A few years ago, JetBlue Airways (JBLU -0.66%) seemed to have unstoppable momentum. Profit soared in 2015 and 2016, as the successful rollout of Mint -- JetBlue's premium service -- coincided with a sharp drop in the price of jet fuel. Adjusted earnings per share peaked at $2.22 in 2016, up from just $0.70 in 2014.

Unfortunately, profitability has plunged since then. Analysts currently expect JetBlue to post adjusted EPS of $1.50 in 2018, despite receiving a 20%-plus earnings lift from tax reform.

Yet JetBlue's management insists that this is just a temporary slump. At its investor day on Tuesday, JetBlue revealed aggressive earnings growth targets for the next two years. Even in management's downside scenario, the company would achieve record EPS by 2020.

Taking action to drive better performance

JetBlue executives have made it clear that they aren't satisfied with the company's recent earnings results. Luckily, there are numerous major initiatives in the works to drive earnings growth over the next two to three years.

First, JetBlue unveiled a structural cost reduction program in late 2016. This program is on track to deliver $250 million to $300 million of annualized cost savings by the end of 2020. These cost cuts will really shine through in 2020, by which point other cost headwinds will have faded. Management estimates that incremental cost savings (relative to 2018) will add $0.30 to $0.40 to JetBlue's EPS in 2020.

Second, way back in 2014, JetBlue announced a plan to boost earnings by adding seats to each of its 130 Airbus A320s. The reconfigurations were supposed to be done by now; instead, they just got started this year. The resulting efficiency improvement should increase 2020 EPS by $0.10 to $0.15, with a further EPS gain to be realized in 2021.

A JetBlue Airways plane preparing to land

JetBlue is adding 12 seats to each of its A320s. Image source: JetBlue Airways.

Third, JetBlue recently cut a slew of underperforming flights at its Long Beach, California, focus city. Most of that capacity was redeployed on transcontinental routes that are likely to be much more profitable. Management sees additional opportunities to reallocate capacity to stronger markets. This could lift EPS by $0.30 to $0.40 by 2020.

Fourth, JetBlue President Joanna Geraghty announced to employees last week that the carrier will start offering a "basic economy"-type fare in late 2019. This will complement increases to bag fees, change fees, and pet fees that were implemented a little over a month ago. JetBlue expects these changes -- along with rising ancillary revenue, particularly from its loyalty program -- to improve EPS by $0.35 to $0.55 by 2020.

Great expectations

As you can see, each of these four "building blocks" represents a substantial opportunity to increase EPS by 2020. (JetBlue also highlighted share repurchases as a fifth building block, but buybacks will have a smaller impact than the other four initiatives over the next two years.) Together, they could have a transformative impact on JetBlue's profitability.

Indeed, JetBlue's best-case scenario calls for EPS of $2.75 in 2020. In an optimistic scenario with stronger-than-expected GDP growth or lower oil prices, EPS could double to $3.00. The downside scenario that JetBlue presented looks quite good as well: With weaker GDP growth or higher oil prices, executives still expect EPS of at least $2.50 in 2020.

These are clearly aggressive targets. Furthermore, oil prices have risen significantly in the past few weeks, making JetBlue's oil price forecasts look somewhat optimistic. That said, JetBlue stock currently trades for less than $20, suggesting that if the carrier can get close to the low end of the 2020 target range, it would comfortably surpass investors' expectations.

There's plenty of upside beyond 2020

Even if JetBlue reaches its EPS target range in 2020, it will not have exhausted its earnings improvement opportunities. As noted earlier, some of the benefits of the structural cost reduction program and the A320 cabin reconfiguration project won't be felt until 2021.

Moreover, JetBlue expects a massive earnings benefit from replacing its E190 fleet with Airbus A220-300s between 2020 and 2025. In July, management estimated that the fleet transition would ultimately boost EPS by $0.65.

It's unlikely that JetBlue will realize the full benefit of all the initiatives it announced this week -- and if it does, some of the EPS gains will likely be offset by other headwinds. But that's not a problem. Partial success would still lead to strong earnings growth for JetBlue over the next few years. Given that the stock already trades at a discount to the broader market, this should be sufficient to drive a huge rally in JetBlue shares.