JetBlue Airlines 2014 Annual Report Download - page 58

JETBLUE AIRWAYS CORPORATION-2014Annual Report52
PART II
ITEM 8Financial Statements and Supplementary Data
at JFK, Newark, LaGuardia and Reagan National airports as well as certain
other assets. The Credit Facility includes covenants that require us to
maintain certain minimum balances in unrestricted cash, cash equivalents,
and unused commitments available under all revolving credit facilities.
In addition, the covenants restrict our ability to incur additional indebtedness,
issue preferred stock or pay dividends. As of December 31, 2014 and
2013, we did not have an outstanding balance under this line of credit.
NOTE 3 Operating Leases
We lease aircraft, all of our facilities at the airports we serve, office space
and other equipment. These leases have varying terms and conditions,
with some having early termination clauses which we determine to be
the lease expiration date. The length of the lease depends upon the type
of asset being leased, with the latest lease expiring in 2035. Total rental
expense for all operating leases was $298 million in 2014, $295 million
in 2013 and $284 million in 2012. As of December 31, 2014, we have
approximately $33 million in assets that serve as collateral for letters of
credit. These letters of credit relate to a certain number of our leases and
are included in restricted cash.
As of December 31, 2014, 60 of the 203 aircraft in our fleet were leased
under operating leases, with lease expiration dates ranging from 2016
to 2026. Five of the 60 aircraft operating leases have variable rate rent
payments based on LIBOR. Leases for 46 of our aircraft can generally be
renewed at rates based on fair market value at the end of the lease term for
one or two years. We have purchase options for 45 of our aircraft leases
at the end of their lease term. These purchase options are at fair market
value and have a one-time option during the term at fixed amounts that
were expected to approximate the fair market value at lease inception.
We did not extend any leases on our fleet during 2014. During 2013, we
extended the leases on eight Airbus A320 aircraft that were previously set
to expire in 2014. These extensions resulted in an additional $42million
of lease commitments through 2022. During 2012, we extended the
leases on three Airbus A320 aircraft that were previously set to expire
in 2013. These extensions resulted in an additional $24 million of lease
commitments through 2018. During 2010, we leased six used Airbus
A320 aircraft from a third party, each with a separate six year operating
lease term. Our aircraft lease agreements contain termination provisions
which include standard maintenance and return conditions. Our policy is
to record these lease return conditions when they are probable and the
costs can be estimated.
Future minimum lease payments under noncancelable operating leases, including those described above, with initial or remaining terms in excess of one year
at December 31, 2014, are as follows (in millions):
Aircraft Other Total
2015 $ 150 $ 85 $ 235
2016 90 80 170
2017 75 65 140
2018 75 60 135
2019 58 57 115
Thereafter 213 487 700
TOTAL MINIMUM OPERATING LEASE PAYMENTS $ 661 $ 834 $ 1,495
In the past we have entered into sale-leaseback arrangements with a third
party lender for 45 of our operating aircraft. The sale-leasebacks occurred
simultaneously with the delivery of the related aircraft to us from their
manufacturers. Each sale-leaseback transaction was structured with a
separate trust set up by the third party lender, the assets of which consist
of the one aircraft initially transferred to it following the sale by us and the
subsequent lease arrangement with us. Because of their limited capitalization
and the potential need for additional financial support, these trusts are
VIEs as defined in the Consolidations topic of the Codification and must be
considered for consolidation in our financial statements. Our assessment
of each trust considers both quantitative and qualitative factors, including
whether we have the power to direct the activities and to what extent we
participate in the sharing of benefits and losses of the trusts. JetBlue does
not retain any equity interests in any of these trusts and our obligations to
them are limited to the fixed rental payments we are required to make to
them. These were approximately $585 million as of December 31, 2014
and are reflected in the future minimum lease payments in the table above.
Our only interest in these entities is the purchase options to acquire the
aircraft as specified above. Since there are no other arrangements, either
implicit or explicit, between us and the individual trusts that would result in
our absorbing additional variability from the trusts, we concluded we are
not the primary beneficiary of these trusts. We account for these leases
as operating leases, following the appropriate lease guidance as required
by the Leases topic in the Codification.
NOTE 4 JFK Terminal 5
We operate out of T5 at JFK and our occupancy is governed by various
lease agreements with the PANYNJ. Under the terms of the facility lease
agreement we were responsible for the construction of the 635,000 square
foot 26-gate terminal, a parking garage, roadways and an AirTrain Connector,
all of which are owned by the PANYNJ and collectively referred to as the
T5 Project. In 2012, we commenced construction on an expansion to T5,
referred to as T5i, for an international arrivals facility and additional gates.
The construction of T5i was completed in November 2014, with the first
international flight using the facilities on November 12, 2014. T5i includes six
international arrival gates comprised of three new gates and three converted
gates from T5, as well as an international arrivals hall with full U.S. Customs
and Border Protection services.
We executed an extension to the original T5 lease in 2013. The lease, as
amended, now incorporates a total of approximately 19 acres of space for
our T5 facilities and ends on the 28th anniversary of the date of beneficial
occupancy of T5i. We have the option to terminate the agreement in 2033,
five years prior to the end of the original scheduled lease term of October
2038. We are responsible for various payments under the leases, including
ground rents which are reflected in the future minimum lease payments
table in Note 3, and facility rents which are included below. The facility rents
are based upon the number of passengers enplaned out of the terminal,
subject to annual minimums.