e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011


o		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.)

118-29 Queens Boulevard, Forest Hills, New York (Address of principal executive offices)		11375 (Zip Code)

(718) 286-7900
(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 Section 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. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

As of June 30, 2011, there were 296,880,550 shares outstanding of the registrant’s common stock, par value $.01.

JETBLUE AIRWAYS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	June 30,			December 31,
	2011			2010
	(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	102		$	104
Air traffic liability		705			514
Accrued salaries, wages and benefits		138			147
Other accrued liabilities		175			137
Current maturities of long-term debt and capital leases		190			183

Total current liabilities		1,310			1,085

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS		2,893			2,850

CONSTRUCTION OBLIGATION		526			533

DEFERRED TAXES AND OTHER LIABILITIES
Deferred income taxes		348			327
Other		141			144

		489			471

STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 25,000,000 shares authorized, none issued		—			—
Common stock, $.01 par value; 900,000,000 shares authorized, 325,041,254 and 322,272,207 shares issued and 296,880,550 and 294,687,308 outstanding in 2011 and 2010, respectively		3			3
Treasury stock, at cost; 28,160,704 and 27,585,367 shares in 2011 and 2010, respectively		(7	)		(4	)
Additional paid-in capital		1,460			1,446
Retained earnings		247			219
Accumulated other comprehensive loss		(13	)		(10	)

Total stockholders’ equity		1,690			1,654

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,908		$	6,593

See accompanying notes to condensed consolidated financial statements.

JETBLUE AIRWAYS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
OPERATING REVENUES
Passenger	$	1,046		$	851		$	1,952		$	1,637
Other		105			89			211			174

Total operating revenues		1,151			940			2,163			1,811

OPERATING EXPENSES
Aircraft fuel and related taxes		439			279			792			533
Salaries, wages and benefits		235			218			470			437
Landing fees and other rents		63			58			120			112
Depreciation and amortization		58			54			114			111
Aircraft rent		36			31			70			62
Sales and marketing		51			43			96			83
Maintenance materials and repairs		54			41			106			80
Other operating expenses		129			121			264			255

Total operating expenses		1,065			845			2,032			1,673


OPERATING INCOME		86			95			131			138

OTHER INCOME (EXPENSE)
Interest expense		(44	)		(43	)		(88	)		(90	)
Capitalized interest		1			1			2			2
Interest income and other		—			(1	)		4			1

Total other income (expense)		(43	)		(43	)		(82	)		(87	)


INCOME BEFORE INCOME TAXES		43			52			49			51

Income tax expense		18			21			21			21


NET INCOME	$	25		$	31		$	28		$	30


EARNINGS PER COMMON SHARE:
Basic	$	0.09		$	0.11		$	0.10		$	0.11

Diluted	$	0.08		$	0.10		$	0.10		$	0.11

See accompanying notes to condensed consolidated financial statements.

JETBLUE AIRWAYS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)


	Six months ended
	June 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	28		$	30
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		21			20
Depreciation		105			96
Amortization		16			20
Stock-based compensation		7			8
Collateral returned (paid) for derivative instruments		7			(5	)
Changes in certain operating assets and liabilities		198			172
Other, net		24			15

Net cash provided by operating activities		406			356

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(204	)		(131	)
Predelivery deposits for flight equipment		(24	)		(20	)
Assets constructed for others		(2	)		(8	)
Sale of auction rate securities		—			36
Purchase of available-for-sale securities		(279	)		(722	)
Sale of available-for-sale securities		114			761
Purchase of held-to-maturity investments		(236	)		(584	)
Proceeds from the maturities of held-to-maturity investments		291			72
Other, net		1			—

Net cash used in investing activities		(339	)		(596	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Issuance of common stock		5			5
Issuance of long-term debt		141			66
Short-term borrowings and lines of credit		—			20
Construction obligation		2			9
Repayment of long-term debt and capital lease obligations		(92	)		(239	)
Repayment of short-term borrowings and lines of credit		—			(37	)
Other, net		(13	)		(3	)

Net cash provided by (used in) financing activities		43			(179	)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		110			(419	)

Cash and cash equivalents at beginning of period		465			896


Cash and cash equivalents at end of period	$	575		$	477

See accompanying notes to condensed consolidated financial statements.

JETBLUE AIRWAYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation: Our condensed consolidated financial statements include the accounts of JetBlue Airways Corporation and our subsidiaries, collectively “we” or the “Company”, with all intercompany transactions and balances having been eliminated. These condensed consolidated financial statements and related notes should be read in conjunction with our 2010 audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2010, or our 2010 Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.

These condensed consolidated financial statements are unaudited and have been prepared by us following the rules and regulations of the Securities and Exchange Commission, or the SEC, and, in our opinion, reflect all adjustments including normal recurring items which are necessary to present fairly the results for interim periods. Our revenues are recorded net of excise and other related taxes in our condensed consolidated statements of operations.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. 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.

Investment securities: We held various investment securities at June 30, 2011 and December 31, 2010. When sold, we use a specific identification method to determine the cost of the securities. The carrying values of these investments were as follows (in millions):


	June 30,		December 31,
	2011		2010
Available-for-sale securities
Asset-back securities	$	10	$	10
Time deposits		40		19
Commercial paper		269		125

		319		154
Held-to-maturity securities
Corporate bonds		327		418
Municipal bonds		—		16
Government bonds		85		40

		412		474


Total	$	731	$	628

Held-to-maturity investment securities: The contractual maturities of the corporate bonds we held as of June 30, 2011 were no greater than 24 months. We did not record any significant gains or losses on these securities during the six months ended June 30, 2011. The estimated fair value of these investments approximates their carrying value as of June 30, 2011.

Loyalty Program: The initial five year term of our co-branded credit card agreement, under which we sell TrueBlue points as described in Note 1 of our 2010 Form 10-K, provided for a minimum cash payment guarantee through April 2011 if specified point sales and other ancillary activity payments were not achieved. During the six months ended June 30, 2011 and 2010, we recognized approximately $10 million

and $5 million, respectively, of other revenue related to this guarantee. The remaining $1 million received under this guarantee is subject to refund and is included in our air traffic liability as of June 30, 2011.

New Accounting Pronouncements: On January 1, 2011, the September 2009 Emerging Issues Task Force updates to the Revenue Recognition topic of the Financial Accounting Standards Board’s, or FASB, Accounting Standards Codification, or Codification, rules became effective, which change the accounting for certain revenue arrangements. The new requirements change the allocation methods used in determining how to account for multiple element arrangements and may result in the ability to separately account for more deliverables, and potentially less revenue deferrals. Additionally, this new accounting treatment requires enhanced disclosures in financial statements. This new accounting treatment will impact any new contracts entered into by LiveTV, as well as any loyalty program or commercial partnership arrangements we may enter into or materially modify. Since adoption of this new accounting treatment, we have not entered into any new or materially modified contracts.

In May 2011, the FASB issued Accounting Standards Update 2011-04, or ASU 2011-04, amending the Fair Value Measurement topic of the Codification. The amendments in this update were intended to result in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards, or IFRS. ASU 2011-04 expands and enhances current disclosures about fair value measurements and clarifies the FASB’s intent about the application of existing fair value measurement requirements in certain circumstances. These amendments are effective for fiscal years and interim periods beginning after December 15, 2011 and should be applied prospectively. Although we continue to review this update, we do not believe that it will have a material impact on our consolidated financial statements or the notes thereto.

In June 2011, the FASB issued Accounting Standards Update 2011-05, or ASU 2011-05, amending the Comprehensive Income topic of the Codification. This update changes the requirements for the presentation of other comprehensive income, eliminating the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity, among other things. ASU 2011-05 requires that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. These amendments are effective for fiscal years and interim periods beginning after December 15, 2011 and should be applied retrospectively. Since the update only requires a change in presentation, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

Note 2 — Stock-Based Compensation

2011 Incentive Compensation Plan: At our Annual Shareholders Meeting held on May 26, 2011, our shareholders approved the new 2011 Incentive Compensation Plan, or 2011 Plan, which replaces the Amended and Restated 2002 Stock Incentive Plan, which was set to expire at the end of 2011. Upon inception, the 2011 Plan had 15.0 million shares of our common stock reserved for issuance. The 2011 Plan, by its terms, will terminate no later than May 2021. During June 2011, we granted an insignificant amount of restricted stock units and deferred stock units under the 2011 Plan.

