JetBlue Airlines 2006 Annual Report Download - page 72

We have various leases with respect to real property, and various agreements among airlines
relating to fuel consortia or fuel farms at airports, under which we have agreed to standard language
indemnifying the lessor against environmental liabilities associated with the real property or
operations described under the agreement, even if we are 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. We have 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 specified parties against legal liability arising out of actions
by other parties. The terms of these contracts range up to 30 years. Generally, we have liability
insurance protecting ourselves for the obligations we have undertaken relative to these indemnities.
LiveTV provides product warranties to third party airlines to which it sells its products and
services. We do 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 systems.
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, 2006 and 2005, the fair value of our
$425 million aggregate amount of convertible debt, based on quoted market prices, was $437 million
and $438 million, respectively. The fair value of our other long-term debt, which approximated its
carrying value at December 31, 2006 and 2005, 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, 2006 and
2005.
Investment securities, excluding fuel hedge derivatives, at December 31, 2006 and 2005 consisted
of the following (in millions):
2006 2005
Available-for-sale securities:
Student loan bonds .................................... $ 599 $ 407
Asset-backed securities................................. 25 64
Commercial paper ..................................... 52 —
676 471
Held-to-maturity securities:
Corporate bonds ...................................... 13 5
Total................................................... $ 689 $ 476
The carrying values of available-for-sale and held-to-maturity securities approximate fair value.
There were no material realized gains or losses on these investments for the years ended
December 31, 2006, 2005 or 2004. Contractual maturities of available-for-sale securities at
December 31, 2006 consisted of $52 million maturing in 2007 and $624 million maturing after 2024.
We are exposed to the effect of changes in the price and availability of aircraft fuel. To manage
this risk, we periodically purchase crude or heating oil option contracts or swap agreements. Prices for
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