JetBlue Airlines 2007 Annual Report Download - page 60

Estimated useful lives and residual values for our property and equipment are as follows:
Estimated Useful Life Residual Value
Aircraft ................................. 25years 20%
In-flight entertainment systems ............. 12years 0%
Aircraft parts ............................. Fleet life 10%
Flight equipment leasehold improvements.... Lease term 0%
Ground property and equipment ............ 3-10 years 0%
Leasehold improvements................... Lower of 15 years or lease term 0%
Buildings on leased land ................... Lease term 0%
Property under capital leases are recorded at an amount equal to the present value of future
minimum lease payments computed on the basis of our incremental borrowing rate, or, when known,
the interest rate implicit in the lease. Amortization of property under capital leases is on a
straight-line basis over the expected useful life and is included in depreciation and amortization
expense.
We record impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets may be impaired and the undiscounted future cash flows
estimated to be generated by these assets are less than the assets’ net book value. If impairment
occurs, the loss is measured by comparing the fair value of the asset to its carrying amount.
Impairment losses are recorded in depreciation and amortization expense.
In 2007, we sold three Airbus A320 aircraft, which resulted in gains of $7 million. In 2006, we
sold five Airbus A320 aircraft, which resulted in gains of $12 million. The gains on our sales of Airbus
A320 aircraft are included in other operating expenses. In December 2005, we discontinued
development of a maintenance and inventory tracking system and consequently wrote off $6 million in
capitalized costs. Each of these items is included in other operating expenses.
Restricted Cash: Restricted cash primarily consists of security deposits and performance bonds
for aircraft and facility leases and funds held in escrow for estimated workers’ compensation
obligations.
Passenger Revenues: Passenger revenue is recognized, net of the taxes that we are required to
collect from our customers including federal transportation taxes, security taxes and airport facility
charges, when the transportation is provided or after the ticket or customer credit (issued upon
payment of a change fee) expires. Tickets sold but not yet recognized as revenue and unexpired
credits are included in air traffic liability.
LiveTV Revenues and Expenses: We account for LiveTV’s revenues and expenses related to the
sale of hardware, maintenance of hardware, and programming services provided, as a single unit in
accordance with Emerging Issues Task Force Issue 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. Revenues and expenses related to these components are recognized ratably over
the service periods which currently extend through 2014. Customer advances are included in other
liabilities.
Airframe and Engine Maintenance and Repair: Regular airframe maintenance for owned and
leased flight equipment is charged to expense as incurred unless covered by a third-party services
contract. In 2006 and 2005, we commenced separate services agreements covering the scheduled and
unscheduled repair of airframe line replacement unit components and the engines on our Airbus A320
aircraft. These agreements, which range from ten to 15 years, require monthly payments at rates based
either on the number of cycles each aircraft was operated during each month or the number of flight
hours each engine was operated during each month, subject to annual escalations. These payments are
expensed as the related flight hours or cycles are incurred.
Advertising Costs: Advertising costs, which are included in sales and marketing, are expensed as
incurred. Advertising expense in 2007, 2006 and 2005 was $41 million, $40 million and $35 million,
respectively.
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