JetBlue Airlines 2007 Annual Report Download - page 65

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issued in November 2006 and December 2007, respectively. If we fail to maintain these collateral
ratios, we will be required to provide additional collateral or redeem some or all of the equipment
notes so that the ratios return to compliance. In 2007, we sold three owned Airbus A320 aircraft for
$100 million and repaid $68 million in associated debt. Aircraft, engines, predelivery deposits and
other equipment and facilities having a net book value of $3.52 billion at December 31, 2007 were
pledged as security under various loan agreements. Cash payments of interest, net of capitalized
interest, aggregated $175 million, $133 million and $79 million in 2007, 2006 and 2005, respectively.
The carrying amounts and estimated fair values of our long-term debt at December 31, 2007 were
as follows (in millions):
Carrying
Value
Estimated
Fair Value
Public Debt
Floating rate enhanced equipment notes
Class G-1, due through 2016 ............................... $321 $281
Class G-2, due 2014 and 2016 .............................. 373 327
Class B-1, due 2014....................................... 49 46
Class C, due through 2008................................. 102 102
Fixed rate special facility bonds, due through 2019 ............. 85 77
3½%convertible notes due in 2033 ........................... 175 171
3¾%convertible debentures due in 2035 ...................... 250 214
Non-Public Debt
Floating rate equipment notes, due through 2018............... 724 724
Fixed rate equipment notes, due through 2019 ................. 778 800
The estimated fair values of our publicly held long-term debt were based on quoted market
prices. The fair value of our non-public debt was estimated using discounted cash flow analysis based
on our current borrowing rates for instruments with similar terms. The fair values of our other
financial instruments approximate their carrying values.
Note 3—Operating Leases
We lease aircraft, as well as airport terminal space, other airport facilities, office space and other
equipment, which expire in various years through 2035. Total rental expense for all operating leases in
2007, 2006 and 2005 was $225 million, $190 million and $137 million, respectively. We have $26 million
in assets that serve as collateral for letters of credit related to certain of our leases, which are included
in restricted cash.
At December 31, 2007, 53 of the 134 aircraft we operated were leased under operating leases,
with initial lease term expiration dates ranging from 2009 to 2025. Five of the 53 aircraft operating
leases have variable-rate rent payments based on LIBOR. Leases for 46 of our aircraft can generally
be renewed at rates based on fair market value at the end of the lease term for one or two years. We
have purchase options in 44 of our aircraft leases at the end of the lease term at fair market value and
a one-time option during the term at amounts that are expected to approximate fair market value.
During 2007, we entered into sale and leaseback transactions for seven EMBRAER 190 aircraft
acquired during the year that are being accounted for as operating leases. We have deferred $4 million
in gains related to these sale and leaseback transactions, which are being recognized on a straight-line
basis over the related 18-year lease terms as a reduction to aircraft rent expense. During 2007 we also
returned one leased A320 aircraft to its lessor.
55