In February 2020, JetBlue Airways
became the first-ever airline to deploy a sustainability-linked loan (SLL) by
amending its existing $550 million senior secured revolving credit facility
(RCF). For JetBlue, this SLL is not a singular milestone but the latest step in
a continuing journey to a new climate reality.
The general mechanisms of an SLL –
where the interest rate or commitment fee paid on the RCF increases or
decreases based on whether a company achieves agreed-upon sustainability
metrics – give 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
environmental, social and governance (ESG) score. This score will be provided
on an annual basis by independent third party data specialist Vigeo Eiris, a
provider of ESG research and services for investors and other organisations.
Sophia Mendelsohn, JetBlue’s Chief
Sustainability Officer, explains that the airline’s owners, which includes many
of its crewmembers, 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 directly linking our commitment to addressing
environmental and social issues with our bottom line. We are proud of what we
have accomplished, but also understand we have more to do in reducing our
carbon footprint and meeting the needs of our stakeholders.”
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. In 2019, JetBlue collaborated with BNP Paribas 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.
Florence Pourchet, Co-Head of Global
Banking Americas at BNP Paribas, also with responsibility for overseeing the
bank’s sustainable finance strategy in the region, says, “JetBlue’s SLL is just
one element of the airline’s comprehensive ESG and sustainable finance
strategy. As a leader in sustainable finance, BNP Paribas is dedicated to
working with our corporate clients to identify tailored solutions that align
with their specific efforts and commitments toward achieving their ESG goals.”
JetBlue’s sustainability strategy
At JetBlue, the sixth-largest airline in the US by passengers carried, sustainable finance initiatives are part of a comprehensive, long-term strategy to ensure a more sustainable business and limit its climate impact. From July 2020, the airline will become one of the first US airlines to be carbon-neutral on all domestic flights by offsetting emissions from jet fuel, eliminating more than 17 billion pounds (7.7 billion kilogrammes) of CO2 emissions per year.It also plans to start flying with sustainable fuel, which has an 80% smaller carbon footprint versus regular jet fuel, from mid-2020 on flights from San Francisco International Airport. The airline’s sustainability commitment has spanned every aspect of the airline’s operations, including upgrading its fleet via new fuel-efficient aircraft to help reduce carbon emissions as well as converting all of its ground equipment to electric power at its hub at New York’s John F. Kennedy Airport.
All of these endeavors reinforce JetBlue’s view that moving to a carbon-neutral future is not only good for society, but good for all businesses as well.
This material is for informational purposes only and is not intended as advertising for or an endorsement of the parties mentioned therein.