SIX MONTHS RESULTS ANNOUNCEMENT

International Airlines Group today (July 29) presented Group consolidated results for the six months ended June 30, 2011. In addition, IAG presented combined results for the six months ended June 30, 2011 including Iberias first 21 days of January. IAG period highlights on combined results: Second quarter operating profit of 190 million, before exceptional items (2010: operating loss 71 million). Passenger unit revenue up 9.4 per cent for the quarter and non-fuel unit costs down 5.8 per cent Operating profit for the half year to June 30, 2011 of 88m before exceptional items (2010: operating loss 309 million) Profit before tax for the half year of 39 million (2010: loss before tax of 419 million) Revenue for the half year up 17.9 per cent to 7,773 million (2010: 6,594 million), including 76 million or 1.1 per cent currency translation Passenger unit revenue for the half year up 7.5 per cent, on top of volume increases of 10.4 per cent Fuel costs up 34.8 per cent to 2,439 million (2010: 1,809 million) Other operating costs before exceptional items, up 4.2 per cent at 5,307 million, including 53 million of adverse currency translation. Non fuel unit costs down 5.6 per cent, or 5.9 per cent at constant currency Cash down 161 million to 4,191 million (December 2010: 4,352 million) Group net debt down 415 million to 480 million (December 2010: 895 million)

Performance summary:
Financial data ( million) unaudited Passenger revenue Total revenue Operating profit/(loss) before exceptional items Exceptional items Operating profit/(loss) after exceptional items Profit/(loss) before tax Profit/(loss) after tax Basic earnings per share Operating figures Available seat kilometres (ASK million) Revenue passenger kilometres (RPK million) Seat factor (per cent) Passenger yield per RPK (cents) Passenger unit revenue per ASK (cents) Non fuel unit costs per ASK (cents) ( million) unaudited Cash, cash equivalents and interest bearing deposits Net debt Equity (3) Adjusted gearing

Six months to June 30

2011(1) 2010(1) Higher / (lower)

Excludes 21 days Iberia pre-merger

Six months to June 30, 2011(2)

Six months to June 30, 2010(2)

6,448 7,773 88 (56) 32 39 71

2011(1)

5,435 6,594 (309) (309) (419) (352)

2010(1)

18.6 % 17.9 % 397 (56) 341 458 423

Higher / (lower)

6,269 7,537 125 (56) 69 78 98 4.7

3,753 4,326 (246) (246) (401) (342) (30.5)

104,543 80,403 76.9 8.02 6.17 5.08

At June 30, 2011(2)

94,699 72,640 76.7 7.48 5.74 5.38

At December 31, 2010(1)

10.4 % 10.7 % 0.2pts 7.2 % 7.5 % (5.6)%

Higher / (lower)

4,191 480 5,194 42%

4,352 895 4,670 47%

(3.7)% (46.4)% 11.2 % (5pts)

Willie Walsh, IAG chief executive, said: This is a good first half performance with a return to operating profitability. In the quarter, unit revenue rose by 7.6 per cent with continued strength in premium markets. Our focus on cost control remains with non-fuel unit costs down 5.8 per cent in the quarter but fuel is still a significant issue with costs up 32.0 per cent. While last years figures for this quarter were affected by disruption, the underlying trends remain positive. We continue to match capacity to demand. Capacity was up 11.7 per cent in the quarter while traffic was up 15.7 per cent. Against a background of economic uncertainty, London remains a strong market. IAG is on target to deliver its year one synergies. We are already making cost savings through joint procurement in areas such as insurance and airport handling. We have established a single cargo business and introduced integrated sales and airport teams in several key markets. Customers are also directly benefiting through airline website cross-selling, more fare and schedule choice on overlapping longhaul routes and easier access to more destinations via new codeshares.
(1) This financial data is based on the combined results of operations of British Airways, Iberia and IAG the company for the six month periods ended June 30, 2011 and 2010, and the balance sheet as at December 31, 2010. These combined financial statements eliminate cross holdings and related party transactions, however the comparatives do not reflect any adjustments required to account for the merger transaction. Financial ratios are before exceptional items. The IAG June 30, 2011 income statement is the consolidated results of BA and IAG the company for the six month periods ended June 30, 2011 and Iberia from January 22, 2011 to June 30, 2011. The IAG June 30, 2010 comparative is solely the results of BA. Adjusted gearing is net debt plus capitalised operating aircraft lease costs, divided by net debt plus capitalised operating aircraft lease costs and equity.

(2) (3)

Trading Outlook We expect significant growth in operating profit this year, with improvements in both our unit revenue and unit cost performance versus 2010 and are on track to reach our synergy targets. Our long haul business is stable, with strength in the premium sector, but the short haul European market remains highly competitive. We expect the impact of events in Japan and North Africa / Middle East to have a negative impact on operating profit for the full year of 90 to 100 million. With current fuel prices, hedge positions and foreign exchange rates, we expect our total fuel cost for the year to be approximately 5.2 billion. Although we achieved 50 per cent recovery of the fuel cost impact in H1 through revenue initiatives, it should be noted that this task becomes progressively harder through the year as we face tougher revenue comparables with last year: cargo performance was particularly strong in H2 last year, our hedged fuel price will gradually converge with spot rates, and the European economic outlook remains uncertain. Capacity growth is mainly concentrated in core markets and is being achieved with no material growth in fleet or staff. Our 2011 ASK growth plan (+7 to +8 per cent reported / +4 to +5 per cent underlying) remains essentially unchanged, although we are currently evaluating some reduction in capacity growth for the winter.

Forwarding-looking statements: Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and Consolidated International Airlines Group S.A. (the Group) plans and objectives for the future operations, including, without limitation, discussions of the Companys Business Plan, expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this report are based upon information known to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the Companys forward-looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Further information on some of the most important risks in this regard is given in the shareholder documentation in respect of the merger issued on October 26, 2010 and in the Securities Note and Summary issued on January 10, 2011; these documents are available on www.iagshares.com.

IAG Investor Relations 2 World Business Centre Heathrow Newall Road, London Heathrow Airport HOUNSLOW TW6 2SF Tel: +44 (0)208 564 2900 Investor.relations@iairgroup.com

IAG INCOME STATEMENT:

Excludes 21 days Iberia premerger

Six months to June 30

( million) unaudited Before exceptional items 2011

Exceptional items

Total (1) 2011

2010

(1)

Higher / (lower)

Six months to June 30, (2) 2011

Six months to June 30, (2) 2010

Passenger revenue Cargo revenue Other revenue Total revenue Employee costs Fuel and oil costs Handling, catering and other operating costs Landing fees and en-route charges Engineering and other aircraft costs Property, IT and other costs Selling costs Depreciation, amortisation and impairment Aircraft operating lease costs Currency differences Total expenditure on operations Operating profit/(loss) Net non-operating income/(costs) Profit/(loss) before tax Taxation Profit/(loss) after tax Basic earnings per share Diluted earnings per share
Operating figures

6,448 592 733 7,773 1,909 2,378 759 589 553 445 359 491 200 2 7,685 88 (76) 12 32 44 27 (5) 56 (56) 83 27 61

6,448 592 733 7,773 1,909 2,439 759 589 553 445 359 491 195 2 7,741 32 7 39 32 71

5,435 509 650 6,594 1,799 1,809 715 554 505 490 335 499 193 4 6,903 (309) (110) (419) 67 (352)

18.6 % 16.3 % 12.8 % 17.9 % 6.1 % 34.8 % 6.2 % 6.3 % 9.5 % (9.2)% 7.2 % (1.6)% 1.0 % (50.0)% 12.1 % 341 117 458 (35) 423

6,269 578 690 7,537 1,838 2,370 736 564 528 430 343 481 178 7,468 69 9 78 20 98 4.7 4.3

3,753 369 204 4,326 1,133 1,313 534 332 307 336 172 413 39 (7) 4,572 (246) (155) (401) 59 (342) (30.5) (30.5)

June 30 2011

June 30 2010

Higher / (lower)

Available seat kilometres (ASK) (million) Revenue passenger kilometres (RPK) (million) Seat factor (per cent) Passenger numbers (thousands) Cargo tonne kilometres (CTK) (million) Passenger yield per RPK Passenger unit revenue per ASK Cargo yield Total cost per ASK Fuel cost per ASK Total cost excluding fuel per ASK Aircraft in service Average employee number

104,543 80,403 76.9 24,809 3,066 8.02 6.17 19.31 7.35 2.27 5.08 348 56,404

94,699 72,640 76.7 23,368 2,830 7.48 5.74 17.99 7.29 1.91 5.38 352 56,484

10.4 % 10.7 % 0.2pts 6.2 % 8.3 % 7.2 % 7.5 % 7.3 % 0.8 % 18.8 % (5.6)% (4) (0.1)%

(1)

Please see page 1 for full note reference Please see page 1 for full note reference. Note the 2011 consolidated results for the Group above are the consolidated results including the impact of the exceptional items.

