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The COVID-19 Pandemic | 12 Months Ended
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Dec. 31, 2020
Unusual or Infrequent Items, or Both [Abstract] |
The COVID-19 Pandemic | The COVID-19 Pandemic The unprecedented coronavirus ("COVID-19") pandemic and the related travel restrictions and physical distancing measures implemented throughout the world have significantly reduced demand for air travel. Beginning in March 2020, large public events were canceled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel, and popular leisure destinations temporarily closed to visitors. Certain countries have imposed bans on international travelers for specified periods or indefinitely. Demand for air travel began to weaken at the end of February 2020. The pace of decline accelerated throughout March into April 2020 and demand remained depressed throughout the rest of 2020. This decline in demand has had a material adverse impact on our operating revenues and financial position. Our operating revenues for the year ended December 31, 2020 declined by 63.5% year-over-year. Although demand began to improve as the year progressed, it remained significantly lower than in prior yea rs. The exact timing and pace of the recovery is uncertain given the significant impact of the pandemic on the overall U.S. and global economy. Some states have experienced a resurgence of COVID-19 cases after reopening and as a result, certain other states have implemented travel restrictions or advisories for travelers from such states. We have also seen a similar resurgence of COVID-19 cases in other countries and we expect to continue to see fluctuations in the number of cases, which we believe will result in actions by governmental authorities restricting activities. We expect the demand environment to remain depressed until the majority of the U.S. population is vaccinated against COVID-19. Our response to the pandemic and the measures we take to secure additional liquidity may be modified as we have more clarity on the timing of demand recovery. In response to the COVID-19 pandemic, since March 2020 we have implemented the following measures to focus on the safety of our customers, our crewmembers, and our business. Customers and Crewmembers The safety of our customers and crewmembers continues to be a priority. As the COVID-19 pandemic developed, we took steps to promote physical distancing and implemented new procedures that reflect the recommendations of health experts, including the following: •Introduced "Safety from the Ground Up", an initiative with a multi-layer approach that encompasses enhanced safety and cleaning measures on our flights, at our airports, and in our offices; •Instituted temperature checks for our customer-facing and support-center crewmembers; •Updated our sick leave policy to provide up to 14 days of paid sick leave for crewmembers who were diagnosed with COVID-19 or were required to quarantine; •Implemented a framework for internal contact tracing, crewmember notification, and a return to work clearance process for all crewmembers, wherever they may be located; •Required face coverings for all crewmembers while boarding, in flight, and when physical distancing cannot be maintained; •Administered more frequent disinfecting of common surfaces and areas with high touchpoints in our facilities; •Enhanced daily and overnight cleaning of our aircraft and all facilities, using electrostatic spraying of disinfectant in the cabins of aircraft parked overnight at selected focus cities; •Required customers to wear face coverings during check-in, boarding, and inflight; •Limited the number of seats sold on most flights through January 7, 2021; •Suspended group boarding and implemented a back-to-front boarding process to minimize passing in the aisle; •Eliminated layovers for crewmembers in New York City and worked with crew transportation companies to ensure physical distancing; •Implemented jump seat buffers on our flights to further promote physical distancing measures; •Provided enhanced flexibility to our customers by waiving change and cancel fees for customers with existing bookings made through March 31, 2021, while also extending the expiration date of travel credits issued between February 27, 2020 and June 30, 2020 for flight purchases to 24 months; and •Announced our partnership with Vault Health to provide discounted at-home COVID-19 testing to customers with pending travel plans. Our Business The COVID-19 pandemic drove a significant decline in demand beginning in the second half of March 2020. We significantly reduced our capacity to a level that maintains essential services to align with demand. Our capacity for the year ended December 31, 2020 declined by 48.8% year-over-year. As a result of the significant reduction in demand expectations and lower capacity, we have temporarily parked a portion of our fleet. The reductions in demand and in our capacity have resulted in a significant reduction to our revenue. As a result, we have, and will continue to implement cost saving initiatives to reduce our overall level of cash spend. Some of the initiatives we have undertaken include: •Adjustments in flying capacity to align with the expected demand. •Temporary consolidations of our operations in certain cities that contain multiple airport locations. •Renegotiated service rates with business partners and extended payment terms. •Instituted a company-wide hiring freeze. •Implemented salary reductions for a portion of our crewmembers, including our officers throughout 2020 and continuing into 2021. •Offered crewmembers voluntary time off and separation programs, with most departures for the separation program occurring during the third quarter of 2020. We believe the unprecedented impact of COVID-19 on the demand for air travel and the corresponding decline in revenue will continue to have an adverse impact on our operating cash flow. Given this situation, we have taken actions to increase liquidity, strengthen our financial position, and conserve cash. Some of the actions we have taken since the onset of the pandemic through December 31, 2020 include: •Executed a $1.0 billion 364-day delayed draw term loan agreement in March 2020 and immediately drew down on the facility for the full amount available. This term loan facility was repaid during the third quarter. •Borrowed on our existing $550 million revolving credit