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Jblu2008annual-Report.Pdf 2008 Dear Fellow Shareholders, 2008 was a challenging year for the airline industry as high fuel prices and a weakening economy transformed the landscape. Fuel prices reached record levels, forcing airlines around the world to cease operations, seek financial protection and consolidate. Despite these challenges, 2008 was a successful year for JetBlue. We took action on multiple fronts to manage the impact of high fuel prices and an uncertain economic environment, while continuing to provide our customers with the award-winning product and service we are known for. As a result of these efforts, we led the industry in unit revenue growth throughout the year. Our strong revenue performance, however, did not keep pace with the unprecedented spike in fuel prices, which cost us an additional $400 million compared to 2007. Yet, despite record fuel prices and turmoil in the financial markets, we ended the year with one of the strongest liquidity positions, relative to our size, in the industry. The JetBlue Experience In 2008, we marked the beginning of a new chapter in JetBlue’s history with the opening of our new Terminal 5 facility at JFK Airport. This project, a partnership with the Port Authority of New York & New Jersey, involved six years of planning and construction and includes 26 gates, new roadways, a parking structure, and a connector to the AirTrain. As the seventh largest airline in the United States, we are truly excited to be able to offer our customers and our crewmembers a world-class airport experience at our home base of operations. We believe we have a tremendous advantage being based in New York, the largest travel market in the world, and Terminal 5 gives us the opportunity to provide superior customer service on the ground that matches our award-winning experience in the air. We continue to strengthen the JetBlue brand, and our 11,000+ crewmembers – at the core of this effort – continue to be recognized for exceptional customer service. For the fourth year in a row, JetBlue achieved the number one customer service ranking among low cost carriers by J.D. Power and Associates. This award, and many others, is a testament to the dedication of our crewmembers who do a tremendous job delivering The JetBlue Experience to our 22 million customers. During 2008, we continued to improve the travel experience for our customers onboard our aircraft. For example, we modified our fleet with a product we call Even More Legroom. Even More Legroom seats provide our customers with 38 inches of pitch in selected rows for a modest fee. We believe our cabin experience, which includes the most legroom in coach (based on average fleet-wide seat pitch for U.S. airlines) and DIRECTV and Sirius XM Radio installed by our LiveTV subsidiary, to be “best in class” across the industry. Network Optimization We took delivery of 18 new aircraft in 2008. As part of a more disciplined growth strategy, however, we managed our capacity through aircraft sales, deferrals and leases. During the year, we sold nine of our older Airbus A320 aircraft and leased two of our EMBRAER 190 aircraft to a third party. We also modified our aircraft order book, deferring delivery of aircraft. We believe our revised fleet plan allows us to better position ourselves for long-term growth. At the same time, we believe our fleet order book, including the availability of aircraft purchase options, provides us with the ability to quickly react to changing economic conditions and seize market opportunities. Slower growth has afforded us the opportunity to focus on strengthening our core network. During 2008, we reduced our flying in longer haul east-west markets, which have more exposure to fuel prices, while increasing our presence in north-south and Caribbean markets – where the yields have historically been better. As part of our ongoing network optimization, we suspended service to Ontario, CA and Tucson, AZ, as these markets were not sustainable amid the challenging industry environment. While it is difficult to close markets, we believe these decisions will ultimately strengthen our airline, resulting in greater value for our crewmembers and shareholders in the long run. Most of our 2008 capacity growth was in Latin American and Caribbean markets where we launched service to two new destinations – St. Maarten and Puerto Plata, in the Dominican Republic. We also continued to leverage our market presence in New York, Boston, Florida, and on the West Coast with new service between existing city pairs, which helped improve our efficiency and asset utilization. For example, we added new service into White Plains, where we are now the largest carrier. This service, coupled with our service to JFK, LaGuardia, Newark and Stewart, further bolsters our position as New York’s true hometown airline. During 2008, we commenced our marketing partnership with Aer Lingus, which enables customers to book a single reservation on the Aer Lingus website