SEC Company Response from JETBLUE AIRWAYS CORP (JBLU) (CIK 0001158463) (JBLU) — Oct 19, 2007
JETBLUE AIRWAYS CORP (JBLU) (CIK 0001158463)
Date: Oct. 19, 2007 · CIK: 0001158463 · Accession: 0000950136-07-007115
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-49728
Referenced dates: August 21, 2007
Letter
October 19, 2007
VIA EDGAR AND FACSIMILE
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street N.E., Stop 3561
Washington, D.C. 20549
Attention:
Daniel Morris, Esq.
Attorney Advisor
Re:
JetBlue Airways Corporation
Definitive 14A
Filed April 2, 2007
File No. 000-49728
Ladies and Gentlemen:
On behalf of JetBlue Airways Corporation, or JetBlue or the Company, set forth below are our responses to the comments of the Staff of the Division of Corporation Finance of the United States Securities and Exchange Commission, or the Staff, set forth in the Staff’s letter dated August 21, 2007, regarding the above-referenced filing. For your convenience, we have repeated each of the comments set forth in the Staff’s letter, followed by our responses to each comment.
Compensation Discussion and Analysis, page 16
1.
Please provide an expanded analysis of the elements and levels of compensation paid to the named executive officers. Throughout your Compensation Discussion and Analysis, and as to each compensation element, you should provide an analysis of how you arrived at and why you paid each particular level and form of compensation for 2006. For example, we noted limited analysis on pages 18 and 19 of how your long term equity awards were determined. In this regard, although your disclosure provides
Daniel Morris, Esq. United States Securities and Exchange Commission Division of Corporation Finance October 19, 2007 Page 2 of 13
general information relating to this form of compensation, provide substantive analysis and insight into how the committee makes actual payout determinations. Refer to paragraphs (b)(1)(iii) and (v) of Item 402 of Regulation S-K. Please revise your Compensation Discussion and Analysis such that investors are provided with an understanding of the specific factors considered by the committee in ultimately approving particular pieces of each named executive officer’s compensation package and describe the reasons why the committee believes that the amounts paid to each named executive officer are appropriate in light of the various items it considered in making specific compensation decisions. Refer to Item 402(b)(1)(v) of Regulation S-K.
We will provide the requested expanded disclosure in our future proxy statements.
As disclosed in our 2006 proxy statement, our named executive officers receive compensation in the form of base salary, annual (cash) incentive bonuses, long-term incentive awards, and perquisites. Through and including 2006, we did not have any retirement programs in place other than the Company’s 401(k) plan with a Company match component that is available to all of our crewmembers. We blend these elements in order to formulate compensation packages which provide competitive pay and reward the achievement of financial, operational and strategic objectives (which management sets forth annually in a company-wide document that we refer to as our “Flight Plan”).
Historically, at the executive officer level, our cash incentive bonuses have been based on the Company’s achievement of our corporate goals set forth in our Flight Plan. Stock options have been awarded annually in amounts that vary automatically according to a crewmember’s level within our organization, as approved by the Compensation Committee. In 2006, options were granted to our named executive officers in such predetermined amounts.
Since our inception, we have provided long-term incentive awards in the form of stock options because we and the Compensation Committee believed that the potential financial upside for a growth company, such as JetBlue, was a benefit desired by, and an appropriate reward to, our crewmembers. However, in light of our adoption of SFAS 123(R) in 2006, which significantly increased the amount our stock-based compensation expense, combined with our slower growth reported last year, we began investigating other types of long-term incentive awards, including potential grants of restricted stock units.
To understand our compensation philosophy, it is important to note that we believe that compensation is not the only reason we attract people to JetBlue. We strive to hire and retain talented people who are compatible with our corporate culture, interested and committed to our core values, and who are looking to make a contribution to our mission of Bringing Humanity Back to Air Travel in new and innovative ways. We and the
Daniel Morris, Esq. United States Securities and Exchange Commission Division of Corporation Finance October 19, 2007 Page 3 of 13
Compensation Committee believe that our innovative approach to a traditionally less than innovative industry and our unique culture has made JetBlue an attractive employer even if we do not offer premium industry compensation to our senior management.