(2)

IAG COMBINED INCOME STATEMENT Three months to June 30

( million) unaudited Before exceptional items 2011

Exceptional items

Total 2011(1)

2010(1)

Higher / (lower)

Passenger revenue Cargo revenue Other revenue Total revenue Employee costs Fuel and oil costs Handling, catering and other operating costs Landing fees and en-route charges Engineering and other aircraft costs Property, IT and other costs Selling costs Depreciation, amortisation and impairment Aircraft operating lease costs Currency differences Total expenditure on operations Operating profit/(loss) Net non-operating costs Profit/(loss) before tax Taxation Profit/(loss) after tax
Operating figures

3,430 302 405 4,137 985 1,250 376 301 275 230 180 245 96 9 3,947 190 (48) 142 (48) 94 (56) (56) 61

3,430 302 405 4,137 985 1,311 376 301 275 230 180 245 91 9 4,003 134 (48) 86 (48) 38

2,808 276 358 3,442 910 947 364 286 258 249 161 244 94 3,513 (71) (75) (146) 37 (109)
2010

22.2 % 9.4 % 13.1 % 20.2 % 8.2 % 38.4 % 3.3% 5.2 % 6.6 % (7.6 )% 11.8 % 0.4 % (3.2)% 100% 13.9 % 205 27 232 (85) 147
Higher / (lower)

(5) 56 (56)

2011

Available seat kilometres (ASK) (million) Revenue passenger kilometres (RPK) (million) Seat factor (per cent) Passenger numbers (thousands) Cargo tonne kilometres (CTK) (million) Passenger yield per RPK Passenger unit revenue per ASK Cargo yield Total cost per ASK Fuel cost per ASK Total cost excluding fuel per ASK Average employee number

53,425 42,635 79.8 13,288 1,552 8.05 6.42 19.46 7.39 2.34 5.05 56,649

47,841 36,865 77.1 12,196 1,439 7.62 5.87 19.18 7.34 1.98 5.36 56,593

11.7 % 15.7 % 2.7pts 9.0 % 7.9 % 5.6 % 9.4 % 1.5 % 0.7 % 18.2 % (5.8)% 0.1 %

(1)

Please see page 1 for full note reference

Financial review Results including Iberia from the acquisition date - January 21, 2011 The consolidated performance (comparing IAG with British Airways stand-alone last year) shows revenue up 3,211 million to 7,537 million and costs up 2,896 million to 7,468 million, principally as a result of the inclusion of Iberia within the group, as well as the nonrepetition of the significant disruption in 2010. Line by line comparatives are not meaningful due to the Iberia acquisition. Therefore this financial review comments on the full six months to June 30, 2011 of IAG compared to the combined performance of the IAG for the prior year. FULL SIX MONTHS PERFORMANCE OF IAG TO PRIOR YEAR SIX MONTHS Exchange rates For the six months the translation of British Airways from sterling functional currency into Euro reporting currency has resulted in a 76 million year over year benefit to revenue and a 78 million adverse impact on operating costs, mainly reflecting 1.6 per cent strengthening of the Euro against sterling. The transactional exchange rate impacts across the Group for the half year saw a negative impact on revenue of 72 million and a favourable impact on costs of 121 million. Therefore total exchange rate impacts were 4 million favourable on revenues and 43 million favourable on costs. Passenger revenue Passenger revenue increased by 1,013 million or 18.6 per cent compared to the prior year six months. This reflected increased volume (ASKs) up 10.4 per cent and increased traffic (RPKs) of 10.7 per cent. The translation impact at the Group level from BA's revenue accounted for 1.2 per cent of this increase and at constant exchange rates passenger revenue would have been up 18.5 per cent. Unit passenger revenue (per ASK) was up 7.5 per cent and passenger yield (per RPK) was up 7.2 per cent. At constant exchange rates unit passenger revenue was up 7.4 per cent and passenger yield up 7.1 per cent. However significant stage length growth (particularly at Iberia, where shorthaul capacity was substantially reduced whilst at the same time long haul was increased) has reduced headline unit revenues and yields. The focus for 2011 has been on volume recovery and market growth whilst also improving unit revenues and yields. Volume growth was driven from both the recapture of lost activity from the volcanic ash cloud and industrial disruption of 2010 and market increases in 2011. Longhaul North America capacity increased by 15.5 per cent, whilst traffic improved by 16.0 per cent, resulting in a seat factor increase of 0.4 points to 78.8 per cent. The joint business between BA, Iberia and American Airlines was in place for the first time this year providing increased customer choice and destinations across the North Atlantic. Latin America and Caribbean capacity grew by 16.5 per cent and traffic by 13.9 per cent such that seat factor declined 1.9 points to 82.5 per cent. Africa, Middle East and South Asia saw moderate capacity increases of only 2.2 per cent, but traffic increasing by 4.2 per cent leading to a seat factor increase of 1.4 points to 73.4 per cent. Asia Pacific capacity grew by 14.9 per cent, whilst traffic grew by 12.5 per cent, which resulted in a seat factor decline of 1.7 points to 78.1 per cent. Shorthaul Europe saw capacity growth of 6.7 per cent and traffic improvement of 7.4 per cent leading to a seat factor increase of 0.5 points to 70.7 per cent. The European market has continued to be very competitive particularly in the southern Europe region. This has seen reductions in Iberias capacity partly through moving some flights to Air Nostrum and Vueling. Domestic capacity decreased by 8.9 per cent and traffic was down 7.4 per cent leading to a seat factor improvement of 1.2 points to 71.2 per cent.

