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ANNUAL REPORT 2011
We may be small, but we’re making some big changes.
U
contents We may be small, but we’re making some big changes. This is why we’ve chosen a yellow butterfly to represent our company. It is said that even the subtlest flutter of a butterfly’s wings can cause an avalanche of events culminating in a wold-changing result. We aim to achieve that result with our everyday efforts towards the best quality customer service, consistent low fares and fees, a strong focus on energy efficiency, and careful attention to the details that will make our customer’s experience the best it can be.
we work hard on
04 at a glance 06 08 18
us
to offer great service to
letter from alex employee breakdown financial information
10 12
you
and connect you to
special features customer service
14 16
them social media geographical market
at a glance low-cost
full service
Vueling, is a low cost airline based in El Prat de Llobregat, Spain, where it maintains its main operating base.
Its name came from the combination of the Spanish word Vuelo, which means flight and “flying.� In only 7 years Vueling has established itself as one of the top airlines in Spain and Europe. We are a new generation airline that offers competitive prices while providing a wide range of value added services and products that meet the needs of both business and leisure passengers.
864
Million Euros in Revenue
Revenues increased by 8.4% driven by activity growth and RASK (revenue per available seat kilometer) improvement. The net result amounted to â‚Ź10.4m despite fuel prices +40% higher than last year. Vueling will set up new initiatives to increase revenues during 2012. These include improved revenue management, interline agreements, indirect channel sales and Advanced CRM and direct channel sales.
12
+
Million Passengers
In 2011, passenger traffic rose by 11.6% (a record-breaking amount) driven by a higher load factor and a significant capacity increase. Spain to Europe traffic grew close to 10% over the year and Vueling increased amount of passengers by +7% compared to 2010 at its home hub in Barcelona. We achieved a higher load factor whilst managing a significant growth in capacity. Capacity, measured in seats, grew by 8.7%
4
Budgie Awards Won
Vueling has become the first company to win four out of the eight possible awards at the Budgie Awards, presented by the World Low Cost Airlines Congress, in London Sept 2012. These include Best Airline of the Year, Best Business Traveler Offering, Best Sales and Distribution Strategy and Best Customer Loyalty Scheme. Vueling has also been awarded Most Innovative Company and Alex Cruz was named Airline CEO of the Year.
48
Aircrafts
The company carried 12.315.721 passengers in 2011, the largest number of transported passengers since inception. This growth was possible due to a 9.2% increase in the number of flights, and to the increase in the average number of planes operated, which reached and average number of 48 in 2011 compared to 36 of 2010. All this growth took place in a profitable and sustainable manner, with a net profit of 10.4 million Euros.
24
Countries
We fly to over 70 destinations, which include major cities in Spain, Europe, North Africa and the Middle East. We have bases in Barcelona, Madrid, Seville, Málaga, Valencia, Bilbao, Ibiza, Mallorca, Alicante and A Coruña as well as international bases in Amsterdam, Rome and Toulouse. And that’s not all... we’ve extended our destinations through flights connecting to Barcelona. What more can you ask for?
letter from alex To our stakeholders: The economic realities of sky-rocketing fuel prices, a sluggish U.S. economy, and international uncertainties continue to challenge the U.S. airline industry. Once again the People of Vueling Airlines prevailed by showing their Warrior Spirit and finding a way to win.
