Fighting record high oil prices, fierce competition, and a falling stock price, JetBlue Airways (Nasdaq: JBLU) has finally clawed its way back to profitability.

On Tuesday, JetBlue announced its first full-year profit since 2004, along with a narrower-than-expected fourth-quarter loss. The company cited a jump in traffic and operational improvements as primary reasons for the strong results. Although JetBlue lost $4 million, or $0.02 per share, for the quarter, revenue increased more than 16%. For the full year, JetBlue earned $18 million, or $0.10 per share.

A turbulent ride
Once lauded as the new standard in a dying industry, offering low-fare flights with high-fare perks, JetBlue has seen its stock price fall from a lofty $30 in 2003 to a current $7. After adding planes and expanding its routes, the company seemed to upset its streamlined system, stumbling out of profitability in 2005.

Then last winter, just when the company was returning to profitability, JetBlue grossly mishandled a major winter storm in the Eastern U.S. and because of that, founder David Neeleman resigned his CEO position. In the end, the company paid more than $30 million in reparations to stranded passengers.

The entire airline industry has hit hard times, with fuel prices obliterating profits. According to the Department of Energy, jet fuel prices increased 49% in 2007. In addition, airlines are having a very difficult time passing those higher fuel costs on to customers because competition is too fierce. With competitive pressures so strong, many expect the industry to undergo a wave of consolidation in a quest to improve margins and better compete in this environment.

This month, Lufthansa (OTC BB: DLAKY) finalized a purchase of a 19% stake in JetBlue for $300 million. It's still unclear whether that purchase was a straight financial investment for Lufthansa, or if the company is perhaps eyeing JetBlue's JFK routes. Either way, this cash infusion will help JetBlue pay down debt and better organize its balance sheet.

As long as energy costs stay high, JetBlue will be lucky to break even. Still, investors should keep an eye on the company. If JetBlue can manage to scrape out a small profit, even in this horrible environment for airlines, the stock price could soar -- especially if oil prices slip and the economy warms.

Fool contributor Tom Hutchinson holds no financial position in any companies mentioned. The Motley Fool has a disclosure policy.