Premium Premium traffic (RPKs) increased substantially more than non-premium in the half year with a positive mix impact on unit revenues and yields. Cargo Cargo revenue was up 83 million or 16.3 per cent for the half year, reflecting volume increases (cargo tonne Kilometres) of 8.3 per cent and yield increases of 7.3 per cent. Other revenue Other revenue increased by 83 million or 12.8 per cent. The main increases were in the MRO business with revenue growing by 21.7 per cent and handling which was up 9.8 per cent. Last year included 33m benefit at Iberia from the recovery of provisions in the wake of four Supreme Court rulings accepting Iberias appeals and absolving the company from paying several settlements of customs duties for the period from 1998 to 2000. The 2011 first half includes a benefit of 35 million in respect of a change in estimate on some elements of deferred revenue. Costs Total costs were up 838 million or 12.1 per cent to 7,741 million. Excluding the exceptional items they were up 11.3 per cent from capacity increases of 10.4 per cent. Total unit costs were up 0.8 per cent mainly as a result of increased fuel unit costs. Non fuel unit costs were down 5.6 per cent, and 5.9 per cent at constant exchange rates. Reductions in non-fuel unit costs benefited from both the non-repeat of disruption in the prior year and continued cost control across the Group. Fuel costs represented 31.5 per cent of total costs compared to 26.2 per cent last year reflecting primarily the unit commodity price increase of 40 per cent. Fuel costs were up 630 million or 34.8 per cent to 2,439 million. Excluding the non-cash exceptional item, fuel costs were up 31.5 per cent and fuel unit costs were up 18.8 per cent, as a result of increased price, net of hedging benefits, this was partly offset by exchange rate benefits as the dollar weakened against the euro (2.6 per cent). Fuel unit costs were up 22.1 per cent at constant exchange rates. Employee costs rose by 6.1 per cent to 1,909 million, reflecting wage awards and increased volumes. Volume and price increases accounted for more than 50 per cent of this increase. In addition, adverse exchange rates and a 20 million restructuring provision also added to these costs. Employee unit costs were down 3.7 per cent, reflecting increased productivity (ASKs per average employee number) of 10.2 per cent. Handling, catering and other operating costs were up 6.2 per cent to 759 million. During the half year volume increases accounted for more than the total increase, but were partially offset by exchange rate benefits and efficiencies. Landing fees and en-route charges rose by 6.3 per cent to 589 million, mostly as a result of increased volume, but also price increases which outstripped inflation, particularly at London Heathrow. Engineering and other aircraft costs were up 9.5 per cent to 553 million, partly reflecting increased volume of flying across the Group, but also increased materials for the Maintenance, Repair and Overhaul (MRO) business. Property, IT and other costs were down 9.2 per cent to 445 million, reflecting the non-repeat of merger costs incurred in the prior year of 26 million. Selling costs increased by 7.2 per cent to 359 million. This reflected increased volume cost from the higher revenue and also non repeat of savings from the prior year disruption. Depreciation, amortisation and impairment costs were down 1.6 per cent to 491 million, reflecting elements of the reduced fleet such as the retirement of Boeing 757s. Aircraft operating lease costs rose by 1.0 per cent to 195 million, or 3.6 per cent excluding the exceptional items, reflecting increased operating leased aircraft, mainly Boeing 777-300s in the British Airways fleet. Currency differences reduced by 2 million to a charge of 2 million. Exceptional items The business combination accounting principles require that the gain Iberia has recognised in the first six months from the maturity of hedges that existed at January 21, 2011 (the merger date) are not allowed to be recognised by IAG. IFRS3 Revised limits IAG to

recognising only post-acquisition benefits or losses upon re-designation of the hedges that existed at the date of the acquisition or new hedges. The mark to market value of these hedges at January 21, 2011 amounted to 78 million in reserves. The resultant cash gains of 56 million in the first six months, which Iberia have benefited from and which have been included in their own income statement, are eliminated on consolidation at the IAG Group level. Operating profit IAG operating profit was 88 million, excluding the exceptional items, compared to a loss of 309 million for the first half of 2010. The consolidated results including Iberia from the acquisition date of January 21, 2011, show an operating profit of 69 million. Non-operating items Finance costs Cost for the half year net finance costs were 76 million, down from 110 million in the prior year, mainly reflecting the reduction in net debt. Other non-operating items The step acquisition of Iberia resulted in 83 million profit arising as an exceptional non-cash gain. Profit before tax IAG profit before tax was 39 million, compared to a loss of 419 million for the first half of 2010. The consolidated results including Iberia from the acquisition date of January 21, 2011, show a profit before tax of 78 million, compared to a loss of 401 million for the prior year. Taxation There was a 32 million tax credit for the first six months due to a rate reduction of Corporation tax in the UK and that no tax is charged on the step acquisition profit of Iberia under the merger transaction. Profit after tax IAG profit after tax was 71 million, compared to a loss of 352 million for the first half of 2010. The consolidated results including Iberia from the acquisition date of January 21, 2011, show a profit before tax of 98 million, compared to a loss of 342 million for the prior year. Cash and cash equivalents Cash and cash equivalents at June 30, 2011 was 4,191 million, down 161 million from December 31, 2010. This mainly reflects the strong trading performance during the first half, but is after one off payments in relation to the British Airways competition fines of 168 million and a 157 million payment to the British Airways pension fund as part of the 2010 agreement with the trustees. In addition, a further 74 million is held as restricted cash as it is possible that further amounts may be payable to the fund. Net debt The net debt of the Group has fallen 415 million in this half of the year and stands at 480 million. Adjusted gearing has therefore fallen to 42 per cent, from 47 per cent in the prior year. Business review Our mission is to be the leading international airline group. This means we will: win the customer through service and value across our global network; deliver higher returns to our shareholders through leveraging cost and revenue opportunities across the Group; attract and develop the best people in the industry; provide a platform for quality international airlines, leaders in their markets, to participate in consolidation; retain the distinct cultures and brands of individual airlines. By accomplishing our mission, IAG will help to shape the future of the industry, set new standards of excellence and provide sustainability, security and growth.

Our 6 key aims...

Leadership in our main hubs Leadership across the Atlantic Stronger Europe-to-Asia position in critical markets Grow share of Europe-to-Africa routes Stronger intra-Europe network Competitive cost positions across our businesses

Synergies We have made significant progress in the delivery of both our first year synergies and the planning and commencement of the longer term changes required across the Group to deliver our five year target of 400m of revenue and cost synergy benefits. Key areas already achieved include: Fare combinability across BA and Iberias longhaul networks, where customers can combined BA and Iberia fares on cross airline journeys such as London Buenos Aries Madrid London; Code share across an additional 17 routes; Cross selling through airline channels such as ba.com and Iberia.com; Sales force integration in BA and Iberia home markets as well as USA, South Africa, and Nigeria, with more to come later this year; and A number of joint purchases have also been made using the economies of scale of the Group.

Principal risks and uncertainties The Directors of the Group believe that the risks and uncertainties described below are the ones that may have the most significant impact on the long-term value of IAG. The list is in alphabetical order and is not intended to be exhaustive. The Group carries out detailed risk management reviews to ensure that the risks are mitigated where possible. Brand reputation The Group brands have significant commercial value. Erosion of the brands, through either a single event, or series of events, may adversely impact our leadership position with customers and ultimately affect our future revenue and profitability. Competition The markets in which we operate are highly competitive. We face direct competition from other airlines on our routes, as well as from indirect flights, charter services and from other modes of transport. Competitor capacity growth in excess of demand growth could materially impact our margins. Some competitors have cost structures that are lower than ours or have other competitive advantages such as being supported by government intervention or benefitting from insolvency protection. Fare discounting by competitors has historically had a negative effect on our results because we are generally required to respond to competitors' fares to maintain passenger traffic. Our strong global market positioning, our network and alliances and diverse customer base continue to address this risk. Consolidation / deregulation As noted above the airline market is fiercely competitive and will need to rationalise given current market conditions. This will involve further airline failures and consolidation. Mergers and acquisitions amongst competitors have the potential to adversely affect our market position and revenue. The merger between British Airways and Iberia and the Joint Business Agreement between British Airways, American Airlines and Iberia for transatlantic routes include delivery risks such as realising planned revenue and cost synergies. The delivery of synergies is inherently subject to industrial relations, revenue leakage and programme management risks. The Management Team has a robust merger integration and Joint Business Agreement programme which addresses these risks. Some of the markets in which we operate remain regulated by governments, in some instances controlling capacity and/or restricting market entry. Relaxation of such restrictions, whilst creating growth opportunities for us, may have a negative impact on our margins. Debt funding We carry substantial debt that will need to be repaid or refinanced. Our ability to finance ongoing operations, committed aircraft orders and future fleet growth plans are vulnerable to various factors including financial market conditions. Although most of our future capital commitments are currently asset related and already financed, there can be no assurance that aircraft will continue to provide attractive security for lenders in the future. The Group's Treasury Committee regularly reviews the Group's financial position. The results of these reviews are discussed with management and the appropriate action taken.

