2018 ANNUAL REPORT 2018 ANNUAL 1 GLOBALIA CORPORACIÓN EMPRESARIAL S.A. Y SOCIEDADES DEPENDIENTES Entre ellas: AIR EUROPA LÍNEAS AÉREAS, S.A.U. GLOBALIA BUSINESS TRAVEL, S.A.U. GLOBALIA TRAVEL CLUB SPAIN, S.L.U. WELCOME INCOMING SERVICES, S.L.U. VIAJES HALCÓN, S.A.U. VIAJES ECUADOR, S.A.U. VIAJES TU BILLETE, S.L. BE LIVE HOTELS, S.L.U. GLOBALIA HANDLING, S.A.U. Centro Empresarial Globalia 07620 Llucmajor (Mallorca), Baleares. España / Spain. Tel. +34 971 178 103 · Fax +34 971 178 352 www.globalia.com Impresión: Globalia Artes Gráficas Diseño y maquetación: som2.com 2 INDEX 4 Executive Letter of the Annual Report 6 Introduction to the Management Report and Main Magnitudes 15 Audit report on the Consolidated Annual Accounts 62 17. Inventories 20 Consolidated Annual Accounts 62 18. Prepayments 63 19. Cash and Cash Equivalents 63 20. Equity 27 Notes to the Consolidated Annual Accounts 64 21. Non-Controlling Interests 27 1. Nature, Activities and Composition 64 22. Provisions of the Group 65 23. Financial Liabilities by Category 27 2. Basis of Presentation 65 24. Payables and Trade Payables 29 3. Distribution of Profit of the Parent 67 25. Late Payments to Suppliers. 29 4. Significant Accounting Policies “Reporting Requirement”, Third Additional Provision of Law 15/2010 of 5 July 2010 50 5. Joint Ventures 67 26. Accruals 50 6. Intangible Assets 68 27. Taxation 51 7. Goodwill, Goodwill of Consolidated Companies and Impairment 71 28. Environmental Information 52 8. Property, Plant and Equipment 72 29. Related Party Balances and Transactions 55 9. Investment Property 73 30. Income and Expense 56 10. Finance Leases - Lessee 74 31. Employee Information 57 11. Operating Leases - Lessee 75 32. Audit Fees 57 12. Risk Management Policy 75 33. Other Contingencies 58 13. Equity-Accounted Investees 58 14. Financial Assets by Category 59 15. Investments and Trade Receivables 61 16. Derivative Financial Instruments 76 Directors’ Report 84 Appendix 96 Non-financial Information Report 3 Presentation of 2018 ANNUAL REPORT 2018 has demonstrated the success of the strategy adopted by our group through its different divisions. If the previous year was a turning point for our group, during the year 2018 our group has registered historic economic results, that strengthen our leadership within the sector and enable us to face the coming years knowing that we are progressing in the right direction. 2018 has been a record year in which we have practically quintu- pled our profits before taxes, that have amounted to 72 million Euros, and in which, moreover, we have implemented During recent months, said international expan- the principles that will determine our future lines sion has been enhanced through the growth of of action. the European network with new routes to Düssel- dorf and Venice, as well as through an increase of Within a market as excessively competitive as the the number of flights to Rome, Milan, Tel Aviv and tourist sector, our group, that is managed by the Marrakesh, and the implementation of the second best possible professionals, has been capable of phase of the Canary Islands inter-island flights. carrying out new and remarkable achievements and adopting an innovative use and application of The sector increasingly associates Air Europa with new technologies that has situated our group in a modernity, renovation, security, efficacy, sustaina- key position to successfully face the future. bility and quality, and all of the foregoing is demon- strated through the continuous improvement of the Consolidation year for Air Europa products and services that are provided on board, During 2018, the air division has become firmly thereby making passengers feel special. established as a solid flight alternative for the transatlantic corridor with the establishment In 2018, Air Europa has been acknowledged as the of a new route to Quito and with the consolida- most efficient European network airline. The perti- tion of other routes such as Recife and San Pe- nent data corroborates said distinction: CO2 emis- dro Sula; as well as through an enhancement of sions have been reduced by 2.88% in relation to 2017 flight frequencies to other destinations. During and, furthermore, fuel consumption has been re- this year, the first two Boeing 787-9 Dreamliners duced, especially with regard to the Boeing 787 fleet. have been incorporated to our fleet, being the most efficient aircraft that enhance the connota- With an increase of turnover of 9.3% in relation to tive meaning of flying. the previous year, Air Europa has also exceeded, for the first time, the barrier of 11 million passen- With the incorporation of the foregoing two air- gers and has implemented its new Air Europa Car- craft and three Boeing 737-8 New Generation the go division for the transport of goods within the group continues to progress with its plans regard- aircraft holds. ing the homogenisation of the fleet