JetBlue Airlines 2003 Annual Report Download - page 21

Aircraft Fuel
Fuel costs are our second-largest operating expense. We contract with a third party to provide fuel
management services and negotiate with suppliers to provide fuel at the many locations we serve. The
following chart summarizes our fuel consumption and costs:
Year Ended December 31,
2003 2002 2001
Gallons consumed, in thousands .................... 173,157 105,515 55,095
Total cost, in thousands .......................... $ 147,316 $ 76,271 $ 41,666
Average price per gallon (cents) .................... 85.08 72.28 75.63
Percent of operating expenses ...................... 17.8% 14.4% 14.2%
Total cost and average price per gallon each exclude taxes and fueling services.
Fuel costs are extremely volatile, as they are subject to many global economic and geopolitical
factors that we can neither control nor accurately predict. In 2001, we implemented a fuel hedging
program under which we enter into crude oil option contracts and swap agreements to partially protect
against significant increases in fuel prices. We cannot assure you that our fuel hedging program is
sufficient to protect us against significant increases in the price of fuel. Significant increases in fuel
costs would have a material adverse effect on our operating results.
LiveTV, LLC
In September 2002, we purchased all of the membership interests of LiveTV, LLC. LiveTV
provides in-flight entertainment systems for commercial aircraft. LiveTV’s assets include the tangible
equipment installed on JetBlue aircraft, spare parts in inventory and rights to all the patents and
intellectual property used for live in-seat satellite television, XM Satellite Radio service, wireless
aircraft data link service, cabin surveillance systems and Internet services. LiveTV’s major competitors
include Rockwell Collins, Thales Avionics, Boeing Connexion and Matsushita Avionics. None of these
competitors are currently providing in-seat live television, except for Matsushita who began providing
this service in the fourth quarter of 2003.
LiveTV has contracts for the sale of certain hardware and installation, programming and
maintenance of its live in-seat satellite television system with Frontier Airlines and WestJet Airlines,
and is pursuing additional customers. The contract with WestJet is subject to design approval from the
FAA and Transport Canada.
Government Regulation
General. We are subject to regulation by the DOT, the FAA, the TSA and other governmental
agencies. The DOT primarily regulates economic issues affecting air service, such as certification and
fitness, insurance, consumer protection and competitive practices. The DOT has the authority to
investigate and institute proceedings to enforce its economic regulations and may assess civil penalties,
revoke operating authority and seek criminal sanctions. In February 2000, the DOT granted us a
certificate of public convenience and necessity authorizing us to engage in air transportation within the
United States, its territories and possessions.
The FAA primarily regulates flight operations and in particular, matters affecting air safety, such as
airworthiness requirements for aircraft and pilot, mechanic, dispatcher and flight attendant certification.
The civil aviation security functions of the FAA were transferred to the TSA under the Aviation
Security Act. The FAA requires each airline to obtain an operating certificate authorizing the airline to
operate at specific airports using specified equipment. We have and maintain FAA certificates of
airworthiness for all of our aircraft and have the necessary FAA authority to fly to all of the cities that
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