Economic conditions Our revenue is highly sensitive to economic conditions in the markets in which we operate. Deterioration in either the domestic and/or global economy may have a material impact on our financial position. The operational complexities inherent in our business, together with the highly regulated and commercially competitive environment of the airline industry, leave us exposed to a number of significant risks. We have maintained a focus on mitigating those risks although many remain outside of our control for example changes in governmental regulation, acts of terrorism, adverse weather, pandemics and the availability of funding from the financial markets. The IAG Management Committee regularly reviews the Groups revenue forecast. The results of these reviews are discussed with management and the appropriate action taken. Employee relations We have a large unionised workforce. Collective bargaining takes place on a regular basis and a breakdown in the bargaining process may disrupt operations and adversely affect business performance. Our continued effort to manage employment costs increases the risk in this area. Event causing long-term network disruption Several possible events may cause a long-term network disruption or revenue decline. Example scenarios include a significant failure of the public transport system, the complete or partial loss of the use of terminals at Heathrow, Madrid Barajas or New York JFK airports, adverse weather conditions (such as snow, fog or volcanic ash), widespread or co-ordinated air traffic control industrial action, war, civil unrest or terrorism. A long-term network disruption may result in significant lost revenue and additional cost. Management has robust business continuity plans to mitigate these risks to the extent feasible. Failure of a critical IT system We are dependent on IT systems for most of our principal business processes. The failure of a key system may cause significant disruption to our operation and/or lost revenue. System controls, disaster recovery and business continuity arrangements exist to mitigate the risk of a critical system failure. Fuel price, currency and interest rate fluctuation We used approximately 7.4 million tonnes of jet fuel in 2010. Volatility in the price of oil and petroleum products can have a material impact on our operating results. This price risk is partially hedged through the purchase of oil and petroleum derivatives in forward markets which can generate a profit or a loss. The Group is exposed to currency risk on revenue, purchases and borrowings in foreign currencies. The Group seeks to reduce foreign exchange exposures arising from transactions in various currencies through a policy of matching, as far as possible, receipts and payments in each individual currency and selling the surplus or buying the shortfall of its currency obligations. The Group is exposed to non-performance to financial contracts by counterparties, for activities such as fuel and currency hedging. Failure of counterparties may result in financial losses. The IAG Group is exposed to increases in interest rates when its floating rate debt in a particular currency exceeds floating rate cash deposits in that currency. The IAG Group is also exposed to changes in interest rates as future fixed rate debt drawn down to meet capital expenditure commitments may become expensive relative to market interest rates. The Group's Treasury Committee regularly reviews the Group's fuel and currency positions. The results of these reviews are discussed with management and the appropriate action taken. Governance The governance structure of the IAG Group put in place at the time of the merger between BA and Iberia has a number of complex features, including nationality structures to protect BA and Iberias route and operating licenses and assurances to preserve the specific interests of those companies. This governance structure could hinder the IAG Groups decision making ability and, if so, the financial performance of the Group. Government intervention Regulation of the airline industry covers many of our activities including route flying rights, airport slot access, security and environmental controls. Our ability to both comply with and influence any changes in these regulations is key to maintaining our operational and financial performance. Plans by governments to significantly increase environmental taxes such as the introduction of a per-plane' tax, the European Union Emissions Trading scheme and the potential for other environmental taxes may have an adverse impact upon demand for air travel and/or reduce the profit margin per ticket. These taxes may also benefit our competitors by reducing the relative cost of doing business from their hubs.
9

Infrastructure constraints The IAG Group is dependent on and may be affected by infrastructure decisions or changes in infrastructure policy by governments, regulators or other entities, which are often outside the IAG Group's control. Key supplier risk We are dependent on suppliers for some principal business processes, and access to certain key business assets. The failure of a key supplier to deliver contractual obligations, or a failure to negotiate continued satisfactory terms with suppliers, may cause significant disruption to our operation. Pandemic If there is a significant outbreak of swine flu or other infectious disease, staff absence will increase which may seriously impact the operation. Key corporate clients may discourage travel, significantly impacting sales. During the recent outbreak of swine flu we implemented our pandemic business continuity plan. Landing fees and security charges Airport, transit and landing fees and security charges or initiatives represent a significant operating cost to British Airways and Iberia and have an impact on operations. Whilst certain airport and security charges are passed onto passengers by way of surcharges, others are not. There can be no assurance that such costs will not increase or that the IAG Group will not incur new costs in the UK, Spain or elsewhere. In addition, security charges and regulations at airports in the UK, Spain or elsewhere, particularly in the US, could increase further, specifically in the event of terrorist attacks. Safety/security incident The safety and security of our customers and employees are fundamental values for us. Failure to prevent or respond effectively to a major safety or security incident may adversely impact our operations and financial performance. Seasonality If an event or circumstance were to weaken the demand for air travel or materially affect airline operations during the seasonal high period (for instance industrial disputes with employees or a terrorist incident), this could have a relatively higher impact on results for the relevant financial year.

10

INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.

Interim Management Report Consolidated Results January 1, 2011 - June 30, 2011

The IAG June 30, 2011 consolidated incom e and cashflow statements are the results of BA and IAG the company for the six month period ended June 30, 2011 and Iberia from January 22, 2011 to June 30, 2011; the IAG June 30, 2010 comparatives are solely the results of BA. The IAG June 30, 2011 balance sheet is the consolidated financial position of BA, IAG the company and Iberia; the IAG December 31, 2010 balance sheet comparative is solely BA.

11

IAG CONSOLIDATED INCOME STATEMENT Six months to June 30 ( million) unaudited

Before exceptional items 2011 Exceptional items

Total 2011 6,269 578 690 7,537

2010 3,753 369 204 4,326 1,133 1,313 534 332 307 336 172 413 39 (7) 4,572 (246) (108) 9 (36) (12) (2) (20) (1) 15 (401) 59 (342) (352) 10 (342) (30.5) (30.5) 2010 (342) (104) 10 25 70 (341)

Passenger revenue Cargo revenue Other revenue Total revenue Employee costs Fuel and oil costs Handling, catering and other operating costs Landing fees and en-route charges Engineering and other aircraft costs Property, IT and other costs Selling costs Depreciation, amortisation and impairment Aircraft operating lease costs Currency differences Total expenditure on operations Operating profit/(loss) Finance costs Finance income Retranslation credit/(charge) on currency borrowings Fuel derivative gains/(losses) Net credit/(charge) relating to available-for-sale financial assets Share of post-tax profits/(losses) in associates accounted for using the equity method Profit/(loss) on sale of property, plant and equipment and investments Net financing credit/(charge) relating to pensions Profit/(loss) before tax Taxation Profit/(loss) after tax Attributable to: Equity holder of the parent Non-controlling interest Basic earnings per share Diluted earnings per share IAG CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME million Profit/(loss) after tax for the period Changes in the fair value of derivatives held as cash flow hedges Changes in the fair value of available-for-sale financial assets Share of other movements in reserves of associates Exchange (losses)/gains Total comprehensive income/(loss) net of tax Total comprehensive income is attributable to: Equity holders of the parent Non-controlling interests Items in the statement of comprehensive income above are disclosed net of tax.

6,269 578 690 7,537 1,838 2,309 736 564 528 430 343 481 183 7,412 125 (117) 35 20 1 (16) (12) 1 14 51 20 71 61 10 71 61

(5) 56 (56)

1,838 2,370 736 564 528 430 343 481 178 7,468 69 (117) 35 20 1 (16) (12) 84 14 78 20 98 88 10 98 4.7 4.3 2011 98 73 (10) (4) 157

83 27 27

158 (1) 157

(372) 31 (341)

12

IAG CONSOLIDATED BALANCE SHEET ( million) unaudited Non-current assets Property, plant and equipment Intangible assets and excess of purchase price over book value Investments in associates Available-for-sale financial assets Employee benefit assets Derivative financial instruments Deferred tax assets Other non-current assets Total non-current assets Current assets Non-current assets held for sale Inventories Trade receivables Other current assets Derivative financial instruments Other current interest-bearing deposits Cash and cash equivalents Total current assets Total assets Shareholders' equity Issued share capital Share premium Investment in own shares Other reserves Total shareholders equity Non-controlling interests Total equity Non-current liabilities Interest-bearing long-term borrowings Employee benefit obligations Deferred tax liability Provisions for liabilities and charges Derivative financial instruments Other long-term liabilities Total non-current liabilities Current liabilities Current portion of long-term borrowings Trade and other payables Derivative financial instruments Current tax payable Provisions for liabilities and charges Total current liabilities Total liabilities Total equity and liabilities June 30, 2011 8,851 1,360 150 545 951 41 631 104 12,633 21 382 1,344 504 239 2,517 1,674 6,681 19,314 928 5,280 (18) (1,220) 4,970 224 5,194 December 31, 2010 8,080 336 287 77 676 22 48 9,526 39 115 453 306 156 1,381 917 3,367 12,893 323 1,049 (4) 1,222 2,590 235 2,825