In 2006, three of our named executive officers (David Neeleman, our Chairman and CEO, David Barger, our President and COO, and John Owen, our EVP, Supply Chain and IT) each had an existing employment agreement that provided for an annual salary of $200,000 and a guaranteed annual bonus of $75,000. These agreements are discussed in detail in our proxy statement under the heading “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table.” As a result of these contractually required compensation amounts, there was little discretion on the part of the Committee in approving compensation levels for these officers in 2006. With respect to their 2006 bonus payments, Mr. Neeleman and Barger each waived part of their contractually guaranteed bonus to bring this component of their compensation into line with the bonuses we paid to our other executive officers based on our performance against our Flight Plan.
Base salary and incentive (bonus) compensation for our remaining named executive officers is discussed below in response to Comment 3. The requested additional disclosure relating to long-term equity award payout determinations is provided below in response to Comment 5.
Role of Executive Officers in Compensation Decisions, page 17
2.
Your disclosure in this section is unclear as to which person or body determines the compensation of your executives, particularly your chief executive officer. Please expand your disclosure to discuss in greater detail the responsibilities of the compensation committee and board of directors’ and the interaction between these groups when setting compensation for the chief executive officer and other senior executives. Refer to Item 402(b)(2)(xv) of Regulation S-K.
We will clarify our disclosure in the future to discuss in greater detail the responsibilities of our Compensation Committee and our Board of Directors’ and the interaction between them when determining compensation for our Chief Executive Officer and other senior executives. We anticipate providing such revised disclosure in future proxy statements, similar to the following:
The Compensation Committee reviews and establishes, subject to ratification by the Board of Directors, the compensation arrangements for the Chief Executive Officer and the other executive officers of the Company,
Daniel Morris, Esq. United States Securities and Exchange Commission Division of Corporation Finance October 19, 2007 Page 4 of 13
including salaries, bonuses and grants of awards and administration of the Company’s equity incentive plans.
Base Salary, page 17
3.
The precise nature of your benchmarking activities is not clear. Please identify the companies, including those whose information is included in the proprietary data purchased by the company, considered in your internal review of the market position of your executive compensation practices. Further, if you have benchmarked different elements of your compensation against different benchmarking groups, please identify the companies that comprise each group. Refer to Item 402(b)(2)(xiv) of Regulation S-K. In addition, please disclose the actual percentiles for total compensation, and each benchmarked element of compensation, in 2006. This disclosure should include a discussion of where you target each element of compensation against the comparator companies and where actual payments fall within targeted parameters. To the extent actual compensation was outside a targeted percentile range, please explain why.
We will expand our disclosure in future proxy statements to discuss in greater detail our benchmarking activities along the lines requested, as applicable.
Historically, our benchmarking activities involving compensation of our most senior executives has been limited due primarily to two facts: first, that several of our most senior executives were compensated under employment contracts and second, that a significant percentage of our senior executive officers were also founders of JetBlue and holders of a significant amount of our common stock. As such, the Compensation Committee and they believed that each of them already had sufficient incentive to promote the Company’s growth and the achievement of its strategic goals and, therefore, it was not necessary for such officers to receive additional remuneration through increases in base salary or significant bonuses.
