JetBlue Airlines 2006 Annual Report Download - page 28

Our reputation and financial results could be harmed in the event of an accident or incident
involving our aircraft.
An accident or incident involving one of our aircraft, or an aircraft containing LiveTV equipment,
could involve significant potential claims of injured passengers or others in addition to repair or
replacement of a damaged aircraft and its consequential temporary or permanent loss from service.
We are required by the DOT to carry liability insurance. Although we believe we currently maintain
liability insurance in amounts and of the type generally consistent with industry practice, the amount
of such coverage may not be adequate and we may be forced to bear substantial losses from an
accident. Substantial claims resulting from an accident in excess of our related insurance coverage
would harm our business and financial results. Moreover, any aircraft accident or incident, even if fully
insured, could cause a public perception that we are less safe or reliable than other airlines, which
would harm our business.
Risks Associated with the Airline Industry
The airline industry has incurred significant losses resulting in airline restructurings, bankruptcies
and consolidations, which could result in changes in our industry.
Through 2005, the domestic airline industry, as a whole, reported five consecutive years of losses,
which caused fundamental and permanent changes in the industry. These losses have resulted in
airlines renegotiating or attempting to renegotiate labor contracts, reconfiguring flight schedules,
furloughing or terminating employees, as well as consideration of other efficiency and cost-cutting
measures. Despite these actions, several airlines have reorganized under Chapter 11 of the U.S.
Bankruptcy Code to permit them to reduce labor rates, restructure debt, terminate pension plans and
generally reduce their cost structure. Additionally, in 2005 and 2006, the U.S. airline industry has
experienced consolidation and, in the fourth quarter of 2006, there were reports of potential further
consolidation in the industry. It is foreseeable that further airline reorganizations, bankruptcies or
consolidations may occur, the effects of which we are unable to predict. We cannot assure you that the
occurrence of these events, or potential changes resulting from these events, will not harm our
business or the industry.
A future act of terrorism, the threat of such acts or escalation of U.S. military involvement overseas
could adversely affect our industry.
Even if not directed at the airline industry, a future act of terrorism, the threat of such acts or
escalation of U.S. military involvement overseas could have an adverse effect on the airline industry.
In the event of a terrorist attack, the industry would likely experience significantly reduced demand.
We cannot assure you that these actions, or consequences resulting from these actions, will not harm
our business or the industry.
Changes in government regulations imposing additional requirements and restrictions on our
operations or the U.S. government ceasing to provide adequate war risk insurance could increase our
operating costs and result in service delays and disruptions.
Airlines are subject to extensive regulatory and legal requirements, both domestically and
internationally, that involve significant compliance costs. In the last several years, Congress has passed
laws, and the DOT, FAA and the TSA have issued regulations relating to the operation of airlines
that have required significant expenditures. We expect to continue to incur expenses in connection
with complying with government regulations. Additional laws, regulations, taxes and airport rates and
charges have been proposed from time to time that could significantly increase the cost of airline
operations or reduce the demand for air travel. If adopted, these measures could have the effect of
raising ticket prices, reducing revenue and increasing costs. We cannot assure you that these and other
laws or regulations enacted in the future will not harm our business.
The U.S. government currently provides insurance coverage for certain claims resulting from acts
of terrorism, war or similar events. Should this coverage no longer be offered, the coverage that would
be available to us through commercial aviation insurers may have substantially less desirable terms,
result in higher costs and not be adequate to protect our risk, any of which could harm our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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