Recent Developments

On September 27, 2002, we purchased all the membership interests of LiveTV, LLC, or LiveTV, for $80.3 million in cash. LiveTV provides in-flight entertainment systems for commercial aircraft, including live in-seat satellite television, wireless aircraft data link service and cabin surveillance systems. As a result of the purchase, we acquired all of the equipment installed on our aircraft, spare parts in inventory and rights to all of the intellectual property owned or licensed by LiveTV. The assets

and liabilities were recorded at their fair values on the purchase date. We will incur additional amortization, depreciation and salaries and benefits expense which will be offset by a reduction in other operating expenses where the expense for payments by JetBlue under its long-term contractual agreement to LiveTV were previously recorded.

The current financial condition of the airline industry is at one of the lowest points in history. The industry suffered losses in 2001 due to weak economic conditions, which were further impacted by the terrorist attacks of September 11, 2001, in which four U.S. commercial aircraft were hijacked and crashed. These losses have continued with the major U.S. airlines reporting net losses of more than $11 billion in 2002. Most major U.S. airlines anticipate these losses to continue into 2003 and have announced reductions in capacity, service and employee benefits as well as headcount in an effort to increase efficiencies and control costs. Since the attacks, several airlines, including US Airways and United Air Lines, have filed for bankruptcy and others may follow. Although we have been able to raise capital, remain profitable and continue to grow in this difficult industry environment, we may be subject to factors that could harm us and the airline industry, including, but not limited to:

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the increased likelihood of U.S. military involvement in Iraq the Middle East or other regions, which could result in reduced demand for air travel and increased fuel prices,



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continued consolidation in the airline industry, and



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increased competitive pressures as the major U.S. airlines continue to reduce their costs to compete with low-cost carriers such as us.