JetBlue Airlines 2015 Annual Report Download - page 61

JETBLUE AIRWAYS CORPORATION-2015Annual Report 57
PART II
ITEM 8Financial Statements and Supplementary Data
calculated as 15% of adjusted pre-tax income before profit sharing and
special items with the result reduced by Retirement Plus contributions.
Eligible non-management employees may elect to have their profit sharing
contributed directly to the Plan. Certain Federal Aviation Administration, or
FAA-licensed Crewmembers, receive an additional contribution of 3% of
eligible compensation, which we refer to as Retirement Advantage. Total
401(k) company match, Retirement Plus, profit sharing and Retirement
Advantage expensed in for the years ended December 31, 2015, 2014
and 2013 were $256 million, $119 million and $94 million, respectively.
NOTE 10 Commitments
Flight Equipment Commitments
As of December 31, 2015, our firm aircraft orders consisted of 21 Airbus
A321 aircraft, 25 Airbus A320 new engine option (neo) aircraft, 45 Airbus
A321neo aircraft, 24 Embraer E190 aircraft and 10 spare engines scheduled
for delivery through 2023. Committed expenditures for these aircraft and
related flight equipment, including estimated amounts for contractual
price escalations and predelivery deposits, will be approximately $661
million in 2016, $742 million in 2017, $656 million in 2018, $1.0 billion in
2019, $1.4 billion in 2020 and $2.4 billion thereafter. We are scheduled
to receive 10 new Airbus A321 aircraft in 2016. Dependent on market
conditions, we anticipate paying cash for the 10 Airbus A321 aircraft
scheduled for delivery in 2016.
In November 2014, we amended our purchase agreement with Airbus
by deferring 13 Airbus A321 aircraft orders and eight Airbus A320 aircraft
orders from 2016-2020 to 2020-2023. Of these deferrals, 10 Airbus
A321 aircraft orders were converted to Airbus A321 new engine option
(A321neo) orders and five Airbus A320neo aircraft orders were converted
to Airbus A321neo aircraft orders. We additionally converted three Airbus
A320 aircraft orders in 2016 to Airbus A321 aircraft orders. In October
2013, we amended our purchase agreements with both Embraer and
Airbus. We deferred 24 Embraer E190 aircraft from 2014-2018 to 2020-
2022. We converted eight existing Airbus A320 orders to Airbus A321
orders and ten Airbus A320neo orders to Airbus A321neo orders. We
incrementally ordered 15 Airbus A321 aircraft for delivery between 2015
and 2017 and 20 Airbus A321neo aircraft for delivery between 2018 and
2020. In 2015, we entered into an agreement with Airbus to convert the
configuration on six of our 10 A321 aircraft scheduled to be delivered in
2016 to our Mint configuration.
Other Commitments
We utilize several credit card processors to process our ticket sales. Our
agreements with these processors do not contain covenants, but do
generally allow the processor to withhold cash reserves to protect the
processor from potential liability for tickets purchased, but not yet used for
travel. While we currently do not have any collateral requirements related
to our credit card processors, we may be required to issue collateral to
our credit card processors, or other key vendors, in the future.
As of December 31, 2015, we had approximately $24 million pledged
related to our workers compensation insurance policies and other business
partner agreements, which will expire according to the terms of the related
policies or agreements.
As part of the sale of LiveTV, refer to Note 16, a $3 million liability relating to
Airfone was assigned to JetBlue under the purchase agreement. Separately,
prior to the sale of LiveTV, JetBlue had an agreement with ViaSat Inc.
through 2020 relating to in-flight broadband connectivity technology on
our aircraft. That agreement stipulated a $20 million minimum commitment
for the connectivity service and a $25 million minimum commitment for the
related hardware and software purchases. As part of the sale of LiveTV,
these commitments to ViaSat Inc. were assigned to LiveTV and JetBlue
entered into two new service agreements with LiveTV pursuant to which
LiveTV will provide in-flight entertainment and connectivity services to
JetBlue for a minimum of seven years.
Except for our pilots, our Crewmembers do not have third-party
representation. In April 2014, JetBlue pilots elected to be solely represented
by ALPA. The NMB certified ALPA as the representative body for JetBlue
pilots and we are working with ALPA to reach our first collective bargaining
agreement. We enter into individual employment agreements with each of
our non-unionized FAA-licensed Crewmembers which include dispatchers,
technicians and inspectors as well as air traffic controllers. Each employment
agreement is for a term of five years and automatically renews for an
additional five years unless either the Crewmember or we elect not to
renew it by giving at least 90 days notice before the end of the relevant
term. Pursuant to these agreements, these Crewmembers can only be
terminated for cause. In the event of a downturn in our business that
would require a reduction in work hours, we are obligated to pay these
Crewmembers a guaranteed level of income and to continue their benefits
if they do not obtain other aviation employment.
NOTE 11 Contingencies
We self-insure a portion of our losses from claims related to workers’
compensation, environmental issues, property damage, medical insurance
for employees and general liability. Losses are accrued based on an estimate
of the ultimate aggregate liability for claims incurred, using standard industry
practices and our actual experience.
We are a party to many routine contracts under which we indemnify third
parties for various risks. These indemnities consist of the following:
All of our bank loans, including our aircraft and engine mortgages, contain
standard provisions present in loans of this type. These provisions obligate
us to reimburse the bank for any increased costs associated with continuing
to hold the loan on our books which arise as a result of broadly defined
regulatory changes, including changes in reserve requirements and bank
capital requirements. These indemnities would have the practical effect of
increasing the interest rate on our debt if they were to be triggered. In all cases,
we have the right to repay the loan and avoid the increased costs. The term
of these indemnities matches the length of the related loan up to 15 years.
Under both aircraft leases with foreign lessors and aircraft and engine
mortgages with foreign lenders, we have agreed to customary indemnities
concerning withholding tax law changes. Under these contracts we are
responsible, should withholding taxes be imposed, for paying such amount
of additional rent or interest as is necessary to ensure that the lessor or
lender still receives, after taxes, the rent stipulated in the lease or the interest
stipulated under the loan. The term of these indemnities matches the length
of the related lease up to 16 years.
We have various leases with respect to real property as well as various
agreements among airlines relating to fuel consortia or fuel farms at airports.
Under these contracts we have agreed to standard language indemnifying
the lessor against environmental liabilities associated with the real property
or operations described under the agreement, even if we are not the party
responsible for the initial event that caused the environmental damage.
In the case of fuel consortia at airports, these indemnities are generally
joint and several among the participating airlines. We have purchased a