facility in April 2020. •Executed a $150 million pre-purchase arrangement of TrueBlue® points with our co-brand credit card partner in April 2020. •Suspended non-critical capital expenditure projects. •Amended our purchase agreement with Airbus which changed the timing of our Airbus A321 and A220 deliveries in May and October 2020 resulting in approximately $2.0 billion of reduction in aircraft capital expenditures through 2022. •Suspended share repurchases. •Obtained $963 million of government funding under the Payroll Support Program of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is discussed further below. •Executed a $750 million term loan credit facility and immediately drew down on the facility for the full amount available in June 2020. •Entered into $563 million of sale-leaseback transactions; which is discussed further below. •Completed public placements of equipment notes in an aggregate principal amount of $923 million secured by 49 Airbus A321 aircraft in August 2020, which is discussed further in Note 4 to our consolidated financial statements. The net proceeds were primarily used to repay the outstanding borrowings under our 364-day delayed draw term loan facility that was due to be repaid in March 2021. •Entered into a Loan and Guarantee agreement, as amended, with the United States Department of the Treasury ("Treasury") under the Loan Program of the CARES Act which gives us access to loans in an aggregate principal amount of up to $1.9 billion until May 28, 2021, which is discussed further below. We drew down $115 million under the Loan Program on September 29, 2020. •Completed the public offering of 42 million shares of our common stock for net proceeds of $583 million in December 2020. As a result of these activities, we had cash, cash equivalents, and short-term investments of approximately $3.1 billion at December 31, 2020. In 2020, we executed $563 million of sale-leaseback transactions. Of these transactions, $354 million did not qualify as sales for accounting purposes. The assets associated with these transactions remain on our consolidated balance sheets within property and equipment and the related liabilities under the lease are classified within debt and finance leases obligations. These transactions are treated as cash from financing activities on our consolidated statements of cash flows. The remaining $209 million of sale-leaseback transactions qualified as sales and generated a loss of $106 million. The assets associated with these transactions which qualified as sales are recorded within operating lease assets. The liabilities are recorded within current operating lease liabilities and long-term operating lease liabilities on our consolidated balance sheets. These transactions are treated as cash from investing activities on our consolidated statements of cash flows. Valuation of Long-Lived Assets Under the Property, Plant, and Equipment topic of the Codification, we are required to assess long-lived assets for impairment when events and circumstances indicate that the assets may be impaired. An impairment of long-lived assets exists when the sum of the estimated undiscounted future cash flows expected to be generated directly by the assets are less than the book value of the assets. Our long-lived assets include both owned and leased properties which are classified as property and equipment, and operating lease assets on our consolidated balance sheets, respectively. As discussed above, our operations were adversely impacted by the unprecedented decline in demand for travel caused by the COVID-19 pandemic. To determine if impairment exists in our fleet, we grouped our aircraft by fleet-type and estimated their future cash flows based on projections of capacity, aircraft age, and maintenance conditions. Based on the assessment, we determined the future forecasted cash flows from the operation of our Embraer E190 fleet were lower than the carrying value. For those aircraft, including the ones that are under operating lease, and related spare parts in our Embraer E190 fleet, we recorded impairment los ses of $273 million for th e year ended December 31, 2020. These losses represent the difference between the book value of these assets and their fair value. In determining fair value, we obtained third party valuations for our Embraer E190 fleet, which considered the effects of the current market environment, age of the assets, and marketability. For our owned Embraer E190 aircraft and related spare parts, we made adjustments to the valuations to reflect the impact of their current maintenance conditions to determine fair value. Our estimate of fair value was not based on distressed sales or forced liquidations. The fair value of our Embraer E190 aircraft under operating lease and related parts was based on the present value of current market lease rates utilizing a market discount rate for the remaining term of each lease. Since the fair value of our Embraer E190 fleet was determined using unobservable inputs, it is classified as Level 3 in the fair value hierarchy. We evaluated the remaining fleet types and determined the future cash flows of our Airbus A320 and Airbus A321 fleets exceeded their carrying value as of December 31, 2020. As the extent of the ongoing impact from the COVID-19 pandemic remains uncertain, we will update our assessment as new information becomes available. The Coronavirus Aid, Relief, and Economic Security (CARES) Act On March 27, 2020, Congress passed the CARES Act. Under the CARES Act, assistance was made available to the aviation industry in the form of direct payroll support (the "Payroll Support Program") and secured loans (the "Loan Program"). Payroll Support Program On April 23, 2020, we entered into a Payroll Support Program Agreement (the "PSP Agreement") with the United States Department of the Treasury ("Treasury") governing our participation in the Payroll Support Program. Under the Payroll Support Program, Treasury provided us with a payment of $936 million (the "Payroll Support Payment"), consisting of $685 million in grants and $251 million in an unsecured term loan. The loan has a 10-year term and bears interest on the principal amount outstanding at an annual rate of 1.00% until April 23, 2025, and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% thereafter until April 23, 2030. The principal amount may be repaid at any time prior to maturity at par. In consideration for the Payroll