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.
For JetBlue Airways, being the first airline to deploy a sustainability-linked loan is 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 strategyAt 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.
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