Amended and Restated 2002 Stock Incentive Plan: During the six months ended June 30, 2011, we granted approximately 2.7 million restricted stock units under our Amended and Restated 2002 Stock Incentive Plan, at a weighted average grant date fair value of $6.01 per share. We issued approximately 1.6 million shares of our common stock in connection with the vesting of restricted stock units during the six months ended June 30, 2011. At June 30, 2011, 4.6 million restricted stock units were unvested with a weighted average grant date fair value of $5.64 per share.

Crewmember Stock Purchase Plan: In May 2011, our shareholders also approved the new 2011 Crewmember Stock Purchase Plan, or 2011 CSPP, to replace the original Crewmember Stock Purchase Plan, which was set to expire in April 2012. The 2011 CSPP has 8.0 million shares of our common stock reserved for issuance. The 2011 CSPP, by its terms, will terminate no later than the last business day of April 2021. All other terms of the 2011 CSPP are essentially the same as the original CSPP.

LiveTV Equity Incentive Plan: In May 2011, we terminated the LiveTV Equity Incentive Plan, or LiveTV EIP. In exchange for the release of their rights under the LiveTV EIP, participants were granted restricted stock units under the Amended and Restated 2002 Stock Incentive Plan in May 2011.

Note 3 — Long-term Debt and Capital Lease Obligations

Own Share-Lending Arrangement

In June 2008, as more fully described in Note 2 of our 2010 Annual Report, we loaned 44.9 million shares of our common stock in conjunction with our 2008 $201 million convertible debt issuance. As of June 30, 2011, there were approximately 18.0 million shares outstanding under the share lending

agreement. The fair value of similar common shares not subject to our share lending arrangement, based upon our closing stock price, was approximately $110 million.

Other Indebtedness

During the six months ended June 30, 2011, we issued $93 million in non-public floating rate equipment notes due through 2025 and $48 million, net of discount, in fixed rate equipment notes due through 2026, which are secured by three new Airbus A320 aircraft and two new EMBRAER 190 aircraft.

We do not have any financial covenants associated with our debt agreements other than certain collateral ratio requirements in our spare parts pass-through certificates and spare engine financing issued in November 2006 and December 2007, respectively. If we fail to maintain these collateral ratios, we are required to provide additional collateral or redeem some or all of the equipment notes so that the ratios return to compliance. As a result of lower spare parts inventory balances and the associated reduced third party valuation of these parts, we pledged as collateral a previously unencumbered spare engine with a carrying value of approximately $7 million during the second quarter of 2011.

Aircraft, engines and other equipment and facilities having a net book value of $3.67 billion at June 30, 2011 were pledged as security under various loan agreements.

Our outstanding debt and capital lease obligations were reduced by $91 million as a result of principal payments made during the six months ended June 30, 2011. At June 30, 2011, the weighted average interest rate of all of our long-term debt was 4.53% and scheduled maturities were $96 million for the remainder of 2011, $193 million in 2012, $392 million in 2013, $612 million in 2014, $256 million in 2015 and $1.53 billion thereafter.

The carrying amounts and estimated fair values of our long-term debt at June 30, 2011 and December 31, 2010 were as follows (in millions):


	June 30, 2011				December 31, 2010
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Public Debt
Floating rate enhanced equipment notes
Class G-1, due through 2016	$	222	$	206	$	234	$	210
Class G-2, due 2014 and 2016		373		330		373		312
Class B-1, due 2014		49		47		49		46
Fixed rate special facility bonds, due through 2036		83		74		84		75
6.75% convertible debentures due in 2039		201		304		201		293
5.5% convertible debentures due in 2038		123		190		123		194

Non-Public Debt
Floating rate equipment notes, due through 2025		750		715		696		654
Fixed rate equipment notes, due through 2026		1,157		1,146		1,144		1,132


Total	$	2,958	$	3,012	$	2,904	$	2,916

The estimated fair values of our publicly held long-term debt were based on quoted market prices or other observable market inputs when instruments are not actively traded. The fair value of our non-public debt was estimated using discounted cash flow analysis based on our borrowing rates for instruments with similar terms. The fair values of our other financial instruments approximate their carrying values.

Note 4 — Comprehensive Income

Comprehensive income includes changes in fair value of our aircraft fuel derivatives and interest rate swap agreements, which qualify for hedge accounting. The differences between net income and comprehensive income for each of these periods are as follows (dollars are in millions):


	Three Months Ended
	June 30,
	2011			2010
Net income	$	25		$	31

Loss on derivative instruments (net of $14 and $11 of taxes)		(22	)		(16	)

Total other comprehensive loss		(22	)		(16	)


Comprehensive income	$	3		$	15


	Six Months Ended
	June 30,
	2011			2010
Net income	$	28		$	30

Loss on derivative instruments (net of $1 and $16 of taxes)		(3	)		(24	)

Total other comprehensive loss		(3	)		(24	)


Comprehensive income	$	25		$	6

A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes, for the three and six months ended June 30, 2011 is as follows (in millions):


	Aircraft Fuel			Interest
	Derivatives			Rate Swaps			Total
Beginning accumulated gains (losses), at March 31, 2011	$	21		$	(12	)	$	9
Reclassifications into earnings		(2	)		1			(1	)
Change in fair value		(18	)		(3	)		(21	)

Ending accumulated gains (losses), at June 30, 2011	$	1		$	(14	)	$	(13	)


	Aircraft Fuel			Interest
	Derivatives			Rate Swaps			Total
Beginning accumulated gains (losses), at December 31, 2010	$	4		$	(14	)	$	(10	)
Reclassifications into earnings		(4	)		3			(1	)
Change in fair value		1			(3	)		(2	)

Ending accumulated gains (losses), at June 30, 2011	$	1		$	(14	)	$	(13	)

Note 5 — Earnings Per Share

The following table shows how we computed basic and diluted earnings per common share (dollars in millions; share data in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Numerator:
Net income	$	25	$	31	$	28	$	30
Effect of dilutive securities:
Interest on convertible debt, net of income taxes		3		3		2		6

Net income applicable to common stockholders after assumed conversion for diluted earnings per share	$	28	$	34	$	30	$	36


Denominator:
Weighted average shares outstanding for basic earnings per share		278,459		275,229		277,863		274,644
Effect of dilutive securities:
Employee stock options		1,795		2,603		1,937		2,506
Convertible debt		68,605		68,605		27,429		68,605

Adjusted weighted average shares outstanding and assumed conversions for diluted earnings per share		348,859		346,437		307,229		345,755


Shares excluded from EPS calculation (in millions):
Shares issuable upon conversion of our convertible debt as assumed conversion would be antidilutive		—		—		41.2		—
Shares issuable upon exercise of outstanding stock options or vesting of restricted stock units as assumed exercise would be antidilutive		22.3		22.5		23.1		25.8

As of June 30, 2011, a total of approximately 18.0 million shares of our common stock, which were lent to our share borrower pursuant to the terms of our share lending agreement, as described more fully in Note 2 to our 2010 Form 10-K, were issued and outstanding for corporate law purposes. Holders of the borrowed shares have all the rights of a holder of our common stock. However, because the share borrower must return all borrowed shares to us (or identical shares or, in certain circumstances of default by the counterparty, the cash value thereof), the borrowed shares are not considered outstanding for the purpose of computing and reporting basic or diluted earnings (loss) per share.

Note 6 — Employee Retirement Plan

We sponsor a retirement savings 401(k) defined contribution plan, or the Plan, a component of which is a profit sharing contribution for certain eligible employees. All employees are eligible to participate in the Plan. Our contributions expensed for the Plan for the three months ended June 30, 2011 and 2010 were $15 million and $13 million, respectively, and contributions expensed for the Plan for the six months ended June 30, 2011 and 2010 were $31 million and $27 million, respectively.

Note 7 — Commitments and Contingencies

In June 2011, we amended our Airbus purchase agreement, deferring delivery of eight aircraft previously scheduled for delivery in 2014 through 2015 to 2017. Additionally, we cancelled the eight options previously scheduled for delivery in 2014 and 2015. In February 2011, we cancelled the orders for two EMBRAER 190 aircraft previously scheduled for delivery in 2013.

During the second quarter of 2011, we extended the leases on four Airbus A320 aircraft, leases which were previously set to expire in 2012. These extensions resulted in an additional $19 million of lease commitments through 2015. In May 2011, we returned one EMBRAER E190 aircraft to its lessor, upon expiration of the lease term.

