # #
This press release contains statements of a forward-looking nature relating to future events or future financial results of JetBlue that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, including without limitation, the rapidly changing industry and regulatory environment following recent terrorist attacks, our limited operating history, our ability to implement our growth strategy, our fixed obligations, our dependence on the New York market, our ability to renew or replace gate leases, our competitive environment, problems with our aircraft, economic and other conditions in markets in which we operate, governmental regulation, increases in maintenance costs, fuel prices and insurance premiums and cyclical and seasonal fluctuations in our operating results. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to, the Company's registration statement on Form S-1, as amended. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release.