JetBlue Airlines 2008 Annual Report Download - page 57

stated at amortized cost; and (c) derivative instruments stated at fair value, net of collateral postings. When
sold, we use a specific identification method to determine the cost of the securities.
At December 31, 2008 investment securities, excluding fuel hedge derivatives, were transferred to trading
securities and consisted of $244 million in student loan bonds and at December 31, 2007 were classified as
available-for-sale and consisted of $591 million in student loan bonds and $20 million in other securities.
Inventories: Inventories consist of expendable aircraft spare parts, supplies and aircraft fuel. These
items are stated at average cost and charged to expense when used. An allowance for obsolescence on aircraft
spare parts is provided over the remaining useful life of the related aircraft.
Property and Equipment: We record our property and equipment at cost and depreciate these assets on
a straight-line basis to their estimated residual values over their estimated useful lives. Additions,
modifications that enhance the operating performance of our assets, and interest related to predelivery deposits
to acquire new aircraft and for the construction of facilities are capitalized.
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 ....................... Lowerof15years 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 2008, we recorded an impairment loss of $8 million related to the write-off our
temporary terminal facility at JFK.
In 2008, we sold nine aircraft, which resulted in gains of $23 million. In 2007, we sold three aircraft,
which resulted in gains of $7 million. In 2006, we sold five aircraft, which resulted in gains of $12 million.
The gains on our sales of aircraft are included in other operating expenses.
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 2017. 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
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