As of June 30, 2011, our firm aircraft orders consisted of 52 Airbus A320 aircraft, 50 EMBRAER E190 aircraft and 14 spare engines scheduled for delivery through 2018. Committed expenditures for these aircraft, including the related flight equipment and estimated amounts for contractual price escalations and predelivery deposits, were approximately $200 million for the remainder of 2011, $460 million in 2012, $505 million in 2013, $655 million in 2014, $735 million in 2015 and $1.60 billion thereafter.

In June 2011, we also executed a memorandum of understanding with Airbus to substitute 30 of our 52 remaining A320 aircraft deliveries with A321 aircraft and to place a new order for 40 A320 new engine option, or A320neo, aircraft with delivery tentatively scheduled to commence in 2017. We plan to execute a new purchase agreement incorporating the details of this memorandum of understanding with Airbus later this year.

In March 2011, we executed a seven year agreement, subject to an optional three year extension, with ViaSat Inc. to develop and introduce in-flight broadband connectivity technology on our aircraft. Committed expenditures under this agreement include a minimum of $9 million through 2017 and an additional $22 million for minimum hardware and software purchases. Through our wholly-owned subsidiary LiveTV, we plan to partner with ViaSat to make this technology available to other airline customers in the future as well.

As of June 30, 2011, we had approximately $31 million of restricted assets pledged under standby letters of credit related to certain of our leases which will expire at the end of the related lease terms. Additionally, we had $19 million pledged related to our workers compensation insurance policies and other business partner agreements, which will expire according to the terms of the related policies or agreements.

In March 2010, we announced we will be combining our Darien, CT and Forest Hills, NY corporate offices and relocating to a new corporate headquarters in Long Island City, NY. In September 2010, we executed a 12 year lease for our new corporate headquarters in Long Island City. Other than this commitment related to this lease, we do not have any material obligations as of June 30, 2011 related to this corporate relocation, which is currently scheduled to commence in 2012.

Note 8 —Financial Derivative Instruments and Risk Management

As part of our risk management strategy, we periodically purchase crude or heating oil option contracts or swap agreements to manage our exposure to the effect of changes in the price and availability of aircraft fuel. Prices for these commodities are normally highly correlated to aircraft fuel, making derivatives of them effective at providing short-term protection against sharp increases in average fuel prices. We also periodically enter into basis swaps for the differential between heating oil and jet fuel, as well as jet fuel swaps, to further limit the variability in fuel prices at various locations. To manage the variability of the cash flows associated with our variable rate debt, we have also entered into interest rate swaps. We do not hold or issue any derivative financial instruments for trading purposes.

Aircraft fuel derivatives: We attempt to obtain cash flow hedge accounting treatment for each aircraft fuel derivative that we enter into. This treatment is provided for under the Derivatives and Hedging topic of the Codification, which allows for gains and losses on the effective portion of qualifying hedges to be deferred until the underlying planned jet fuel consumption occurs, rather than recognizing the gains and losses on these instruments into earnings during each period they are outstanding. The effective portion of

realized aircraft fuel hedging derivative gains and losses is recognized in fuel expense in the period the underlying fuel is consumed.

Ineffectiveness results, in certain circumstances, when the change in the total fair value of the derivative instrument differs from the change in the value of our expected future cash outlays for the purchase of aircraft fuel and is recognized immediately in interest income and other. Likewise, if a hedge does not qualify for hedge accounting, the periodic changes in its fair value are recognized in the period of the change in interest income and other. When aircraft fuel is consumed and the related derivative contract settles, any gain or loss previously recorded in other comprehensive income is recognized in aircraft fuel expense. All cash flows related to our fuel hedging derivatives are classified as operating cash flows.

Our current approach to fuel hedging is to enter into hedges on a discretionary basis without a specific target of hedge percentage needs in order to mitigate potential liquidity issues and cap fuel prices, when possible.

The following table illustrates the approximate hedged percentages of our projected fuel usage by quarter as of June 30, 2011 related to our outstanding fuel hedging contracts that were designated as cash flow hedges for accounting purposes.


	Crude oil cap	Crude oil	Heating oil	Jet fuel swap
	agreements	collars	collars	agreements	Total
Third Quarter 2011	18%	9%	9%	7%	43%
Fourth Quarter 2011	7%	9%	9%	8%	33%
First Quarter 2012	3%	5%	8%	2%	18%
Second Quarter 2012	2%	5%	7%	2%	16%
Third Quarter 2012	—	4%	7%	2%	13%
Fourth Quarter 2012	—	5%	7%	2%	14%

We also have outstanding contracts, which we entered into in the first quarter of 2011, for approximately 5% of our projected consumption for the third and fourth quarters of 2011 using 3-way crude oil collars, which have not been designated as cash flow hedges for accounting purposes. We also enter into basis swaps, which we do not designate as cash flow hedges and adjust their fair value through earnings each period based on their current fair value. As of June 30, 2011, the fair value recorded for these contracts was immaterial.

Interest rate swaps: The interest rate hedges we had outstanding as of June 30, 2011 effectively swap floating rate for fixed rate, taking advantage of lower borrowing rates in existence at the time of the hedge transaction as compared to the date our original debt instruments were executed. As of June 30, 2011, we had $375 million in notional debt outstanding related to these swaps, which cover certain interest payments through August 2016. The notional amount decreases over time to match scheduled repayments of the related debt.

All of our outstanding interest rate swap contracts qualify as cash flow hedges in accordance with the Derivatives and Hedging topic of the Codification. Since all of the critical terms of our swap agreements match the debt to which they pertain, there was no ineffectiveness relating to these interest rate swaps in 2011 or 2010, and all related unrealized losses were deferred in accumulated other comprehensive income. We recognized approximately $5 million and $4 million in additional interest expense as the related interest payments were made during the six months ended June 30, 2011 and 2010, respectively.

Any outstanding derivative instrument exposes us to credit loss in the event of nonperformance by the counterparties to the agreements, but we do not expect that any of our six counterparties will fail to meet their obligations. The amount of such credit exposure is generally the fair value of our outstanding contracts. To manage credit risks, we select counterparties based on credit assessments, limit our overall

exposure to any single counterparty and monitor the market position with each counterparty. Some of our agreements require cash deposits if market risk exposure exceeds a specified threshold amount.

The financial derivative instrument agreements we have with our counterparties may require us to fund all, or a portion of, outstanding loss positions related to these contracts prior to their scheduled maturities. The amount of collateral posted, if any, is periodically adjusted based on the fair value of the hedge contracts. Our policy is to offset the liabilities represented by these contracts with any cash collateral paid to the counterparties. We did not have any collateral posted related to our outstanding fuel hedge contracts at June 30, 2011 or December 31, 2010. We had $24 million and $30 million posted in collateral related to our interest rate derivatives which offset the hedge liability in other current liabilities at June 30, 2011 and December 31, 2010, respectively.

The table below reflects quantitative information related to our derivative instruments and where these amounts are recorded in our financial statements (dollar amounts in millions):


	As of
	June 30,			December 31,
	2011			2010
Fuel derivatives
Asset fair value recorded in prepaid expenses and other (1)	$	13		$	19
Asset fair value recorded in other long term assets (1)		3			4
Liability fair value recorded in other accrued liabilities (1)		4			—
Liability fair value recorded in other long term liabilities (1)		1			—
Longest remaining term (months)		18			24
Hedged volume (barrels, in thousands)		4,770			4,290
Estimated amount of existing gains (losses) expected to be reclassified into earnings in the next 12 months		—			3

Interest rate derivatives
Liability fair value recorded in other long term liabilities (2)		23			23
Estimated amount of existing gains (losses) expected to be reclassified into earnings in the next 12 months		(11	)		(10	)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Fuel derivatives
Hedge effectiveness gains (losses) recognized in aircraft fuel expense	$	5		$	(2	)	$	7		$	—
Hedge ineffectiveness gains (losses) recognized in other income (expense)		—			(2	)		—			(2	)
Gains (losses) of derivatives not qualifying for hedge accounting recognized in other income (expense)		(1	)		—			1			—
Hedge gains (losses) of derivatives recognized in comprehensive income, (see Note 4)		(29	)		(21	)		3			(28	)
Percentage of actual consumption economically hedged		43	%		45	%		40	%		55	%

Interest rate derivatives
Hedge gains (losses) of derivatives recognized in comprehensive income, (see Note 4)		(5	)		(7	)		(5	)		(12	)
Hedge gains (losses) of derivatives recognized in interest expense		(3	)		(2	)		(5	)		(4	)


(1)		Gross asset or liability of each contract prior to consideration of offsetting positions with each counterparty.

