JetBlue Airlines 2015 Annual Report Download - page 64

JETBLUE AIRWAYS CORPORATION-2015Annual Report60
PART II
ITEM 8Financial Statements and Supplementary Data
NOTE 13 Fair Value
Under the Fair Value Measurements and Disclosures topic of the Codification,
disclosures are required about how fair value is determined for assets and
liabilities and a hierarchy for which these assets and liabilities must be grouped
is established, based on significant levels of inputs as follows:
• Level 1 quoted prices in active markets for identical assets or liabilities;
•Level 2 quoted prices in active markets for similar assets and liabilities
and inputs that are observable for the asset or liability; or
•
Level 3 unobservable inputs for the asset or liability, such as discounted
cash flow models or valuations.
The determination of where assets and liabilities fall within this hierarchy
is based upon the lowest level of input that is significant to the fair value
measurement.
The following is a listing of our assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the
fair value hierarchy (in millions):
As of December 31, 2015
Level1 Level2 Level3 Total
Assets
Cash equivalents $ 147 $ — $ — $ 147
Available-for-sale investment securities 75 180 — 255
Aircraft fuel derivatives — — — —
$ 222 $ 180 $ — $ 402
Liabilities
Aircraft fuel derivatives — 5 — 5
Interest rate swap — — — —
$ — $ 5 $ — $ 5
As of December 31, 2014
Level1 Level2 Level3 Total
Assets
Cash equivalents $ 153 $ — $ — $ 153
Available-for-sale investment securities — 125 — 125
Aircraft fuel derivatives $ — $ — $ — $ —
$ 153 $ 125 $ — $ 278
Liabilities
Aircraft fuel derivatives $ — $ 102 $ — $ 102
Interest rate swap — 1 — 1
$ — $ 103 $ — $ 103
The carrying values of all other financial instruments approximated their
fair values at December 31, 2015 and 2014. Refer to Note 2 for fair value
information related to our outstanding debt obligations as of December
31, 2015 and 2014.
Cash equivalents
Our cash equivalents include money market securities and commercial
paper which are readily convertible into cash, have maturities of 90 days
or less when purchased and are considered to be highly liquid and easily
tradable. These securities are valued using inputs observable in active
markets for identical securities and are therefore classified as Level 1
within our fair value hierarchy.
Available-for-sale investment securities
Included in our available-for-sale investment securities are time deposits,
commercial paper and treasury bills. The fair values of these instruments
are based on observable inputs in non-active markets, which are therefore
classified as Level 2 in the hierarchy. We did not record any material gains
or losses on these securities during the year ended December 31, 2015
or 2014.
Aircraft fuel derivatives
Our aircraft fuel derivatives include swaps, caps, collars, and basis swaps
which are not traded on public exchanges. Their fair values are determined
using a market approach based on inputs that are readily available from
public markets for commodities and energy trading activities; therefore,
they are classified as Level 2 inputs. The data inputs are combined into
quantitative models and processes to generate forward curves and
volatilities related to the specific terms of the underlying hedge contracts.
Interest rate swaps
The fair values of our interest rate swaps are based on inputs received
from the related counterparty, which are based on observable inputs for
active swap indications in quoted markets for similar terms. Their fair
values are determined using a market approach based on inputs that
are readily available from public markets; therefore, they are classified
as Level 2 inputs.