Corporate Responsibility Report 2015 1 Content guide 1. STRATEGY AND ANALYSIS 4 1.1. Executive Chairman’s Statement 4 1.2. Key achievements 6 2. ORGANISATIONAL PROFILE 10 2.1. Brand values 11 2.2. Air transport activity 14 2.3. Airport services activity 20 2.4. Aircraft maintenance activity 26 2.5. Iberia Express 30 2.6. IAG 31 2.7. Corporate Responsibility Policy 34 2.8. Commitment to quality 39 2.9. Awards 40 2.10. Memberships of associations 44 3. STAKEHOLDER ENGAGEMENT 46 4. MATERIAL ASPECTS AND BOUNDARIES 50 5. CR REPORT PROFILE 56 6. GOVERNANCE 60 6.1. IAG–Iberia governance structure 62 6.2. Risk management 66 6.3. Internal and external audit 66 6.4. Ethics and integrity 66 6.5. Grievance mechanisms 67 7. ECONOMIC PERFORMANCE 68 7.1. Economic figures 70 7.2. Innovation management 73 8. ENVIRONMENTAL 74 8.1. Energy consumption 76 8.2. Biodiversity: protection of endangered species 78 8.3. Climate change: emissions 79 8.4. Local air quality and noise 80 8.5. Effluents and waste 81 8.6. Environmental management 82 8.7. Environmental projects 83 2 9. SOCIAL PERFORMANCE 86 9.1. Employment 88 9.2. Labour/management relations 91 9.3. Occupational health and safety 95 9.4. Training and education 97 9.5. Diversity and equal opportunity 103 9.6. Supplier assessment for labour practices 107 10. HUMAN RIGHTS 108 10.1. United Nations Global Compact 110 10.2. Human rights training 111 10.3. Responsible procurement 112 11. SOCIETY 114 11.1. Key social development actions 117 11.2. Achievement of the millennium development goals 122 11.3. Iberia anti-corruption policy 128 11.4. Public policies of the organisation 130 11.5. Compliance with rules on anti-competitive behaviour 131 11.6. Commitment to passenger rights 131 11.7. Commitment to price transparency 132 12. PRODUCT RESPONSIBILITY 134 12.1. Commitment to continuous improvement 136 12.2. Operating safety 142 12.3. Quality of service (punctuality and NPS) 143 12.4. Quality of service (claims) 146 12.5. Quality of service (airports and aircraft maintenance) 146 12.6. Customer privacy 148 12.7. Communication channels 148 12.8. Advertising ethics 149 APPENDIX 150 Global Reporting Initiative (GRI) Indicators 150 3 1. Strategy and analysis 1.1 Executive chairman’s statement It is pleasure to present our Corporate Responsibility report for the year 2015, an important year for the Future Plan 2014-2017. We have reached the halfway point of the implementation of the plan and we can say that we are meeting our goals; both economic and operational, as well as in relation to the cultural transformation of the company. One of the key achievements of the year was the recovery of all the routes suspended as a result of the company’s Transformation Plan, the purpose of which was to return to profitability. In 2014 we recovered the majority of them and in 2015 we returned to Havana and Johannesburg; the only two left to reopen. Furthermore, in our commitment to extending the offering to our customers with profitability and sustainability criteria, in 2015 we also started new long- haul routes to Cali and Medellin, and short-haul routes to Florence, Hamburg, Budapest, Edinburgh, Naples, Budapest, in collaboration with Iberia Express. Another goal of ours is to constantly renew the fleet in order to increase efficiency and quality. So, in 2015 a new order for a long-haul fleet for Iberia was confirmed, consisting of eight A350-900 and five A330-200 aircraft, adding to the eight aircraft of each model ordered a year earlier. In this process, at the end of the year we received the first of the A330-200 aircraft. These new aircraft, which will substi- tute the current aircraft to address the projected growth and combine economic efficiency and the possibility of offering a better service to the customer, due to their design and to the incorporation of new long-haul cabins. 4 Luis Gallego Chairman The positive progress of the company as a result of the Promotor Score (NPS) is increasing and reaching levels we Future Plan and the agreements with all staff in order to have never reached before. None of this would have been improve productivity not only resulted in new routes and possible without the commitment and hard work of our new aircraft. In 2015, for the first time in 11 years, we hired employees, whom I thank for their dedication. new pilots, 80 of whom joined the company in 2015 and we The end of 2015 left us with positive results and in line with expect to reach 200 in 2016. the budget, halfway towards what the results of the Iberia The Handling and Maintenance business areas continue of the future must be. In line with our trend for recovery, our to advance in their transformation process to increase operating profits increased from 50 million euros in 2014 competitiveness and