JetBlue Airlines 2015 Annual Report Download - page 21

JETBLUE AIRWAYS CORPORATION-2015Annual Report 17
PART I
ITEM1ARisk Factors
Our reputation and business may be harmed and we may be subject to
legal claims if there is loss, unlawful disclosure or misappropriation of, or
unsanctioned access to, our customers’, employees’, business partners’
or our own information or other breaches of our information security.
We make extensive use of online services and centralized data processing,
including through third party service providers. The secure maintenance and
transmission of customer and employee information is a critical element
of our operations. Our information technology and other systems and
those of service providers or business partners, that maintain and transmit
customer information, may be compromised by a malicious third party
penetration of our network security, or of a third party service provider
or business partner, or impacted by deliberate or inadvertent actions or
inactions by our employees, or those of a third party service provider or
business partner. As a result, personal information may be lost, disclosed,
accessed or taken without consent.
We transmit confidential credit card information by way of secure private
retail networks and rely on encryption and authentication technology licensed
from third parties to provide the security and authentication necessary to
effect secure transmission and storage of confidential information, such
as customer credit card information. The Company has made significant
efforts to secure its computer network. If any compromise of our security
or computer network were to occur, it could have a material adverse effect
on the reputation, business, operating results and financial condition of
the Company, and could result in a loss of customers. Additionally, any
material failure by the Company to achieve or maintain compliance with
the Payment Card Industry, or PCI, security requirements or rectify a
security issue may result in fines and the imposition of restrictions on the
Company’s ability to accept credit cards as a form of payment.
Any such loss, disclosure or misappropriation of, or access to, customers’,
employees’ or business partners’ information or other breach of our
information security can result in legal claims or legal proceedings, including
regulatory investigations and actions, may have a negative impact on
our reputation, may lead to regulatory enforcement actions against us,
and may materially adversely affect our business, operating results and
financial condition. Furthermore, the loss, disclosure or misappropriation
of our business information may materially adversely affect our business,
operating results and financial condition. The regulations in this area are
developing and evolving. International regulation adds complexity as we
expand our service and include more passengers from other countries.
Data security compliance requirements could increase our costs, and
any significant data breach could disrupt our operations and harm our
reputation, business, results of operations and financial condition.
Our business requires the appropriate and secure utilization of customer,
employee, business partner and other sensitive information. We cannot
be certain that advances in criminal capabilities (including cyber-attacks or
cyber intrusions over the Internet, malware, computer viruses and the like),
discovery of new vulnerabilities or attempts to exploit existing vulnerabilities
in our systems, other data thefts, physical system or network break-ins
or inappropriate access, or other developments will not compromise or
breach the technology protecting the networks that access and store
sensitive information. The risk of a security breach or disruption, particularly
through cyber-attack or cyber intrusion, including by computer hackers,
foreign governments and cyber terrorists, has increased as the number,
intensity and sophistication of attempted attacks and intrusions from
around the world have increased. Furthermore, there has been heightened
legislative and regulatory focus on data security in the U.S. and abroad,
including requirements for varying levels of customer notification in the
event of a data breach.
In addition, [many] of our commercial partners, including credit card
companies, have imposed data security standards that we must meet.
In particular, we are required by the Payment Card Industry Security
Standards Council, founded by the credit card companies, to comply
with their highest level of data security standards. While we continue
our efforts to meet these standards, new and revised standards may be
imposed that may be difficult for us to meet and could increase our costs.
A significant data security breach or our failure to comply with applicable
U.S. or foreign data security regulations or other data security standards
may expose us to litigation, claims for contract breach, fines, sanctions or
other penalties, which could disrupt our operations, harm our reputation
and materially and adversely affect our business, results of operations and
financial condition. Failure to address these issues appropriately could
also give rise to additional legal risks, which, in turn, could increase the
size and number of litigation claims and damages asserted or subject us
to enforcement actions, fines and penalties and cause us to incur further
related costs and expenses.
Our liquidity could be adversely impacted in the event one or more of our
credit card processors were to impose material reserve requirements
for payments due to us from credit card transactions.
We currently have agreements with organizations that process credit
card transactions arising from purchases of air travel tickets by our
customers. Credit card processors have financial risk associated with
tickets purchased for travel which can occur several weeks after the
purchase. Our credit card processing agreements provide for reserves
to be deposited with the processor in certain circumstances. We do
not currently have reserves posted for our credit card processors. If
circumstances were to occur requiring us to deposit reserves, the
negative impact on our liquidity could be significant which could materially
adversely affect our business.
If we are unable to attract and retain qualified personnel or fail to maintain
our company culture, our business could be harmed.
We compete against the other major U.S. airlines for pilots, mechanics and
other skilled labor; some of them offer wage and benefit packages exceeding
ours. As more pilots in the industry approach mandatory retirement age,
the U.S. airline industry may be affected by a pilot shortage. We may be
required to increase wages and/or benefits in order to attract and retain
qualified personnel or risk considerable employee turnover. If we are unable
to hire, train and retain qualified employees, our business could be harmed
and we may be unable to implement our growth plans.
In addition, as we hire more people and grow, we believe it may be increasingly
challenging to continue to hire people who will maintain our company culture.
One of our competitive strengths is our service-oriented company culture
which emphasizes friendly, helpful, team-oriented and customer-focused
employees. Our company culture is important to providing high quality
customer service and having a productive workforce in order to help keep
our costs low. As we continue to grow, we may be unable to identify, hire
or retain enough people who meet the above criteria, including those in
management or other key positions. Our company culture could otherwise
be adversely affected by our growing operations and geographic diversity.
If we fail to maintain the strength of our company culture, our competitive
ability and our business may be harmed.
Our results of operations fluctuate due to seasonality, weather and
other factors.
We expect our quarterly operating results to fluctuate due to seasonality
including high vacation and leisure demand occurring on the Florida
routes between October and April and on our western routes during the
summer. Actions of our competitors may also contribute to fluctuations
in our results. We are more susceptible to adverse weather conditions,
including snow storms and hurricanes, as a result of our operations
being concentrated on the East Coast, than some of our competitors.
Our Florida and Caribbean operations are subject to hurricanes. As we
enter new markets we could be subject to additional seasonal variations
along with any competitive responses to our entry by other airlines. Price
changes in aircraft fuel as well as the timing and amount of maintenance
and advertising expenditures also impact our operations. As a result of
these factors, quarter-to-quarter comparisons of our operating results
may not be a good indicator of our future performance. In addition, it is
possible in any future period our operating results could be below the
expectations of investors and any published reports or analysis regarding
JetBlue. In such an event, the price of our common stock could decline,
perhaps substantially.