June 2 (Bloomberg) -- JetBlue Airways Corp., the U.S. carrier partly owned by Germany’s Deutsche Lufthansa AG, plans to sell 20 million common shares and $150 million in convertible debt as the recession erodes travel demand and fares.

The debt, convertible into common stock, will be sold in two series of $75 million each, the New York-based carrier said today in a statement. Depending on demand, another 3 million shares and $11.25 million in debt may be sold, JetBlue said.

Proceeds will be used for general corporate purposes, bolstering JetBlue’s cash in a year when airlines have been forced to discount fares to woo customers. JetBlue said May passenger traffic fell 3.3 percent and revenue from each seat flown a mile dropped 10 percent.

Selling 20 million shares would raise $101 million at today’s closing price of $5.03 in Nasdaq Stock Market composite trading. The stock has gained 30 percent in the past year. JetBlue had $3.22 billion in debt as of March 31.

US Airways Group Inc., the smallest of the U.S. full-fare airlines, said May 26 that it will ask stockholders to approve doubling the number of common shares it can issue to 400 million, giving the company more funding flexibility.

Shareholders will vote on the proposal at the Tempe, Arizona-based carrier’s June 10 annual meeting.

Lufthansa owns 15.6 percent of JetBlue and is the largest shareholder in the airline, which is the seventh-biggest in the U.S. by traffic, behind US Airways.

To maintain that ownership stake, the Cologne, Germany- based carrier will be offered the same percentages of the planned stock sale and the offering that would depend on demand, JetBlue said.

Morgan Stanley is overseeing the offerings, with Goldman, Sachs & Co. and JPMorgan Chase & Co. co-managing the debt sale. The interest rate, conversion rate and price, offering price and other terms haven’t yet been determined, JetBlue said. The convertible debt will mature in 2039.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

Last Updated: June 2, 2009 17:34 EDT