JetBlue Airlines 2006 Annual Report Download - page 49

be accounted for as a financing obligation because we currently do not believe we will qualify for sale
and leaseback accounting due to our continuing involvement in the property following the
construction period. Minimum ground and facility rents for this terminal totaling $1.33 billion are
included in the commitments table above as lease commitments and financing obligations.
Anticipated capital expenditures for facility improvements, spare parts and ground purchases for
2007 are projected to be approximately $195 million. 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 that
would require a reduction in work hours, we are obligated to pay these employees a guaranteed level
of income and to continue their benefits. 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 to finance the
acquisition of new aircraft and certain aircraft spare parts owned by JetBlue and held by such
pass-through trusts. These pass-through trusts maintain 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 aircraft certificates and the spare
parts certificates are Landesbank Hessen-Thüringen Girozentrale and Morgan Stanley Capital
Services Inc. The liquidity providers for the Series 2004-2 aircraft certificates are Landesbank
Baden-Württemberg 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
MBIA, Inc.). Financial information for the parent company of the policy provider is available at the
SEC’s website at http://www.sec.gov or at the SEC’s public reference room in Washington, D.C.
We have also made certain guarantees and indemnities to other unrelated parties that are not
reflected on our balance sheet, which we believe will not have a significant impact on our results of
operations, financial condition or cash flows. We have no other off-balance sheet arrangements. See
Notes 2, 3 and 12 to our consolidated financial statements for a more detailed discussion of our
variable interests and other contingencies, including guarantees and indemnities.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with generally accepted accounting
principles requires management to adopt accounting policies and make estimates and judgments to
develop amounts reported in our financial statements and accompanying notes. We maintain a
thorough process to review the application of our accounting policies and to evaluate the
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