In 2006, we used broad-based compensation data purchased from Mercer Human Resources Consulting and Watson Wyatt involving approximately 5,000 companies to develop comparative data for review in connection with our officer compensation decisions. This information included job titles by industry and/or geographic region; minimum, mid-point and maximum salary ranges; and bonus payout ranges. We used this data to build salary and bonus-competitive ranges according to job specifications. We did not list the companies included in this compensation data in our proxy statement because we felt that, given the large number of companies included and the fact that we did not target any specific group of companies in our benchmarking activities, such level of detail could have been counterproductive and burdened the proxy statement with immaterial details. We compared the average of the compensation ranges derived from the survey data to the amounts paid to our officers in similar positions. We did not
Daniel Morris, Esq. United States Securities and Exchange Commission Division of Corporation Finance October 19, 2007 Page 5 of 13
calculate the percentage difference between our officers’ compensation and the average officer compensation for comparable positions from the survey data, nor did we benchmark against specific compensation elements in 2006. The Compensation Committee used this general market data, along with feedback from our Chief Executive Officer (relating to his evaluation of all of the other executive officers’ performance), and the Board’s assessment of each individual executive officer’s performance to determine the executive officers’ compensation adjustment.
The Compensation Committee and the Company are presently revising several aspects of our approach to compensation awards, including our use of comparator groups in connection with determination of salary, bonus and equity ranges and the form of equity to be granted, which will affect some elements of compensation for our executive officers in 2007. We anticipate these revisions will result in more comprehensive changes to our compensation practices in 2008. The Compensation Committee has not yet approved the specific changes, but they will be disclosed in our 2007 proxy statement (to the extent they are then finalized) with the additional level of detail outlined in the Staff’s comment.
4.
We note the discussion of the impact of individual performance on salary and merit-based increases. Please expand your Compensation Discussion and Analysis to include a more specific discussion and analysis of how the applicable elements of your compensation package are structured and implemented to reflect your named executive officer’s individual performance. Please disclose the elements of individual performance, both quantitative and qualitative, and specific contributions the compensation committee considered in its evaluation, and if applicable, how they were weighted and factored into specific compensation decisions. See Item 402(b)(2)(vii) of Regulation S-K.
In future proxy statement, we will expand our Compensation Discussion and Analysis to include a more specific discussion and analysis of how the applicable elements of our compensation package are structured and implemented to reflect our named executive officer’s individual performance, to the extent applicable.
In general, our executive officers are judged on overall corporate performance. The individual component of our executive compensation is discussed below.
As discussed in our response to Comment 1 above, in 2006, three of our named executive officers (Messrs. Neeleman, Barger and Owen) had employment agreements that provided for base salaries of $200,000 per year. None of them received raises above these amounts. For the remaining named executive officers (and all of our other salaried crewmembers), salaries and merit-based increases are determined on an annual basis through our internal review process. In 2006, this review process involved crewmembers below the level of Executive Vice President. Each year, crewmembers perform a self-
Daniel Morris, Esq. United States Securities and Exchange Commission Division of Corporation Finance October 19, 2007 Page 6 of 13
evaluation covering specific topics and concluding with their individual performance goals for the upcoming year. This evaluation is reviewed by each crewmember’s supervisor and, after consultation, the crewmember’s goals for the next year are approved. The overall assessment of crewmembers’ performance, including the degree to which they have achieved their personal goals, drives merit-based salary increases. The weight given to overall corporate performance versus individual goal achievement is subjective and largely determined by an individual’s supervisor and our People Department. Individual goals vary according to a crew member’s level of responsibility and the particular area of our operations in which he or she is employed. For example, in 2006, Mr. Anderson’s individual performance goals included helping to maintain the safety and reliability of our Airbus A320 aircraft and to integrate the new Embraer E190 aircraft into our fleet. The performance review process was conducted on an April to March cycle, with increases effective in April of the following year. Mr. Harvey was promoted to the Chief Financial Officer position in May 2006. His individual performance objectives were driven by the cost targets of the Company’s Return to Profitability, or RTP, plan announced during the year. These cost targets involved reducing the Company’s crewmember costs, corporate discretionary spending, supply chain costs and fuel expenditures.
As discussed below and on page 20 of our proxy statement, Mr. Harvey received a special bonus in 2006 based on his surpassing these objectives.
