JetBlue Airlines 2005 Annual Report Download - page 69

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. The term of these
indemnities matches the length of the related lease up 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 or operations described under the agreement, even if the Company is not the party
responsible for the initial event that caused the environmental damage. In the case of fuel consortia at
airports, these indemnities are generally joint and several among the participating airlines. The
Company has purchased a stand alone environmental liability insurance policy to help mitigate this
exposure. Our existing aviation hull and liability policy includes some limited environmental coverage
when a clean up is part of an associated single identifiable covered loss.
Under certain contracts, we indemnify certain parties against legal liability arising out of actions
by other parties. The terms of these contracts range up to 30 years. Generally, the Company has
liability insurance protecting the Company for the obligations it has undertaken relative to these
indemnities.
LiveTV provides product warranties to third party airlines to which it sells its products and
services. The Company does not accrue a liability for product warranties upon sale of the hardware
since revenue is recognized over the term of the related service agreements of up to 13 years.
Expenses for warranty repairs are recognized as they occur. In addition, LiveTV has provided
indemnities against any claims which may be brought against its customers related to allegations of
patent, trademark, copyright or license infringement as a result of the use of the LiveTV system.
We are unable to estimate the potential amount of future payments under the foregoing
indemnities and agreements.
Note 13—Financial Instruments and Risk Management
We maintain cash and cash equivalents with various high-quality financial institutions or in
short-term duration high-quality debt securities. Investments in highly-liquid debt securities are stated
at fair value, which approximates cost. The majority of our receivables result from the sale of tickets
to individuals, mostly through the use of major credit cards. These receivables are short-term,
generally being settled shortly after the sale. As of December 31, 2005 and 2004, the fair value of our
convertible debt, based on quoted market prices, was $438 million and $167 million, respectively. The
fair value of our other long-term debt, which approximated its carrying value at December 31, 2005
and 2004, was estimated using discounted cash flow analysis based on our current incremental
borrowing rates for instruments with similar terms. The carrying values of all other financial
instruments approximated their fair values at December 31, 2005 and 2004.
Investment securities, excluding fuel hedge derivatives, at December 31, 2005 and 2004 consisted
of the following (in millions):
2005 2004
Available-for-sale securities:
Student loan bonds .................................... $ 407 $ 325
Asset-backed securities................................. 64 67
471 392
Held-to-maturity securities:
Corporate bonds ...................................... 5 18
Total................................................... $ 476 $ 410
The carrying values of available-for-sale and held-to-maturity securities approximate fair value.
There were no realized gains or losses on these investments for the years ended December 31, 2005,
2004 or 2003. Contractual maturities of available-for-sale securities at December 31, 2005 consisted of
$36 million maturing in 2006 and $435 million maturing after 2019.
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