with the con- sequential benefits that shall be provided thereby, Strategic time for the hotel division both in relation to the reduction of costs as well as The hotel division “Be Live” continues with the enhanced marketing opportunities. consolidation of its establishments and the suc- 4 2018 ANNUAL REPORT cess thereof is guaranteed by reason of its promi- In light of the fact that two years have passed since nent presence within the four most popular tourist the creation of “Geomoon”, and by reason that the destinations worldwide: Cuba, Dominican Repub- brand already includes within its network 200 as- lic and the Balearic and Canary archipelagos. sociated offices, the division is satisfied with the growth thereof and acknowledges the trust and The refurbishment of the division’s hotels both confidence that has been created and that contin- in the Canary Islands as well as in the Balearic Is- ues to be created within the sector. lands has enhanced, even more, the strength of the division in both tourist destinations and the di- The objective of the division is to continue to grow vision’s entry to Mexico through the Melody Maker within the different travel sectors, and to increase resort represents the beginning for the new brand the number of associated offices and to promote in a strategic destination for the projection and the growth of the online business. development of the hotel division. Ground Handling Division: national benchmark The portfolio of the hotel division comprises a to- The services for more than 190,000 flights with- tal of 32 establishments, that are operated under a in Spain that Groundforce has provided during range of different regimes, that have registered an 2018, that has continued to grow as in other pre- average occupancy of more than 78%. vious years, strengthens its position as the lead- ing ground handling operator for third parties Success of the wholesale division throughout Spain. During 2018, the wholesale division of Globalia, leader in the tour-operator segment in Spain, has In turn, “Groundforce Cargo” continues to be the enhanced its position and market share and has leading player as it has the largest network of car- grown by more than the average sales growth reg- go services with 15 terminals in Spain. In 2018, istered in previous years in relation to products “Groundforce Cargo” managed 16% more tonnes such as “Disney” and “Circuitos por Europa”. than in 2017. The leadership of the wholesale division is also re- Road transport division: enhancement of operations flected in the trends of the rest of the products that In 2018 our road transport division has continued homogeneously maintain their sales volumes. to develop the upcoming inclusion of new routes and has continued to consolidate its existing The wholesale division of Globalia has the neces- routes. The division is working to optimise the reg- sary resources to successfully face the upcoming ular line between Alicante-Cartagena-Murcia and year and to enhance the profitability of its prod- the division has enhanced and has obtained opti- ucts and to adapt to a dynamic and constantly mum operating results in relation to the transport evolving market. of passengers between the airport terminals at the Adolfo Suárez Madrid-Barajas airport. The incoming division has consolidated its growth volumes with the inclusion of new accounts both The report that is presented hereinbelow presents in Europe, the Middle East and Africa, as well as in a perfect snap short image of our tourist services South America, and also by reason of the increase group, and highlights the milestones achieved and of the business of Welcomebeds. strengthens the pillars upon which the group must continue to support its activities in order to con- Retail division: forecast of growth of sales and offices tinue to grow and retain our leadership position For the year that has now been closed, the sales within the sector. For said purposes, we have the of the Retail and Online Division amounted to 980 best possible professionals that, without a doubt, million Euros and the forecast projections and es- constitute our most valuable asset. timations predict a 2% growth for 2019. For the purposes of promoting the different com- mercial activities, this year the split-off was car- ried out of the Corporate and Holiday business. 5 INTRODUCTION TO THE 2018 MANAGEMENT REPORT AND MAIN MAGNITUDES GLOBALIA CORPORACIÓN EMPRESARIAL, S.A. AND SUBSIDIARIES Globalia, the company founded and chaired by 2010 to provide us with our own infrastructure in the Juan José Hidalgo, operates in the transport, most significant destinations where Globalia cur- hotel, travel and tourism sectors, and essentially rently operates. It operates two main business lines: comprises the following business units: sale of accommodation online and incoming servic- es such as trips, transportation and vehicle rentals.