JetBlue Airlines 2013 Annual Report Download - page 19

JETBLUE AIRWAYS CORPORATION-2013Annual Report 13
PART I
ITEM 1Business
Regulation
Airlines are heavily regulated, with rules and regulations set by various
federal, state and local agencies. We also operate under specific regulations
due to our operations within the high density airspace of the northeast
U.S. Most of our airline operations are regulated by U.S. governmental
agencies including;
DOT: The DOT primarily regulates economic issues affecting air service
including but not limited to certification and fitness, insurance, consumer
protection and competitive practices. They set the requirement that carriers
do not permit domestic flights to remain on the tarmac for more than three
hours. They also require that the advertised price for an airfare or a tour
package including airfare (e.g., a hotel/air vacation package) has to be
the total price to be paid by the customer, including all government taxes
and fees. It has the authority to investigate and institute proceedings to
enforce its economic regulations and may assess civil penalties, revoke
operating authority and seek criminal sanctions.
FAA: The FAA primarily regulates flight operations, in particular, matters
affecting air safety. This includes but is not limited to airworthiness
requirements for aircraft, the licensing of pilots, mechanics and dispatchers,
and the certification of flight attendants. It requires each airline to obtain an
operating certificate authorizing the airline to operate at specific airports
using specified equipment. Like all U.S. certified carriers, we cannot fly to
new destinations without the prior authorization of the FAA. After providing
notice and a hearing it has the authority to modify, suspend temporarily
or revoke permanently our authority to provide air transportation or that
of our licensed personnel for failure to comply with FAA regulations. It
can additionally assess civil penalties for such failures as well as institute
proceedings for the imposition and collection of monetary fines for the
violation of certain FAA regulations. When significant safety issues are
involved, it can revoke our authority to provide air transportation on an
emergency basis, without providing notice and a hearing. It monitors
our compliance with maintenance as well as flight operations and safety
regulations. It maintains on-site representatives and performs frequent
spot inspections of our aircraft, employees and records. It also has the
authority to issue airworthiness directives and other mandatory orders.
This includes the inspection of aircraft and engines, fire retardant and
smoke detection devices, collision and windshear avoidance systems,
noise abatement and the mandatory removal and replacement of aircraft
parts that have failed or may fail in the future. We have and maintain FAA
certificates of airworthiness for all of our aircraft and have the necessary
FAA authority to fly to all of the destinations we currently serve.
TSA: The TSA operates under the Department of Homeland Security and
is responsible for all civil aviation security. This includes passenger and
baggage screening, cargo security measures, airport security, assessment
and distribution of intelligence, and security research and development. It
also has law enforcement powers and the authority to issue regulations,
including in cases of national emergency, without a notice or comment period.
Taxes & Fees: The airline industry is one of the most heavily taxed in the
U.S., with taxes and fees accounting for approximately 16% of the total
fare charged to a customer. Airlines are obligated to fund all of these
taxes and fees regardless of their ability to pass these charges on to the
customer. The TSA sets the September 11, or 9/11, Security Fee as well
as the Aviation Security Infrastructure Fee, or ASIF. The 9/11 Security Fee
is passed to the customer while the ASIF directly impacts our costs. The
federal budget expected to be ratified in 2014 has removed the ASIF fee
but has increased the 9/11 Security Fee from $2.50 per enplanement, with
a maximum of $5 per one-way trip, to $5.60 per one-way trip regardless
of connecting flights. This higher tax will be effective from July 1, 2014.
State and Local: We are subject to state and local laws and regulations
in a number of states in which we operate and the regulations of various
local authorities operating the airports we serve.
Airport Access: JFK, LaGuardia, Newark and Ronald Reagan Washington
National Airport in Washington D.C., or Reagan National, are slot-controlled
airports subject to the “High Density Rule” and successor rules issued by
the FAA. These rules were implemented due to the high volume of traffic
at these popular airports located in the northeast corridor airpsace. The
rules limit the air traffic in and out of these airports during specific times;
however even with the rules in place, delays remain among the highest
in the nation due to continuing airspace congestion. We additionally have
slots at other slot-controlled airports governed by unique local ordinances
not subject to the High Density Rule, Westchester County Airport in White
Plains, NY and Long Beach (California) Municipal Airport. In January 2014,
we were notified of our successful bid to acquire a certain number of
takeoff and landing slots at Reagan National. The acquisition of these slots
is subject to final approval by the Department of Justice and customary
written agreements.
Airport Infrastructure: The northeast corridor of the U.S. is some of the
most congested airspaces in the world. The airports in this region are
some of the busiest in the country, the majority of which are more than
60 years old. Due to high usage and aging infrastructure, issues arise at
these airports that are not necessarily seen in other parts of the country.
Starting in 2015, a heavily utilized runway at JFK is scheduled to be
refurbished and the Central Terminal at LaGuardia is scheduled to be
refurbished in phases over the next six years.
Foreign Operations: International air transportation is subject to extensive
government regulation. The availability of international routes to U.S. airlines
is regulated by treaties and related agreements between the U.S. and
foreign governments. We currently operate international service to Aruba,
the Bahamas, Barbados, Bermuda, the Cayman Islands, Colombia, Costa
Rica, the Dominican Republic, Haiti, Jamaica, Mexico, Peru, Saint Lucia,
St. Maarten and the Turks and Caicos Islands. To the extent we seek to
provide air transportation to additional international markets in the future,
we would be required to obtain necessary authority from the DOT and the
applicable foreign government.
We believe we are operating in material compliance with DOT, FAA, TSA
and applicable international regulations as well as hold all necessary
operating and airworthiness authorizations and certificates. Should any
of these authorizations or certificates be modified, suspended or revoked,
our business could be materially adversely affected.
Other
Environmental: We are subject to various federal, state and local laws
relating to the protection of the environment. This includes the discharge
or disposal of materials and chemicals as well as the regulation of aircraft
noise administered by numerous state and federal agencies.
The Airport Noise and Capacity Act of 1990 recognizes the right of airport
operators with special noise problems to implement local noise abatement
procedures as long as those procedures do not interfere unreasonably
with the interstate and foreign commerce of the national air transportation
system. Certain airports, including those in San Diego and Long Beach,
California, have established restrictions to limit noise which can include
limits on the number of hourly or daily operations and the time of such
operations. These limitations are intended to protect the local noise-
sensitive communities surrounding the airport. Our scheduled flights
at Long Beach and San Diego are in compliance with the noise curfew
limits but on occasion when we experience irregular operations we may
violate these curfews. We have agreed to a payment structure with the
Long Beach City Prosecutor for any violations which we pay quarterly to
the Long Beach Public Library Foundation. The payment is based on the
number of infractions in the preceding quarter. This local ordinance has not
had, and we believe it will not have, a negative effect on our operations.
We use our “Jetting to Green” program on www.jetblue.com to educate
our customers and Crewmembers about environmental issues and to
inform the public about our environmental protection initiatives. Our most
recent corporate sustainability report for 2012 is available on our website
and addresses our environmental programs, including those aimed at