Liquidity and Capital Resources

At December 31, 2002, we had cash and cash equivalents of $246.8 million, compared to $117.5 million at December 31, 2001. We presently have no lines of credit other than a short-term borrowing facility for certain aircraft predelivery deposits. The facility allows for borrowings of up to $32.0 million prior to November 2004, with $21.7 million outstanding at December 31, 2002.

We rely primarily on cash flows from operations to provide working capital for current and future operations. Cash flows from operating activities totaled $216.5 million in 2002, $111.3 million in 2001 and $2.8 million in 2000. The increase in operating cash flows is due to the growth of our business, and in 2002, as a result of our meeting certain financial targets, the amount of cash withheld by our credit card processor was reduced to zero during 2002. If we fail to maintain these targets, the amount withheld could increase in the future. Net cash used in investing and financing activities was $87.2 million in 2002 and $28.2 million in 2001. Net cash provided by investing and financing activities was $13.3 million in 2000.

Investing activities.    During 2002, investing activities consisted of the acquisition of 16 Airbus A320 aircraft and two spare engines, predelivery deposits for ordered aircraft, security deposits, facility improvements, ground equipment purchases and spare part purchases which totaled $654 million. Investing activities also included the acquisition of LiveTV for $80.5 million on September 27, 2002 and the purchase and maturity of short-term investments, netting to $9.4 million. During 2001, we made similar investments in our fleet and facilities which totaled $287.9 million, which included the acquisition of seven Airbus A320 aircraft.

Financing activities.    On April 17, 2002, we completed our initial public offering of 10,120,000 shares (as adjusted for the December 2002 3-for-2 stock split) of our common stock with net proceeds of $167.4 million. We invested the net proceeds in short-term, investment-grade, interest bearing instruments, pending their use to fund working capital and capital expenditures, including capital expenditures related to the purchase of aircraft and the acquisition of LiveTV. Additionally during 2002, our financing activities included (i) $416 million of 10- to 12- year floating rate equipment notes issued to various European banks secured by 12 aircraft and a 5-year floating rate equipment note secured by a spare engine, (ii) the sale and leaseback over 18 years of one aircraft for $38.5 million financed by a Japanese institution, (iii) the sale and leaseback over 20 years of three aircraft for $111.5 million by a U.S. leasing institution, (iv) net repayment of short-term borrowings of $7.1 million and (v) the repayment of $71.4 million of debt. None of our lenders or lessors are affiliated with us. Our short-term borrowings are part of a floating rate facility with a group of commercial banks to finance aircraft predelivery deposits.

Financing activities for the year ended December 31, 2001 consisted primarily of (i) the incurrence of $185.0 million of 10- and 12-year floating rate equipment notes secured by five aircraft and five-year floating rate equipment notes secured by two spare engines, (ii) the sale and leaseback over 18 years of two aircraft for $72.0 million, (iii) net short-term borrowings of $13.6 million and (iv) the repayment of debt of $35.3 million. All the aircraft equipment notes were issued to various European banks and the two sale and leasebacks were financed by a Japanese institution, none of which are affiliated with us. To ensure that we had adequate liquidity following the terrorist attacks, we issued 4,053,586 shares of Series B-1 and Series B-2 preferred stock in the fourth quarter of 2001 to our existing investors, including some of our directors and officers, at a purchase price of $7.387 per share and an aggregate purchase price of $29.7 million.

Capital resources.    We have been able to generate sufficient funds from operations to meet our working capital requirements. We do not currently have any lines of credit and almost all of our property and equipment is encumbered. We typically finance our aircraft through either secured debt or lease financing. At December 31, 2002, we operated a fleet of 37 Airbus A320 aircraft, of which 16 are financed under operating leases with the remaining 21 financed by secured debt. At December 31, 2002, financing in the form of operating leases had been arranged for the first six deliveries scheduled for 2003. Although we believe that debt and/or lease financing should be available for our remaining aircraft deliveries, we cannot make assurances that we will be able to secure financing on terms acceptable 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 modify our aircraft acquisition plans or to incur higher than anticipated financing costs.