(2)		Gross liability, prior to impact of collateral posted

Note 9 —Fair Value of Financial Instruments

Under the Fair Value Measurements and Disclosures topic of the Codification, disclosures are required about how fair value is determined for assets and liabilities and a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

	Level 1		quoted prices in active markets for identical assets or liabilities;

	Level 2		quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

	Level 3		unobservable inputs, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a listing of our assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of June 30, 2011 and December 31, 2010 (in millions).


	As of June 30, 2011
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	467	$	—	$	—	$	467
Restricted cash		56		—		—		56
Available-for-sale investment securities		319		—		—		319
Aircraft fuel derivatives		—		16		—		16

	$	842	$	16	$	—	$	858


Liabilities
Aircraft fuel derivatives	$	—	$	5	$	—	$	5
Interest rate swap		—		—		23		23

	$	—	$	5	$	23	$	28


	As of December 31, 2010
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	399	$	—	$	—	$	399
Restricted cash		59		—		—		59
Available-for-sale investment securities		154		—		—		154
Aircraft fuel derivatives		—		23		—		23

	$	612	$	23	$	—	$	635


Liabilities
Interest rate swap	$	—	$	—	$	23	$	23

	$	—	$	—	$	23	$	23

Refer to Note 3 for fair value information related to our outstanding debt obligations as of June 30, 2011. The following tables reflect the activity for the major classes of our assets and liabilities measured at fair value using level 3 inputs (in millions) for the three and six months ended June 30, 2011 and 2010:


	Interest Rate
	Swaps
Balance as of March 31, 2011	$	(21	)
Total gains or (losses), realized or unrealized
Included in earnings		—
Included in comprehensive income		(5	)
Settlements		3


Balance as of June 30, 2011	$	(23	)


Balance as of December 31, 2010	$	(23	)
Total gains or (losses), realized or unrealized
Included in earnings		—
Included in comprehensive income		(5	)
Settlements		5


Balance as of June 30, 2011	$	(23	)


	Auction Rate			Put Option			Interest Rate
	Securities			related to ARS			Swaps			Total
Balance as of March 31, 2010	$	63		$	9		$	(15	)	$	57
Total gains or (losses), realized or unrealized
Included in earnings		3			(3	)		—			—
Included in comprehensive income		—			—			(9	)		(9	)
Purchases, sales, issuances and settlements, net		(24	)		1			2			(21	)


Balance as of June 30, 2010	$	42		$	7		$	(22	)	$	27


Balance as of December 31, 2009	$	74		$	11		$	(10	)	$	75
Total gains or (losses), realized or unrealized
Included in earnings		4			(4	)		—			—
Included in comprehensive income		—			—			(16	)		(16	)
Purchases, sales, issuances and settlements, net		(36	)		—			4			(32	)


Balance as of June 30, 2010	$	42		$	7		$	(22	)	$	27

Cash and cash equivalents: Our cash and cash equivalents include money market securities and trade deposits and commercial paper which are readily convertible into cash with maturities of three months or less when purchased. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as level 1 within our fair value hierarchy.

Available-for-sale investment securities: Included in our available-for-sale investment securities are certificates of deposit placed through an account registry service, or CDARS, and commercial paper with original maturities greater than 90 days but less than one year. We also held asset backed securities, which are considered variable rate demand notes with contractual maturities generally greater than ten years with interest reset dates often every 30 days or less. The fair values of these investments are based on observable

market data. We did not record any significant gains or losses on these securities during the six months ended June 30, 2011.

Auction rate securities and related put option: In July 2010, all of our then outstanding auction rate securities were repurchased at par by UBS in accordance with the settlement agreement we had with UBS. The proceeds were used to terminate the outstanding balance on the line of credit with UBS. As a result, we no longer hold any trading securities at June 30, 2011, and the related put option was also terminated upon final sale of the investments. We had elected to apply the fair value option under the Financial Instruments topic of the Codification to the UBS put option in order to closely conform to our treatment of the underlying ARS.

Interest Rate Swaps: The fair values of our interest rate swaps are initially based on inputs received from the counterparty. These values were corroborated by adjusting the active swap indications in quoted markets for similar terms (6 — 8 years) for the specific terms within our swap agreements. Since some of these inputs were not observable, they are classified as level 3 inputs in the hierarchy.

Aircraft fuel derivatives: Our jet fuel swaps, heating oil and crude oil collars, and crude oil caps are not traded on public exchanges. Their fair values are determined using a market approach based on inputs that are readily available from public markets for commodities and energy trading activities; therefore, they are classified as level 2 inputs. The data inputs are combined into quantitative models and processes to generate forward curves and volatilities related to the specific terms of the underlying hedge contracts.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Outlook

We remain focused on generating unit revenue growth even with our increase in capacity and despite persistent challenges with the fuel pricing environment and domestic economy. During the second quarter of 2011, our operating revenue per available seat mile increased 13% on a capacity increase of 9%. Our average fares for the second quarter increased 14% to $158 over the same period in 2010. Average fuel prices over the same period increased 44%. Our growth is a result of seizing opportunities in the competitive landscape, particularly in Boston and the Caribbean and Latin America, where we have recently dedicated significant investments. Due to uncertain economic conditions, we do not anticipate unit revenue growth as strong as we experienced in the first half of the year for the remainder of 2011. However, our strong liquidity position affords us some flexibility to navigate the challenging fuel environment and to re-focus our efforts, if needed, to proactively respond to changes in the demand and pricing environments.

We continue to leverage our presence as the largest domestic carrier at both New York’s John F. Kennedy Airport, or JFK, and Boston’s Logan International Airport, or Logan. Attracting and building a loyal base of business travelers is a critical component of our growth strategy, particularly in Boston. We also continue to build our portfolio of strategic commercial partnerships to allow our customers further access to our network and beyond. To this end, during the second quarter, we announced two new commercial partnerships, with Icelandair, the flagship carrier of Iceland, and Qatar Airways, the national airline of the State of Qatar and one of the world’s fastest growing airlines.

Our disciplined growth strategy includes managing capacity as well as the growth, size and age of our fleet. We remain focused on our operations in Boston and the Caribbean and Latin America, especially as competitive reductions continue in those regions. This includes our focus on our growth in San Juan, Puerto Rico, where we recently became the largest airline serving Puerto Rico. Most recently, we have announced plans to begin service to La Romana, Dominican Republic and Liberia, Costa Rica in November 2011, and St. Croix and St. Thomas in the U.S. Virgin Islands in December, 2011. Our growth in these regions allow for us to diversify our leisure and visiting friends and family traffic.

In June 2011, we amended our Airbus purchase agreement, deferring delivery of eight aircraft previously scheduled for delivery in 2014 and 2015 to 2017. Additionally, we cancelled eight options previously available for delivery in 2014 and 2015. During the second quarter, we returned one EMBRAER E190 aircraft to its lessor upon the expiration of its lease term. We also extended the leases on four Airbus A320 aircraft, leases which were previously set to expire in 2012. We expect our operating aircraft to consist of 120 Airbus A320 aircraft and 49 EMBRAER 190 aircraft at the end of 2011. We have one of the youngest and most fuel efficient fleets in the industry, with an average age of 5.7 years, which we believe gives us a competitive advantage.

In June 2011, we also executed a memorandum of understanding with Airbus to substitute 30 of our 52 remaining A320 aircraft deliveries with A321 aircraft and to place a new order for 40 A320 new engine option, or A320neo, aircraft with delivery tentatively scheduled to commence in 2017. We plan to execute a new purchase agreement, incorporating the details of this memorandum of understanding with Airbus later this year.

In addition to the above fleet adjustments, all of our A320 and A321 deliveries beginning in 2013 will be equipped with sharklet wing tips, which we expect to improve our fuel efficiency by roughly 3%. We anticipate that the improved fuel efficiency of these new aircraft as well as the A320neo aircraft will provide significant savings against our largest and most unpredictable cost.

