JetBlue Airlines 2003 Annual Report Download - page 71

JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2003
Note 12—Contingencies
Beginning in September 2003, several lawsuits were commenced against us alleging various causes
of action, including fraudulent misrepresentation, breach of contract, violation of privacy rights, as well
as violations of consumer protection statutes and federal electronic communications laws. These claims
arose out of our providing access to limited customer data to a government contractor in connection
with a test project for military base security. Other parties, including certain governmental agencies, are
conducting inquiries, and may commence proceedings, file claims or seek other relief with respect to
this matter. Since the litigation and inquiries are in their early stages, we are unable to determine the
impact they may have upon us.
The Company is party to other legal proceedings and claims that arise during the ordinary course
of business. It is the opinion of management that the ultimate outcome of these matters will not have a
material adverse effect upon the Company’s financial position, results of operations or cash flows.
We self-insure a portion of our losses from claims related to workers’ compensation, environmental
issues, property damage, medical insurance for employees and general liability. Losses are accrued
based on an estimate of the ultimate aggregate liability for claims incurred, using standard industry
practices and our actual experience.
On February 21, 2003, we received approval from the Federal Aviation Administration and the
Department of Transportation, or the DOT, to increase the number of aircraft we are allowed to
operate to up to 70 aircraft through March 2005. As the size of our fleet increases, we anticipate the
submission of another application to the DOT requesting authorization to operate additional aircraft.
The Company is a party to many routine contracts under which it indemnifies third parties for
various risks. These indemnities consist of the following:
All of the Company’s bank loans, including its aircraft and engine mortgages, contain standard
provisions present in loans of this type which obligate the Company to reimburse the bank for any
increased costs associated with continuing to hold the loan on its books which arise as a result of
broadly defined regulatory changes, including changes in reserve requirements and bank capital
requirements. These indemnities would have the practical effect of increasing the interest rate on our
debt if they were to be triggered. In all cases, the Company has the right to repay the loan and avoid
the increased costs. The term of these indemnities matches the length of the loan up to 12 years.
Under both aircraft leases with foreign lessors and aircraft and engine mortgages with foreign
lenders, the Company has agreed to customary indemnities concerning withholding tax law changes
under which the Company is responsible, should withholding taxes be imposed, for paying such amount
of additional rent or interest as is necessary to ensure that the lessor or lender still receives, after taxes,
the rent stipulated in the lease or the interest stipulated under the loan. Terms for these indemnities
range from two to 18 years.
The Company has various leases with respect to real property, and various agreements among
airlines relating to fuel consortia or fuel farms at airports, under which the Company has agreed to
standard language indemnifying the lessor against environmental liabilities associated with the real
property covered under the agreement, even if the Company is not the party responsible for the
environmental damage. In the case of fuel consortia at airports, these indemnities are generally joint
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