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Financial Derivative Instruments and Risk Management | 12 Months Ended
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Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Derivative Instruments and Risk Management | Financial Derivative Instruments and Risk Management As part of our risk management techniques, we periodically purchase over the counter energy derivative instruments and enter into fixed forward price agreements, or FFPs, to manage our exposure to the effect of changes in the price of aircraft fuel. Prices for the underlying commodities have historically been highly correlated to aircraft fuel, making derivatives of them effective at providing short-term protection against volatility in average fuel prices. We also periodically enter into jet fuel basis swaps for the differential between heating oil and jet fuel, to further limit the variability in fuel prices at various locations. We do not hold or issue any derivative financial instruments for trading purposes. Aircraft fuel derivatives We attempt to obtain cash flow hedge accounting treatment for each fuel derivative that we enter into. This treatment is provided for under the Derivatives and Hedging topic of the Codification which allows for gains and losses on the effective portion of qualifying hedges to be deferred until the underlying planned jet fuel consumption occurs, rather than recognizing the gains and losses on these instruments into earnings during each period they are outstanding. The effective portion of realized aircraft fuel hedging derivative gains and losses is recognized in aircraft fuel expense in the period the underlying fuel is consumed. Ineffectiveness occurs, in certain circumstances, when the change in the total fair value of the derivative instrument differs from the change in the value of our expected future cash outlays for the purchase of aircraft fuel. ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, eliminated the requirement for companies to separately measure and record ineffectiveness after initial qualification. If a hedge does not qualify for hedge accounting, the periodic changes in its fair value are recognized in interest income and other. When aircraft fuel is consumed and the related derivative contract settles, any gain or loss previously recorded in other comprehensive income is recognized in aircraft fuel expense. All cash flows related to our fuel hedging derivatives are classified as operating cash flows. Our current approach to fuel hedging is to enter into hedges on a discretionary basis without a specific target of hedge percentage needs. We view our hedge portfolio as a form of insurance to help mitigate the impact of price volatility and protect us against severe spikes in oil prices, when possible. The following table illustrates the approximate hedge percentages of our projected 2020 fuel usage by quarter as of December 31, 2019, related to our outstanding fuel hedging contracts that were designated as cash flow hedges for accounting purposes.
|  | Jet fuel call option spread agreements |  | Total
First Quarter 2020 |  | 20 | % |  | 20 | %
Second Quarter 2020 |  | 19 | % |  | 19 | %
Third Quarter 2020 |  | — | % |  | — | %
Fourth Quarter 2020 |  | — | % |  | — | %
The table below reflects quantitative information related to our derivative instruments and where these amounts are recorded in our financial statements (dollar amounts in millions):
|  | As of December 31,
|  | 2019 |  | 2018
Fuel derivatives |  |  |  |
Asset fair value recorded in prepaid expenses and other(1) |  | $ | 8 |  |  | $ | — |
Longest remaining term (months) |  | 6 |  |  | 6 |
Hedged volume (barrels, in thousands) |  | 2,112 |  |  | 756 |
Estimated amount of existing (gains) losses expected to be reclassified into earnings in the next 12 months |  | $ | (2 | ) |  | $ | 4 |
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Fuel derivatives |  |  |  |  |  |
Hedge effectiveness (gains) losses recognized in aircraft fuel expense |  | $ | 5 |  |  | $ | 2 |  |  | $ | (15 | )
Hedge (gains) losses on derivatives recognized in comprehensive income |  | $ | (1 | ) |  | $ | 6 |  |  | $ | 6 |
Percentage of actual consumption economically hedged |  | 6 | % |  | 4 | % |  | 10 | %
(1) | Gross asset of each contract prior to consideration of offsetting positions with each counterparty and prior to impact of collateral paid.
Any outstanding derivative instrument exposes us to credit loss in connection with our fuel contracts in the event of nonperformance by the counterparties to the agreements, but we do not expect any of our counterparties will fail to meet their obligations. The amount of such credit exposure is generally the fair value of our outstanding contracts for which we are in a receivable position. To manage credit risks we select counterparties based on credit assessments, limit our overall exposure to any single counterparty, and monitor the market position with each counterparty. Some of our agreements require cash deposits from either JetBlue or our counterparty if market risk exposure exceeds a specified threshold amount. We have master netting arrangements with our counterparties allowing us the right of offset to mitigate credit risk in derivative transactions. The financial derivative instrument agreements we have with our counterparties may require us to fund all, or a portion of, outstanding loss positions related to these contracts prior to their scheduled maturities. The amount of collateral posted, if any, is periodically adjusted based on the fair value of the hedge contracts. Our policy is to offset the liabilities represented by these contracts with any cash collateral paid to the counterparties. There were no offsetting derivative instruments as of December 31, 2019 and 2018.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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