We believe our strong brand and the JetBlue Experience are core elements of our continued success. To that end, we continually seek to enhance our product and provide our customers with superior service. In June 2011, we re-branded and expanded our popular Even More Legroom offering, now known as Even More Space, to include extra legroom plus early boarding and early access to overhead bin space. Additionally, we introduced Even More Speed, which offers customers the option to enjoy an expedited

security experience in select JetBlue airports. Earlier in 2011, we executed an agreement with ViaSat Inc. to develop and introduce state of the art in-flight broadband connectivity technology on our aircraft.

The price and availability of aircraft fuel, which is our single largest operating expense, are extremely volatile due to global economic and geopolitical factors that we can neither control nor accurately predict. During 2011, fuel prices have remained volatile. We actively manage the volume and diversification of our fuel hedge portfolio. We effectively hedged 43% of our total second quarter 2011 fuel consumption. As of June 30, 2011, we had outstanding fuel hedge contracts covering approximately 48% of our forecasted consumption for the third quarter of 2011, 42% for the full year 2011, and 15% for the full year 2012. We will continue to monitor fuel prices closely and expect to take advantage of fuel hedging opportunities in order to provide some protection against significant volatility and increases in fuel prices.

We expect our full-year operating capacity to increase approximately 6% to 8% over 2010 primarily as a result of our growth in Boston and the Caribbean and Latin America including San Juan, Puerto Rico and the net addition of four EMBRAER 190 and four Airbus A320 aircraft to our operating fleet. Assuming fuel prices of $3.24 per gallon, including fuel taxes and net of effective hedges, our cost per available seat mile for 2011 is expected to increase by 14% to 16% over 2010. This expected increase is a result of higher fuel prices and higher maintenance costs.

Results of Operations

Our operating revenue per available seat mile for the quarter increased 13% over the same period in 2010. Our average fares for the quarter increased 14% over 2010 to $158, while our load factor decreased 0.5 points to 81.5% from a year ago. Our on-time performance, defined by the Department of Transportation, or DOT, as arrival within 14 minutes of schedule, was 72.7% in the second quarter of 2011 compared to 83.2% for the same period in 2010, while our completion factor was 99.2% in each of 2011 and 2010.

Three Months Ended June 30, 2011 and 2010

We reported net income of $25 million for the three months ended June 30, 2011, compared to $31 million for the three months ended June 30, 2010. Diluted earnings per share were $0.08 for the second quarter of 2011 compared to $0.10 for 2010. Our operating income for the three months ended June 30, 2011 was $86 million compared to $95 million for the same period last year, and our pre-tax margin decreased 1.8 points from 2010 to 3.8%.

Operating Revenues. Operating revenues increased 22%, or $211 million, over the same period in 2010, primarily due to a 23%, or $195 million, increase in passenger revenues. The increase in passenger revenues was largely attributable to a 9% increase in capacity along with a 14% increase in yield over the second quarter of 2010. This includes revenue from our re-branded Even More Space seats, which increased approximately $10 million.

Other revenue increased 17%, or $16 million, primarily due to a $4 million increase in marketing related revenues. Additionally, we had a $4 million increase in LiveTV third party revenues, $2 million increase in baggage fees and a $2 million increase in rental income.

Operating Expenses. Operating expenses increased 26%, or $220 million, over the same period in 2010, primarily due to higher fuel prices and increased maintenance costs. Operating capacity increased 9% to 9.44 billion available seat miles. Operating expenses per available seat mile increased 16% to 11.28 cents for the three months ended June 30, 2011. Excluding fuel, our cost per available seat mile for the three months ended June 30, 2011 was 2% higher compared to the same period in 2010. In detail, operating costs per available seat mile were as follows (percent changes are based on unrounded numbers):


	Three Months Ended
	June 30,				Percent
	2011		2010		Change
	(in cents)
Operating expenses:
Aircraft fuel		4.66		3.21		45.0	%
Salaries, wages and benefits		2.48		2.51		(0.9	)%
Landing fees and other rents		.67		.66		1.2	%
Depreciation and amortization		.62		.62		(0.9	)%
Aircraft rent		.38		.35		6.5	%
Sales and marketing		.54		.50		8.3	%
Maintenance materials and repairs		.57		.48		18.5	%
Other operating expenses		1.36		1.39		(1.7	)%

Total operating expenses		11.28		9.72		16.0	%

Aircraft fuel expense increased 58%, or $160 million, due to a 44% increase in average fuel cost per gallon, or $133 million after the impact of fuel hedging, and an increase of 12 million gallons of aircraft fuel consumed, resulting in $27 million in additional fuel expense. We recorded $5 million in effective fuel hedge gains during the second quarter of 2011 versus $2 million in effective fuel hedge losses during the same period in 2010. Our average fuel cost per gallon was $3.31 for the second quarter of 2011 compared to $2.30 for the second quarter of 2010. Cost per available seat mile increased 45% primarily due to the increase in fuel price.

Salaries, wages and benefits increased 8%, or $17 million, primarily due to increases in wages and related benefits as a result of pay increases for many of our larger work groups and the increasing seniority levels of our crewmembers. Additionally, we had a 12% increase in the average number of full-time equivalent pilots and flight attendants needed to support our growth plans. Cost per available seat mile decreased 1% primarily due to the increase in capacity.

Landing fees and other rents increased 10%, or $5 million, primarily due to a 10% increase in departures over 2010. Airport rental rates increased due to increased rates in existing markets, the opening of five new cities since the second quarter of 2010 and expanded operations in Boston. These rate increases were slightly offset by lower average landing fee rates. Cost per available seat mile increased 1% due to increased departures.

Depreciation and amortization increased 8%, or $4 million, primarily due to having an average of 104 owned and capital leased aircraft in 2011 compared to 96 in 2010. Cost per available seat mile decreased 1% due to the increase in capacity.

Aircraft rent increased 16%, or $5 million, due to our leasing of six used aircraft during the second half of 2010. Cost per available seat mile increased 6% due to a higher percentage of our fleet being leased.

Sales and marketing expense increased 18%, or $8 million, due to $5 million in higher credit card fees resulting from the increased average fares and $3 million in higher advertising costs. On a cost per available seat mile basis, sales and marketing expense increased 8% primarily due to increased fares and higher advertising expense.

Maintenance, materials, and repairs increased 29%, or $13 million, due to 13.6 additional average operating aircraft in 2011 compared to the same period in 2010, the gradual aging of our fleet, and aircraft coming off of warranty. The average age of our fleet increased to 5.7 years as of June 30, 2011 compared to

4.8 years as of June 30, 2010. Maintenance expense is expected to increase significantly as our fleet ages, resulting in the need for additional repairs over time. Cost per available seat mile increased 18% primarily due to the gradual aging of our fleet.

Other operating expenses increased 7%, or $8 million, primarily due to an increase in variable costs as a result of 10% more departures versus 2010 and operating out of five additional cities opened since the second quarter of 2010. Cost per available seat mile decreased 2% primarily due the increase in capacity.

Other Income (Expense). Interest expense increased 2%, or $1 million, primarily due to new debt issued.

Interest income and other increased 127%, or $1 million, primarily due to fuel hedging ineffectiveness. Additionally, in the second quarter of 2011, we recorded a $1 million loss to adjust the fair market value of derivative instruments not classified as cash flow hedges. Accounting ineffectiveness on our crude and heating oil derivative instruments classified as cash flow hedges resulted in an insignificant loss in 2011, compared to a $2 million loss in 2010. We are unable to predict what the amount of ineffectiveness will be related to these instruments, or the potential loss of hedge accounting, which is determined on a derivative-by-derivative basis, due to the volatility in the forward markets for these commodities.

Six Months Ended June 30, 2011 and 2010

We reported net income of $28 million for the six months ended June 30, 2011, compared to $30 million for the six months ended June 30, 2010. Diluted earnings per share were $0.10 for the six months ended June 30, 2011 compared to $0.11 for the same period in 2010. Our operating income for the six months ended June 30, 2011 was $131 million compared to $138 million for the same period last year, and our pre-tax margin decreased 0.5 points from 2010 to 2.3%.

Operating Revenues. Operating revenues increased 19%, or $352 million, over the same period in 2010, primarily due to a 19%, or $315 million, increase in passenger revenues. The increase in passenger revenues was largely attributable to a 5% increase in capacity along with an 11% increase in yield over the first half of 2010. This includes $15 million increase in Even More Space fees as a result of increased capacity and revised pricing.