In addition, when reviewing executive officer compensation, the Compensation Committee may exercise its discretion with regard to compensation decisions for individual officers. The Compensation Committee does so by reviewing the officer’s performance over the past year in light of JetBlue’s corporate goals (articulated in the Flight Plan in 2006), the CEO’s evaluation of the individual officer, and the Committee members’ own interaction with and evaluation of the performance of that
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filename1.htm
October 19, 2007
VIA EDGAR AND FACSIMILE
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street N.E., Stop 3561
Washington, D.C. 20549
Attention:
Daniel Morris, Esq.
Attorney Advisor
Re:
JetBlue Airways Corporation
Definitive 14A
Filed April 2, 2007
File No. 000-49728
Ladies and Gentlemen:
On behalf of JetBlue Airways Corporation, or JetBlue or the Company, set forth below are our responses to the comments of the Staff of the Division of Corporation Finance of the United States Securities and Exchange Commission, or the Staff, set forth in the Staff’s letter dated August 21, 2007, regarding the above-referenced filing. For your convenience, we have repeated each of the comments set forth in the Staff’s letter, followed by our responses to each comment.
Compensation Discussion and Analysis, page 16
1.
Please provide an expanded analysis of the elements and levels of compensation paid to the named executive officers. Throughout your Compensation Discussion and Analysis, and as to each compensation element, you should provide an analysis of how you arrived at and why you paid each particular level and form of compensation for 2006. For example, we noted limited analysis on pages 18 and 19 of how your long term equity awards were determined. In this regard, although your disclosure provides
Daniel Morris, Esq.
United States Securities and Exchange Commission
Division of Corporation Finance
October 19, 2007
Page 2 of 13
general information relating to this form of compensation, provide substantive analysis and insight into how the committee makes actual payout determinations. Refer to paragraphs (b)(1)(iii) and (v) of Item 402 of Regulation S-K. Please revise your Compensation Discussion and Analysis such that investors are provided with an understanding of the specific factors considered by the committee in ultimately approving particular pieces of each named executive officer’s compensation package and describe the reasons why the committee believes that the amounts paid to each named executive officer are appropriate in light of the various items it considered in making specific compensation decisions. Refer to Item 402(b)(1)(v) of Regulation S-K.
We will provide the requested expanded disclosure in our future proxy statements.
As disclosed in our 2006 proxy statement, our named executive officers receive compensation in the form of base salary, annual (cash) incentive bonuses, long-term incentive awards, and perquisites. Through and including 2006, we did not have any retirement programs in place other than the Company’s 401(k) plan with a Company match component that is available to all of our crewmembers. We blend these elements in order to formulate compensation packages which provide competitive pay and reward the achievement of financial, operational and strategic objectives (which management sets forth annually in a company-wide document that we refer to as our “Flight Plan”).
Historically, at the executive officer level, our cash incentive bonuses have been based on the Company’s achievement of our corporate goals set forth in our Flight Plan. Stock options have been awarded annually in amounts that vary automatically according to a crewmember’s level within our organization, as approved by the Compensation Committee. In 2006, options were granted to our named executive officers in such predetermined amounts.
Since our inception, we have provided long-term incentive awards in the form of stock options because we and the Compensation Committee believed that the potential financial upside for a growth company, such as JetBlue, was a benefit desired by, and an appropriate reward to, our crewmembers. However, in light of our adoption of SFAS 123(R) in 2006, which significantly increased the amount our stock-based compensation expense, combined with our slower growth reported last year, we began investigating other types of long-term incentive awards, including potential grants of restricted stock units.
To understand our compensation philosophy, it is important to note that we believe that compensation is not the only reason we attract people to JetBlue. We strive to hire and retain talented people who are compatible with our corporate culture, interested and committed to our core values, and who are looking to make a contribution to our mission of Bringing Humanity Back to Air Travel in new and innovative ways. We and the
Daniel Morris, Esq.
United States Securities and Exchange Commission
Division of Corporation Finance
October 19, 2007
Page 3 of 13
Compensation Committee believe that our innovative approach to a traditionally less than innovative industry and our unique culture has made JetBlue an attractive employer even if we do not offer premium industry compensation to our senior management.
