JetBlue Airlines 2007 Annual Report Download - page 24

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strategy, which would harm our business. Additionally, if a traditional network airline were to fully
develop a low cost structure, or if other low cost carriers were to compete with us directly, our
business could be materially adversely affected.
Our business is highly dependent on the price and availability of fuel.
Fuel costs, which have been at unprecedented high levels, comprise a substantial portion of our
total operating expenses and the cost of fuel is our single largest operating expense. Our 2007 average
fuel price, including the impact of fuel hedging, increased 97%from 2004, which has adversely affected
our operating results. Historically, fuel costs have been subject to wide price fluctuations based on
geopolitical factors and supply and demand. The availability of fuel is dependent on oil refining
capacity. When even a small amount of the domestic or global oil refining capacity becomes
unavailable, supply shortages can result for extended periods of time. The availability of fuel is also
affected by demand for home heating oil, gasoline and other petroleum products, as well as crude oil
reserves, dependence on foreign imports of crude oil and potential hostilities in oil producing areas of
the world. Because of the effects of these factors on the price and availability of fuel, the cost and
future availability of fuel cannot be predicted with any degree of certainty.
Our aircraft fuel purchase agreements do not protect us against price increases or guarantee the
availability of fuel. Additionally, some of our competitors may have more leverage than we do in
obtaining fuel. We have and may continue to enter into crude oil and heating oil option contracts and
swap agreements to partially protect against significant increases in fuel prices; however, such contracts
and agreements do not completely protect us against price increases and are limited in fuel volume
and duration.
Due to the competitive nature of the domestic airline industry, we have not been able to
adequately increase our fares when fuel prices have risen and we may not be able to do so in the
future. Continued high fuel costs or further price increases or fuel supply shortages may result in a
curtailment of scheduled services and could have a material adverse effect on our financial condition
and results of operations.
If we fail to successfully implement our growth strategy, our business could be harmed.
We have grown, and expect to continue to grow our business by increasing the frequency of
flights to markets we currently serve, expanding the number of markets we serve and increasing flight
connection opportunities. Increasing the number of markets we serve depends on our ability to access
suitable airports located in our targeted geographic markets in a manner that is consistent with our
cost strategy. We may also need to obtain additional gates at some of our existing destinations. Any
condition that would deny, limit or delay our access to airports we currently serve or may seek to
serve in the future would constrain our ability to grow. Opening new markets requires us to commit a
substantial amount of resources, even before the new services commence. Expansion is also dependent
upon our ability to maintain a safe and secure operation and requires additional personnel, equipment
and facilities. An inability to hire and retain personnel, timely secure the required equipment and
facilities in a cost-effective manner, efficiently operate our expanded facilities, or obtain the necessary
regulatory approvals may adversely affect our ability to achieve our growth strategy, which could harm
our business.
Due primarily to higher fuel prices, the competitive pricing environment and other cost increases,
it has become increasingly difficult to fund our growth profitably. As a result, beginning in 2006 we
modified our growth plans by deferring delivery of some of our Airbus A320 aircraft and EMBRAER
190 aircraft and selling or terminating our leases for some of our 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.
LiveTV has contracts to provide in-flight entertainment products and services with seven other
airlines. At December 31, 2007, LiveTV services were available on 372 aircraft under these
agreements, with firm commitments for 314 additional aircraft through 2012, with options for 182
14