Other revenue increased 21%, or $37 million, primarily due to a $13 million increase in marketing related revenues, of which $5 million related to an increase in revenue recognized related to the guarantee associated with our co-branded credit card agreement. We also had a $9 million increase in third party revenues for LiveTV. Change fees increased 10%, or $5 million, over the same period in 2010 as a result of several change fee waivers implemented during the first half of 2010 in conjunction with our system migration. Additionally, rental income increased approximately $3 million, baggage fees increased approximately $2 million and inflight sales revenue increased $2 million.

Operating Expenses. Operating expenses increased 21%, or $359 million, over the same period in 2010, primarily due to higher fuel prices and increased maintenance costs. Operating capacity increased 5% to 17.95 billion available seat miles. Operating expenses per available seat mile increased 16% to 11.32 cents for the six months ended June 30, 2011. Excluding fuel, our cost per available seat mile for the six months ended June 30, 2011 was 4% higher compared to the same period in 2010. In detail, operating costs per available seat mile were as follows (percent changes are based on unrounded numbers):


	Six Months Ended
	June 30,				Percent
	2011		2010		Change
	(in cents)
Operating expenses:
Aircraft fuel		4.41		3.11		41.6	%
Salaries, wages and benefits		2.62		2.55		2.6	%
Landing fees and other rents		.67		.65		2.3	%
Depreciation and amortization		.63		.65		(1.8	)%
Aircraft rent		.39		.36		7.3	%
Sales and marketing		.54		.49		10.2	%
Maintenance materials and repairs		.59		.47		25.9	%
Other operating expenses		1.47		1.49		(1.3	)%

Total operating expenses		11.32		9.77		15.8	%

Aircraft fuel expense increased 49%, or $259 million, due to a 40% increase in average fuel cost per gallon, or $225 million after the impact of fuel hedging, and an increase of 16 million gallons of aircraft fuel consumed, resulting in $34 million in additional fuel expense. We recorded $7 million in effective fuel hedge gains during 2011 versus an immaterial amount in effective fuel hedge losses during 2010. Our average fuel cost per gallon was $3.14 for the six months ended June 30, 2011 compared to $2.25 for the same period in 2010. Cost per available seat mile increased 42% primarily due to the increase in fuel price.

Salaries, wages and benefits increased 8%, or $33 million, primarily due to increases in wages and related benefits as a result of pay increases for many of our larger work groups and the increasing seniority levels of our crewmembers. Additionally, we had a 9% increase in the average number of full-time equivalent pilots and flight attendants needed to support our growth plans. These increases were partially offset by an additional $6 million of expense associated with higher staffing levels in the first quarter of 2010 related to the implementation of our new customer service system. Cost per available seat mile increased 3% primarily due to an increase in full-time equivalent employees and pay rate adjustments.

Landing fees and other rents increased 7%, or $8 million, primarily due to a 7% increase in departures over 2010. Airport rental rates increased due to increased rates in existing markets, the opening of five new cities since the second quarter of 2010, and expanded operations in Boston. These rate increases were slightly offset in lower average landing fee rates. Cost per available seat mile increased 2% due to increased departures.

Depreciation and amortization increased 3%, or $3 million, primarily due to having an average of 103 owned and capital leased aircraft in 2011 compared to 96 in 2010. Cost per available seat mile decreased 2% due to the increase in capacity.

Aircraft rent increased 13%, or $8 million, due to our leasing of six used aircraft during the second half of 2010. Cost per available seat mile increased 7% due to a higher percentage of our fleet being leased.

Sales and marketing expense increased 16%, or $13 million, due to $6 million in higher credit card fees resulting from the increased average fares and $6 million in higher advertising costs. Additionally, we incurred $1 million in higher commissions in 2011 related to our participation in GDSs and OTAs. On a cost per available seat mile basis, sales and marketing expense increased 10% primarily due to increased fares and higher advertising costs.

Maintenance, materials, and repairs increased 32%, or $26 million, due to 12 additional average operating aircraft in 2011 compared to the same period in 2010, the gradual aging of our fleet and aircraft coming off of warranty. The average age of our fleet increased to 5.7 years as of June 30, 2011 compared to 4.8 years as of June 30, 2010. Maintenance expense is expected to increase significantly as our fleet ages, resulting in the need for additional repairs over time. Cost per available seat mile increased 26% primarily due to the gradual aging of our fleet.

Other operating expenses increased 3%, or $9 million, primarily due an increase in variable costs as a result of 7% more departures versus 2010 and operating out of five additional cities opened since the second quarter of 2010. These increases were offset by $13 million in one time costs related to the implementation of our new customer service system incurred in 2010. Cost per available seat mile decreased 1% due to the increase in capacity.

Other Income (Expense). Interest expense decreased 2%, or $2 million, primarily due to lower average principal balances outstanding on our debt.

Interest income and other increased 270%, or $3 million, primarily due to changes in fuel hedging ineffectiveness. Additionally, during 2011, we recorded a $1 million gain to adjust the fair market value of derivative instruments not classified as cash flow hedges. Accounting ineffectiveness on our crude and heating oil derivative instruments classified as cash flow hedges was an insignificant gain in 2011 versus a loss of $2 million in 2010. We are unable to predict what the amount of ineffectiveness will be related to these instruments, or the potential loss of hedge accounting, which is determined on a derivative-by-derivative basis, due to the volatility in the forward markets for these commodities.

The following table sets forth our operating statistics for the three months ended June 30, 2011 and 2010:


	Three Months Ended									Six Months Ended
	June 30,						Percent			June 30,						Percent
	2011			2010			Change			2011			2010			Change
Operating Statistics:
Revenue passengers (thousands)		6,622			6,114			8.3			12,661			11,642			8.8
Revenue passenger miles (millions)		7,692			7,126			7.9			14,616			13,596			7.5
Available seat miles (ASMs) (millions)		9,441			8,688			8.7			17,952			17,112			4.9
Load factor		81.5	%		82.0	%	(0.5		)pts.		81.4	%		79.5	%	1.9		pts.
Aircraft utilization (hours per day)		11.9			11.8			0.8			11.6			11.8			(1.7	)

Average fare	$	158.01		$	139.20			13.5		$	154.20		$	140.60			9.7
Yield per passenger mile (cents)		13.60			11.94			13.9			13.36			12.04			11.0
Passenger revenue per ASM (cents)		11.08			9.79			13.2			10.88			9.57			13.7
Operating revenue per ASM (cents)		12.19			10.83			12.6			12.05			10.58			13.9
Operating expense per ASM (cents)		11.28			9.72			16.0			11.32			9.77			15.8
Operating expense per ASM, excluding fuel (cents)		6.62			6.51			1.7			6.91			6.66			3.7
Airline operating expense per ASM (cents) (1)		11.10			9.55			16.3			11.14			9.58			16.2

Departures		61,632			56,202			9.7			118,338			110,569			7.0
Average stage length (miles)		1,091			1,102			(1.0	)		1,083			1,102			(1.7	)
Average number of operating aircraft during period		164.6			151.0			9.0			163.0			151.0			7.9
Average fuel cost per gallon	$	3.31		$	2.30			43.7		$	3.14		$	2.25			39.6
Fuel gallons consumed (millions)		133			121			9.7			253			237			6.4
Full-time equivalent employees at period end (1)											11,609			10,906			6.4


(1)		Excludes operating expenses and employees of LiveTV, LLC, which are unrelated to our airline operations.

Liquidity and Capital Resources

At June 30, 2011, we had unrestricted cash and cash equivalents of $575 million and short term investments of $598 million compared to cash and cash equivalents of $465 million and short term investments of $495 million at December 31, 2010. Cash flows from operating activities were $406 million and $356 million for the six months ended June 30, 2011 and 2010, respectively. The increase in operating cash flows reflects the 10% increase in average fares and the 40% higher price of fuel in 2011 compared to 2010. We rely primarily on operating cash flows to provide working capital.

Investing Activities. During the six months ended June 30, 2011, capital expenditures related to our purchase of flight equipment included $156 million for three Airbus A320 aircraft and two EMBRAER E190 aircraft, $24 million for flight equipment deposits and $12 million for spare part purchases. Capital expenditures for other property and equipment, including ground equipment purchases, facilities improvements, and LiveTV inventory, were $36 million. Investing activities also included the net purchase of $110 million in investment securities.