4,242 252 1,066 1,331 69 594 7,554 429 5,720 52 169 196 6,566 14,120 19,314

4,114 258 928 194 4 362 5,860 538 3,314 11 12 333 4,208 10,068 12,893

13

IAG CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months to June 30, 2011 Investment in own shares (18) (18) 158 8 (4) (1,220) 158 8 (4) 4,970 (1) (10) 224 157 8 (4) (10) 5,194 Total shareholder equity 1,088 3,720 Noncontrolling interest 235 -

( million) unaudited At January 1, 2011 Shares issued during the period Total comprehensive income for the period (net of tax) Cost of share-based payment Exercise of share options Distributions made to holders of perpetual securities At June 30, 2011
1)

Issued capital 928 928

Share premium 5,280 5,280

Other reserves 1,088

(1)

Total equity 1,323 3,720

(2,470)

Closing balance includes retained earnings of 1,201 million.

For the half year ended June 30, 2010 Investment in own shares (7) 2 (5) Total shareholders equity 2,324 (372) (1) 1,951 Noncontrolling interest 224 31 (10) 245

Issued capital At January 1, 2010 Total comprehensive (loss)/income for the period (net of tax) Cost of share-based payment Exercise of share options Distributions made to holders of perpetual securities At June 30, 2010
1)

Share premium 1,049 1,049

Other reserves 959

(1)

Total equity 2,548 (341) (1) (10) 2,196

323 323

(372) (1) (2) 584

Closing balance includes retained earnings of 772 million.

14

IAG CONSOLIDATED CASHFLOW STATEMENT ( million) unaudited Cash flows from operating activities Operating profit (loss) Depreciation, amortisation and impairment Movement in working capital Settlement of competition investigation Cash payments to pension scheme Other non cash movements Interest paid Other Net cash flows from operating activites Acquisition of property, plant and equipment & intangble assets Sale of property, plant and equipment Cash acquired on business combination (net of proceeds) Interest received Decrease/(increase) in other current interest- bearing deposits Acquisition of own shares Other net investing movements Net cash outflow from investing activities Cash flows from financing activities Proceeds from long-term borrowings Repayment of borrowings Repayment of finance leases Exercise of share options Distributions made to holders of perpetual securities Net cash flows from financing activities Net increase in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at 1 January Cash and cash equivalents at period end Interest bearing deposits maturing after more than three months Cash, cash equivalents and other interest bearing deposits
(1)

Six months to June 30 2011 2010

Better / (worse)

69 481 488 (168) (157) 25 (102) (4) 632 (358) 23 689 28 (338) (19) 310 335

(246) 413 414 (3) (2) (88) (2) 486 (291) 19 (10) 6 142 (2) (136)

315 68 74 (165) (157) 27 (14) (2) 146 (67) 4 699 22 (480) (19) 312 471

218 (175) (218) (10) (185) 782 (25) 917 1,674 2,517 4,191

258 (86) (252) (1) (10) (91) 259 146 585 990 1,155 2,145

(40) (89) 34 1 (94) 523 (171) 332 684 1,362 2,046

Restricted cash of 74 million (December 2010: nil) consists of cash deposited by British Airways in a bank account, which is not available for general use by the Group. The cash deposited will be used to satisfy the terms of a funding agreement with trustees of the British Airways Defined Benefit pension scheme with the balance returned to the Group. The final amount required to settle the agreement with the pension trustees is subject to uncertainty but will not be in excess of the 74 million.

15

NOTES TO THE ACCOUNTS For the six months to June 30, 2011 1. CORPORATE INFORMATION AND BASIS OF PREPARATION On January 21, 2011 British Airways Plc and Iberia Lneas Areas de Espaa S.A. (hereinafter British Airways and Iberia respectively) completed a merger transaction of the two companies to create a new leading European airline group. As a result of the merger, International Consolidated Airlines Group S.A. (hereinafter International Airlines Group, IAG or the Group) was formed to hold the interests of both the existing airline groups. IAG is a Spanish company registered in Madrid and was incorporated on April 8, 2010. IAG shares are traded on the London Stock Exchanges main market for listed securities and also on the stock exchanges of Madrid, Barcelona, Bilbao and Valencia (the Spanish Stock Exchanges), through the Spanish Stock Exchanges Interconnection System (Mercado Continuo Espaol). The Groups summary condensed consolidated interim financial statements for the six months ended June 30, 2011 were prepared on a going concern basis, in accordance with IAS 34 and authorised for issue by the Board of Directors on July 28, 2011. The interim condensed financial statements herein are not the Companys statutory accounts and are unaudited. IAGs prior period comparative for the interim condensed financial statements are the results of operations and financial position of British Airways. The basis of preparation and accounting policies set out in the British Airways Report and Accounts for the nine months ended December 31, 2010 have been applied in the preparation of these summary consolidated financial statements. British Airways financial statements for nine months ended December 31, 2010 have been filed with the Registrar of Companies in England and Wales, and are in accordance with the International Financial Reporting Standards as adopted by the European Union and with those of the Standing Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the International Accounting Standards Board (IASB). References to 'IFRS' hereafter should be construed as references to IFRSs as adopted by the EU. As a result of the Business combination, the Group has enhanced the description of its accounting policy on Exceptional items.
(1)

For the purposes of these statements IFRS also includes International Accounting Standards.

2.

ACCOUNTING POLICIES The accounting policies and methods of calculation adopted are consistent with those of the annual financial statements for the period ended December 31, 2010, as described in the financial statements of British Airways available on www.iairgroup.com, except as discussed below. The Group has adopted the following standards, interpretations and amendments from January 1, 2011. IFRS 3 (Amendment), Business Combinations; effective for periods beginning on or after January 1, 2011. The amendment clarifies guidance on the choice of measuring non-controlling interests at fair value or at the proportionate share of the acquirees net assets applies only to instruments that present ownership interest and entitle their holders to a proportionate share of the net assets in the event of liquidation. IFRS 7 (Amendment) Financial Instruments: Disclosures; effective for periods beginning on or after January 1, 2011. The amendment includes multiple clarifications related to the disclosure of financial instruments. IAS 1 (Amendment) Presentation of Financial Statements; effective for periods beginning on or after January 1, 2011. The amendment permits, for each component of equity, the presentation of the analysis by item to be included in either the statement of changes in equity or the notes to the financial statements. IAS 34 (Amendment) Interim Financial Reporting; effective for periods beginning on or after January 1, 2011. The amendment clarifies guidance on the disclosure principals involving significant events and transactions, including changes to fair value measurements, and the requirement to update relevant information from the most recent annual report. IAS 24 (Amendment) Related Party Transactions; effective for periods beginning on or after January 1, 2011. The amendment clarifies the definition of related party relationships, with particular emphasis on party relationships with persons and key management personnel. The amendment also permits that entities may be exempt from related party disclosure requirements for transactions with a government, where those entities are controlled, jointly controlled, or significantly influenced by that same government. IAS 32 (Amendment) Financial Instruments: Presentation; effective for periods beginning on or after January 1, 2011. The amendment permits that rights issues and certain options or warrants may be classified as equity instruments, provided that the rights are given pro rata to all existing owners of the same class of an entitys non-derivative equity instruments, to acquire a fixed number of the entitys own equity instruments for a fixed amount in any currency. IFRIC 14 (Amendment) Prepayments of a Minimum Funding Requirement; effective for periods beginning on or after January 1, 2011. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset, the Group is not subject to minimum funding requirements.
16

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

2.

