Reviewing the operating activities in 2007, the airline ( Vueling ) has improved successfully after a year of strong growth: it has been able to carry 6.2 million passengers (77% over the 3.5 million during previous year); its market share in its core markets has increased from 4.7% to 6.8%; it has operated in average 50 routes compared to 31, a 61% growth; its load factor has reached 73%, 3.6 points up from 69.4% in 2006; the fleet rose from 16 to 24 in the last 12 months; the utilization of aircrafts has increased by 7.4% from 10.3 daily block hours to 11.0 based on operational improvements; the handling costs per turnaround were 14% down due to new contracts and new self-handling operations in some airports; and personnel and overheads per ASK (Available Seat-Kilometer) just rose by 2%, under inflation figures.

However, the results were negatively affected by the fierce competitive environment which drove fares per passenger down 10 euros (21%) from 47.6 to 37.7 euros. Then, revenue per ASK dropped 12% and income per flight decreased by 9% to 7,630 euros. Besides, the increase in fuel costs (9% on annual basis but 20% over the last quarter)which could not be offset by hedging policies and ended having a negative impact on results of 10 million euros, additional to the 60 million euros loss from the decrease in fares.

As a result, Vueling got operating losses: the EBITDAR (Earnings Before Interests, Taxes, Depreciation, Amortization and Rentals) was -5.1 million euros, and the EBITDA (after deducting aircraft leases) amounted to almost -69 million euros. The company faced 2 profit warnings along the year and has finally decided to discontinue some of the routes with negative contribution margins and no great prospects but to launch new routes (example: to the Canary Islands) and other operating decisions were taken for 2008 such as introducing a new baggage fee (like Ryanair) and reducing the use of aircrafts through wet leases or dry leases were taken.

The company ended with a cash position of 85 million euros but it does not have the fundamentals, the cost structure, the financial leverage and purchasing power negotiation of competitors such as the Spanish flag carrier Iberia (revenues of 5.5 billion euros, net profits of 328 million euros, 27 million passengers, load factor 81.6%, cash position over 2 billion euros)or the European low cost leaders Ryanair and Easyjet… Will it be able to be profitable? Because during the last years the growth strategy seems to be unprofitable. We will see at least when the company will present its new strategic plan by mid March prepared by the new management team which joined the company in November.