between Ireland and more than 40 JetBlue destinations. Lufthansa Airlines completed its $300 million investment in our company in 2008, further strengthening our financial position, and we look forward to finalizing a commercial agreement with Lufthansa later this year. We also continued to benefit from our marketing partnership with Cape Air, and we will continue to explore opportunities to link our network with other airlines. Revenue Maximization Leisure demand for air travel was remarkably resilient throughout most of 2008. We benefitted from our more disciplined growth strategy as new markets became a smaller percentage of our overall network. In addition to slowing our growth through fleet adjustments, we managed capacity through aircraft utilization and gauge adjustments. The EMBRAER 190 aircraft, configured with 100 seats, is a valuable tool that allows us to more effectively match capacity with demand by replacing Airbus A320s with the smaller EMBRAER 190s on certain flights. These capacity adjustments helped us gain more pricing traction. Our average fare increased about 13% to $139 in 2008, driving industry-leading passenger revenue per available seat mile (PRASM) growth of 14% year over year. The reallocation of our capacity from east-west markets to shorter-haul markets and to the Caribbean had a positive impact on our PRASM as well. We also continued to diversify our product to attract higher yielding travelers and generate new revenue streams such as our Even More Legroom product. Customer response to Even More Legroom has exceeded our expectations, driving more than $40 million of incremental revenue during the last three quarters of 2008. In addition, we began selling premium beverages onboard our aircraft and expanded the selection of pay-per-view movies available onboard. We believe our value proposition differentiates us within the industry. Our goal is to preserve the award- winning core JetBlue Experience and enhance it with optional product offerings our customers value and are willing to pay for. In doing so, we strive to strike a balance between preserving the integrity of our brand and remaining competitively aligned with our peers. As a result of our efforts, our 2008 ancillary revenues increased significantly compared to 2007. At the same time, we remain focused on building customer loyalty, and we are very pleased with the growth of our TrueBlue loyalty program, which now totals seven million members. We continued to focus on making our product easy for our customers to purchase while keeping costs low. In 2008, we introduced a cash payment option for customers booking JetBlue travel reservations via 800-JETBLUE or through our website www.jetblue.com. Approximately 77% of our 2008 revenues were booked through jetblue.com, which continues to be our lowest cost distribution channel. Cost Control and Productivity Fuel continues to be our largest operating cost. Our average fuel price per gallon increased more than 40% in 2008 compared to 2007. We remain focused, however, on maximizing our fuel efficiency. With an average age of approximately three and a half years, JetBlue operates one of the youngest, most fuel-efficient and environmentally friendly fleets in the industry. We also continue to focus on fuel conservation techniques to help reduce aircraft fuel burn, including single-engine taxi and rapid deployment of ground power units at our airport gates. We believe our ability to deliver exceptional customer service at low cost differentiates us from the rest of the industry. We have continued our efforts to increase productivity, ending the year with 70 full-time equivalent employees, or FTEs, per aircraft, compared to 74 at the end of 2007. We also invested in technology to improve productivity with added functionality on our website and at our airport kiosks. While slower growth has helped drive better unit revenue performance, it has pressured our unit costs in the near term as it takes more time to remove the associated costs from our system. Our commitment to not furlough crewmembers despite a weak economic environment has also pressured our unit costs. We believe, however, that a no-furlough policy is the correct approach over the long term because it creates a better work environment and helps preserve our unique culture, resulting in greater crewmember productivity. Our goal is to recruit and retain the best people in the industry as our success depends on the hard work and commitment of our crewmembers. Working together as a team will help us continue to secure our future. It is our unique culture and collaborative efforts that truly differentiate JetBlue from the competition. As such, we will continue to focus on preserving and enhancing our culture across the airline. We believe our culture is our most important asset. A Look Ahead While many challenges lie ahead, we believe JetBlue is well prepared for this environment, and we are optimistic about the future of JetBlue.
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