JetBlue Airlines 2015 Annual Report Download - page 56

JETBLUE AIRWAYS CORPORATION-2015Annual Report52
PART II
ITEM 8Financial Statements and Supplementary Data
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.
During 2015, we extended the lease on one Airbus A320 aircraft that was
previously set to expire in 2016. This extension resulted in an additional
$9 million of lease commitments through 2020. 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. 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.
In the fourth quarter of 2015, we bought out the operating leases on six
Airbus A320 aircraft for approximately $110 million.
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, 2015, are as follows (in millions):
Aircraft Other Total
2016 $ 83 $ 87 $ 170
2017 79 72 151
2018 77 66 143
2019 59 63 122
2020 53 56 109
Thereafter 163 445 608
TOTAL MINIMUM OPERATING LEASE PAYMENTS $ 514 $ 789 $ 1,303
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 $465 million as of December 31, 2015
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.
We were considered the owner of the T5 Project for financial reporting
purposes only and have been required to reflect an asset and liability for
the T5 Project on our consolidated balance sheets since construction
commenced in 2005. The cost of the T5 Project and the related liability are
being accounted for as a financing obligation. Our construction of T5i is
accounted for at cost with no financing obligation.
Total costs incurred for the elements of the T5 Project were $637 million,
of which $561 million is classified as Assets Constructed for Others and
the remaining $76 million is classified as leasehold improvements in our
consolidated balance sheets. Assets Constructed for Others are being
amortized over the shorter of the 25 year non-cancelable lease term or their
economic life. We recorded amortization expense of $23 million in 2015,
2014 and 2013, respectively. Our expenditure relating to T5i is approximately
$207 million, of which approximately $17 million was incurred in 2015 and
is classified as leasehold improvements in our consolidated balance sheets.
The PANYNJ has reimbursed us for the amounts currently included in Assets
Constructed for Others. These reimbursements and related interest are
reflected as Construction Obligation in our consolidated balance sheets.
When the facility rents are paid they are treated as a debt service on the
Construction Obligation, with the portion not relating to interest reducing
the principal balance. Minimum estimated facility payments including
escalations associated with the facility lease are estimated to be $40 million
per year in 2016 through 2020 and $536 million thereafter. The portion of
these scheduled payments serving to reduce the principal balance of the
Construction Obligation is $15 million in 2016, $16 million in 2017, $17 million
in 2018, $18 million in 2019 and $19 million in 2020. Payments could exceed
these amounts depending on future enplanement levels at JFK. Scheduled
facility payments representative of interest totaled $25 million in 2015, $26
million in 2014 and $27 million in 2013.
We sublease portions of T5 including space for concessionaires, the airspace
lounge and the TSA facilities. Two of our airline commercial partners, Hawaiian
Airlines and Aer Lingus, operate from this terminal and sublease facilities from
us. Minimum lease payments due to us are subject to various escalation
amounts through 2024. Future minimum lease payments due to us during
each of the next five years are estimated to be $13 million in 2016, $14 million
in 2017, $13 million in 2018, $6 million in 2019 and $3 million in 2020.