JetBlue Airlines 2004 Annual Report Download - page 74

JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
Note 10—Commitments (Continued)
2013 and 100 Embraer E190 aircraft scheduled for delivery from 2011 through 2016. Debt financing has
been arranged for all of our 15 Airbus A320 deliveries scheduled for 2005. Lease financing has been
arranged for the first 30 Embraer E190 aircraft deliveries, scheduled for delivery through March 2007.
We anticipate completing construction of an aircraft maintenance hangar and an adjacent office
facility to accommodate our technical support operations personnel at JFK in mid-2005. In 2004, we
began construction at Orlando International Airport of a flight training center as well as a hangar for
the installation and maintenance of our LiveTV in-flight satellite television system and aircraft
maintenance, both of which are expected to be completed in mid-2005.
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. Committed expenditures to these suppliers are approximately $42 million in
2005, $10 million in 2006 and $9 million in each of 2007 and 2008.
We enter into individual employment agreements with each of our FAA-licensed employees, which
include pilots, dispatchers and technicians. 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 by giving at least 90 days notice before the end of the relevant term. 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. None of our employees are covered by
collective bargaining agreements with us.
Note 11—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. Since the lawsuits are in the preliminary 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. We believe 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.
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
66