During the six months ended June 30, 2010, capital expenditures related to our purchase of flight equipment included $65 million for two aircraft and two spare engines, $20 million for flight equipment deposits and $8 million for spare part purchases. Capital expenditures for other property and equipment, including ground equipment purchases, facilities improvements, and LiveTV inventory, were $58 million. Investing activities also included the net purchase of $437 million in investment securities.

Financing Activities. Financing activities for the six months ended June 30, 2011 consisted of (1), scheduled maturities of $92 million of debt and capital lease obligations, (2) our issuance of $48 million in fixed rate equipment notes and $93 million in non-public floating rate equipment notes secured by three Airbus A320 aircraft and two EMBRAER 190 aircraft, (3) the repayment of $8 million in principal related to our construction obligation for Terminal 5 and (4) $3 million in treasury shares related to the withholding of taxes, upon the vesting of restricted stock units.

We may in the future issue, in one or more public offerings, debt securities, pass-through certificates, common stock, preferred stock and/or other securities. At this time, we have no plans to sell any such securities.

Financing activities for the six months ended June 30, 2010 consisted of (1) the required repurchase of $155 million of our 3.75% convertible debentures due 2035, (2) repaying a net $17 million on our line of credit collateralized by our auction rate securities, (3) scheduled maturities of $84 million of debt and capital lease obligations, (4) our issuance of $47 million in fixed rate equipment notes and $19 million in non-public floating rate equipment notes secured by two EMBRAER 190 aircraft and four spare engines, and (5) reimbursement of construction costs incurred for Terminal 5 of $9 million.

Working Capital. We had working capital of $252 million and $275 million at June 30, 2011 and December 31, 2010, respectively. Our working capital includes the fair value of our short term fuel hedge derivatives, which was an asset of $9 million and $19 million at June 30, 2011 and December 31, 2010, respectively.

We expect to meet our obligations as they become due through available cash, investment securities and internally generated funds, supplemented as necessary by financing activities, as they may be available to us. We expect to generate positive working capital through our operations. However, we cannot predict what the effect on our business might be from the extremely competitive environment we are operating in or from events that are beyond our control, such as volatile fuel prices, economic conditions, weather-related disruptions, the impact of airline bankruptcies or consolidations, U.S. military actions or acts of terrorism. We believe the working capital available to us will be sufficient to meet our cash requirements for at least the next 12 months.

Contractual Obligations

Our noncancelable contractual obligations at June 30, 2011, include the following (in millions):


	Payments due in
	Total		2011		2012		2013		2014		2015		Thereafter
Long-term debt and capital lease obligations (1)	$	3,837	$	161	$	318	$	508	$	710	$	338	$	1,802
Lease commitments		1,673		106		200		173		170		171		853
Flight equipment obligations		4,155		200		460		505		655		735		1,600
Financing obligations and other (2)		3,220		129		286		261		212		248		2,084

Total	$	12,885	$	596	$	1,264	$	1,447	$	1,747	$	1,492	$	6,339


(1)		Includes actual interest and estimated interest for floating-rate debt based on June 30, 2011 rates.

(2)		Amounts include noncancelable commitments for the purchase of goods and services.

There have been no material changes in the terms of our debt instruments from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations-Liquidity and Capital Resources included in our 2010 Form 10-K. We are not subject to any financial covenants in any of our debt obligations. We have approximately $31 million of restricted cash pledged under standby letters of credit related to certain of our leases which will expire at the end of the related lease terms.

As of June 30, 2011, we operated a fleet of 119 Airbus A320 aircraft and 46 EMBRAER 190 aircraft, of which 101 were owned, 60 were leased under operating leases and four were leased under capital leases. The average age of our operating fleet was 5.7 years at June 30, 2011. In June 2011, we amended our Airbus A320 purchase agreement, deferring eight aircraft previously scheduled for delivery in 2014 and 2015 to 2017, and canceling eight options previously available for delivery in 2014 and 2015. In February 2011, we cancelled the orders for two EMBRAER 190 aircraft previously scheduled for delivery in 2013. As of June 30, 2011, we had on order 52 Airbus A320 aircraft and 50 EMBRAER 190 aircraft; with options to acquire 59 additional EMBRAER 190 aircraft as follows:


	Firm						Option
	Airbus		EMBRAER				Airbus		EMBRAER
Year	A320		190		Total		A320		190		Total
Remainder of 2011		1		3		4		—		—		—
2012		7		4		11		—		—		—
2013		7		5		12		—		9		9
2014		9		7		16		—		10		10
2015		10		7		17		—		10		10
2016		10		8		18		—		10		10
2017		8		8		16		—		10		10
2018		—		8		8		—		10		10

		52		50		102		—		59		59

The above contractual obligations and fleet commitments do not reflect anticipated changes to our fleet as a result of the June 2011 memorandum of understanding with Airbus. We intend to substitute 30 of our 52 remaining A320 aircraft deliveries with A321 aircraft.. We also intend to place a new order for 40 A320 new engine option, or A320neo, aircraft with delivery tentatively scheduled to commence in 2017. We plan to execute a new purchase agreement incorporating the details of this memorandum of understanding with Airbus later this year.

Committed expenditures for our 102 firm aircraft and 14 spare engines include estimated amounts for contractual price escalations and predelivery deposits. Debt financing has been arranged for all of our remaining firm aircraft deliveries scheduled for 2011. Although we believe that debt and/or lease financing should be available for our remaining aircraft deliveries, we cannot give assurance that we will be able to secure financing on terms attractive to us, if at all. While these financings may or may not result in an increase in liabilities on our balance sheet, our fixed costs will increase significantly regardless of the financing method ultimately chosen. To the extent we cannot secure financing, we may be required to pay in cash, further modify our aircraft acquisition plans or incur higher than anticipated financing costs. Capital expenditures for facility improvements, spare parts, and ground purchases are expected to be approximately $80 million for the remainder of 2011.

In November 2005, we executed a 30-year lease agreement with the PANYNJ for the construction and operation of a new terminal at JFK, which we began to operate in October 2008. For financial reporting purposes only, this lease is being accounted for as a financing obligation because we do not believe we

qualify for sale-leaseback accounting due to our continuing involvement in the property following the construction period. JetBlue has committed to rental payments under the lease, including ground rents for the new terminal site, which began on lease execution and are included as part of lease commitments in the contractual obligations table above. Facility rents commenced upon the date of our beneficial occupancy of the new terminal and are included as part of “financing obligations and other” in the contractual obligations table above.

Off-Balance Sheet Arrangements

None of our operating lease obligations are reflected on our balance sheet. Although some of our aircraft lease arrangements are variable interest entities, as defined in the Consolidations topic of the Codification, none of them require consolidation in our financial statements. The decision to finance these aircraft through operating leases rather than through debt was based on an analysis of the cash flows and tax consequences of each option and a consideration of our liquidity requirements. We are responsible for all maintenance, insurance and other costs associated with operating these aircraft; however, we have not made any residual value or other guarantees to our lessors.

We have determined that we hold a variable interest in, but are not the primary beneficiary of, certain pass-through trusts which are the purchasers of equipment notes issued by us to finance the acquisition of new aircraft and are held by such pass-through trusts. These pass-through trusts maintain liquidity facilities whereby a third party agrees to make payments sufficient to pay up to 18 months of interest on the applicable certificates if a payment default occurs. The liquidity providers for the Series 2004-1 certificates and the spare parts certificates are Landesbank Hessen-Thüringen Girozentrale and Morgan Stanley Capital Services Inc. The liquidity providers for the Series 2004-2 certificates are Landesbank Baden-Württemberg and Citibank, N.A.

We utilize a policy provider to provide credit support on the Class G-1 and Class G-2 certificates. The policy provider has unconditionally guaranteed the payment of interest on the certificates when due and the payment of principal on the certificates no later than 18 months after the final expected regular distribution date. The policy provider is MBIA Insurance Corporation (a subsidiary of MBIA, Inc.). Financial information for the parent company of the policy provider is available at the SEC’s website at http://www.sec.gov or at the SEC’s public reference room in Washington, D.C.

We have also made certain guarantees and indemnities to other unrelated parties that are not reflected on our balance sheet, which we believe will not have a significant impact on our results of operations, financial condition or cash flows. We have no other off-balance sheet arrangements.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates included in our 2010 Form 10-K.

Other Information

Recent Awards. In June 2011, JetBlue was recognized by J.D. Power and Associates as having the highest customer satisfaction among low-cost carriers in North America for the seventh consecutive year.

