JetBlue Airlines 2013 Annual Report Download - page 23

JETBLUE AIRWAYS CORPORATION-2013Annual Report 17
PART I
ITEM1ARisk Factors
We rely on the third party providers of our current automated systems and
data center infrastructure for technical support. If the current provider were
to fail to adequately provide technical support for any one of our key existing
systems or if new or updated components were not integrated smoothly,
we could experience service disruptions, which, if they were to occur, could
result in the loss of important data, increase our expenses, decrease our
revenues and generally harm our business and reputation. Furthermore,
our automated systems cannot be completely protected against events
beyond our control, including natural disasters, computer viruses, other
security breaches, or telecommunications failures. Substantial or sustained
system failures could impact customer service and result in our customers
purchasing tickets from other airlines. We have implemented security
measures and change control procedures and have disaster recovery plans
as well as requiring our third party providers to have disaster recovery plans;
however, we cannot assure you these measures are adequate to prevent
disruptions, which, if they were to occur, could result in the loss of important
data, increase our expenses, decrease our revenues and generally harm
our business and reputation.
We may be impacted by increases in airport expenses relating to
infrastructure and facilities.
In order to operate within our current markets as well as continue to
grow in new markets, we must be able to obtain adequate infrastructure
and facilities within the relevant airports. This includes gates, check-in
facilities, operations facilities and landing slots (where applicable). The costs
associated to these airports are often negotiated on a short-term basis
with the relevant airport authority and we could be subject to increases
in costs on a regular basis with or without our approval.
In addition, our operations concentrated in older airports may be harmed
if the infrastructure at those airports fail to operate as expected due to
age, overuse or significant unexpected weather events.
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
maintain and transmit customer information, or those of service providers
or business partners, 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 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.
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, to some extent. 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 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. 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 analyses regarding JetBlue. In such an event, the price of our
common stock could decline, perhaps substantially.
We are subject to the risks of having a limited number of suppliers for
our aircraft, engines and a key component of our in-flight entertainment
system.
Our current dependence on three types of aircraft and engines for all of
our flights makes us vulnerable to significant problems associated with
the International Aero Engines, or IAE V2533-A5 engine on our Airbus
A321 fleet, the International Aero Engines, or IAE V2527-A5 engine on our
Airbus A320 fleet and the General Electric Engines CF-34-10 engine on
our EMBRAER 190 fleet. This could include design defects, mechanical
problems, contractual performance by the manufacturers, or adverse
perception by the public which would result in customer avoidance or in
actions by the FAA resulting in an inability to operate our aircraft. Carriers
operating a more diversified fleet are better positioned than we are to
manage such events.