In 2006, three of our named executive officers (David Neeleman, our Chairman and CEO, David Barger, our President and COO, and John Owen, our EVP, Supply Chain and IT) each had an existing employment agreement that provided for an annual salary of $200,000 and a guaranteed annual bonus of $75,000. These agreements are discussed in detail in our proxy statement under the heading “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table.” As a result of these contractually required compensation amounts, there was little discretion on the part of the Committee in approving compensation levels for these officers in 2006. With respect to their 2006 bonus payments, Mr. Neeleman and Barger each waived part of their contractually guaranteed bonus to bring this component of their compensation into line with the bonuses we paid to our other executive
officers based on our performance against our Flight Plan.
Base salary and incentive (bonus) compensation for our remaining named executive officers is discussed below in response to Comment 3. The requested additional disclosure relating to long-term equity award payout determinations is provided below in response to Comment 5.
Role of Executive Officers in Compensation Decisions, page 17
2.
Your disclosure in this section is unclear as to which person or body determines the compensation of your executives, particularly your chief executive officer. Please expand your disclosure to discuss in greater detail the responsibilities of the compensation committee and board of directors’ and the interaction between these groups when setting compensation for the chief executive officer and other senior executives. Refer to Item 402(b)(2)(xv) of Regulation S-K.
We will clarify our disclosure in the future to discuss in greater detail the responsibilities of our Compensation Committee and our Board of Directors’ and the interaction between them when determining compensation for our Chief Executive Officer and other senior executives. We anticipate providing such revised disclosure in future proxy statements, similar to the following:
The Compensation Committee reviews and establishes, subject to ratification by the Board of Directors, the compensation arrangements for the Chief Executive Officer and the other executive officers of the Company,
Daniel Morris, Esq.
United States Securities and Exchange Commission
Division of Corporation Finance
October 19, 2007
Page 4 of 13
including salaries, bonuses and grants of awards and administration of the Company’s equity incentive plans.
Base Salary, page 17
3.
The precise nature of your benchmarking activities is not clear. Please identify the companies, including those whose information is included in the proprietary data purchased by the company, considered in your internal review of the market position of your executive compensation practices. Further, if you have benchmarked different elements of your compensation against different benchmarking groups, please identify the companies that comprise each group. Refer to Item 402(b)(2)(xiv) of Regulation S-K. In addition, please disclose the actual percentiles for total compensation, and each benchmarked element of compensation, in 2006. This disclosure should include a discussion of where you target each element of compensation against the comparator companies and where actual payments fall within targeted parameters. To the extent actual compensation was
outside a targeted percentile range, please explain why.
We will expand our disclosure in future proxy statements to discuss in greater detail our benchmarking activities along the lines requested, as applicable.
Historically, our benchmarking activities involving compensation of our most senior executives has been limited due primarily to two facts: first, that several of our most senior executives were compensated under employment contracts and second, that a significant percentage of our senior executive officers were also founders of JetBlue and holders of a significant amount of our common stock. As such, the Compensation Committee and they believed that each of them already had sufficient incentive to promote the Company’s growth and the achievement of its strategic goals and, therefore, it was not necessary for such officers to receive additional remuneration through increases in base salary or significant bonuses.
In 2006, we used broad-based compensation data purchased from Mercer Human Resources Consulting and Watson Wyatt involving approximately 5,000 companies to develop comparative data for review in connection with our officer compensation decisions. This information included job titles by industry and/or geographic region; minimum, mid-point and maximum salary ranges; and bonus payout ranges. We used this data to build salary and bonus-competitive ranges according to job specifications. We did not list the companies included in this compensation data in our proxy statement because we felt that, given the large number of companies included and the fact that we did not target any specific group of companies in our benchmarking activities, such level of detail could have been counterproductive and burdened the proxy statement with immaterial details. We compared the average of the compensation ranges
derived from the survey data to the amounts paid to our officers in similar positions. We did not
Daniel Morris, Esq.
