JetBlue Airlines 2008 Annual Report Download - page 17

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Aircraft Fuel
In 2008, continuing a trend that began in 2005, fuel costs were our largest operating expense due to high
average fuel prices. Fuel prices and availability are subject to wide price fluctuations based on geopolitical
factors and supply and demand that we can neither control nor accurately predict. We use a third party fuel
management service to procure most of our fuel. Our historical fuel consumption and costs were:
2008 2007 2006
Year Ended December 31,
Gallons consumed (millions) ..................... 453 444 377
Total cost (millions) ........................... $1,352 $ 929 $ 752
Average price per gallon ........................ $ 2.98 $2.09 $1.99
Percent of operating expenses .................... 41.2% 34.8% 33.6%
Total cost and average price per gallon each include effective fuel hedging gains and losses and exclude
taxes and fueling services.
Throughout 2008, we entered into crude and heating oil option contracts and swap agreements with a
goal of achieving a targeted hedge position of approximately 30% of our expected consumption for the next
twelve months to protect against significant increases in fuel prices. Oil prices began declining during the third
quarter and, therefore, in October 2008, we modified our fuel hedging program to minimize fuel hedging
losses in the event of further declines in oil prices. We began selling swap contracts to our fuel hedge
counterparties covering 60% of our fourth quarter 2008 swap contracts and all of our 2009 swap contracts.
Additionally, we suspended our fuel hedging program during the fourth quarter with the rapid decline in oil
prices and are currently in the process of revising this program in light of the current levels of crude oil
prices. At December 31, 2008, we had hedged approximately 8% of our projected 2009 fuel requirements. We
had approximately $117 million posted in collateral related to margin calls on our outstanding 2009 fuel hedge
contracts as of December 31, 2008.
LiveTV, LLC
LiveTV, LLC, a wholly owned subsidiary of JetBlue, provides in-flight entertainment, voice
communication and data connectivity services for commercial and general aviation aircraft. LiveTV’s assets
include certain tangible equipment and interests in systems installed on its customers’ aircraft, system
components and spare parts in inventory, an air-to-ground spectrum license granted by the Federal
Communications Commission, or the FCC, a network of approximately 100 ground stations across the
continental U.S., and rights to certain patents and intellectual property used for live in-seat satellite television,
XM Satellite Radio service, wireless aircraft data communication service for in-flight e-mail and messaging,
and cabin surveillance systems. LiveTV’s major competitors in the in-flight entertainment systems include
Rockwell Collins, Thales Avionics and Panasonic Avionics. Only Panasonic is currently providing in-seat live
television. In the voice and data communication services market, LiveTV’s primary competitors are Aircell,
Row 44, Panasonic, OnAir and Aeromobile. These competitors offer data subscription services while LiveTV
provides free data connectivity to passengers supported by advertising, ecommerce and/or airline customer
payments.
LiveTV has contracts with eleven other domestic and international commercial airlines for the sale of
certain hardware and installation, programming and maintenance of its live in-seat satellite television as well
as XM Satellite Radio Service and certain other products and services. LiveTV also has general aviation
customers to which it supplies voice and data communication services. LiveTV continues to pursue additional
customers.
Government Regulation
General. We are subject to regulation by the DOT, the FAA, the Transportation Security Administration,
or TSA, and other governmental agencies. The DOT primarily regulates economic issues affecting air service,
such as certification and fitness, insurance, consumer protection and competitive practices. The DOT has the
authority to investigate and institute proceedings to enforce its economic regulations and may assess civil
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