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”, “plans” 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 progresses, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change prior to the end of each quarter or year. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Although these expectations may change, we may not inform you if they do.

You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, without limitation, our extremely competitive industry; volatility in financial and credit markets which could affect our ability to obtain debt and/or lease financing or to raise funds through debt or equity issuances; increases in fuel prices, maintenance costs and interest rates; our ability to profitably implement our growth strategy, including the ability to operate reliably the EMBRAER 190 aircraft and our new terminal at JFK; our significant fixed obligations; our ability to attract and retain qualified personnel and maintain our culture as we grow; our reliance on high daily aircraft utilization; our dependence on the New York metropolitan market; our reliance on automated systems and technology; our exposure to potential unionization; our reliance on a limited number of suppliers; changes in or additional government regulation; changes in our industry due to other airlines’ financial condition; a continuance of the economic recessionary conditions in the U.S. or a further economic downturn leading to a continuing or accelerated decrease in demand for domestic and business air travel; and external geopolitical events and conditions.

Additional information concerning these and other factors is contained in our SEC filings, including but not limited to, our 2010 Form 10-K and part II of this report.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in market risks from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in our 2010 Form 10-K, except as follows:

Aircraft Fuel. As of June 30, 2011, we had hedged approximately 43% of our expected remaining 2011 fuel requirements using jet fuel swaps, heating oil collars, and crude oil caps and collars. Our results of operations are affected by changes in the price and availability of aircraft fuel. Market risk is estimated as a hypothetical 10% increase in the June 30, 2011, cost per gallon of fuel, including the effects of our fuel hedges. Based on our projected twelve month fuel consumption, such an increase would result in an increase to annual aircraft fuel expense of approximately $176 million, compared to an estimated $107 million for 2010 measured as of June 30, 2010. See Note 8 to our unaudited condensed consolidated financial statements for additional information.

Fixed Rate Debt. On June 30, 2011, our $324 million aggregate principal amount of convertible debt had an estimated fair value of $494 million, based on quoted market prices.


Item 4.		Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded,

PART II. OTHER INFORMATION


Item 1.		Legal Proceedings.

In the ordinary course of our business, we are party to various legal proceedings and claims which we believe are incidental to the operation of our business. We believe that the ultimate outcome of these 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 1A.		Risk Factors.

The following is an update to Item 1A-Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2010, or our 2010 Form 10-K. For additional risk factors that could cause actual results to differ materially from those anticipated, please refer to our 2010 Form 10-K.

Risks Related to JetBlue

We may be subject to unionization, work stoppages, slowdowns or increased labor costs; recent changes to the labor laws may make unionization easier to achieve.

Our business is labor intensive and, unlike most other airlines, we have a non-union workforce. The unionization of any of our employees could result in demands that may increase our operating expenses and materially adversely affect our financial condition and results of operations. Any of the different crafts or classes of our employees could unionize at any time, which would require us to negotiate in good faith with the employee group’s certified representative concerning a collective bargaining agreement. In June 2011, the Airline Pilots Association, or ALPA, filed a petition with the NMB seeking to become the collective bargaining representative of our pilots. The NMB will hold an election from July 26 through August 16, 2011. In 2010, the National Mediation Board, or NMB, changed its election procedures to permit a majority of those voting to elect to unionize (from a majority of those in the craft or class). These rule changes fundamentally alter the manner in which labor groups have been able to organize in our industry since the inception of the Railway Labor Act. Ultimately, if we and a newly elected representative were unable to reach agreement on the terms of a collective bargaining agreement and all of the major dispute resolution processes of the Railway Labor Act were exhausted, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be disruptive to our operations and could harm our business.

Our reputation and business may be harmed and we may be subject to legal claims if there is loss, disclosure or misappropriation of or access to our customers’, employees’, business partners’ or our own information or other breaches of our information security.

We make extensive use of online services and centralized data processing, including through third party service providers. The secure maintenance and transmission of customer and employee information is a critical element of our operations. Our information technology and other systems that maintain and transmit customer information, or those of service providers or business partners, may be compromised by a malicious third party penetration of our network security, or that of a third party service provider or business partner, or impacted by advertent or inadvertent actions or inactions by our employees, or those of a third party service provider or business partner. As a result, personal information may be lost, disclosed, accessed or taken without consent.

Any such loss, disclosure or misappropriation of, or access to, customers’, employees’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a serious impact on our reputation and may materially adversely affect our business, operating results and financial condition. Furthermore, the loss, disclosure or misappropriation of our business information may materially adversely affect our business, operating results and financial condition.

Risks Associated with the Airline Industry

Changes in government regulations imposing additional requirements and restrictions on our operations or the U.S. Government ceasing to provide adequate war risk insurance could increase our operating costs and result in service delays and disruptions.

Airlines are subject to extensive regulatory and legal requirements, both domestically and internationally, that involve significant compliance costs. In the last several years, Congress has passed laws, and the DOT, FAA and the TSA have issued regulations relating to the operation of airlines that have required significant expenditures. We expect to continue to incur expenses in connection with complying with government regulations. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted or materially amended, these measures could have the effect of raising ticket prices, reducing air travel demand and/or revenue and increasing costs. The FAA is currently drafting new requirements, and depending on whether the final rules incorporate significant changes to crew rest requirements, our cost structure could be adversely affected. We cannot assure you that these and other laws or regulations enacted in the future will not harm our business.

The U.S. Government currently provides insurance coverage for certain claims resulting from acts of terrorism, war or similar events. Should this coverage no longer be offered, the coverage that would be available to us through commercial aviation insurers may have substantially less desirable terms, result in higher costs and not be adequate to protect our risk, any of which could harm our business.


Item 6.		Exhibits.

Exhibits: See accompanying Exhibit Index included after the signature page of this report for a list of the exhibits filed or furnished with this report.

EXHIBIT INDEX


Exhibit
Number		Exhibit
10.1(y)**		Amendment No. 36 to Airbus A320 Purchase Agreement between AVSA, S.A.R.L., and JetBlue Airways Corporation, dated June 17, 2011.

10.31(a)		JetBlue Airways Corporation 2011 Incentive Compensation Plan.

10.31(b)		JetBlue Airways Corporation 2011 Incentive Compensation Plan forms of award agreement.

10.32**		Memorandum of Understanding, dated June 17, 2011, between Airbus S.A.S and JetBlue Airways Corporation.

12.1		Computation of Ratio of Earnings to Fixed Charges.

31.1		13a-14(a)/15d-14(a) Certification of the Chief Executive Officer, furnished herewith.

31.2		13a-14(a)/15d-14(a) Certification of the Chief Financial Officer, furnished herewith.

32		Certification Pursuant to Section 1350, furnished herewith.

101.INS *		XBRL Instance Document

101.SCH *		XBRL Taxonomy Extension Schema Document

101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB *		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document


*		XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

**		Portions of this exhibit have been omitted pursuant to a Confidential Treatment Request under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


	Page #’s
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3
Condensed Consolidated Balance Sheets — June 30, 2011 and December 31, 2010		3
Consolidated Statements of Operations — Three and Six Months Ended June 30, 2011 and 2010		5
Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2011 and 2010		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		28
Item 4. Controls and Procedures		28

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 6. Exhibits		30
EX-10.1.Y
EX-10.31.A
EX-10.31.B
EX-10.32
EX-12.1
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


	June 30,		December 31,
	2011		2010
	(unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	575	$	465
Investment securities		598		495
Receivables, less allowance		114		84
Restricted cash		—		3
Prepaid expenses and other		275		313

Total current assets		1,562		1,360

PROPERTY AND EQUIPMENT
Flight equipment		4,517		4,320
Predelivery deposits for flight equipment		166		178

		4,683		4,498
Less accumulated depreciation		753		679

		3,930		3,819

Other property and equipment		500		491
Less accumulated depreciation		192		178

		308		313

Assets constructed for others		559		558
Less accumulated depreciation		60		49

		499		509

Total property and equipment		4,737		4,641

OTHER ASSETS
Investment securities		133		133
Restricted cash		65		65
Other		411		394

Total other assets		609		592

TOTAL ASSETS	$	6,908	$	6,593


	JETBLUE AIRWAYS CORPORATION (Registrant)
Date: August 3, 2011	By:	/s/ DONALD DANIELS
		Vice President, Controller and Chief
		Accounting Officer (Principal Accounting Officer)

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