JetBlue Airlines 2010 Annual Report Download - page 61

Our co-branded credit card agreement, under which we sell TrueBlue points as described above, provides
for a minimum cash payment guarantee, which is to be paid to us throughout the life of the agreement if
specified point sales and other ancillary activity payments have not been achieved. Through December 31,
2010, we had received $21 million in connection with this guarantee, which is subject to refund in the event
that cash payments exceed future minimums through April 2011. We record revenue related to this guarantee
when it is remote that any future service will be provided by us. We recognized approximately $5 million of
other revenue during each of 2010 and 2009 related to this guarantee, leaving $11 million deferred and
included in our air traffic liability as of December 31, 2010.
Upon launch of the new TrueBlue program in November 2009, we extended our co-branded credit card
and membership rewards participation agreements. In connection with these extensions, we received a one-
time payment of $37 million, which we deferred and are recognizing as other revenue over the term of the
agreement through 2015.
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
the Revenue Recognition-Multiple-Element Arrangements topic of the Codification because we lack objective
and reliable evidence of fair value of the undelivered items. Revenues and expenses related to these
components are recognized ratably over the service periods, which extend through 2018 as of December 31,
2010. 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. We have
separate service agreements covering certain of our 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 power by the hour contracts transfer certain risks to the third-party service
providers and fix the amounts we pay per flight hour or number of cycles in exchange for maintenance and
repairs under a predefined maintenance program. 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 2010, 2009 and 2008 was $55 million, $53 million and $52 million,
respectively.
Share-Based Compensation: We record compensation expense in the financial statements for share-
based awards based on the grant date fair value of those awards. Share-based compensation expense includes
an estimate for pre-vesting forfeitures and is recognized over the requisite service periods of the awards on a
straight-line basis, which is generally commensurate with the vesting term.
Under the Compensation-Stock Compensation topic of the Codification, the benefits associated with tax
deductions in excess of recognized compensation cost are required to be reported as a financing cash flow. We
recorded an insignificant amount in excess tax benefits generated from option exercises in each of 2010, 2009
and 2008.
Our policy is to issue new shares for purchases under our Crewmember Stock Purchase Plan, or CSPP,
and issuances under our Amended and Restated 2002 Stock Incentive Plan, or 2002 Plan.
Income Taxes: We account for income taxes utilizing the liability method. Deferred income taxes are
recognized for the tax consequences of temporary differences between the tax and financial statement
reporting bases of assets and liabilities. A valuation allowance for deferred tax assets is provided unless
realizability is judged by us to be more likely than not. Our policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense.
New Accounting Standards: Our financial statements are prepared in accordance with the Codification
which was established in 2009 and superseded all then existing accounting standard documents and has
become the single source of authoritative non-governmental U.S. GAAP. New accounting rules and disclosure
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