United States Securities and Exchange Commission
Division of Corporation Finance
October 19, 2007
Page 5 of 13
calculate the percentage difference between our officers’ compensation and the average officer compensation for comparable positions from the survey data, nor did we benchmark against specific compensation elements in 2006. The Compensation Committee used this general market data, along with feedback from our Chief Executive Officer (relating to his evaluation of all of the other executive officers’ performance), and the Board’s assessment of each individual executive officer’s performance to determine the executive officers’ compensation adjustment.
The Compensation Committee and the Company are presently revising several aspects of our approach to compensation awards, including our use of comparator groups in connection with determination of salary, bonus and equity ranges and the form of equity to be granted, which will affect some elements of compensation for our executive officers in 2007. We anticipate these revisions will result in more comprehensive changes to our compensation practices in 2008. The Compensation Committee has not yet approved the specific changes, but they will be disclosed in our 2007 proxy statement (to the extent they are then finalized) with the additional level of detail outlined in the Staff’s comment.
4.
We note the discussion of the impact of individual performance on salary and merit-based increases. Please expand your Compensation Discussion and Analysis to include a more specific discussion and analysis of how the applicable elements of your compensation package are structured and implemented to reflect your named executive officer’s individual performance. Please disclose the elements of individual performance, both quantitative and qualitative, and specific contributions the compensation committee considered in its evaluation, and if applicable, how they were weighted and factored into specific compensation decisions. See Item 402(b)(2)(vii) of Regulation S-K.
In future proxy statement, we will expand our Compensation Discussion and Analysis to include a more specific discussion and analysis of how the applicable elements of our compensation package are structured and implemented to reflect our named executive officer’s individual performance, to the extent applicable.
In general, our executive officers are judged on overall corporate performance. The individual component of our executive compensation is discussed below.
As discussed in our response to Comment 1 above, in 2006, three of our named executive officers (Messrs. Neeleman, Barger and Owen) had employment agreements that provided for base salaries of $200,000 per year. None of them received raises above these amounts. For the remaining named executive officers (and all of our other salaried crewmembers), salaries and merit-based increases are determined on an annual basis through our internal review process. In 2006, this review process involved crewmembers below the level of Executive Vice President. Each year, crewmembers perform a self-
Daniel Morris, Esq.
United States Securities and Exchange Commission
Division of Corporation Finance
October 19, 2007
Page 6 of 13
evaluation covering specific topics and concluding with their individual performance goals for the upcoming year. This evaluation is reviewed by each crewmember’s supervisor and, after consultation, the crewmember’s goals for the next year are approved. The overall assessment of crewmembers’ performance, including the degree to which they have achieved their personal goals, drives merit-based salary increases. The weight given to overall corporate performance versus individual goal achievement is subjective and largely determined by an individual’s supervisor and our People Department. Individual goals vary according to a crew member’s level of responsibility and the particular area of our operations in which he or she is employed. For example, in 2006, Mr. Anderson’s individual performance goals included helping to maintain the safety and reliability of our Airbus A320 aircraft and to integrate the new Embraer E190 aircraft into our fleet. The performance review process was conducted on an April to March cycle, with increases effective in April of the following year. Mr. Harvey was promoted to the Chief Financial Officer position in May 2006. His individual performance objectives were driven by the cost targets of the Company’s Return to Profitability, or RTP, plan announced during the year. These cost targets involved reducing the Company’s crewmember costs, corporate discretionary spending, supply chain costs and fuel expenditures.
As discussed below and on page 20 of our proxy statement, Mr. Harvey received a special bonus in 2006 based on his surpassing these objectives.
In addition, when reviewing executive officer compensation, the Compensation Committee may exercise its discretion with regard to compensation decisions for individual officers. The Compensation Committee does so by reviewing the officer’s performance over the past year in light of JetBlue’s corporate goals (articulated in the Flight Plan in 2006), the CEO’s evaluation of the individual officer, and the Committee members’ own interaction with and evaluation of the performance of that