ACCOUNTING POLICIES continued Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group: IFRS 3 Business Combinations. Clarification that contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008) are accounted for in accordance with IFRS 3 (2005). IFRS 3 Business Combinations. Unreplaced and voluntarily replaced share-based payment awards and its accounting treatments within a business combination. IAS 27 Consolidated and Separate Financial Statements. Applying the IAS 27 (as revised in 2008) transition requirements to consequentially amended standards. IFRIC 13 Customer Loyalty Programmes. In determining the fair value of award credits, an entity shall consider discounts and incentives that would otherwise be offered to customers not participating in the loyalty programme. The Group has not early adopted any other standard, interpretation or amendment that has been issued but not yet effective. Exceptional Items Exceptional items are those that in managements view need to be separately disclosed by virtue of their size and incidence. The Exceptional items column in the income statement relates primarily to the impact of Business Combination transactions that do not contribute to the on-going operating results of the Group. Business Combination transactions include cash items such as the costs incurred to effect the transaction and non-cash items such as accounting gains or losses recognised through the Income statement.

17

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

3.

BUSINESS COMBINATIONS On January 21, 2011 British Airways Plc and Iberia Lneas Areas de Espaa S.A. (hereinafter British Airways and Iberia respectively) completed a merger transaction of the two companies to create a new, leading European airline group. As a result of the merger, IAG was formed to hold the interests of both the existing airline groups. IAG is a Spanish company registered in Madrid incorporated on April 8, 2010. The Group is expecting to generate annual synergies of approximately 400 million by the end of its fifth year and benefit shareholders, customers and employees. IAG will combine the two companies leading positions in the UK and Spain and enhance their strong presence in international long-haul markets, while retaining the individual brands and operations of both airlines. Principal terms Under the terms of the merger, British Airways ordinary shareholders received one new ordinary share of IAG for every existing British Airways ordinary share and Iberia shareholders received 1.0205 new ordinary shares for every existing Iberia ordinary share. Upon completion of the transaction, British Airways shareholders held 56 per cent of IAG and Iberias shareholders 44 per cent. Prior to January 21, 2011 British Airways owned 13.15 per cent of the issued share capital of Iberia (13.55 per cent after cancellation of Iberia Treasury Shares) and Iberia owned 9.98 per cent of the issued share capital of British Airways. Subsequent to the merger, the cross holdings between British Airways and Iberia were maintained or recreated with the same economic and voting rights. For the purposes of accounting British Airways is deemed to be the acquirer of Iberia. IAG's value was determined based on British Airways' fair value, calculated from British Airways quoted market price at the close of business on January 20, 2011 of 3.346 (or 2.825) for its 1,154 million outstanding ordinary shares. The purchase price of Iberia was calculated based on the agreed merger ratios and IAG's value on the transaction date. January 21, 2011 3,862 (385) 3,477 British Airways ownership in IAG (per cent) IAG value Purchase price IAG value Iberia ownership in IAG (per cent) British Airways stake in Iberia at market value Purchase price Step acquisition As a result of British Airways initial investment in Iberia, the Business Combination of the Group was deemed to have been achieved in stages. Therefore, the Group was required to revalue its initial investment in Iberia to fair value at the acquisition date through the income statement resulting in a non-cash gain of 83 million. For the half year ended June 30, 2011, the Group has recognised the gain within the Exceptional items column in the income statement. Derivatives and financial instruments On January 21, 2011, Iberia had a portfolio of cash flow hedges with a net mark-to-market benefit of 67 million recorded within Other reserves on the balance sheet (78 million of which is expected to unwind in 2011). As these cash flow hedge positions unwind, Iberia will recycle the benefit from other reserves through the Income statement. 6,209 44 2,732 370 3,102 56 6,209

million IAG value British Airways fair value Iberia stake in British Airways

18

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

3.

BUSINESS COMBINATIONS CONTINUED

However, under IFRS3 (revised) IAG is not able to recognise this pre-acquisition other reserve balance within the consolidated IAG financial statements. As a result, IAG is required to recognise fuel and aircraft operating lease costs gross of the preacquisition cash flow hedges. For the half year, this has resulted in a non-cash increase in fuel expense of 61 million and a noncash decrease in aircraft operating lease costs of 5 million. From a Group perspective, IAG received a 56 million net cash benefit from the pre-acquisition hedges for the half year. The full year impact will be a non-cash increase in fuel of 89 million and a non-cash decrease in aircraft operating lease costs of 11 million. From a Group perspective, IAG will receive a 78 million net cash benefit from the pre-acquisition hedges for the full year. For the half year ended June 30, 2011, the Group has recognised the non-cash impact of the cash flow hedges within the Exceptional items column in the Income statement. Provisional fair value As at June 30, 2011 the fair values of acquired assets, liabilities and goodwill have been determined on a provisional basis, pending the finalisation of the valuations of the tangible and intangible assets and the related deferred taxes. The provisional values have not been recorded in the individual asset and liability line items of the Groups Balance sheet. The excess of the purchase price over the book value of the assets has been included within Intangible assets and excess of purchase price over book value in the Balance sheet. This value is shown net of the applicable deferred taxes. The Group has recorded depreciation on the provisional fair values of property, plant and equipment and other depreciable assets based on the expected remaining useful life of the assets. However, any movements in the provisional fair value of depreciable assets would result in an adjustment to this depreciation charge through the Income statement from the date of acquisition. The assets and liabilities arising from the acquisition are as follows: Acquiree's carrying amount 689 1,175 568 215 201 1,264 45 157 1,254 (462) (1,550) (184) (1,203) (456) 1,713 Provisional fair value 689 1,175 568 215 201 1,369 1,006 157 1,254 (462) (1,550) (184) (1,265) (456) 2,717

million Cash and cash equivalents Other current interest-bearing deposits (1) Trade receivables Inventories Other current assets Property, plant and equipment (2) Intangible assets and remaining excess of fair value over purchase price Investments in associates Other non-current assets Interest bearing long-term borrowings Trade and other payables Other current liabilities Non-current provisions and accruals Other non-current liabilities Net identifiable assets acquired
(1) (2)

The gross contractual amount for trade receivables is 603 million, 94% which is expected to be collected. Included within the intangible assets are provisional fair values for brands of 306 million and franchise agreements of 75 million. Provisional values for landing rights and the frequent flyer programme have not yet been finalised. The excess of fair value over purchase price is shown net of applicable deferred taxes.

Transaction costs of 58 million were recognised in the Income statement for the period ended December 31, 2010 within Property, IT and other costs. No material costs arose in the half year ended June 30, 2011.

19

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

4.

SEASONALITY The Groups business is highly seasonal with demand strongest during the summer months. Accordingly higher revenues and operating profits are usually expected in the latter six months of the financial year than in the first six month.

5. a.

SEGMENT INFORMATION Business segments British Airways and Iberia are managed as individual operating companies. Each company operates its network passenger and cargo operations as a single business unit. The chief operating decision maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the IAG Management Committee. The IAG Management Committee makes resource allocation decisions based on route profitability, which considers aircraft type and route economics, based primarily by reference to passenger economics with limited reference to cargo demand. The objective in making resource allocation decisions is to optimise consolidated financial results. Therefore, based on the way the Group treats the network passenger and cargo operations, and the manner in which resource allocation decisions are made, the Group has two (2010: one) reportable operating segments for financial reporting purposes, reported as British Airways and Iberia. Six months to June 30 2011 million Revenue External revenue Inter-segment revenue Segment revenue Operating profit/(loss)(1) Depreciation and amortisation
(1)

2010 Unallocated 14 14 (63) (5) Total 7,537 30 7,567 69 (481) 4,326 4,326 (246) (413)

British Airways 5,443 (18) 5,425 210 (395)

Iberia 2,094 34 2,128 (78) (81)

The 'Unallocated' segment includes exceptional items of 56 million (2010: nil).

Tangible assets by segment are British Airways 7,626 million and Iberia 1,225 million.

b.

Geographical segments by area of original sale

million UK Spain USA Rest of world Revenue

Six months to June 30 2011 2010 2,571 1,003 1,157 2,806 7,537 1,992 51 816 1,467 4,326

20

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

5. c.

