JetBlue Airlines 2012 Annual Report Download - page 37

JETBLUE AIRWAYS CORPORATION-2012 10K 33
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Although we experienced signifi cant revenue growth in 2012, this trend
may not continue. We expect our expenses to continue to increase
signifi cantly as we acquire additional aircraft, as our fl eet ages and as we
expand the frequency of fl ights in existing markets and enter into new
markets. Accordingly, the comparison of the fi nancial data for the quarterly
periods presented may not be meaningful. In addition, we expect our
operating results to fl uctuate signifi cantly from quarter-to-quarter in the
future as a result of various factors, many of which are outside our control.
Consequently, we believe quarter-to-quarter comparisons of our operating
results may not necessarily be meaningful and you should not rely on our
results for any one quarter as an indication of our future performance.
Network Concentrations and Seasonality
We have historically been a highly leisure-focused airline subject to
seasonality in our business. Our focus in recent years has been to increase
our mix of business customers, particularly in Boston, to lessen the
seasonality impact on our business. Additionally, we believe VFR markets
complement our leisure-driven markets from both a seasonal and day of
week perspective. The highest levels of traffi c and revenue on our routes
along the East Coast are generally realized from October through April
and on our routes to and from the western United States in the summer.
Many of our areas of operations in the Northeast experience poor weather
conditions in the winter, causing increased costs associated with de-icing
aircraft, cancelled fl ights and accommodating displaced customers. Many
of our Florida and Caribbean routes experience bad weather conditions
in the summer and fall due to thunderstorms and hurricanes. As we
enter new markets we could be subject to additional seasonal variations
along with competitive responses to our entry by other airlines. Given our
high proportion of fi xed costs, this seasonality may cause our results of
operations to vary from quarter to quarter. As such, we remain focused
on trying to reduce the seasonal impact of our operations and increase
demand and travel during the trough periods.
Liquidity and Capital Resources
The airline business is capital intensive. Our ability to successfully execute
our profi table growth plans is largely dependent on the continued availability
of capital on attractive terms. In addition, our ability to successfully operate
our business depends on maintaining suffi cient liquidity. We believe we
have adequate resources from a combination of cash and cash equivalents
and investment securities on hand and two available lines of credit.
Additionally, as of December31, 2012, we had 11 unencumbered A320
aircraft and nine unencumbered spare engines which we believe could
be an additional source of liquidity, if necessary.
We believe a healthy cash balance is crucial to our ability to weather any part
of the economic cycle while continuing to execute on our plans for profi table
growth and increased returns. Our goal is to continue to be diligent with our
liquidity, maintaining fi nancial fl exibility and allowing for prudent capital spending,
which in turn we expect to lead to improved returns for our shareholders.
As of December 31, 2012 our cash balance declined as compared to a year
ago. The current environment of strong industry fundamentals and low interest
rates enabled us to adopt a more reasonable cash balance as compared to
prior years (as measured by a percentage of trailing twelve months revenue).
We believe our current level of cash of approximately 15% of trailing twelve
months revenue, combined with our available lines of credit and portfolio of
unencumbered assets provides us with a strong liquidity position and the
potential for higher returns on cash deployment. We believe we have taken
several important actions during 2012 in solidifying our strong balance sheet
and overall liquidity position, including:
• Increased our available lines of credit up to $325 million as of December
31, 2012.
• Prepaid approximately $220 million in high cost debt, which will result
in an annual interest expense savings of approximately $10 million.
• Increased the number of unencumbered aircraft from one as of December
31, 2011 to 11 as of December 31, 2012.
•Reduced our overall debt balance by $285 million while increasing our
total property and equipment by $483 million during 2012.
•Prepaid $200 million for certain 2013 deliveries and deposits on future
aircraft deliveries in exchange for favorable pricing terms.