Like most U.S. airlines, JetBlue Airways (NASDAQ:JBLU) posted another sizable loss in the first quarter but saw a big jump in demand beginning in the middle of February. That positions the company for solid sequential earnings improvement over the next few quarters.

That said, JetBlue faces a slower climb back to profitability than many of its rivals. Let's take a look at what that means for investors.

A decent first-quarter performance

In contrast to what many other airlines reported, JetBlue's revenue increased sequentially last quarter, rising to $733 million from $661 million a quarter earlier. Two factors enabled this revenue improvement. First, JetBlue resumed selling every seat on its planes in early January.

Second -- and more importantly -- the COVID-19 vaccine rollout has given customers more confidence to travel. That encouraged JetBlue to restore more capacity toward the end of the first quarter. As a result, whereas revenue declined 65% or more compared to 2019 in January and February, JetBlue's revenue was down a more modest 52% from 2019 levels in March.

A JetBlue Airways plane preparing to land

Image source: JetBlue Airways.

On the other hand, JetBlue's costs also jumped sequentially last quarter, albeit not quite as much as management had anticipated a few months ago. That caused the airline's adjusted pre-tax loss to worsen to $636 million from $581 million in the fourth quarter of 2020.

Return to profitability not yet in sight

Many U.S. low-fare airlines expect to reach breakeven within a couple of months and return to profitability (excluding special items) by the third quarter. JetBlue anticipates a longer road back to profitability, though.

On Tuesday, the company estimated that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will remain negative in the second quarter. And while JetBlue expects to achieve breakeven adjusted EBITDA in the third quarter, that would translate to a pre-tax loss of nearly $200 million. This outlook would place the airline's return to profitability in the fourth quarter at best.

JetBlue faces two major headwinds to returning to profitability. First, most of the airline's operations touch its two Northeast focus cities: New York and Boston. Those cities (especially New York) were particularly hard hit early in the pandemic, and that appears to have caused a lingering reluctance to travel.

Second, JetBlue entered 2020 planning for significant growth -- particularly in the second half of the year. As a result, it has a bigger overstaffing challenge than many of its peers. Similarly, while many of its rivals have cut costs by shrinking their fleets over the past year, JetBlue is on track to end 2021 with 23 more Airbus jets than it had two years earlier.

A rendering of an A220 in the JetBlue Airways livery

Image source: Airbus.

The long-term outlook remains promising

Despite its near-term earnings headwinds, JetBlue is likely to generate strong profits again within a couple of years. The carrier expects to have lower nonfuel unit costs in 2022 than in 2019, with capacity in line with 2019 levels. Assuming aircraft utilization recovers to normal shortly thereafter, nonfuel unit costs could decline again in 2023. JetBlue's investments in next-generation aircraft should drive rapid fuel-efficiency improvements, too.

Meanwhile, JetBlue's new alliance with American Airlines will enable it to expand significantly in New York over the next several quarters. That positions JetBlue to capitalize on the accelerating recovery in leisure demand. American will also deliver connecting traffic to JetBlue (particularly in New York).

Finally, JetBlue plans to launch its first flights to London this summer (most likely in August). In the short term, those flights will likely lose money as international travel demand remains depressed and JetBlue needs to build brand awareness in the U.K. But in the long term, expanding into Europe could be a big profit growth driver -- particularly because the pandemic has thinned out the competition and enabled JetBlue to snag better slots in London.

JetBlue shareholders should prepare for some turbulence over the next few quarters -- although it's certainly possible that management's current outlook is conservative. But by 2023, JetBlue is likely to be a larger airline with higher margins than it had prior to the pandemic.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.