JetBlue Airlines 2015 Annual Report Download - page 35

JETBLUE AIRWAYS CORPORATION-2015Annual Report 31
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Although we experienced revenue growth in 2015, this trend may not
continue. We expect our expenses to continue to increase as we acquire
additional aircraft, as our fleet ages and as we increase the frequency of
flights in existing markets as well as enter into new markets. Accordingly,
the comparison of the financial data for the quarterly periods presented
may not be meaningful. In addition, we expect our operating results to
fluctuate significantly from quarter-to-quarter in the future as a result of
various factors, many of which are outside our control. Consequently, we
believe quarter-to-quarter comparisons of our operating results may not
necessarily be meaningful and you should not rely on our results for any
one quarter as an indication of our future performance.
Liquidity and Capital Resources
The airline business is capital intensive. Our ability to successfully execute
our profitable growth plans is largely dependent on the continued availability
of capital on attractive terms. In addition, our ability to successfully operate
our business depends on maintaining sufficient liquidity. We believe we
have adequate resources from a combination of cash and cash equivalents,
investment securities on-hand and two available lines of credit. Additionally,
as of December31, 2015, we had 61 unencumbered aircraft and 33
unencumbered spare engines which we believe could be an additional
source of liquidity, if necessary.
We believe a healthy liquidity position is a crucial element of our ability
to weather any part of the economic cycle while continuing to execute
on our plans for profitable growth and increased returns. Our goal is to
continue to be diligent with our liquidity, maintaining financial flexibility and
allowing for prudent capital spending.
As of December31, 2015, we had unrestricted cash and cash equivalents
of $318 million and short-term investments of $558 million. We believe
our current level of unrestricted cash, cash equivalents and short-term
investments of approximately 14% of trailing twelve months revenue,
combined with our approximately $600 million in available lines of credit
and portfolio of unencumbered assets, provides us with a strong liquidity
position and the potential for higher returns on cash deployment. We
believe we have taken several important actions during 2015 in solidifying
our strong balance sheet and overall liquidity position.
Our highlights for 2015 included:
•
Reduced our overall debt balance by $390 million, including $132 million
of debt prepayments related to aircraft and facilities.
• Increased the number of unencumbered aircraft from 39 as of
December31, 2014, to 61 as of December31, 2015. This was principally
accomplished by paying cash for the delivery of 12 Airbus A321 aircraft,
buying out the leases on six of our aircraft, and prepaying debt.
• As a result of these 2015 highlights, our net debt to earnings before
interest, taxes, depreciation, amortization and rent (EBITDAR) ratio
improved from 2.5x in 2014 to 1.1x in 2015.
Analysis of Cash Flows
We had cash and cash equivalents of $318 million as of December 31, 2015.
This compares to $341 million and $225 million as of December 31, 2014
and 2013, respectively. We held both short and long term investments in
2015, 2014 and 2013. Our short-term investments totaled $558 million
as of December 31, 2015 compared to $367 million and $402 million as
of December 31, 2014 and 2013, respectively. Our long-term investments
totaled $49 million as of December31, 2015 compared to $60 million and
$114 million as of December 31, 2014 and 2013, respectively.
Operating Activities
Cash flows provided by operating activities totaled $1,598 million in 2015
compared to $912 million in 2014 and $758 million in 2013. There was
a $686 million increase in cash flows from operating activities in 2015
compared to 2014. During 2015 we saw a 9.5% increase in capacity, a
0.8% increase in average fares and a 35.7% decrease in the price of fuel
which all helped to improve operating cash flows. The $154 million increase
in cash flows from operations in 2014 compared to 2013 was primarily a
result of a 2% increase in average fares, a 5% increase in capacity and a
decrease of 5% in fuel prices. We additionally recognized a gain on sale
of our subsidiary, LiveTV, of $241 million during 2014. As of December31,
2015, our unrestricted cash, cash equivalents and short-term investments
as a percentage of trailing twelve months revenue was approximately
14%. We rely primarily on cash flows from operations to provide working
capital for current and future operations.
Investing Activities
During 2015, capital expenditures related to our purchase of flight equipment
included $104 millionfor flight equipment deposits, $450 million for the
purchase of 12 new Airbus A321 aircraft and $110 million for the buyout of
six aircraft leases, $120million for spare part purchases, and $29 million for
flight equipment work-in-progress. Other property and equipment capital
expenditures also included ground equipment purchases and facilities
improvements for $128 million. Investing activities also included the net
purchase of $187 million in investment securities.
During 2014, capital expenditures related to our purchase of flight equipment
included $127million for flight equipment deposits, $298 million for the
purchase of seven new Airbus A321 aircraft, $33million for spare part
purchases, $79 million for flight equipment work-in-progress, and $1 million
relating to other activities. Capital expenditures also included the purchase of
the Slots at Reagan National for $75 million, other property and equipment
including ground equipment purchases and facilities improvements for
$224 million and LiveTV in-flight entertainment equipment inventory for
$20 million. Investing activities also included the proceeds from the sale
of LiveTV for $393 million and the net proceeds of $81 million from the
sale of investment securities.
During 2013, the capital expenditure for seven new Embraer E190 aircraft,
three new Airbus A320 aircraft and four new Airbus A321 aircraft was $365
million. We additionally paid $22 million for flight equipment deposits and
$54 million for spare parts. Capital expenditures for other property and
equipment, including ground equipment purchases, facilities improvements
and LiveTV in-flight entertainment equipment inventory were $196 million.
LiveTV sold its investment in the Airfone business with proceeds of $8
million. Investing activities also include the net sale of $161 million in
investment securities.
We currently anticipate 2016 capital expenditures to be between $820 million
and $920 million, including approximately $670 million to $720 million for
aircraft and predelivery deposits. The remaining capital expenditures of
approximately $150 million to $200 million relate to non-aircraft projects
such as the customer technology refresh, the expansion of our facilities
at Boston and updates to our IT infrastructure.
Financing Activities
Financing activities during 2015 consisted ofthe scheduled repayment
of $196 million relating to debt and capital lease obligations. We prepaid
$100 million of outstanding principal relating to 10 Airbus A320 aircraft. As
a result,fouraircraft became unencumbered andsixhave lower principal
balances. We also prepaid the outstanding balance of $32 million on a
special facility revenue bond for JFK that was issued by the New York
City Industrial Development Agency in December 2006. In addition, we
acquired $241 million in treasury shares of which $150 million related
to our accelerated share repurchase in June 2015. During the period,