Time‐domain airborne electromagnetic (AEM) systems historically measure the inline horizontal (x) component. New versions of the electromagnetic systems are designed to collect two additional components [the vertical (z) component and the lateral horizontal (y) component] to provide greater diagnostic information. In areas where the geology is near horizontal, the z‐component response provides greater signal‐to‐noise, particularly at late delay times. This allows the conductivity to be determined to greater depth. In a layered environment, the symmetry implies that the y component will be zero; hence a nonzero y component will indicate a lateral inhomogeneity. The three components can be combined to give the “energy envelope” of the response. Over a vertical plate, the response profile of this envelope has a single positive peak and no side lobes. The shape of the energy envelope is dependent on the flight direction, but less so than the shape of the x‐component response profile. In the interpretation of discrete conductors, the z‐component data can be used to ascertain the dip and depth to the conductor using simple rules of thumb. When the profile line is perpendicular to the strike direction and over the center of the conductor, the y component will be zero; otherwise it appears to be a combination of the x and z components. The extent of contamination of the y component by the x and z components can be used to ascertain the strike direction and the lateral offset of the target, respectively. Having the z and y component data increases the total response when the profile line has not traversed the target. This increases the possibility of detecting a target located between adjacent flight lines or beyond a survey boundary.