JetBlue Airlines 2004 Annual Report Download - page 52

substitute Airbus A321 aircraft or A319 aircraft for the A320 aircraft until 21 months prior to the
scheduled delivery date for those aircraft not on firm order.
We are constructing an aircraft maintenance hangar and an adjacent office facility at JFK that is
scheduled to be completed in the second quarter of 2005. In 2004, we began construction of a flight
training center as well as a hangar for installation and maintenance of our LiveTV in-flight satellite
television system and aircraft maintenance at Orlando International Airport, both of which are
expected to be completed in mid-2005. Anticipated capital expenditures for facility improvements, spare
parts and ground purchases for 2005 are projected to be approximately $200 million in the aggregate.
In addition, discussions are on-going with the Port Authority of New York and New Jersey and the
FAA regarding the construction of a new terminal at JFK. If an agreement is reached, we plan to build
a new terminal with occupancy currently projected in mid-2008.
Our commitments also include those of LiveTV, which has several noncancelable long-term
purchase agreements with its suppliers to provide equipment to be installed on its customers’ aircraft,
including JetBlue’s aircraft.
We enter into individual employment agreements with each of our FAA-licensed employees. Each
employment agreement is for a term of five years and automatically renews for an additional five-year
term unless either the employee or we elect not to renew it. Pursuant to these agreements, these
employees can only be terminated for cause. In the event of a downturn in our business, we are
obligated to pay these employees a guaranteed level of income and to continue their benefits if they do
not obtain other aviation employment. As we are not currently obligated to pay this guaranteed income
and benefits, no amounts related to these guarantees are included in the table above.
Off-Balance Sheet Arrangements
None of our operating lease obligations are reflected on our balance sheet. Although some of our
aircraft lease arrangements are variable interest entities as defined by FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, or FIN 46, none of them require consolidation in our financial
statements. The decision to finance these aircraft through operating leases rather than through debt
was based on an analysis of the cash flows and tax consequences of each option and a consideration of
our liquidity requirements. We are responsible for all maintenance, insurance and other costs associated
with operating these aircraft; however, we have not made any residual value or other guarantees to our
lessors.
We have determined that we hold a variable interest in, but are not the primary beneficiary of,
certain pass-through trusts which are the purchasers of equipment notes issued by us and held by such
pass-through trusts. The proceeds from the sale of the certificates are being held in escrow with a
depositary. As aircraft are delivered, the proceeds are utilized to purchase our secured equipment notes
issued to finance these aircraft. The proceeds held in escrow are not assets of ours, nor are the
certificates obligations of ours or guaranteed by us; therefore they are not included in our consolidated
financial statements.
The certificates contain liquidity facilities whereby a third party agrees to make payments sufficient
to pay up to 18 months of interest on the applicable certificates if a payment default occurs. The
liquidity providers for the Series 2004-1 certificates are Landesbank Hessen-Th¨ uringen Girozentrale and
Morgan Stanley Capital Services Inc. The liquidity providers for the Series 2004-2 certificates are
Landesbank Baden-W¨ urttemberg and Citibank, N.A.
We utilize a policy provider to provide credit support on the Class G-1 and Class G-2 certificates.
The policy provider has unconditionally guaranteed the payment of interest on the certificates when
due and the payment of principal on the certificates no later than 18 months after the final expected
regular distribution date. The policy provider is MBIA Insurance Corporation (a subsidiary of
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