JetBlue Debt

[skirt]

JetBlue experts,

This is not another one of those "does jB pay its bills" questions!!! I already know all about that one...no urban legends there.

I have done a bunch of research, but I still can't figure out how the debt works out. I know half the planes are leased from Airbus, half are bought outright, then leased back to financers. Why do all planes have payments? Is that normal? I know there are huge tax advantages. What are the downsides, if any. What do the competitors do? What is the debt to equity ratio, and what is the equity in. So much is "off the books" leasing, that it is too hard for me to figure out. What is the average monthly lease payments?

I am just trying to get my hands around the financials, so I understand the company better. So much of the leasing information is NOT in the SEC financials. I know David Neeleman is rabid about saving and retirement, so it would seem that his philosophy should carry over to the corporation.

Thanks

Skirt

 

[dgs]

Skirt -- Sounds like an excellent question for Dave Barger at your interview. He's about 100 times smarter than I am and can give you the straight scoop. We'll see you there. Good luck.

In the mean time, I'll try to give you my simplistic answer to one part of your question. We have to make payments to either the bank that has the financing or the leasing company who owns the airplane. Last count was about 50-50 between own vs. leased.

 

[Blue Dude]

Looking at the 1Q numbers, it seems that the only logical pigeonholes for aircraft expense would be aircraft rent and depreciation and amortization. Of course that last item probably includes other items than just aircraft, like LiveTV and other equipment, so there is no direct measurement. Aircraft rent is pretty specific, though, and it was 13.079 million, up only 38%. That fits since most aircraft acquired since 1Q 2002 were owned. Depreciation and amortization were 10.322 million, up 119%, versus a 74% increase in average aircraft operating, so that's probably where they put it.

dgs is right, though, ask the boss. He will have that kind of detail for you. Good luck tomorrow!

 

[skirt]

Dgs and Blue Dude,

Thanks! I'm going to scope out the scene tommorrow and see if I can catch Dave Barger for a moment to ask. I think it is great that he shows up for these gigs. I do worry that it is too heavy of a question to ask in an interview forum. I almost would rather dig up some accounting books and try to learn the terminology on my own. In any case, whenever I do figure it out, I'll let you know.

I do know that the planes are 50/50 owned/leased, and that whenever possible, Neeleman prefers to buy versus lease. However, then the owned planes are leased back.

I am wondering if that is like buying your house with cash, then putting a home equity line on it for full value and drawing it down, you can write off the depreciation and the lease. Still haven't figured out why its better than just keeping it debt free. Obviously, I am no accountant. I do have faith in Neeleman's business acumen and savings style, so I am not questioning the wisdom, just trying to understand it.

Also, I have always heard the term "off book lease" which, to me seems like some of the leases are not in the 13 mill. rent listed on the 10K.

I have to figure out how to ask the question without it sounding like the usual "gee how come JB doesn't pay bills?" question that some people keep asking and asking.

As an aside....very cool flight out to JFK today. Big batch of guys here, all seem to be very nice. Hope JB will hire us all.

Skirt