IAG and Air France-KLM's Monster Earnings

Both groups have benefited from the premium leisure boom.

Dear readers,

By now, you've probably digested the big third quarter profits for International Airlines Group and Air France-KLM, both of which benefited from a big boost in long-haul demand. Excluding special items, IAG reported an operating profit of €1.745 billion ($1.853 billion) with an operating margin of 20.2 percent, while Air France-KLM said it made €1.3 billion in operating profit with an operating margin of 15.5 percent.

Every segment of IAG and Air France-KLM made money, but the top performer was IAG's Vueling. It recorded a 26.1 percent margin, a slight improvement over last summer. The worst segment was Air France-KLM's maintenance division, which eked out a 6 percent operating margin.

Compared to IAG's other business segments, British Airways looks like an under-performer, reporting an operating margin 10 points lower than Aer Lingus’s and eight points lower than Iberia’s. But judged against Air France and KLM, which have similar models, British Airways did fine. Air France, KLM and British Airways all reported operating margins around 15 percent, suggesting that airlines that never relied on gobs of business travelers for their profits are doing better than those that did.

It's important to share numbers for context, but this is not a financial newsletter. I follow earnings to collect nuggets about commercial strategy. Here's what I found most interesting from Air France-KLM's and IAG’s Oct. 27 interactions with analysts.