Led by Delta Air Lines (NYSE:DAL), in the past few years, airlines have taken advantage of their resurgent profitability to return lots of cash to shareholders through share buybacks. Delta announced a $500 million buyback in 2013 and a $2 billion buyback in 2014, both of which have already been completed. It's now working on a new $5 billion share repurchase program announced in May.

JetBlue Airways (NASDAQ:JBLU) is one of the few major airlines that hasn't followed suit. JetBlue lagged the industry in terms of profitability for most of 2013 and 2014, and its relatively heavy capital spending meant that it didn't produce much free cash flow.

Airline Jetblue Airways Jblu Airbus A

JetBlue has lagged the airline industry in profitability -- until this year. Photo: JetBlue.

However, JetBlue's profitability and cash flow are soaring in 2015. For the moment, the airline has prioritized paying down debt over returning cash to shareholders, but the company is likely to embark on a significant buyback program before long.

Profit rising
JetBlue has made a dramatic comeback in the past twelve months. Like its airline peers, it has gotten a huge windfall from falling fuel prices. However, for most airlines, the impact of falling fuel prices has been offset by unit revenue declines.

JetBlue is unique in that it has continued to post solid unit revenue increases for most of 2015. Through the first half of 2015, passenger revenue per available seat mile rose 2.9% year over year, and JetBlue recently projected that PRASM would be flat in the third quarter. JetBlue also did an admirable job of getting its non-fuel cost growth under control beginning with Q4 2014.

The result is that JetBlue's profit margin has exploded this year. Through the first six months of 2015, the company's operating margin spiked to 17.1% from just 6.4% a year earlier. Analysts currently expect JetBlue's full year profit to jump from $0.70 to $1.88.

Jetblue Premium Cabin

JetBlue's popular Mint premium service is just one factor in its rising profitability. Photo: JetBlue.

Furthermore, JetBlue is just getting started on a variety of strategic initiatives that I believe could deliver $600 million of incremental profit annually by 2019. Charging for checked bags, adding seats to JetBlue's A320 planes, expanding the popular Mint premium service, and implementing a new co-branded credit card agreement are four of the most important changes that will drive continued strong earnings growth at JetBlue.

Free cash flow follows
JetBlue's rapidly rising profitability is helping to lift its free cash flow. However, an equally important part of that story is JetBlue's capital spending discipline.

In 2014, JetBlue's capital expenditures totaled $857 million. JetBlue expects to spend a similar amount ($820 million-$870 million) on capex in 2015, despite buying 12 new planes this year, compared to nine in 2014. The savings mostly comes from JetBlue having completed several non-aircraft capital projects last year.

Additionally, JetBlue announced last November that it would defer the delivery of 18 aircraft scheduled to arrive in the 2016-2018 period to 2022 and 2023. This reduced its planned capex through 2018 by $900 million.

JetBlue now plans to buy just nine new airplanes per year on average for the next three years. This means that while its profitability rises over the next few years, annual capex will be lower. This will drive a sharp increase in free cash flow.

Allocating capital
JetBlue has been buying back some stock this year, but only enough to offset the dilution caused by stock-based employee compensation. Its main use of cash has been debt reduction; JetBlue paid off about $200 million of debt in the first half of 2015.

This focus on debt reduction is wise. Whereas credit rating agency S&P has raised Delta Air Lines' rating to BB+ -- one notch short of an investment-grade rating -- JetBlue's rating is three notches lower at B+.

That said, JetBlue's rising free cash flow allows it to have the best of both worlds. Delta has reduced its net debt by more than $3 billion since mid-2013, even as it has bought back more and more shares. JetBlue could similarly start a significant buyback program while continuing to work down its debt over time.

JetBlue has a lower credit rating, higher stock earnings multiple, and faster growth rate than Delta. As a result, I don't expect it to announce a buyback program for more than 10% of its stock, as Delta and several other airlines have done this year. Nevertheless, JetBlue will generate plenty of excess cash in the next few years, and I expect it to use at least some portion of that money to reward investors through a larger buyback program.

Adam Levine-Weinberg is long January 2017 $17 calls on JetBlue Airways and long January 2017 $40 calls on Delta Air Lines, The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.