JetBlue Airways Corporation (NASDAQ: JBLU) — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; fourth-quarter figures are noted separately below. Amounts are in U.S. dollars.
Business context
JetBlue operates a predominantly point-to-point airline serving 107 destinations at year-end, with major focus cities in New York, Boston, Fort Lauderdale, Orlando, Los Angeles and San Juan. COVID-19 continued to materially affect travel demand, although management reported recovery during 2021. The Northeast Alliance (NEA) with American Airlines began implementation in February 2021 and supported network expansion.
Financial performance and key metrics
| Metric | 2021 | 2020 | Comparison / context |
|---|---|---|---|
| Operating revenue | $6.037 billion | $2.957 billion | Up 104.2% year over year; 25.4% below 2019 |
| Operating income (loss) | $(80) million | $(1.714) billion | 2021 reported operating margin was (1.3)% versus (58.0)% in 2020 |
| Net income (loss) | $(182) million | $(1.354) billion | 2019 net income was $569 million |
| Reported diluted EPS | $(0.57) | $(4.88) | 2019 diluted EPS was $1.91 |
| Adjusted operating loss | $(913) million | $(1.997) billion | Excludes special items; adjusted operating margin was (15.1)% and (67.5)%, respectively |
| Adjusted net loss | $(797) million | $(1.568) billion | Excludes special items and equity-investment gains |
| Operating cash flow | $1.642 billion | $(683) million | 2021 included federal payroll support and initial co-brand agreement payments |
| Free cash flow | $647 million | $(1.474) billion | Company-defined non-GAAP measure: operating cash flow less capital expenditures and aircraft deposits |
- Capacity increased 65.5% from 2020 but remained 15.2% below 2019. Revenue passengers rose 110.8% year over year; load factor was 76.0%, up 19.1 percentage points.
- Revenue per available seat mile (RASM) was 11.16 cents, up 23.4% year over year but 12.0% below 2019. Operating expense per ASM (CASM) was 11.30 cents, down 20.9% year over year. CASM ex-fuel was 10.11 cents, up 19.8% versus 2019.
- Fuel expense was $1.436 billion, 23.5% of operating expenses; average fuel cost was $2.06 per gallon versus $1.53 in 2020. No fuel hedges were outstanding at year-end.
- Year-end cash and cash equivalents were $2.018 billion; short-term investments were $824 million. Unrestricted cash, cash equivalents and short-term investments totaled $2.8 billion.
- Debt and finance lease obligations were about $4.0 billion, down from $4.9 billion at year-end 2020. Adjusted debt-to-capitalization was 53%, down from 57%. Working capital was a $170 million deficit, compared with a $671 million surplus in 2020.
- Capital expenditures were $907 million, with $88 million of aircraft pre-delivery deposits. Total assets were $13.642 billion and stockholders’ equity was $3.849 billion.
- Fourth quarter: Revenue was $1.834 billion, operating loss $119 million, net loss $129 million and basic loss per share $0.40. In fourth-quarter 2020, revenue was $661 million and net loss was $373 million.
Material changes and unusual items
- Revenue and operations rebounded sharply from 2020, but revenue remained below pre-pandemic 2019 levels and JetBlue still reported a GAAP annual loss.
- Reported 2021 operating expenses included $830 million of federal payroll support grants and $11 million of Employee Retention Credits as contra-expenses, plus $8 million of inflight crew contract ratification costs. The grants were fully utilized by year-end. These items materially affect comparisons between reported and adjusted results.
- JetBlue repaid approximately $1.9 billion of debt and finance lease obligations during 2021, including its $722 million term loan, $550 million revolving facility and $115 million CARES Act secured loan. It issued $750 million of 0.50% convertible notes due 2026, receiving net proceeds of approximately $734 million.
- The 2020 comparison included a $273 million Embraer E190 impairment, $106 million of sale-leaseback losses, and $59 million of voluntary separation costs. No fleet impairment was recorded in 2021.
- The company entered an amended co-branded card agreement extending through 2031; initial payments are deferred and recognized over contract terms. Loyalty-program air-traffic liabilities were $891 million at year-end.
Outlook, risks and contingencies
- Management forecast 2022 capacity growth of 11%–15% versus 2019, with more than three-quarters of planned growth in the historically constrained Northeast. It expected sequential demand improvement after Omicron-related disruption, while noting recovery remained nonlinear and domestic demand was expected to recover faster than international demand.
- Management estimated 2022 capital expenditures of approximately $1.0 billion and said first-quarter spending was expected to be about $175 million. At year-end, the company had $7.5 billion of aircraft and related flight-equipment commitments through 2027; in February 2022 it exercised an option for 30 additional A220 aircraft.
- The DOJ and several state authorities sued JetBlue and American, alleging the NEA violates antitrust law and seeking to halt it. JetBlue disputes the claims; the filing states the potential loss or range of loss cannot be estimated. An adverse outcome could impair expected alliance benefits and entail costs to unwind elements of the arrangement.
- Principal risks include continued COVID-19 effects and variants, fuel-price volatility, labor availability and wage pressure, operational disruptions and congestion in New York and other focus cities, substantial debt, leases and aircraft commitments, and reliance on a limited set of aircraft and engine suppliers. JetBlue also flagged possible operational effects from 5G restrictions near airports.
- Federal support programs impose restrictions, including limits on share repurchases and dividends through September 30, 2022 and other operating and compensation conditions. JetBlue reported no cash dividends and stated it believed liquidity was sufficient for at least the next 12 months.
- Other exposures include potential credit-card processor reserve requirements, environmental and weather-related costs, and litigation or claims in the ordinary course. The filing identifies no other legal matter as expected to have a material adverse effect, but notes outcomes may differ from estimates.
Most important facts for investors to verify
- Whether demand, load factor and unit revenue recover as forecast, and whether 2022 capacity growth can be delivered without worsening margins.
- How much operating cash flow reflects sustainable airline operations versus government grants, advance customer bookings and co-brand agreement upfront payments.
- Debt repayment capacity and liquidity after considering aircraft commitments, lease obligations, fuel costs and the working-capital deficit.
- Developments in the DOJ case and the resulting legal, operating and financial implications for the NEA.
- The assumptions behind adjusted results, loyalty-point breakage estimates and co-brand revenue allocation; the auditor identified loyalty breakage and the co-brand agreement as critical audit matters.
Ernst & Young issued an unqualified opinion on the financial statements and internal controls. The company reported effective internal control over financial reporting as of December 31, 2021.