JetBlue Airlines 2012 Annual Report Download - page 40

JETBLUE AIRWAYS CORPORATION-2012 10K36
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Contractual Obligations
Our noncancelable contractual obligations at December31, 2012 include (in millions):
Payments due in
Total 2013 2014 2015 2016 2017 Thereafter
Long-term debt and capital lease
obligations
(1) $ 3,450 $ 509 $ 673 $ 342 $ 527 $ 236 $ 1,163
Lease commitments 1,492 198 194 191 125 111 673
Flight equipment obligations 5,005 360 525 745 765 575 2,035
Financing obligations and other
(2) 2,915 399 331 306 293 306 1,280
TOTAL $ 12,862 $ 1,466 $ 1,723 $ 1,584 $ 1,710 $ 1,228 $ 5,151
(1) Includes actual interest and estimated interest for floating-rate debt based on December31, 2012 rates.
(2) Amounts include noncancelable commitments for the purchase of goods and services.
The interest rates are fi xed for $1.72 billion of our debt and capital lease
obligations, with the remaining $1.13 billion having fl oating interest rates.
The fl oating interest rates adjust quarterly or semi-annually based on the
London Interbank Offered Rate, or LIBOR. The weighted average maturity
of all of our debt was 6 years at December31, 2012. We are subject to
certain fi nancial ratios for our unsecured line of credit issued in September
2011, including a requirement to maintain certain cash and short-term
investment levels and a minimum earnings before income taxes, interest,
depreciation and amortization, or EBITDA margin, as well as customary
events of default. We are subject to certain collateral ratio requirements
in our spare parts pass-through certifi cates and spare engine fi nancing
issued in November 2006 and December 2007, respectively. If we fail
to maintain these collateral ratios, we are required to provide additional
collateral or redeem some or all of the equipment notes so the ratios return
to compliance. As a result of lower spare parts inventory balances and the
associated reduced third party valuation of these parts, we pledged as
collateral a previously unencumbered spare engine with a carrying value
of approximately $7 million during the second quarter of 2011. During the
third quarter of 2011, we did not meet the minimum ratios on our spare
parts pass-through certifi cates due to the reduced third party valuation of
these parts. In order to maintain the ratios, we elected to redeem $3 million
of the equipment notes in November 2011. At December31, 2012, we
were in compliance with all covenants of our debt and lease agreements
and 70% of our owned property and equipment were pledged as security
under various loan agreements.
We have operating lease obligations for 60 aircraft with lease terms that
expire between 2014 and 2026. Five of these leases have variable-rate rent
payments that adjust semi-annually based on LIBOR. We also lease airport
terminal space and other airport facilities in each of our markets, as well as
offi ce space and other equipment. We have approximately $30million of
restricted assets pledged under standby letters of credit related to certain
of our leases which will expire at the end of the related leases.
Our fi rm aircraft orders at December31, 2012 consisted of 14 Airbus
A320 aircraft, 30 Airbus A321 aircraft, 40 Airbus A320 neo aircraft and
31 EMBRAER 190 aircraft scheduled for delivery as follows 14 in 2013,
10 in 2014, 17 in 2015, 18 in 2016, 13 in 2017, 13 in 2018, 10 in 2019,
10 in 2020 and 10 in 2021. We expect to meet our predelivery deposit
requirements for our aircraft by paying cash or by using short-term
borrowing facilities for deposits required sixto 24months prior to delivery.
Any predelivery deposits paid by the issuance of notes are fully repaid at
the time of delivery of the related aircraft.
Our aircraft orders refl ect contract modifi cations entered in 2012.In July
2012, we amended our EMBRAER purchase agreement accelerating the
delivery of one aircraft to 2013 which was previously scheduled for delivery
in 2014. Additionally, we extended the date by which we may elect not to
further amend our purchase agreement to order a new EMBRAER 190
variant, if developed, to July 31, 2013. If the new variant is not elected,
seven EMBRAER 190 aircraft we previously deferred may either be returned
to their original delivery dates in 2013 and 2014 or canceled and subject to
cancellation fees. In December 2012, we further amended this agreement
effectively accelerating the delivery of four aircraft from 2018 to 2013.
In October 2008, we began operating out of our new Terminal 5 at JFK,
or Terminal 5, which we had been constructing since November 2005.
The construction and operation of this facility is governed by a lease
agreement we entered into with the PANYNJ in 2005.We are responsible
for making various payments under the lease, including ground rents for
the terminal site which began on lease execution in 2005 and facility rents
commenced in October 2008 upon our occupancy of the terminal.The
facility rents are based on the number of passengers enplaned out of the
terminal, subject to annual minimums.The PANYNJ has reimbursed us
for costs of this project in accordance with the terms of the lease, except
for approximately $76 million in leasehold improvements provided by us.
For fi nancial reporting purposes, this project is being accounted for as a
fi nancing obligation, with the constructed asset and related liability being
refl ected on our balance sheets.Minimum ground and facility rents for
this terminal totaling $1.12 billion are included in the commitments table
above as lease commitments and fi nancing obligations.
Our commitments also include those of LiveTV, which has several
noncancelable long-term purchase agreements with various suppliers
to provide equipment to be installed on its customers’ aircraft, including
JetBlue’s aircraft.
We enter into individual employment agreements with each of our FAA-
licensed Crewmembers as well as inspectors and air traffi c controllers.
Each employment agreement is for a term of fi ve years and automatically
renews for an additional fi ve-year term unless the Crewmember is terminated
for cause or the Crewmember elects not to renew it. Pursuant to these
agreements, these Crewmembers can only be terminated for cause. In
the event of a downturn in our business requiring a reduction in fl ying
and related work hours, we are obligated to pay these Crewmembers
a guaranteed level of income and to continue their benefi ts. As we are
not currently obligated to pay this guaranteed income and benefi ts, no
amounts related to these guarantees are included in the table above.