We’ve come out a champion for our Shareholders, Employees, Customers, and the Planet, because we are not content just to survive—we aim to thrive. Motivated by our passions and dedication to our triple bottom lineof Performance, People, and Planet—we made 2011 a historic year for Vueling Airlines. We celebrated our 40th Anniversary. We welcomed AirTran into the Vueling Family, launched a completely revamped All-New Rapid Rewards® frequent flyer program, and opened three new cities: Newark, N.J.; Greenville-Spartanburg, N.C.; and Charleston, S.C. We’re proving that our commitment to our passions continues to propel us forward and lead the industry. Our 2011 Vueling Airlines Report covers our financial, social, and environmental performance. This year’s report is featured in a microsite with enhancements such as the ability to build your own report. Our 2011 One Report adheres to the Global Reporting Initiative (GRI), an internationally recognized standard way of triple bottom line reporting, and fully complies with the GRI’s B+ application level. In addition, we’re introducing a new parallel Carbon Disclosure Project reporting that covers effective management of environmental risks, focusing on greenhousegas emissions and climate change strategies. We had a really strong revenue performance in 2011, generating a record $15.7 billion in revenues and achieving a net income of $178 million despite rapidly rising jet fuel prices. Excluding special items, our 2011 profit was $330 million. Our strategic initiatives, including the acquisition of AirTran, contributed to our 29.4 percent year over
year growth in revenues. By staying true to our low-fare brand, our Customers rewarded us with their loyalty. We set a record load factor of 80.9 percent, grew our domestic market share to 25 percent,1,2 and maintained our distinct position as the largest domestic airline. Our outstanding revenue performance helped to blunt soaring jet fuel prices, but higher fuel costs, ultimately, drove a yearover-year decline in earnings. With fuel costs accounting for 37.7 percent of our operating expenses in 2011, successfully managing our fuel hedging program and controlling our other costs remain vital. We continue our focus on improving productivity, eliminating waste, and conserving fuel. Despite the decline in earnings, we ended 2011 in a strong financial position with cash and short-term investments of $3.1 billion. We generated $1.4 billion of cash flow from operations, had capital expenditures of $968 million, repaid $638 million in debt, and repurchased approximately $225 million, or approximately 27.5 million shares of common stock, under the $500 million stock repurchase authorization program approved by the Board of Directors in 2011. We also preserved our investment grade credit rating. While we fly planes, we are and always have been a Company of People, and they remain our greatest asset. Our People continue to cultivate our unique Culture. Thanks to our Employees delivering world-class Customer Service every day, Vueling Airlines once again led the domestic airline industry in Customer Satisfaction in 2011. We had the lowest ratio of complaints per customers boarded of all low-cost carriers. With our low-fare brand and superior Customer Service, we continually win the hearts of our Customers. Happy vueling,
Alex Cruz CEO Vueling
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“
We continue our focus on improving productivity, eliminating waste, and conserving fuel
1
#
Alex Cruz was named Airline CEO of the Year in the Budgie awards, presented by the World Low Cost Airlines Congress, in London.
Sales personnel
10 16 Operational support
Senior Management
employee breakdown 3 2
70 59
582
Pilots
Flight attendants
155
376
20
74
85
Vueling runs its activities based on the simplicity and efficiency of the low cost model; operating through bases, maximizing turnover and utilization and using a single aircraft model We strive to have among us the very best professionals, who are able to develop a career at Vueling through our career plans, a mobility and inhouse promotion programme, as well as investment in training to the sum of ₏1,423 per employee in 2011. Our employees also enjoy many social benefits, such as the company canteen and, since 2012, we’ve been undertaking a flexible payment project for all personnel at the company.
Administrative support
Airbus A320
it’s all in the details Your flights should be unique, that’s why we offer three fares to suit all our passenger’s needs. When you fly how you want, it becomes an unforgettable experience. Now, Vueling presents the new Basic, Optima and Excellence fares, offering major advantages so you’ll always find the flight you need. Whatever your needs, we have a fare just for you.
BASIC
OPTIMA
EXCELLENCE
Fly at the best price with a seat assigned by Vueling.
Check in a piece of luggage up to 23kg.
Fly on row 1 of the plane with empty middle seat, guaranteed.
Accumulate Vueling Points.
Choose your seat. Fly sooner when you get to the airport if there is an earlier flight the same day. Accumulate Vueling pints,
Guaranteed space for hand luggage. Priority check-in at Madrid, Barcelona and Bilbao. Priority boarding in all airports. Check luggage of up to 23kg. Flexibility of changes on your ticket. Accumulate Vueling or Avios Iberia Points.
customer service Customer service, guest relations, passenger experience; No matter what your specific airport calls it, it is a major component of airport operations. Most airports have noted the importance of social media performance in their business goals. The top goals are Brand Engagement, Customer Service and Revenue. With our current economic crisis, one thing that really makes a difference and brings consumers comfort and ease it good customer service. This includes
the social-media aspect that is increasingly growing tobe the standard. One of the large challenges faced by airports is the lack of resources to social media. The next biggest challenge is the insufficient budget, which often go hand-in-hand. As a budget airline, we keep things simple enough to be efficient but affordable. Although we’re low budget, we care about our customers and consider customer service
one of our highest priorities. We offer a variety of options for all our different kinds of customers -whether it be at the airport, in flight, or at their destinations.
