JetBlue Airways (NASDAQ:JBLU) started 2017 in disappointing fashion, as earnings plunged by 59% in the first quarter. However, management remained optimistic that results would improve in short order.

Indeed, JetBlue bounced back in a big way in the second quarter, boosted by the favorable timing of Easter. As a result, it logged double-digit increases in revenue and earnings last quarter. Furthermore, its outlook for the rest of the year is solid.

JetBlue Airways results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$1.84 billion

$1.64 billion

12.1%

Total unit revenue

12.93 cents

12.09 cents

7%

Cost per available seat mile excluding fuel

8.16 cents

7.76 cents

5.1%

Net income

$211 million

$180 million

16.7%

Pre-tax margin

18%

17.6%

N/A

Adjusted EPS

$0.64

$0.53

21%

Data source: JetBlue Airways Q2 earnings release. Chart by author.

What happened with JetBlue Airways this quarter?

Following more than a year of sometimes steep unit-revenue declines, JetBlue got revenue per available seat mile (RASM) growing again last quarter. Entering the quarter, management had expected RASM to rise 3%-6% year over year. Ultimately, the company reported a phenomenal 7% year-over-year RASM gain for the quarter.

JetBlue attributed 1.25 percentage points of this increase to two discrete factors: a higher-than-normal number of flight cancellations during Q2 and incentive payments from its credit card partnership. Still, even excluding these factors, RASM would have reached the high end of the company's guidance range.

A JetBlue Airways plane

JetBlue Airways' unit revenue surged 7% last quarter. Image source: JetBlue Airways.

Meanwhile, non-fuel unit costs rose 5.1% last quarter and the average jet fuel-price paid jumped by 12.3%. While those were both significant increases, the non-fuel unit-cost increase was below the midpoint of JetBlue's guidance range, and fuel costs came in well below management's original forecast. As a result, JetBlue's net income rose 16.7% year over year in Q2, and earnings per share skyrocketed by about 21%.

What management had to say

Not surprisingly, JetBlue's management was very pleased with the company's performance last quarter. "Our second quarter unit revenue exceeded our initial guidance as a result of our targeted revenue initiatives and a solid demand environment," said JetBlue CEO Robin Hayes.

Hayes also noted that JetBlue's strong second-quarter results kept the company on a path to produce margins above the industry average. CFO Steve Priest echoed those comments, stating:

We are committed to driving improved margins and we are making good progress as we execute our structural cost program. We succeeded in controlling unit cost pressures during the quarter despite a lower completion factor and will continue to bring intensity and discipline to the effort.

Looking forward

JetBlue's outlook for the third quarter isn't quite as strong as its stellar second-quarter results. The company expects to keep RASM growing, but at a much slower rate, primarily due to tougher year-over-year comparisons and less favorable timing of holidays. The midpoint of JetBlue's guidance range calls for a 1% RASM increase this quarter.

On the bright side, non-fuel unit-cost growth will moderate substantially in the second half of the year. For the third quarter, JetBlue expects a 1.5%-3.5% increase compared to a 4.2% rise in the first half, as a whole. Furthermore, based on the company's full-year guidance, non-fuel unit-cost growth should be close to zero in the fourth quarter.

JetBlue's guidance implies that earnings per share may rise again in the third quarter, but at a much slower rate. Still, by comparison to JetBlue's steep first-quarter earnings plunge, this would be a very solid result.

Adam Levine-Weinberg owns shares of JetBlue Airways and is long January 2019 $10 calls on JetBlue Airways. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.