SEGMENT INFORMATION continued Geographical segments by assets

million As at June 30, 2011 UK Spain Unallocated Total As at December 31, 2010 UK Spain Unallocated Total

Property, plant and equipment

Intangible assets

7,536 987 328 8,851

289 1,035 36 1,360

7,976 104 8,080

299 37 336

6.

FINANCE COSTS AND INCOME

million Finance costs: Interest payable on bank and other loans, finance charges payable under finance leases and hire purchase contracts Unwinding of discount on provisions Capitalised interest Change in fair value of cross currency swaps Currency charges on financial fixed assets Total finance costs Finance income: Interest on other interest bearing deposits Total finance income Pensions financing: Net financing income/(expense) relating to pensions Amortisation of actuarial losses in excess of the corridor Effect of APS asset ceiling Total financing income relating to pensions
(1) (1)

Six months to June 30 2011 2010

96 1 (1) 2 19 117 35 35 29 (15) 14

99 13 (1) (3) 108 9 9 (46) (36) 97 15

Unwinding of discount on the competition investigation provision and restoration and handback provisions.

21

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

7.

TAX The Group operates in various countries and as such, is liable for taxes in accordance with the applicable tax legislation prevailing in those countries. The tax credit for the six months to June 30, 2011 is 20 million (June 30, 2010: 59 million). Revised UK Corporation tax legislation was substantively enacted by March 31, 2011 reducing the main rate of corporation tax from 27 per cent to 26 per cent from April 1, 2011, and reducing the rate by an additional 1% per annum to 25 per cent by April 1, 2012. The reduction in the corporation tax rate reduces the deferred tax liability provided at June 30, 2011 by 41 million. Excluding the one-off adjustment arising from the reduction in the corporation tax rate (41 million through the Income statement), the effective tax rate for the half year ended was 27 per cent.

8.

EARNINGS PER SHARE Basic earnings per share for the six months to June 30, 2011 are calculated on a weighted average of 1,848,346,546 ordinary shares and adjusted for shares held for the purposes of Employee Share Ownership Plans. Diluted earnings per share for the six months ended June 30, 2011 are calculated on a weighted average of 2,050,619,506 ordinary shares. The number of shares in issue at June 30, 2011 was 1,855,369,557 ordinary shares of 50 cents each (June 30, 2010: 1,153,660,801 ordinary shares of 25 pence each).

9.

DIVIDENDS The Directors declare that no dividend be paid for the six months to June 30, 2011 (June 30, 2010: nil).

10.

PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS Property, plant and equipment 8,080 353 1,264 (7) (462) (377) 8,851

million Six months to June 30, 2011 Net book value as at January 1, 2011 Additions Acquired through business combinations Disposals Depreciation, amortisation and impairment Exchange movements Net book value as at June 30, 2011 Six months to June 30, 2010 Net book value as at January 1, 2010 Additions Disposals Progress payments Depreciation, amortisation and impairment Exchange movements Net book value as at June 30, 2010

Intangible assets 336 1,012 45 (19) (14) 1,360

7,784 356 2 (20) (408) 740 8,454

299 10 (2) (5) 26 328

Capital expenditure authorised and contracted for but not yet provided for in the accounts amounts to 4,954 million for the Group commitments (December 31, 2010: 4,831 million). The majority of capital expenditure commitments are denominated in US dollars and are subject to exchange movements.

22

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

11.

FINANCIAL INSTRUMENTS BY CATEGORY The detail of the Groups financial instruments as at June 30, 2011 and December 31, 2010 by nature and classification for measurement purposes is as follows: As at June 30, 2011 million Non-current financial assets Available-for-sale financial assets Derivative financial instruments Other non-current assets Total non-current financial assets Current financial assets Trade receivables Other current assets Derivative financial instruments Other current interest-bearing deposits Cash and cash equivalents Total current financial assets Loans and receivables 104 104 Assets at FV through the profit and loss Derivatives used for hedging 41 41

Available for sale 545 545

Total 545 41 104 690

1,344 223 2,517 1,674 5,758

239

1,344 223 239 2,517 1,674 5,997

239

As at June 30, 2011 million Non-current financial liabilities Interest-bearing long term borrowings Derivative financial instruments Other long -term liabilities Total non-current financial liabilities Current financial liabilities Current portion of long -term borrowings Trade and other payables Derivative financial instruments Total current financial liabilities As at December 30, 2010 million Non-current financial assets Available-for-sale financial assets Derivative financial instruments Other non-current assets Total non-current financial assets Current financial assets Trade receivables Other current assets Derivative financial instruments Other current interest-bearing deposits Cash and cash equivalents Total current financial assets
23

Loans and payables

Liabilities at FV through the P&L -

Derivatives used for hedging 69 69

Total 4,242 69 176 4,487

4,242 176 4,418

429 2,882 3,311 Loans and receivables

1 1 Derivatives used for hedging

51 51 Available for sale

429 2,882 52 3,363 Total

29 29

22 22

77 77

77 22 29 128

453 114 1,381 917 2,865

156 156

453 114 156 1,381 917 3,021

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

11.

FINANCIAL INSTRUMENTS BY CATEGORY CONTINUED

As at December 30, 2010 million Interest-bearing long term borrowings Derivative financial instruments Other long-term liabilities Total non-current financial liabilities Current financial liabilities Current portion of long term borrowings Trade and other payables Derivative financial instruments Total current financial liabilities

Loans and payables 4,114 13 4,127

Liabilities at FV through the P&L 4 4

Derivatives used for hedging -

Total

4,114 4 13 4,131

538 1,452 1,990

5 5

6 6

538 1,452 11 2,001

12.

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Six months to 30 June 2011 2010 93 1,402 393 338 (218) 2,008 (134) 1,874 (2,354) (480) . Net debt comprises the current and non-current portions of long-term borrowings less cash and cash equivalents and other current interest-bearing deposits. 259 338 (142) (258) 197 (372) (175) (2,587) (2,762)

million Increase in cash and cash equivalents during the period Net funds acquired on Business Combinations Net cash outflow from repayments of debt and lease financing Increase/(decrease) in other current interest-bearing deposits New loans and finance leases taken out and hire purchase arrangements made Decrease in net debt resulting from cash flow Exchange movements and other non-cash movements Decrease in net debt during the period Net debt at January 1 Net debt at June 30

13.

LONG-TERM BORROWINGS million Current Bank and other loans Finance leases Hire purchase arrangements June 30, 2011 December 31, 2010

210 206 13 429

209 255 74 538

Non-current Bank and other loans Finance leases Hire purchase arrangements 1,605 2,625 12 4,242 1,688 2,405 21 4,114

24

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011 13. LONG-TERM BORROWINGS CONTINUED In August 2009, British Airways issued a 350 million fixed rate 5.8 per cent convertible bond, convertible into ordinary shares at the option of the holder, before or on maturity in August 2014. Under the terms of the merger, the bondholders are now eligible to convert their bonds into ordinary shares of IAG instead of shares in British Airways. Conversion into ordinary shares will occur at rate of 1.89 per share. The equity portion of the convertible bond issue is included in other reserves. In January, 476,190 options were exercised at an exercise price of 1.89 per share with an aggregate principal balance of 900,000. The bondholders received British Airways shares as the transaction occurred pre-merger. The shares were converted to IAG shares on the merger date. As at June 30, 2011 184,708,995 (June 30, 2010: 185,185,185) options were outstanding. 14. SHARE BASED PAYMENTS During the period 5,422,781 conditional shares were awarded, under the Groups Performance Share Plan (PSP) to key senior executives and selected members of the wider management team. No payment is due upon the vesting of the shares. The fair value of equity-settled share options granted is estimated as at the date of the award using the Monte-Carlo model, taking into account the terms and conditions upon which the options were awarded. The following are the inputs to the model for the PSP options granted in the period: Expected share price volatility: 50% Expected life of options: 3 years Weighted average share price: 2.31 The Group also made awards under the bonus deferral plan (BDP) during the period, under which 927,696 conditional shares were awarded. 15. PROVISIONS FOR LIABILITIES AND CHARGES

million Six months to June 30, 2011 Net book value January 1, 2011 Provisions recorded during the period Acquired through business combinations Utilised during the period Exchange differences Net book value at June 30, 2011 Six months to June 30, 2010 Net book value January 1, 2010 Provisions recorded during the period Utilised during the period Exchange differences Closing net book amount at June 30, 2010

Employee related and severance provisions 36 45 956 (88) (2) 947

Legal claims 309 13 30 (178) (10) 164

Other 181 71 216 (43) (9) 416

Total 526 129 1,202 (309) (21) 1,527

43 7 (16) 3 37

279 14 (11) 26 308

136 71 (59) 20 168

458 92 (86) 49 513

Litigation There are ongoing investigations into the Group's passenger and cargo surcharges by the Office of Fair Trade and other jurisdictions. These investigations are likely to continue for some time. The Group is also subject to related class action claims. The final amount required to pay the remaining claims and fines is subject to uncertainty.