Snack and drink on board
Traveling with a baby
XL seat
Children traveling alone
Bring your flight forward
Larger passengers
Pregnant women
Help for reduced mobility
Help for impaired sight
Pets on board
Excellence seat
Preferential boarding
9 out of 10 business flyers recommend Vueling.
Market share % in Barcelona Airport
customer recommendation level is at a 90%
SEPT
JUL
AGO
JUN
APR
MAY
FEB
MAR
JAN
DEC
NOV
OCT
SEPT
JUL
90% recommendation 80% on time performance AUG
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
25 20 15 10 5 0
23%
Vueling
13%
10%
Spanair
Ryanair
We’d like to congratulate Vueling on their effective handling of the situation – their response serves as both a testament and a case-study for airlines that wish to know how crises can (and should) be handled on social media. In short, transparency and speedy responses are of paramount importance. And Vueling kept both at the top of their agenda. Kudos to them!
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Vueling has considerably improved its response on social media during a crises. One example is an incident concerning a bird strike that forced one of our aircraft to land in Barcelona to perform mandatory safety checks. The news broke on the 21st September but the bulk of Tweets were received on the 22nd and 23rd, a Saturday and Sunday respectively. Despite the weekend, Vueling was able to send over 330 replies to users who talked about the issue, even when the tweets were not
directly addressed to the airline. Some of the replies were sent directly to bloggers and the media who were reporting the incident. These tweets were also sent in several languages. The positive effect of this quick, informative action quickly became evident as several of the users replied to the airline thanking it for the information it was providing. At Vueling, we are fully aware of the needs regarding our social sphere and we play our part by helping worthy causes. We work closely with the Make-a-Wish Foundation and Cuina
Justa and support initiatives put forward by our own staff: since 2010, we’ve been organizing regular blood donations at our offices on behalf of the Catalonia Blood Bank and, in 2012, we’ve provided aid to the Manos Unidas solidarity project, which also received the full support of all our personnel.
we’re quite the social butterfly
flickr.com/photos/vueling
facebook.com/vueling.eu
youtube.com/vuelingTV
twitter.com/vueling
myvuelingcity.com
twitter.com/vuelingclients
geographical market
Origin of sales in international routes Spain
In late August, the Spanish low-cost airline Vueling hit the headlines when the news of a possible hijacking spread like wildfire. Luckily, for both the airline and those on board, it was just a false alarm. However, their slow response on social media prompted us to write a detailed analysis of what happened and how the airline could have managed its response better.
56% 44% Other EU countries
2010 363,869
Spain
527,284
Other EU countries
527,284
425,754
At Vueling, we strive to do things better and more efficiently every day. We also strive to incorporate into our way of acting and thinking, criteria of responsibility towards what we most care about: our customers, our staff, our social and environmental sphere. We’re committed to the environment. Efficiency is part of our identity. To that end, we have a multidisciplinary team made up of people from all areas devotes itself to developing and constantly applying solutions to make the flights we offer our passengers more efficient in respect to fuel consumption and reduction of CO2
emissions. Furthermore, we have set in motion a process aimed at purchasing new aircraft with which we intend to completely renew our fleet over the next few years, allowing us to significantly reduce the environmental impact of our operations. Both operational quality and quality for our customers provides the foundation for some of our most important lines of action. In 2011, we began an ambitious project aimed at obtaining the IOSA certification, one of the most prestigious in aviation and which attests to the operational excellence and safety of our flights. At Vueling, we are fully aware of the needs regarding our social sphere and we play our part by contributing
to worthy causes. We work closely with the Make-a-Wish Foundation and Cuina Justa and support initiatives put forward by our own staff: since 2010, we’ve been organising regular blood donations at our offices on behalf of the Catalonia Blood Bank and, in 2012, we’ve contributed to the Manos Unidas solidarity project, which also received the full support of all our personnel.
