JetBlue Airlines 2013 Annual Report Download - page 64

JETBLUE AIRWAYS CORPORATION-2013Annual Report58
PART II
ITEM 8Financial Statements and Supplementary Data
NOTE 10 Employee Retirement Plan
We sponsor a retirement savings 401(k) defined contribution plan, or the
Plan, covering all of our employees. In 2013, we matched 100% of our
employee contributions up to 5% of their compensation. The contributions
vest over five years, measured from an employee’s hire date. Participants
are immediately vested in their voluntary contributions.
Another component of the Plan is a Company discretionary contribution
of 5% of eligible non-management employee compensation, which we
refer to as Retirement Plus. Retirement Plus contributions vest over three
years, measured from an employee’s hire date. Our non-management
employees are also eligible to receive profit sharing, calculated as 15%
of adjusted pre-tax income reduced by the Retirement Plus contributions
discussed above. Certain FAA-licensed employees receive an additional
contribution of 3% of eligible compensation, which we refer to as Retirement
Advantage. Total Retirement Plus, Retirement Advantage, 401(k) company
match and profit sharing expensed in 2013, 2012 and 2011 were $94
million, $73 million and $61 million, respectively.
NOTE 11 Commitments
Flight Equipment Commitments
As of December 31, 2013, our firm aircraft orders consisted of three Airbus
A320 aircraft, 49 Airbus A321 aircraft, 30 Airbus A320 new engine option
(A320neo), 30 Airbus A321neo, 24 EMBRAER 190 aircraft and 10 spare
engines scheduled for delivery through 2022. Committed expenditures for
these aircraft and related flight equipment, including estimated amounts for
contractual price escalations and predelivery deposits, will be approximately
$500 million in 2014, $660 million in 2015, $785 million in 2016,
$835 million in 2017, $855 million in 2018 and $3,235 billion thereafter.
We are scheduled to receive nine new Airbus A321 in 2014, four of which
have committed financing. We plan to purchase the remaining 2014
scheduled deliveries with cash.
In December 2012, we prepaid $200 million for certain 2013 aircraft deliveries
and deposits on future aircraft deliveries in exchange for favorable pricing
terms. In 2012 we amended our Embraer purchase agreement several
times. In July 2012 we accelerated the delivery of one aircraft to 2013,
from 2014 and in December 2012 we accelerated the delivery of four
aircraft from 2018 to 2013. In October 2013 we amended our purchase
agreements with both Embraer and Airbus. We deferred 24 EMBRAER
190 aircraft from 2014-2018 to 2020-2022. We converted eight existing
A320 orders to A321 orders and 10 A320neo orders to A321neo orders.
We incrementally ordered 15 A321 aircraft for delivery between 2015
and 2017 and 20 A321neo aircraft for delivery between 2018 and 2020.
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 for 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, 2013, we had approximately $25 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.
Our commitments also include those of LiveTV, which has several
noncancelable long-term purchase agreements with its suppliers to
provide equipment to be installed on its customers’ aircraft, including
JetBlue’s aircraft. At December 31, 2013, committed expenditures to
these suppliers were approximately $45 million in 2014, and $2 million in
each of 2015 through 2017.
In March 2011, we executed a seven year agreement, subject to an
optional three year extension, with ViaSat Inc. to develop and introduce
in-flight broadband connectivity technology on our aircraft. Committed
expenditures under this agreement as of December 31, 2013 include a
minimum of $20 million through 2020 and an additional $25 million for
minimum hardware and software purchases.
We enter into individual employment agreements with each of our FAA-
licensed employees, which include pilots, dispatchers, technicians and
inspectors as well as air traffic controllers. Each employment agreement
is for a term of 5 years and automatically renews for an additional five-
year term unless either the employee 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 employees 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 employees a guaranteed
level of income and to continue their benefits if they do not obtain other
aviation employment. None of our employees are covered by collective
bargaining agreements.
NOTE 12 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 20 years.