25

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

16.

EMPLOYEE BENEFIT OBLIGATIONS The Group operates two principal funded defined benefit pension schemes in the UK, the Airways pension scheme and the New Airways pension scheme, both of which are closed to new members. In accordance with IAS 19, the Group did not perform an interim valuation as at June 30, 2011 as there had been no significant movement in assumptions.

17.

CONTINGENT LIABILITIES There were contingent liabilities at June 30, 2011 in respect of guarantees and indemnities entered into as part of the ordinary course of the Groups business. No material losses are likely to arise from such contingent liabilities. A number of other lawsuits and regulatory proceedings are pending, the outcome of which in the aggregate is not expected to have a material effect on the Group's financial position or results of operations. The Group has guaranteed certain borrowings, liabilities and commitments, which at June 30, 2011 amounted to 1,239 million (December 31, 2010: 458 million). These included guarantees given in respect of the fixed perpetual securities issued by subsidiary undertakings.

18.

RELATED PARTY TRANSACTIONS The Group has had transactions in the ordinary course of business during the period under review with related parties. Six months to June 30 2011 2010

million Associates: Sales to associates Purchases from associates

60 26 June 30 2011 22 35

3 5 December 31 2010 1 1

million Associates: Amounts owed by associates Amounts owed to associates Directors' and officers' loans and transactions:

No loans or credit transactions were outstanding with Directors or officers of the Company at June 30, 2011 or arose during the year that need to be disclosed in accordance with the requirements of Article 260 of Ley de Sociedades de Capital. The Group has not provided or benefited from any guarantees for any related party receivables or payables. During the half year ended June 30, 2011 the Group has not made any provision for doubtful debts relating to amounts owed by related parties (June 30, 2010: nil). 19. DIRECTORS AND SENIOR EXECUTIVES REMUNERATION Six months to June 30 2011 2010 3 3 1 1

millions Directors Fixed remuneration

Senior executives Total remuneration paid to senior executives

1 1

1 1

The prior period comparatives reflect the remuneration of the Directors' and Senior executives of British Airways.

26

NOTES TO THE ACCOUNTS continued For the six months to June 30, 2011

STATEMENT OF DIRECTORS' RESPONSIBILITIES At a meeting held on July 28, 2011, the Board of Directors of International Consolidated Airlines Group, S.A. confirmed that to the best of its knowledge the Consolidated Condensed Interim Financial Statements for the first half of the year were prepared in accordance with IAS 34 as adopted by the European Union, offer a true and fair view of the assets, liabilities, financial situation and the results of International Consolidated Airlines Group, S.A. and of the companies that fall within the consolidated group taken as a whole, and the Consolidated Condensed Interim Management Report includes an accurate analysis of the required information also in accordance with the Financial Services Authoritys DTR 4.27R and DTR4.28R including an indication of important events in the period, a description of the principle risks and uncertainties for the remaining six months of the financial year and material related party transactions.

By order of the Board Willie Walsh Chief Executive Antonio Vasquez Chairman July 28, 2011

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Review Report on the Consolidated Condensed Interim Financial Statements To the Shareholders of International Consolidated Airlines Group S.A. at the request of Management. 1. We have carried out a review of the accompanying condensed consolidated interim financial statements (hereinafter the interim financial statements) of International Consolidated Airlines Group S.A. (hereinafter the Parent Company) and subsidiaries (hereinafter the Group), which comprise the consolidated balance sheet at June 30, 2011, the consolidated income statement, the consolidated statement of changes in equity, the consolidated cash flow statement, notes 1 to 19, all of them condensed for the six-month period then ended. The Parent Company's directors are responsible for the preparation of said interim financial statements in accordance with the requirements established by IAS 34, "Interim Financial Reporting," as adopted by the European Union for the preparation of interim condensed financial reporting as per article 12 of Royal Decree 1362/2007 and the Disclosure and Transparency Rules of the United Kingdoms Financial Services Authority. Our responsibility is to conclude on these interim financial statements based on our review. Our review was performed in accordance with the International Standard on Review Engagements 2410, Review of Interim Financial Reporting Performed by the Independent Auditor of the Entity. A review of the interim financial statements consists of making inquiries, primarily of personnel responsible for financial and accounting matters, and applying certain analytical and other review procedures. The scope of a review is substantially smaller than that of an audit and therefore, it is not possible to provide assurance that all the significant matters that could be identified in an audit have come to our attention. Therefore, we do not express an audit opinion on the accompanying interim financial statements. As explained in the accompanying Note 1, the abovementioned interim financial statements do not include all the information that would be required for complete consolidated financial statements prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, and therefore the accompanying interim financial statements should be read in conjunction with the British Airways plc consolidated financial statements for the period ended 31 December 2010. During the course of our review, which under no circumstances can be considered an audit of financial statements, no matter came to our attention which would lead us to conclude that the accompanying interim financial statements for the six-month period ended 30 June 2011 have not been prepared, in all material respects, in accordance with the requirements established by International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union in conformity with article 12 of Royal Decree 1362/2007 for the preparation of condensed interim financial statements and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. The accompanying interim consolidated management report for the six-month period ended June 30, 2011 contains such explanations as the Parent Companys directors consider necessary regarding the events which occurred during said period and their effect on the interim financial statements, of which it is not an integral part, as well as on the information required in conformity with article 15 of Royal Decree 1362/2007. We have checked that the accounting information included in the report mentioned above agrees with the interim financial statements for the period ended June 30, 2011. Our work is limited to verifying the management report in accordance with the scope mentioned in this paragraph, and does not include the review of information other than that obtained from the accounting records of the consolidated companies. This report has been prepared at the request of Management with regard to the publication of the half -year financial report required by article 35 of Securities Market Law 24/1988, of July 28, further developed by Royal Decree 1362/2007, of October 19 and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority

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For and on behalf of ERNST & YOUNG, S.L. Rafael Paez Martinez July 28, 2011

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AIRCRAFT FLEET
Number in service with Group companies On balance sheet fixed assets AIRLINE OPERATIONS Airbus A318 Airbus A319 Airbus A320 Airbus A340-300 Airbus A340-600 Airbus A321 Airbus A380 Boeing 737-400 Boeing 747-400 Boeing 757-200 Boeing 767-300 Boeing 777-200 Boeing 777-300 Boeing 787 Embraer E170 Embraer E190 2 31 33 7 2 15 19 51 2 21 41 2 6 7 239 23 36 12 15 15 2 5 1 109 2 54 69 19 17 30 19 51 4 21 46 3 6 7 348 2 56 75 18 17 30 19 50 4 21 46 3 6 5 352 (2) (6) 1 1 2 (4) 3 29 12 3 24 71 31 7 4 28 16 86 Off balance sheet operating leases Changes Since December 31, 2010 Future deliveries

Total June 30, 2011

Total December 31, 2010

Options

Group total

As well as those aircraft in service the Group also hold 38 aircraft (2010: 38) which are not in service

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