After expanding rapidly during its first decade of operations, JetBlue Airways (NASDAQ:JBLU) found itself with an uncomfortably high debt load at the time of the Great Recession. In the decade since then, the popular low-fare airline has become far more disciplined about growth and capital allocation.

Indeed, between late 2009 and the end of 2017, JetBlue slashed its debt from $3.4 billion to just $1.2 billion. It did so by slowing its growth rate, paying for most new aircraft with cash, and using virtually all of its excess cash flow for debt reduction.

JBLU Financial Debt (Quarterly) Chart


As a result, JetBlue now has one of the best balance sheets in the airline industry. The company is capitalizing on that position of strength by pivoting its capital allocation strategy to focus more on share buybacks. Recent debt offerings indicate that JetBlue plans to continue buying back stock at a steady pace.

Share repurchases on the menu

JetBlue began returning cash to shareholders in a meaningful way via share repurchases in 2017. (Prior to that point, the company had bought back some stock, but only enough to offset the shares it was issuing as part of its employee stock ownership plan or as stock-based compensation.)

In the first nine months of 2017, JetBlue repurchased $380 million of stock, exhausting its share repurchase authorization. Just before the end of that year, the company’s board approved a new two-year $750 million share repurchase authorization. JetBlue is set to complete that program this quarter. In September, JetBlue’s board authorized a new $800 million buyback program that will run from Oct. 1, 2019 until the end of 2021.

Just in the past three years, share buybacks have driven a significant reduction in JetBlue’s share count. Last quarter, the company reported a diluted share count of 295.9 million, down from 341.6 million in the final quarter of 2016. The new share repurchase authorization announced in September would allow the company to buy back another 14% of its shares, based on the current stock price, although it’s important to note that stock compensation and employee stock purchases will offset some of those potential buybacks.

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