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ANNUAL REPORT 2011

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We may be small,but we’re makingsome big changes.

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letter from alexat a glance special features

customer serviceemployee breakdown

financial information

social media

geographical market

contentsWe 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.

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+12Million Euros in Revenue Revenues increased by 8.4% driven byactivity growth and RASK (revenue per available seat kilometer) improvement. The net result amounted to €10.4m 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.

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.”

Million PassengersIn 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%

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low-cost full service

at a glance

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.

4Budgie Awards WonVueling 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.

CountriesWe 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?

24AircraftsThe 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.

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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 featuredin a microsite with enhancements such as the ability to buildyour own report. Our 2011 One Report adheres to the GlobalReporting 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 newparallel Carbon Disclosure Project reporting that covers effectivemanagement of environmental risks, focusing on greenhousegasemissions and climate change strategies. We had a really strongrevenue performance in 2011, generating a record $15.7 billionin revenues and achieving a net income of $178 million despiterapidly rising jet fuel prices. Excluding special items, our 2011profit 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 year-over-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

letter from alex

We continue our focuson improving productivity,

eliminating waste, and conserving fuel

Alex Cruz was namedAirline CEO of the Year in the Budgie awards, presented by the World Low Cost Airlines Congress, in London.

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Airbus A320Vueling 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

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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 in-house 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.

it’s all in the detailsYour flights should be unique, that’s why weoffer 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.

Fly at the best price with a seat assigned by Vueling.

Accumulate Vueling Points.

Check in a piece of luggage up to 23kg.

Choose your seat.

Fly sooner when you get to the airport if there is an earlier flight the same day.

Accumulate Vueling pints,

Fly on row 1 of the plane with empty middle seat, guaranteed.

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.

BASIC OPTIMA EXCELLENCE

Excellence seat Preferential boardingHelp for impaired sight Pets on board

XL seat Children traveling aloneTraveling with a babySnack and drink on board

Pregnant women Help for reduced mobilityLarger passengersBring your flight forward

customer serviceCustomer 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.

9 out of 10business flyers recommend Vueling.

customerrecommendation level is at a 90%

23% 13% 10%

Vueling Spanair Ryanair

Market share % in Barcelona Airport

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90% recommendation80% on time performance

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Vueling has considerably improved its response on social media during a crises.One example is an incident concerning abird strike that forced one of our aircraft toland 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’d like to congratulate Vuelingon their effective handling of the situation – their response serves asboth 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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we’re quite the social butterfly

flickr.com/photos/vueling

youtube.com/vuelingTV

myvuelingcity.com

facebook.com/vueling.eu

twitter.com/vueling

twitter.com/vuelingclients

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geographicalmarket

2010

527,284

425,754

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.

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Origin of sales ininternational routes

Other EU countries

Spain

Spain Other EU countries

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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.

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 Notes 6 and 7 6.616 5.787

Change in provisions 22.149 24.668

Profit (loss) for retirements and disposals of fixed assets Note 6 28 203

Financial income (10.344) (3.311)

Financial expenses 3.239 1.566

Exchange rate differences Note 18 3.640 (3.876)

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- (82.453) (204.617) Intangible fixed assets Note 6 (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

2011 CASH FLOW STATEMENT Notes 2011 2010(Thousand Euros)

financial report

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

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INCOME STATEMENT 2008 2009 2010 2011(Millions of Euros)

DISTRIBUTION OF PROFIT(Thousands of Euros)

Offsetting losses from prior years 9,612To reserve for goodwill 771

Total 10,383

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startvuelingtoday.make your very own vueling butterfly!

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