Support Payment, we issued warrants to purchase approximately 2.6 million shares of our common stock to the Treasury at an exercise price of $9.50 per share. The warrants will expire five years after issuance and will be exercisable either through net cash settlement or net share settlement, at JetBlue's option, in whole or in part at any time. In accordance with the PSP Agreement, we are required to comply with the relevant provisions of the CARES Act which, among other things, includes the following: the requirement to use the Payroll Support Payment exclusively for the continuation of payment of crewmember wages, salaries and benefits; the prohibition on involuntary furloughs and reductions in crewmember pay rates and benefits through September 30, 2020; the requirement that certain levels of commercial air service be maintained until March 1, 2022; the prohibitions on share repurchases and the payment of common stock dividends; and restrictions on the payment of certain executive compensation until March 24, 2022. On September 30, 2020, Treasury provided us with a payment of $27 million (the "Additional Payroll Support Payment"), consisting of $19 million in grants and $8 million in an unsecured term loan under the PSP Agreement. The terms of the unsecured term loan are identical to those under the initial loan issued on April 23, 2020. In consideration for the Additional Payroll Support Payment, we issued warrants to purchase approximately 85,540 additional shares of our common stock to the Treasury (the "Additional PSP Warrants"). The Additional PSP Warrants have the same terms and exercise price as the initial warrants issued on April 23, 2020 under the Payroll Support Program. The total payroll support funding of $963 million received under the CARES Act was originally classified as short-term restricted cash since the funds had to be utilized to pay the salaries and benefits costs of our crewmembers. The funds were reclassified from short-term restricted cash within prepaid expenses and other on our consolidated balance sheets to cash and cash equivalents when the funds were utilized. No payroll support funding remained available as of December 31, 2020. The carrying value relating to the payroll support grants was recorded within other accrued liabilities and was recognized as a contra-expense within special items on our consolidated statements of operations as the funds were utilized. The relative fair value of the warrants, estimated to be $19 million, was recorded within additional paid-in capital and reduced the total carrying value of the grants to $685 million. Proceeds from the payroll support grants and from the issuance of warrants were classified within operating activities and financing activities, respectively, on our consolidated statements of cash flows. Our funding from the payroll support grants have been fully utilized as of December 31, 2020. The carrying value relating to the unsecured term loan is recorded within long-term debt and finance lease obligations on our consolidated balance sheets. The proceeds from the loan were classified as financing activities on our consolidated statement of cash flows. Loan Program Under the CARES Act Loan Program as signed in April 2020 and subsequently amended in November 2020, JetBlue has the ability to borrow up to a total of approximately $1.9 billion from the Treasury. If we accept the full amount of the loan, we will issue warrants to purchase approximately 20.5 million shares of our common stock to the Treasury. Any amount received under the Loan Program will be subject to the relevant provisions of the CARES Act, including many of those described above under the Payroll Support Program. We made an initial drawing of $115 million under the Loan Program on September 29, 2020. In connection with this initial drawing, we entered into a warrant agreement with Treasury, pursuant to which we issued to Treasury warrants to purchase approximately 1.2 million shares of our common stock at an exercise price of $9.50 per share. As of December 31, 2020, approximately $1.8 billion of the borrowing capacity remained available to us. On January 15, 2021, we entered into a letter agreement with Treasury which provided an extension of the Loan Agreement allowing us the option to access the remaining borrowing capacity through May 28, 2021. Payroll Tax Deferral The CARES Act also provides for deferred payments of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. We have deferred $48 million in payments through December 31, 2020. Income Taxes Among other things, the CARES Act permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid incomes taxes. As a result, the Company’s effective tax rate includes an income tax benefit related to the anticipated refunds from tax losses generated during 2020 that are permitted to be carried back to certain years when the U.S. federal income tax rate was 35%. Consolidated Appropriations Act, 2021 On January 15, 2021, we entered into a Payroll Support Program Extension Agreement (the “PSP Extension Agreement”) with Treasury governing our participation in the federal Payroll Support Program for passenger air carriers under the United States Consolidated Appropriations Act, 2021 (the “Payroll Support Program 2”). Pursuant to the Payroll Support Program 2, on January 15, 2021, Treasury provided to us a payment of approximately $252 million (the “2021 Payroll Support Payment”) under the PSP Extension Agreement. The 2021 Payroll Support Payment includes a grant of approximately $206 million and a loan of $46 million. In consideration for the 2021 Payroll Support Payment, we issued to Treasury warrants to purchase 316,583 shares of our common stock at an exercise price of $14.43 per share. The loan will mature 10 years after issuance and the warrants will expire five years after issuance. These transactions had no impact on our 2020 consolidated financial statements. Except as noted above, the terms of the PSP Extension Agreement are materially identical to those entered into in connection with the Payroll Support Program under the CARES Act. In connection with the participation in the Payroll Support Program 2, JetBlue may also be entitled to receive an additional disbursement of up to $252 million, including a loan of up to $76 million (with respect to which we would issue to treasury additional warrants to purchase common stock).

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