financial report
2011 CASH FLOW STATEMENT Notes 2011 2010 (Thousand Euros)
CASH FLOWS FROM OPERATING ACTIVITIES (I):
58.170
98.825
Profit (loss) for the year before tax
14.862
65.707
Adjustments to profit (loss)-
25.328
25.037
Depreciation and amortization
6.616
5.787
Change in provisions
22.149
24.668
Profit (loss) for retirements and disposals of fixed assets
28
203
Notes 6 and 7 Note 6
Financial income (10.344) (3.311) Financial expenses
3.239
1.566
Exchange rate differences
18 3.640
(3.876)
Note
Changes in working capital- 12.975 7.535 Trade and other receivables (14.989) 8.173 Change in inventories (183) Other current assets (1.978) 1.051 Trade and other payables 27.357 14.024 Other current liabilities
6.410
(1.838)
Other non-current assets and liabilities
(3.642)
(13.875)
Other cash flows from operating activities-
5.005
546
Payment of interest
(3.239)
(1.566)
Interest received 8.244 2.112 CASH FLOWS FROM INVESTMENT ACTIVITIES (II)
(56.478)
(195.525)
Payments for investments- Intangible fixed assets Note 6
(82.453)
(204.617)
(6.732)
(4.521)
Property, plant and equipment
Note 7
(67)
(359)
Other financial assets
Note 9
(75.654)
(199.737)
Proceeds for disposals 25.975 9.092 CASH FLOWS FROM FINANCING ACTIVITIES (III)
(22.717)
11.390
Collections and payments for financial instruments-
(21.633)
10.960
Debts with credit institutions
(21.633)
10.960
EFFECT OF EXCHANGE RATE VARIATIONS (IV)
Note 18
(1.084)
430
Cash or equivalents at the start of the year
35.972
121.282
Cash or cash equivalents at the end of the year
14.947
35.972
INCOME STATEMENT 2008 2009 2010 2011 (Millions of Euros)
TOTAL REVENUES 437.6 598.0 790.2 856.6 Cost Of Goods Sold 208.4 312.7 430.8 524.7 GROSS PROFIT 229.3 285.3 359.4 331.9 Selling & Admin Expenses 272.8 240.8 299.4 320.4 Depreciation & Amortization 2.6 4.1 5.8 6.6 Other Operating Expenses -8.0 -4.4 -6.1 -6.5 OTHER OPERATING EXPENSES 267.5 240.5 299.1 320.4 OPERATING INCOME -38.2 44.8 60.3 11.4 Interest Expense -- -0.2 -1.6 -3.2 Interest And Investment Income 2.0 1.6 3.3 10.3 NET INTEREST EXPENSE 2.0 1.4 1.7 7.1 Currency Exchange Gains (Loss) -2.8 -1.5 3.9 -3.6 Other Non-Operating Income (Expenses) 0.4 -- -- -- EBT, EXCLUDING UNUSUAL ITEMS -38.6 44.7 65.9 14.9 Gain (Loss) On Sale Of Assets -- 0.2 -- -- Other Unusual Items, Total -- -4.7 -0.2 0.0 EBT, INCLUDING UNUSUAL ITEMS -38.6 40.2 65.7 14.9 Income Tax Expense -47.1 12.4 19.7 4.5 Earnings From Continuing Operations 8.5 27.8 46.0 10.4 NET INCOME 8.5 27.8 46.0 10.4
1,000 900
DISTRIBUTION OF PROFIT (Thousands of Euros)
800 700 600
Offsetting losses from prior years 9,612 To reserve for goodwill 771
500 400
Total 10,383
300 200 100 0
2008
2009
2010
2011
start vueling today. make your very own vueling butterfly! 11. Start with the colored side up. Fold in half both ways. Unfold and turn over. 22. Fold diagonally both ways. 33. Collapse into waterbomb base. 44. Fold the upper layer only. 55. Turn over.
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66. Fold the corner past the edge. 77. Fold behind. Turn over. Do not flatten here!
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88. Fold along the center line. 99. Let go annnd... 10 10. You’re done!