Vueling: a Spanish success story coveted by IAG

Vueling's expansion continues apace, with a further double capacity addition planned in 2013 after a number of years of 20% plus growth rates in spite of a contracting Spanish market. A genuine low-cost carrier in unit cost terms, Vueling has contained its non-fuel costs in spite of moving to a more hybrid business model in recent years, including features such as transfer ticketing and VIP lounges. In 2012, it made a significant step towards pan-European status when its international passenger numbers equalled domestic passengers for the first time.

Profit margins have bounced around with changing fuel prices, but its solid net cash position has ensured its relative financial health while competitors have struggled (Iberia) or even disappeared (Spanair). Spanair's demise allowed it to grow its passenger share at its Barcelona hub from 23% in 2011 to 30% in 2012 in spite of Ryanair's expansion there, showing that it can live with its lower cost competitor.

The elephant in the room on the 2012 results conference call was the takeover bid from IAG for the 54% of Vueling that it does not already own.