JetBlue Airlines 2011 Annual Report Download - page 59

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There has been no ineffectiveness relating to these interest rate swaps since all critical terms continue to match
the underlying debt, with all of the unrealized losses being deferred in accumulated other comprehensive income.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from
adverse changes to the price of fuel and interest rates as discussed below. The sensitivity analyses presented do
not consider the effects that such adverse changes may have on the overall economic activity, nor do they
consider additional actions we may take to mitigate our exposure to such changes. Variable-rate leases are not
considered market sensitive financial instruments and, therefore, are not included in the interest rate sensitivity
analysis below. Actual results may differ. See Notes 1, 2 and 13 to our consolidated financial statements for
accounting policies and additional information.
Aircraft fuel. Our results of operations are affected by changes in the price and availability of aircraft fuel.
To manage the price risk, we use crude or heating oil option contracts or jet fuel swap agreements. Market risk is
estimated as a hypothetical 10% increase in the December 31, 2011 cost per gallon of fuel. Based on projected
2012 fuel consumption, such an increase would result in an increase to aircraft fuel expense of approximately
$175 million in 2012, compared to an estimated $130 million for 2011 measured as of December 31, 2010. As of
December 31, 2011, we had hedged approximately 27% of our projected 2012 fuel requirements. All hedge
contracts existing at December 31, 2011 settle by December 31, 2012. We expect to realize approximately $6
million in losses during 2012 currently in other comprehensive income related to our outstanding fuel hedge
contracts.
Interest. Our earnings are affected by changes in interest rates due to the impact those changes have on
interest expense from variable-rate debt instruments and on interest income generated from our cash and
investment balances. The interest rate is fixed for $1.62 billion of our debt and capital lease obligations, with the
remaining $1.43 billion having floating interest rates. If interest rates average 10% higher in 2012 than they did
during 2011, our interest expense would increase by approximately $1 million, compared to an estimated
$1 million for 2011 measured as of December 31, 2010. If interest rates average 10% lower in 2012 than they did
during 2011, our interest income from cash and investment balances would remain relatively constant, similar to
the relative constant level of interest income for 2011 measured as of December 31, 2010. These amounts are
determined by considering the impact of the hypothetical interest rates on our variable-rate debt, cash equivalents
and investment securities balances at December 31, 2011 and 2010.
Fixed Rate Debt. On December 31, 2011, our $285 million aggregate principal amount of convertible debt
had a total estimated fair value of $378 million, based on quoted market prices. If interest rates were 10% higher
than the stated rate, the fair value of this debt would have been $405 million as of December 31, 2011.
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