sustainability. In 2015, Handling to 222 million in 2015. Thanks to the hard work of everyone saw its first results after winning 17 of the 20 licences involved, we have achieved figures that give us the strength for supplying handling services to third-parties at Spanish and confidence to take on the challenges ahead. airports for which it bid. In this context of change and transformation, Iberia Maintenance is also gradually taking the steps necessary to continues to maintain its social commitment and we become more competitive. In the coming months and years actively collaborate on social projects with organisations we will continue working on transforming this activity in like Envera, Mano a Mano, Make a Wish and Sepla Ayuda. In order to provide the best service to Iberia, to the group and particular we should mention the international agreement to customers at market costs and with excellent quality. that Iberia has signed with Amadeus and Unicef, through which Iberia customers donated over 200,000 euros, which There are two key components for the new Iberia: the people were allocated to the vaccination programme in Chad and and the customers. For this reason, in 2015 we created two which have helped to protect the lives of 600,000 children. departments for both of these, which report to the Manage- In addition, in Spain, Iberia joined the initiative set up by the ment Committee. In this dual commitment, punctuality is Ministry of Health, Social Services and Equality to curb the an essential element, as it is the indicator most highly rated effects of violence against women. by customers and it is also highly influenced by employee attitude. In 2015 our hard work was rewarded. Iberia was the second most punctual international airline in the world, and our subsidiary Iberia Express, the most punctual low- cost airline. As a result of these achievements our Net 5 1. Strategy and analysis 1.2 Key achievements Iberia is halfway through the Future Plan it implemented in order to transform the company into a competitive company and reach a recognised and sustainable position among national and international airlines. The achievements of 2015 are the results of this Plan. Thanks to the joint effort of the entire company, it adjusted costs, increased revenue and improved its competitive position, whilst offering a better customer experience. Below are the most significant achievements for the sustaina- bility of Iberia, grouped into five key categories for the company. New fleet order In 2015 Iberia strengthened its commitment to innovation of its equipment in order to offer the best service. Proof of this is a new long-haul fleet order; eight A350- 900 and five A330-200 aircraft, in addition to the order placed a year earlier. 29 long-haul aircraft on order, which join the eight A330-300 aircraft added to the fleet between 2013 and 2014 6 Strategy and analysis Increased offering In addition, Iberia presented the new cabins in Brazil, Peru and Costa Rica in order to promote the company in these markets. More than 20 new routes in 2015 Leader in Latin America During the year Iberia, along with Iberia Express, increased its Iberia consolidated its leadership in Latin America thanks to the seat offering per kilometre by 101%, whilst the number of hard work carried out in 2015 to offer its customers new routes passengers carried per kilometre grew by 1309%. This growth is (Havana, Cali, Medellin and Puerto Rico) and excellent in-flight the result of the two companies opening new routes to Havana, service, having new aircraft and cabins that offer greater Cali, Medellin, Florence, Catania, Naples, Edinburgh, Hamburg, comfort to do this. Gatwick, Charles de Gaulle, Manchester, Budapest and Funchal, in addition to other destinations. Excellence in punctuality Iberia and Iberia Express stood out throughout 2015 for their punctuality statistics. Iberia was the world’s most punctual international airline in November and second in August, September and October. Iberia Express was the most punctual low-cost airline in July, August, September, October and November New long-haul product In 2015 Iberia made a significant investment to renew the aircraft cabins and to offer a better service and greater comfort during flights. To achieve this it had new aircraft and recondi- tioned the A304-600. As a result of this, the travel platform Skift ranked the company’s business class as the best of all airlines flying between Europe and Latin America. Almost 80% of flights offer the new cabins service 7 1. Strategy and analysis Higher net promotor score Iberia takes its customers’ opinion very seriously because it knows that they are part of the key to the success of the company and in 2015 it multiplied its efforts to improve its quality of service.