JetBlue Airlines 2013 Annual Report Download - page 58

JETBLUE AIRWAYS CORPORATION-2013Annual Report52
PART II
ITEM 8Financial Statements and Supplementary Data
The Credit Facility includes covenants that require us to maintain certain
minimum balances in unrestricted cash, cash equivalents, and unused
commitments available under all revolving credit facilities. In addition
the covenants restrict our ability to incur additional indebtedness, issue
preferred stock or pay dividends. As of December 31, 2013, we did not
have an outstanding balance under our credit facilities.
American Express Unsecured Revolving Credit Facility
In September 2011, we entered into a corporate purchasing line with
American Express, which allowed us to borrow up to a maximum of $125
million. Concurrent to entering into the above agreement with Citibank,
N.A. for the Credit Facility, we terminated the unsecured revolving credit
facility with American Express in April 2013.
NOTE 3 Operating Leases
We lease aircraft, all of our facilities at the airports we serve, office space
and other equipment. These leases have varying terms and conditions,
with some having early termination clauses which we determine to be
the lease expiration date. The length of the lease depends upon the type
of asset being leased, with the latest lease expiring in 2035. Total rental
expense for all operating leases in 2013, 2012 and 2011 was $295 million,
$284 million and $269 million, respectively. We have approximately $31
million in assets that serve as collateral for letters of credit related to certain
of our leases, which are included in restricted cash.
At December 31, 2013, 60 of the 194 aircraft in our fleet were leased under
operating leases, with lease expiration dates ranging from 2016 to 2026.
Five of the 60 aircraft operating leases have variable rate rent payments
based on LIBOR. Leases for 46 of our aircraft can generally be renewed
at rates based on fair market value at the end of the lease term for one or
two years. We have purchase options in 45 of our aircraft leases at the
end of the lease term at fair market value and a one-time option during
the term at fixed amounts that were expected to approximate fair market
value at lease inception.
During 2013, we extended the leases on eight Airbus A320 aircraft that
were previously set to expire starting from 2014. These extensions resulted
in an additional $42 million of lease commitments through 2022. During
2012, we extended the leases on three Airbus A320 aircraft that were
previously set to expire in 2013. These extensions resulted in an additional
$24 million of lease commitments through 2018. During 2010, we leased
six used Airbus A320 aircraft from a third party, each with a separate six
year operating lease term.
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, 2013, are as follows (in millions):
Aircraft Other Total
2014 $ 141 $ 64 $ 205
2015 150 55 205
2016 90 50 140
2017 77 44 121
2018 75 39 114
Thereafter 271 336 607
TOTAL MINIMUM OPERATING LEASE PAYMENTS $ 804 $ 588 $ 1,392
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 variable interest entities
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 $695 million as of December 31, 2013
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 T5i, an expansion to
T5 that will be used as an international arrival facility. An extension of the
original T5 lease was executed in 2013 which incorporates approximately
19 acres of additional space for the T5i facilities. The construction of T5i
is expected to be completed in late 2014. T5i is anticipated to include six
international arrival gates comprised of three new and three converted from
T5 as well as an international arrivals hall with full U.S. Customs and Border
Protection services. The lease terms, as amended, for our terminal lease
at JFK ends on the 28th anniversary of the date of beneficial occupancy of
T5i, which is expected in late 2014. We have an early termination option in
2033 for our terminal lease. 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. Our capital expenditure
to date relating to T5i is approximately $88 million, of which approximately
$71 million was incurred in 2013.