MANAGING - International Airlines Group

1 2020 Annual report and accountsMANAGING THE CRISISTRANSFORMING OUR BUSINESSSHAPING OUR FUTUREANNUAL report AND ACCOUNTS 2020 International AIRLINESGROUP IAG has proven resilient and flexible in a challenging year which saw the devastating effects of the COVID-19 pandemic. We took swift action to mitigate the impact of the crisis and have worked hard to transform our business. This enables us to shape our future as we remain a leading player in the airline industry. Luis GallegoChief Executive OfficerContentsStrategic Report2 Our highlights3 Previous Chairman s letter5Q&A with the Chairman6 Chief Executive Officer s review8 management Committee9Q&A with the Chief Executive Officer10 Business model 12 Section 172 statement18 Strategic priorities and key performance indicators22 Financial overview23 Financial review36 British Airways37 Iberia38 Vueling39 Aer Lingus40 LEVEL40 IAG Platform41 IAG GBS42 IAG Cargo43 IAG Loyalty44 IAG Tech45 Sustainability78 Risk management and principal risk factors89 Regulatory

2 EnvironmentFinancial Statements142 Consolidated income statement143 Consolidated statement of other comprehensive income144 Consolidated balance sheet145 Consolidated cash flow statement146 Consolidated statement of changes in equity148 Notes to the consolidated financial statements202 Alternative performance measures209 Group investmentsStatement of Directors ResponsibilitiesIndependent Auditors ReportAdditional Information223 Glossary225 Fleet table226 Operating and financial statisticsIBCS hareholder informationManagement ReportIAG is required to prepare a management report in accordance with Article 262 of the Spanish Companies Act and Article 49 of the Spanish Commercial Code.

3 Pursuant to this legislation, this management report must contain a fair review of the progress of the business and the performance of the Group , together with a description of the principal risks and uncertainties that it faces. In the preparation of this report , IAG has taken into consideration the guide published in 2013 by the Spanish National Securities Market Commission (CNMV) which establishes a number of recommendations for the preparation of management reports of listed companies. The management report is composed of the following sections:10 Business model 18 Strategic priorities and key performance indicators 22 Financial overview 23 Financial review 40 IAG Platform 45 Sustainability 78 Risk management and principal risk factors 89 Regulatory environment The Annual Corporate Governance report is part of this management report but has been presented report has been filed with the CNMV, together with the required statistical annex, in accordance with the CNMV Circular 2/2018, dated June 12.

4 The Annual Corporate Governance report and the statistical annex are also available on the Company s website ( ).The Non-Financial Information Statement in response to the requirements of Law 11/2018, of December 28 (amending the Commercial Code, the revised Capital Companies Law approved by Legislative Royal Decree 1/2010, of July 2, 2010 and Audit Law 22/2015, of July 20, 2015), is part of this management report and is available on the Company s website ( ).Corporate Governance90 Chairman s introduction to corporate governance92 Board of Directors94 Corporate governance108 report of the Nominations Committee113 report of the Safety Committee114 report of the Audit and Compliance Committee 124 report of the Remuneration Committee Capital increaseTotal liquidity at December 31, 20201 CAPEX savings (2020-22)

5 2 Additional cargo-only flightsRenewal of Amex global partnership3 OUR HIGHLIGHTSA cting quickly to respond to the pandemic IAG acted quickly to mitigate the negative impacts, bolster liquidity and protect its long-term future1 Total liquidity, measured as cash and interest-bearing deposits and committed and undrawn general and aircraft facilities, was billion at December 31, Saving versus planned spend announced at Capital Markets Day Advance cash receipt of 750 million, a significant part of which is a pre-purchase of Avios definitions see GlossaryThe COVID-19 pandemic has caused substantial losses for the global airline industry and IAG Our performance in summary:Statutory operating lossCapacity change ASKs vlyNet Promoter ScoreOperating loss before exceptional itemsTotal revenue before exceptional itemsMore information on the impact of COVID-19 and IAG s response can be found in the following sections.

6 6 Chief Executive Officer s review23 Financial review78 Risk management and principal risk factors146 Note 2 to the financial statements 202 Alternative performance measures 7,426 million- 10,039m vly + pts vly 830 million 4,365 million- 7,650m vly4,003 7,868 vly billion International Airlines GROUPA nnual report and Accounts 20202 Staying competitive and resilient in a changed world In 2020 aviation faced the devastating effects of COVID-19. At a testing time, we took swift action to ensure we emerge from this unprecedented crisis well positioned to compete in a structurally changed industry.

7 The COVID-19 pandemic s impact on people, communities, companies and countries has been overwhelming. The toll on our sector has been particularly heavy, with IATA estimating that global traffic will not reach 2019 levels until around 2020 IAG made an operating loss of 4,365 million before exceptional items on revenues of 7,868 million. This compares with an operating profit before exceptional items of 3,285 million in 2019. Passenger traffic and capacity reduced by per cent and per cent, respectively, with all our Airlines making losses far exceeding those recorded in the 2001 crisis and the 2009 financial S LETTERT hese results reflect the negative effect of the COVID-19 pandemic on our business, exacerbated by constant changes in government travel acted swiftly to mitigate the pandemic s impact, bolster liquidity and protect our long-term future.

8 We ve made significant progress on restructuring, reducing our cost base and increasing the proportion of our variable costs, to ensure IAG not only weathers the present storm, but emerges from the crisis well positioned to compete in a structurally changed of that is down to our successful business model, bringing together a portfolio of world-class, market-leading brands coupled with a record of financial discipline that has seen us become one of the world s best performing airline groups in terms of financial V zquezFormer ReportCorporate GovernanceFinancial StatementsAdditional InformationOur record on growing profitability which increased six-fold between 2011 and 2019 and Return on Invested Capital has underpinned our leadership position, as has our ability to create shareholder value, with billion returned to investors between 2015 and 2019.

9 As the pandemic struck, we strengthened our financial and strategic position. In October we successfully completed a billion capital increase which was fully subscribed by our shareholders. This positions us well for when demand eventually led us to implement plans approved by national regulators in Spain and Ireland to ensure our EU-licensed Airlines continue to meet EU ownership and control rules. They include creating a national ownership structure for Aer Lingus and changes to IAG s longstanding Spanish , we changed the Board composition to create a majority of independent non-executive EU directors.

10 I wish to thank Deborah Kerr, Mar a Fernanda Mej a and Steve Gunning who stepped down from the Board for their valuable contribution to IAG. Steve s executive functions as Chief Financial Officer remain unchanged and I m very grateful for his support for these it was disappointing to take this step, we re pleased that the EU-UK Trade and Cooperation Agreement recognises the potential benefits of further liberalisation of airline ownership and control as we believe it s in the best interests of the industry and the crisis we ve stuck to our strategy, including playing a lead role in industry consolidation.