JetBlue Airlines 2006 Annual Report Download - page 25

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growth plans by reducing the number of Airbus A320 aircraft and EMBRAER 190 aircraft to be
delivered through 2010 and selling five Airbus A320 aircraft. We may further reduce our future
growth plans from previously announced levels. In addition, our competitors often add service, reduce
their fares and/or offer special promotions following our entry into a new market. We cannot assure
you that we will be able to profitably expand our existing markets or establish new markets, and if we
fail to do so, our business could be harmed.
We have a significant amount of fixed obligations and we will incur significantly more fixed
obligations, which could harm our ability to meet our growth strategy and impair our ability to service
our fixed obligations.
As of December 31, 2006, our debt of $2.84 billion accounted for 75%of our total capitalization.
In addition to long-term debt, we have a significant amount of other fixed obligations under leases
related to our aircraft, airport terminal space, other airport facilities and office space. As of
December 31, 2006, future minimum payments under noncancelable leases and other financing
obligations were approximately $1.07 billion for 2007 through 2011 and an aggregate of $2.13 billion
for the years thereafter. We have commenced construction of a new terminal at JFK under a 30-year
lease with the PANYNJ. The minimum payments under this lease will be accounted for as a financing
obligation and have been included above.
As of December 31, 2006, we had commitments of approximately $5.71 billion to purchase
160 additional aircraft and other flight equipment over the next eight years, including estimated
amounts for contractual price escalations. We will incur additional debt and other fixed obligations as
we take delivery of new aircraft and other equipment and continue to expand into new markets. We
typically finance our aircraft through either secured debt or lease financing. Although we believe that
debt and/or lease financing should be available for our aircraft deliveries, we cannot assure you that
we will be able to secure such financing on terms acceptable to us or at all.
Our high level of debt and other fixed obligations could:
• impact our ability to obtain additional financing to support capital expansion plans and for
working capital and other purposes on acceptable terms or at all;
• divert substantial cash flow from our operations and expansion plans in order to service our
fixed obligations;
• require us to incur significantly more interest or rent expense than we currently do, since
most of our debt has floating interest rates and five of our aircraft leases have variable-rate
rent; and
• place us at a possible competitive disadvantage compared to less leveraged competitors and
competitors that have better access to capital resources.
Our ability to make scheduled payments on our debt and other fixed obligations will depend on
our future operating performance and cash flow, which in turn will depend on prevailing economic
and political conditions and financial, competitive, regulatory, business and other factors, many of
which are beyond our control. We have no lines of credit, other than two short-term borrowing
facilities for certain aircraft predelivery deposits. We are dependent upon our operating cash flows to
fund our operations and to make scheduled payments on debt and other fixed obligations. We cannot
assure you that we will be able to generate sufficient cash flow from our operations to pay our debt
and other fixed obligations as they become due, and if we fail to do so our business could be harmed.
If we are unable to make payments on our debt and other fixed obligations, we could be forced to
renegotiate those obligations or obtain additional equity or other forms of financing. To the extent we
finance our activities with additional debt, we may become subject to financial and other covenants
that may restrict our ability to pursue our growth strategy. We cannot assure you that our
renegotiation efforts would be successful or timely or that we could refinance our obligations on
acceptable terms, if at all.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs.
Our business is labor intensive, with labor costs representing approximately one-fourth of our
operating expenses. Unlike most airlines, we have a non-union workforce, although in 2006 we were
subject to an unsuccessful unionization attempt by a group of our airport-based employees. The
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