We expect to continue generating positive working capital through our operations. However, we cannot predict whether current trends and conditions will continue, or how the effects of competition or other factors that are beyond our control will affect us, such as increased fuel prices, the impact to the aircraft finance market and the magnitude of financing we could arrange if any of the airlines in bankruptcy were to liquidate, or the likelihood of U.S. military involvement in Iraq, the Middle East or other regions. We still need to obtain financing for nine of the aircraft to be delivered in 2003, as our anticipated cash flows from operations are not expected to be adequate to cover the acquisition cost of these aircraft. Assuming that we obtain this financing and utilize the predelivery short-term borrowing facility available to us, we believe the working capital available to us will be sufficient to meet our cash requirements for at least the next 12 months.

We currently have approval from the FAA and DOT to operate 40 aircraft through May 2003. Our growth plans and purchase commitments contemplate operating considerably more than 40 aircraft. We have submitted an application to the DOT for authorization to increase the size of our fleet beyond 40 aircraft. Although we expect our request to be approved, we cannot make assurances that such authorization will be granted.

Commitments.    Our contractual obligations, which do not include commitments for goods and services in the ordinary course of business, at December 31, 2002, include the following (in millions):

All of our debt has floating interest rates. Interest rates adjust quarterly or semi-annually based on the London Interbank Offered Rate. Under the debt agreements related to two of our aircraft, we are required to comply with two specific financial covenants. The first requires that our tangible net worth be at least 12% of our total assets. The second requires that for each quarter, our EBITDA for the prior four quarters must be at least twice our interest expense for those four quarters. In addition, under lease agreements for seven of our aircraft, we could be declared to be in default under these

agreements if we fail to maintain a total net worth of $20 million plus fifty percent of: (i) our annual cumulative net income since February 1, 2000 on a consolidated basis; (ii) the cumulative equity contributions from our stockholders since February 1, 2000; and (iii) the net proceeds from the sale of preferred stock, in each case for the period from February 1, 2000 through and including the date of any determination under the relevant default provisions of the lease agreements. Our inability to comply with the required financial maintenance covenants or provisions could result in default under these financing agreements and would result in a cross default under our other financing agreements. At December 31, 2002, we were in compliance with the covenants of all of our debt and lease agreements.

We have significant operating lease obligations for 16 aircraft with lease terms that range from 10 to 20 years. Five of these aircraft have variable-rate rent payments and adjust semi-annually based on the London Interbank Offered Rate. We also lease airport terminal space and other airport facilities in each of our markets, as well as office space and other equipment. We have committed to lease one additional aircraft in 2003 under a 12 year long-term operating lease and five aircraft under sale and leaseback agreements, with 20 year terms for total minimum lease payments estimated to aggregate $291 million. In June 2002, we committed to the terms of a lease through November 2006 for the use of Terminal 6 at JFK and the adjoining ramp area for total minimum lease payments of $43 million. We are in the process of finalizing the lease agreement with the Port Authority of New York and New Jersey, which should be executed in the near future. In conjunction with certain of these lease obligations, we also had $12.9 million of restricted cash pledged under standby letters of credit at December 31, 2002 which expire at the end of the related lease terms.

Our firm aircraft orders at December 31, 2002, as amended in February 2003, consist of 49 Airbus A320 aircraft scheduled for delivery as follows: 14 in 2003, 13 in 2004, 12 in 2005 and five each year in 2006 and 2007. We currently meet our predelivery deposit requirements by paying cash for deposits 24 months prior to delivery and using a short-term borrowing facility for deposits required 12 months prior to delivery. Any predelivery deposits paid by the issuance of notes are fully repaid at the time of delivery of the aircraft.

We also have options to acquire 26 additional aircraft for delivery from 2004 through 2008. We have purchase rights to acquire 19 additional aircraft, which allow us to purchase these additional aircraft under the same terms as the aircraft on order. We can elect to substitute Airbus A321 aircraft or A319 aircraft for the A320 aircraft until 21 months prior to the scheduled delivery date for those aircraft not on firm order.

Our commitments also include those of LiveTV which has several long-term purchase agreements with its suppliers to provide equipment to be installed on its customers' aircraft, including JetBlue's aircraft.

Working capital.    Our working capital was $13.4 million at of December 31, 2002. Prior to our initial public offering, as is customary in the airline industry, we operated with negative working capital, which was $49.9 million at December 31, 2001. We expect to meet our obligations as they become due through available cash and internally generated funds, supplemented as necessary by debt financings and proceeds from aircraft sale and leaseback transactions.