JetBlue Airlines 2010 Annual Report Download - page 79

We enter into individual employment agreements with each of our FAA-licensed employees, which
include pilots, dispatchers and technicians. Each employment agreement is for a term of five years and
automatically renews for an additional five-year term unless either the employee or we elect not to renew it by
giving at least 90 days notice before the end of the relevant term. Pursuant to these agreements, these
employees can only be terminated for cause. In the event of a downturn in our business that would require a
reduction in work hours, we are obligated to pay these employees a guaranteed level of income and to
continue their benefits if they do not obtain other aviation employment. None of our employees are covered
by collective bargaining agreements.
Note 12—Contingencies
The Company is party to legal proceedings and claims that arise during the ordinary course of business.
We believe that the ultimate outcome of these matters will not have a material adverse effect upon our
financial position, results of operations or cash flows.
We self-insure a portion of our losses from claims related to workers’ compensation, environmental
issues, property damage, medical insurance for employees and general liability. Losses are accrued based on
an estimate of the ultimate aggregate liability for claims incurred, using standard industry practices and our
actual experience.
We are a party to many routine contracts under which we indemnify third parties for various risks. These
indemnities consist of the following:
All of our bank loans, including our aircraft and engine mortgages, contain standard provisions present in
loans of this type which obligate us to reimburse the bank for any increased costs associated with continuing
to hold the loan on our books which arise as a result of broadly defined regulatory changes, including changes
in reserve requirements and bank capital requirements. These indemnities would have the practical effect of
increasing the interest rate on our debt if they were to be triggered. In all cases, we have the right to repay the
loan and avoid the increased costs. The term of these indemnities matches the length of the related loan up to
12 years.
Under both aircraft leases with foreign lessors and aircraft and engine mortgages with foreign lenders, we
have agreed to customary indemnities concerning withholding tax law changes under which we are
responsible, should withholding taxes be imposed, for paying such amount of additional rent or interest as is
necessary to ensure that the lessor or lender still receives, after taxes, the rent stipulated in the lease or the
interest stipulated under the loan. The term of these indemnities matches the length of the related lease up to
18 years.
We have various leases with respect to real property, and various agreements among airlines relating to
fuel consortia or fuel farms at airports, under which we have agreed to standard language indemnifying the
lessor against environmental liabilities associated with the real property or operations described under the
agreement, even if we are not the party responsible for the initial event that caused the environmental damage.
In the case of fuel consortia at airports, these indemnities are generally joint and several among the
participating airlines. We have purchased a stand alone environmental liability insurance policy to help
mitigate this exposure. Our existing aviation hull and liability policy includes some limited environmental
coverage when a clean up is part of an associated single identifiable covered loss.
Under certain contracts, we indemnify specified parties against legal liability arising out of actions by
other parties. The terms of these contracts range up to 30 years. Generally, we have liability insurance
protecting ourselves for the obligations we have undertaken relative to these indemnities.
LiveTV provides product warranties to third party airlines to which it sells its products and services. We
do not accrue a liability for product warranties upon sale of the hardware since revenue is recognized over the
term of the related service agreements of up to 12 years. Expenses for warranty repairs are recognized as they
occur. In addition, LiveTV has provided indemnities against any claims which may be brought against its
customers related to allegations of patent, trademark, copyright or license infringement as a result of the use
of the LiveTV system. LiveTV customers include other airlines, which may be susceptible to the inherent risks
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