Airline takes off on flight to a more sustainable future
The challenge
The airline was looking at ways to invest its corporate cash and fund the business in accordance with their Environmental, Social and Governance (ESG) and treasury guidelines.
Brandon Nelson, General Counsel and Corporate Secretary at JetBlue, explains how the firm is exploring a range of sustainable initiatives, particularly in the field of its treasury investments: “We’re actively working with BNP Paribas to develop options that enable us to invest JetBlue’s funds in like-minded companies with a focus on ESG,“he says.
The solution
In 2019, JetBlue collaborated with the bank on embedding ESG into its treasury operations through sustainable cash management – a tailor-made solution to meet the airline’s ESG and treasury guidelines while also providing the flexibility required to adhere to its investment policy.
The bank developed a financing toolkit focused on sustainability, which includes everything from green bonds and sustainability-linked loans to sustainable supply chains.
In February 2020, JetBlue Airways became the first-ever airline to deploy a sustainability-linked loan (SLL) by amending its existing US$550m senior secured revolving credit facility (RCF). For JetBlue, this SLL is not a single milestone but the latest step in a continuing journey to a new climate change reality.
The general mechanisms of an SLL are where the interest rate or commitment fee paid on the RCF increases or decreases based on whether a company achieves its pre-agreed sustainability key performance indicator (KPI) metrics. This approach gives borrowers a financial incentive to attain their targets as part of their corporate sustainability strategy. In JetBlue’s financing, the US airline’s borrowing costs will depend on whether it achieves a pre-determined ESG score. This score will be provided annually by independent third-party data specialist Vigeo Eiris, a provider of ESG research and services for investors and other organisations. View press release and video.
Ursula Hurley, VP Treasurer explains that the airline’s owners, which includes many of its crew members, are keen to see how the company’s ESG strategy can benefit its stakeholders and its financial position.
“As the first airline to accomplish this type of transaction, we are aligning our bottom line with environmental and social issues that are important to our customers. We are proud of what we have accomplished, but also understand we have more to prove ESG’s importance to our stakeholders.”
Best practice and innovation
A notable example of JetBlue’s culture of innovation is in its approach to sustainability, where the firm continuously explores ways to reduce the amount of natural resources it uses on the ground and in the air – from new fuel-efficient aircraft and renewable jet fuel to electric vehicles and investing in the next generation of sustainable aviation start-ups. Every day, JetBlue focuses on the underlying principles that support its culture: safety, caring, integrity, passion and fun.
JetBlue’s milestone SLL transaction is the latest in a long list of innovative solutions during its 20-year partnership with BNP Paribas, which acted as sole sustainability structuring agent on this RCF.
Key benefits
Over the past eight years, JetBlue has focused on addressing its biggest environmental impact, greenhouse gases, by partnering with Carbonfund.org, a leading environmental non-profit organisation, allowing travellers to offset part of the carbon footprint from their flights by donating to carbon reduction projects.
JetBlue is now extending its ESG ambitions into the way in which it manages its financial matters.
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