JetBlue Airlines 2014 Annual Report Download - page 42

JETBLUE AIRWAYS CORPORATION-2014Annual Report36
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
We have operating lease obligations for 60 aircraft with lease terms that
expire between 2016 and 2026. Five of these leases have variable-rate
rent payments which adjust semi-annually based on LIBOR. Our aircraft
lease agreements contain termination provisions which include standard
maintenance and return conditions. Our policy is to record these lease
return conditions when they are probable and the costs can be estimated.
We also lease airport terminal space and other airport facilities in each
of our markets, as well as office space and other equipment. We have
approximately $33 million of restricted assets pledged under standby
letters of credit related to certain of our leases which will expire at the end
of the related leases. As of December 31, 2014, the average age of our
operating fleet was 7.8 years.
We modified our long-term order book in November 2014 and our firm aircraft order as of December 31, 2014 is as follows:
Year
Airbus
A320 neo
Airbus
A321
Airbus
A321 neo
EMBRAER
190 Total
2015 — 12 — — 12
2016 — 10 — — 10
2017 — 10 — — 10
2018 — 1 6 — 7
2019 — — 15 — 15
2020 6 — 9 10 25
2021 16 — — 7 23
2022 3 — 13 7 23
2023 — — 2 — 2
TOTAL 25 33 45 24 127
Committed expenditures for our firm aircraft and spare engines include
estimated amounts for contractual price escalations and predelivery
deposits. We expect to meet our predelivery deposit requirements for
our aircraft by paying cash or by using short-term borrowing facilities
for deposits required six to 24 months prior to delivery. Any predelivery
deposits paid by the issuance of notes are fully repaid at the time of
delivery of the related aircraft.
Our Terminal at JFK, T5, is governed by a lease agreement we entered
into with the PANYNJ in 2005. We are responsible for making various
payments under the lease. This includes ground rents for the terminal
site which began at the time of the lease execution in 2005 and facility
rents commenced in October 2008 upon our occupancy of T5. The
facility rents are based on the number of passengers enplaned out of
the terminal, subject to annual minimums. The PANYNJ reimbursed us
for construction costs of this project in accordance with the terms of the
lease, except for approximately $76 million in leasehold improvements
provided by us. In 2013, we amended this lease to include additional
ground space for our international arrivals facility, T5i, which we opened
in November 2014. For financial reporting purposes, the T5 project is
being accounted for as a financing obligation, with the constructed
asset and related liability being reflected on our consolidated balance
sheets. The T5i project was accounted for at cost. Minimum ground
and facility rents for this terminal totaling $833 million are included in
the commitments table above as lease commitments and financing
obligations.
We enter into individual employment agreements with each of our
non-unionized FAA-licensed Crewmembers, inspectors and air traffic
controllers. Each employment agreement is for a term of five years
and automatically renews for an additional five-year term unless the
Crewmember is terminated for cause or the Crewmember elects not to
renew it. Pursuant to these agreements, these Crewmembers can only
be terminated for cause. In the event of a downturn in our business
requiring a reduction in flying and related work hours, we are obligated to
pay these Crewmembers a guaranteed level of income and to continue
their benefits. As we are not currently obligated to pay this guaranteed
income and benefits, no amounts related to these guarantees are
included in the contractual obligations table above. Our pilots voted to
be represented by ALPA during 2014.
Off-Balance Sheet Arrangements
None of our operating lease obligations are reflected on our consolidated
balance sheets. Although some of our aircraft lease arrangements are
with variable interest entities, as defined by the Consolidations topic
of the Codification, none of them require consolidation in our financial
statements. The decision to finance these aircraft through operating leases
rather than through debt was based on an analysis of the cash flows and
tax consequences of each financing alternative and a consideration of
liquidity implications. We are responsible for all maintenance, insurance
and other costs associated with operating these aircraft. However, we
are not obligated to provide any residual value or other guarantees to
our lessors.
We have determined that we hold a variable interest in, but are not the
primary beneficiary of, certain pass-through trusts. The beneficiaries of
these pass-through trusts are the purchasers of equipment notes issued
by us to finance the acquisition of aircraft. Each trust maintains a liquidity
facility whereby a third party agrees to make payments sufficient to pay
up to 18 months of interest on the applicable certificates if a payment
default occurs.
We have also made certain guarantees and indemnities to other unrelated
parties that are not reflected on our consolidated balance sheets, which
we believe will not have a significant impact on our results of operations,
financial condition or cash flows. We have no other off-balance sheet
arrangements. See Notes 2, 3 and 12 to our consolidated financial
statements for a more detailed discussion of our variable interests and
other contingencies, including guarantees and indemnities.